“On the surface, it seems like they’re being very generous and giving more money, but the reality is they’re just moving money around,” said Vu Le, former executive director of the Seattle nonprofit RVC, and author of the blog Nonprofit AF, where he’s written critically about foundations not dipping into their endowments to increase their charitable spending during the covid-19 crisis.
In a letter to Open Society President Patrick Gaspard last week, more than 200 employees asked leadership of one of the world’s wealthiest charitable foundations to consider pulling money from its endowment and assets of more than $19 billion rather than force them to break verbal grant agreements with organizations from around the globe.
“We are concerned that by sacrificing our grantees and partners, and breaking commitments, we will risk the reputation and legacy of OSF and its founder, an outcome none of us want to see,” the foundation employees wrote. The letter protesting the spending decision was first reported by the Chronicle of Philanthropy.
Soros was unavailable for an interview this week. Gaspard, in a phone interview, defended the decision to not use endowment money or other assets, citing the potential for long-term global economic turmoil that could require more spending in the future while also negatively impacting the foundation’s investments.
“We decided to follow the course of covid-19 with the understanding that this most likely would be a marathon, and not a sprint,” said Gaspard, former executive director of the Democratic National Committee who served as U.S. ambassador to South Africa during the Obama administration. “We also follow the up-and-down bounces of the markets. This is a period of intense volatility, and we’re not sure what our assets will look like by year’s end.”
Gaspard declined to discuss specifics about organizations promised Open Society grants via verbal agreements that now may be at risk of losing funding. In response to staff concerns that some news coverage suggested the $130 million was additional spending, Gaspard said he didn’t believe his announcement — which at one point referred to “investing $68 million in new funds in the United States” — was misleading.
“What we announced is that this was the Open Society Foundation’s urgent response to the covid crisis. And that’s exactly what it is,” Gaspard said. “That is a pivot, a set of decisions, and a narrative that we are incredibly proud of.”
The dispute between staff and leadership at Soros’s foundation touches on a broader discussion in America’s philanthropic community, where some industry leaders are calling for foundations with large endowments to ramp up spending in response to the covid-19 crisis. IRS rules require foundations to spend at least 5 percent of their assets annually, and many foundations hover around that spending figure, opting to preserve savings and endowment money.
On April 2, nine philanthropic membership and advocacy organizations published a joint statement urging foundations to boost spending this year and use endowment money if necessary.
“What nonprofits need most right now is more money. . . . Unprecedented challenges require unprecedented responses,” wrote the leaders of organizations including the Council on Foundations, the Center for Effective Philanthropy, and the National Committee for Responsive Philanthropy.
And as some foundations have heeded that call, they’ve implored their peers to do the same.
“Now is no time for foundations to stand by or to shelter endowments that exist to serve the public good. . . . It is both immoral and a failure to honor the mandate that foundations have to serve society,” said Ellen Dorsey, executive director of the Wallace Global Fund, in a statement announcing a decision to spend about 20 percent of the foundation’s $100 million endowment this year.
In recent weeks, foundations that have announced plans for major hikes in spending this year have ranged from the wealthiest and most high-profile to the smaller and more obscure. The Bill and Melinda Gates Foundation, with nearly $48 billion in assets, announced $150 million in new spending. The Libra Foundation, with more than $420 million in assets, announced $25 million in new spending. And The Alfred and Mary Douty Foundation, with more than $6 million in assets, announced $1.5 million in new spending.
Some larger foundations, like Open Society, have declined to increase spending, however. The Hewlett Foundation, which has about $9.8 billion in assets, will not increase spending this year because of a plan it put in place after the 2008 recession, President Larry Kramer said in a phone interview.
“You have to make a choice between supporting your present grantees and the people they help and your future grantees and the people they help. If you spend more now you’ll have less for your future grantees. . . . It’s a tradeoff,” Kramer said. The Hewlett Foundation’s assets are on pace to shrink in value by 18 to 23 percent this year, Kramer said.
But even with market turmoil, advocates like Le believe America’s wealthiest foundations should have billions of dollars leftover to help charities this year, during a time of perhaps unprecedented need.
“Foundations have generally been very adverse to risk-taking, and talk about saving for a rainy day,” Le said. “This is the rainy day they have been saving for.”
Since 1984, when Soros started a foundation in his native Hungary focused on helping break the Communist Party’s control on information flow in Eastern Europe and Russia, the Open Society Foundations has grown into one of the world’s largest charitable foundations. Each year, Open Society spends roughly $900 million to $1 billion to support democracy through a wide range of projects in sectors including health care, education, journalism and human rights in more than 120 countries.
Gaspard emphasized that Open Society will be honoring all written agreements with its partner organizations and would only be shifting “unallocated funds.”
“I’m not aware of any commitments that were practically signed, sealed and delivered that we reneged on. . . . We simply made a decision that unallocated funds would be shifted,” he said.
In their letter, however, Open Society staff suggested this was a semantic argument that avoided the uncomfortable reality that the money devoted to covid-19 relief efforts includes tens of millions of dollars they had promised to other organizations in verbal conversations and informal emails. Open Society spokeswoman Laura Silber said that at most, $30 million would be repurposed from other organizations, as $100 million of the covid-19 relief fund came from reserves.
And although some organizations will miss out on Open Society funding this year, Gaspard pointed out his foundation had relaxed grant spending requirements for its already funded organizations, so they could use money originally devoted for projects for payroll and general operations.
“I would assume that in every industry in the world, both private and nonprofit, that conversations that were had in January of 2020 look really different in March and April,” Gaspard said. “I’m really comfortable with the decisions that we’ve made.”