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posted on 21 September 2016

What Do The Clinton Charities Actually Do And Where Does Their Money Go?

from The Conversation

-- this post authored by Brian Mittendorf, The Ohio State University

Charities tied to the Clinton family have received seemingly endless scrutiny throughout the presidential campaign. They've been accused of wasting funds, offering access to donors and even serving as a personal "piggy bank" for the Clinton family. As a result, the largest arm of their charitable organization this week said it would become and independent organization if Hillary Clinton is elected president.

The scrutiny of the Clintons' charities has extended to Trump's much smaller foundation as well, including a just-announced investigation by the New York attorney general and a series by The Washington Post.

As a researcher focused on nonprofit finances, I am not accustomed to seeing such widespread interest in the sources and uses of funds by charities. Even if often wrapped up in political rancor, the public interest in the Clinton family's charities provides an opportunity to look closely at what they actually are, what they do and how their money is used.

While the inner workings of the organization are left to insiders, we fortunately have access to public financial disclosures that help provide answers to these questions. As we will see, the answers reveal an interesting and complex organization that may warrant critique but also deserves credit for its ambition and innovation.

The Clintons discuss their university initiative in 2014. Samantha Sais/Reuters

What are the Clinton charities?

We start with what organizations make up the network of Clinton charities.

First up is the Clinton Family Foundation, which was set up in 2001 as a private foundation to direct the family's own personal giving but doesn't engage in any charitable activities of its own.

It acts like any other private foundation in that the family makes donations to it, and the organization (over time) disburses funds to operating public charities.

From 2010 to 2014, the Clintons gave US$10.2 million of their income to the Family Foundation, which disbursed $9.8 million to charities over the same period. Of that, $2.86 million (29 percent) went to initiatives tied to the Bill, Hillary & Chelsea Clinton Foundation, the main operating public charity they founded in 1998. The remaining $6.96 million went to a variety of charities, both local and national, aimed at varied causes ranging from education to health care to the environment.

The Bill, Hillary & Chelsea Clinton Foundation is essentially the "parent" organization of various initiatives and offshoots, a few of which have been (at times) legally distinct from yet remain controlled by the parent. This group of organizations, which includes the Clinton Global Initiative (CGI), Clinton Health Access Initiative (CHAI) and the Clinton Giustra Enterprise Partnership (CGEP), is collectively called "The Clinton Foundation."

The many different initiatives reflects the wide and often shifting goals of the organization, which we discuss next.

Chelsea Clinton, the foundation's vice chair, receives a gift from a Haitian girl during a 2015 trip. Andres Martinez Casares/Reuters

So what does the Clinton Foundation do?

The activities of the Clinton Foundation are a source of many misconceptions, which is understandable given the wide range of them.

For starters, it's important to stress that the Clinton Foundation (unlike the Family Foundation) is an operating public charity, which means (1) it relies heavily on donations from the general public, and (2) it does not primarily act to disburse funds to other charities but rather engages in direct "on-the-ground" services.

The first point is noteworthy because the Clintons' personal giving of about $2.86 million to the foundation accounted for just 0.4 percent of its $807 million in contributions from 2010 to 2014.

Other funders include individuals (Gateway cofounder Theodore W. Waitt and former Formula One champion Michael Schumacher), foundations (Gates and Rockefeller), businesses (Coca-Cola and Barclays) and even foreign governments (Norway, Australia and Saudi Arabia).

Bill Gates and his foundation are among the Clinton Foundation's biggest donors. Brendan McDermid/Reuteres

It's also important because soliciting donations from so many other individuals and entities - some of whom had personal connections with the Clintons or interest in State Department business - is what has fueled many criticisms levied at the organization.

The second point matters because some rival politicians have used the low percentage of donations or grants that it gives to other charities as evidence it spends little on charitable works. In this case, however, the lion's share of the organization's program spending is for on-the-ground efforts. Research I conducted with a colleague demonstrates that this can actually be an indicator of greater effectiveness than grants alone.

Some of the foundation's most notable activities - and where much of its money is spent - are run by the three organizations I mentioned earlier.

The Clinton Health Access Initiative has long been the largest of the organization's initiatives and is now run as a separate legal entity. While the foundation currently retains control by appointing a majority of the board, the charity vowed on Sept. 14 to end this link and separate CHAI completely if Clinton wins in November.

CHAI has worked to secure discounted pharmaceuticals and other supplies for distribution, as well as increase opportunities for health care in over 70 countries, including India, South Africa, Vietnam and Zimbabwe.

The Clinton Global Initiative represents both the most innovative and most controversial program of the organization. CGI serves to match individuals and organizations willing to invest in projects aimed toward key public goals with charities and businesses seeking funding for their enterprises. Examples include funding loans to disabled veteran entrepreneurs and providing money for clinics in small villages in China.

In a sense, CGI serves a role similar to Uber's in providing a platform to facilitate a mutually beneficial match. In this case, the match is aimed at securing funds to achieve social goals. Like Uber, the approach has the potential to accelerate activity (as evidenced by hundreds of millions of dollars in CGI commitments in 2015 alone). Also like Uber, the organization has faced the challenge of vetting the parties it matches (as evidenced by concerns about funding being secured for a for-profit enterprise run by friends of the Clintons).

Clinton Giustra Enterprise Partnership also brings both praise and criticism for its unique approach. With funding from Canadian billionaire Frank Giustra and partnerships with Mexican billionaire Carlos Slim, CGEP represents a hybrid model that provides capital to enterprises, many of which are for-profit, that seek to achieve Clinton Foundation goals.

Blurring the boundaries between for-profit and nonprofit activities, CGEP is ahead of the curve in seeking new ways to achieve social good (the Chan Zuckerberg Initiative is another notable newcomer to this arena). Yet, its approach, both in terms of its funding sources and its funding uses, also subjects the organization to criticism.

The Clinton Foundation's other on-the-ground efforts run the gamut from helping schools develop and deliver healthy food choices (Alliance for a Healthier Generation) and providing farming and economic assistance in underdeveloped countries (Clinton Development Initiative) to supporting the Clinton Presidential Center in Arkansas.

Along with CHAI, many of the foundation's other initiatives will likely be spun off or eliminated if Clinton is elected president.

Bill Clinton has typically been the foundation's public face. Brendan McDermid/Reuters

How does the Clinton Foundation spend its money?

The last area of common misunderstanding is how the organization's funds are spent.

To address this question best, the place to go is their audited financial statements, which consolidate the activities of all the entities that make up the Clinton Foundation.

As a point of context, consider the organization's size. In 2014, the Clinton Foundation had expenses of $250 million, which puts it smaller than its venerable peer the Carter Center at $332 million but much larger than the Donald J. Trump Foundation, which spent $597,000 in its most recent year.

As for where those funds went, the first thing to note is what it doesn't spend a lot of money on: overhead. In its most recent audited financials, the Clinton Foundation reported spending 87.2 percent on programs and services, which means 12.8 percent is going to "overhead" - administrative and fundraising costs. While not the ultimate arbiter of effectiveness, such a figure is well above the 65 percent to 75 percent range of program spending often suggested as a rule-of-thumb.

The Clinton Health Access Initiative alone accounts for nearly two-thirds of all program spending, or $143 million. That's perhaps no surprise given global health has been a longstanding focus of the organization. The rest goes to the Global Initiative (11 percent), the Giustra Enterprise Partnership (3 percent) and a variety of other projects.

This tells us where the money goes in terms of the split among different goals, but another key question is what is the money used for specifically. While some may think that on-the-ground activities means supplies and cash aid, charitable organizations also spend much of their money on labor, meetings and travel. The Clinton Foundation is no exception, with labor, meetings and travel accounting for 37 percent, 12 percent and 8 percent of program spending, respectively.

Evaluating a charity

So where does this leave us?

Clearly the Clinton Foundation is a complex organization that does a wide variety of charitable activities, is funded by many individuals and organizations and spends the majority of its money on the programs and initiatives that meet its goals. That said, its choices over where to spend money on the ground are open to criticism over whether donor resources are being used to their best potential. It's a difficult question that financial statements aren't detailed enough to provide (and is really something that all charities grapple with internally).

Still, being focused on developing relationships with funders and partner governments, offering on-the-ground training and assistance and convening meetings of funding providers suggest labor, travel, and meeting costs should be key components of any charity. And in that regard, the Clinton Foundation's spending looks like you may expect it to given its methods and goals.

These are all things worth bearing in mind the next time you read a headline about the Clinton Foundation.

The ConversationBrian Mittendorf, Fisher College of Business Distinguished Professor of Accounting, The Ohio State University

This article was originally published on The Conversation. Read the original article.

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