SELECT COMMITTEE TO INVESTIGATE FOUNDATIONS AND OTHER ORGANIZATONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP91-00682R000300080008-6
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 18
• Document Creation Date: December 12, 2016
• Document Release Date: October 30, 2001
• Sequence Number: 8
• Publication Date: January 1, 1953
• Content Type: REPORT

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82d Congress, 2d Session - - - - - - House Report No. 2614
SELECT COMMITTEE TO INVESTIGATE
FOUNDATIONS
FINAL REPORT
SELECT COMMITTEE TO INVESTIGATE
FOUNDATIONS AND OTHER
ORGANIZATIONS
(Pursuant to H. Res. 561, 82d Cong.)
JANUARY 1,1953.-Committed to the Committee of the Whole House
on the State of the Union and ordered to be printed
UNITED STATES
GOVERNMENT PRINTING OFFICE
WASHINGTON : 1958
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SELECT COMMITTEE TO INVESTIGATE, AND STUDY EDUCATIONAL
AND PIIILANTIIROPIC FOUNDATIONS AND OTHER COMPARABLE
ORGANIZATIONS WHICH ARE EXEMPT FROM FEDERAL INCOME
TAXATION
BROOKS HAYS, ARKANSAS, Ading Chairman
DONALD L. O'TOOLE, Now York RICHARD I.J. SIMPSON, Pennsylvania
AIME J. FORAND, Rhode Island ANOIER L. OOODWIN, Massachusetts
B. CARROLL REECE, Tennessee
HAROLD M, KacLS, Cenral {Camel
THOMAS J. Fsz qcY, staff Dircdor
EDWARD C. KsNNzLLY. AUorney
Jossru C. KInzR, Diredor of Racarch
MARY E. SEARICRT, Clerk
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Hon. RALPH R. ROBERTS,
HOUSE OF REPRESENTATIVES,
TWJashington, D. C., January 1, 1953.
Clerk of the house of Representatives,
Washington, D. C.
DEAR MR. CLERK: I submit herewith the final report of the Select
Committee To Investigate Foundations and Other Organizations.
BROOKS HAYS, Acting Chairman.
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Union Calendar No. 801
82D CONGRESS HOUSE OF REPRESENTATIVES 5 REPORT
2d Session f No. 2514
SELECT COMMITTEE TO INVESTIGATE AND STUDY EDUCATIONAL
AND PHILANTHROPIC FOUNDATIONS AND OTHER COMPARABLE
ORGANIZATIONS WHICH ARE EXEMPT FROM FEDERAL INCOME
TAXATION
JANUARY 1, 1953.-Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
Mr. HAYS of Arkansas, acting chairman for the Select Committee
To Investigate and Study Educational and Philanthropic and Other
Comparable Organizations Which Are Exempt From Federal In-
come Taxation, submitted the following
FINAL REPORT
(Pursuant to H. Res. 561, 82d Cong.]
Report of the select committee created by House Resolution 561,
Eighty-second Congress, second session, to investigate and study
educational.. and philanthropic foundations and other comparable
organizations which are exempt from Federal income taxation.
The committee was saddened by the death, on December
24, 1952, of its chairman, Hon. E. E. Cox, of Georgia. While
he did not have the opportunity of examining this report in
its final form, the draft of the first half of the report was read
to him by the counsel for the committee on the evening of
December 22 and he approved it. The draft submitted to
Mr. Cox, in manuscript, was adopted by the committee
almost unchanged and is incorporated in this report in
practically the identical form in which it was submitted to
the chairman.
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2 REPORT OF SELECT COMMITTEE TO INVESTIGATE FOUNDATIONS
This committee was created and its powers and duties were defined
by House Resolution 561, Eighty-second Congress, second session,
adopted April 4, 1952. By the terms of the resolution the committee
was-
authorized and directed to conduct a full and complete investigation and study of
educational and philanthropic foundations and other comparable organizations
which are exempt from Federal income taxation to determine which such founda-
tions and organizations are using their resources for purposes other than the
purposes for which they were established and especially to determine which
such foundations and organizations are using their resources for un-American and
subversive activities or for purposes not in the interest or tradition of the United
States
and to report not later than January 1, 1953, to the House of Repre-
sentatives, or to the Clerk of the House if the House be not then in
session, the results of its investigation and study together with such
recommendations as it deems advisable.
The sum of $75,000 was appropriated for the use of the committee
by House Resolution G38, Eighty-second Congress, second session on
July 2, 1952. Of this sum approximately $25,000 will be returned
unexpended.
In the course of its investigation the committee has (1) sent ques-
tionnaires to more than 1,500 organizations; (2) interviewed person-
ally more than 200 persons deemed to possess pertinent information;
(3) communicated by letter or telephone with approximately 200 ad-
ditional persons, many of whom have established themselves in posi-
tions of achievement and competence; (4) heard the testimony of
some twoscore persons; (5) received the prepared statements o ap-
proximately 50 other persons deemed to have some knowledge of the
subject; (6) studied and analyzed thousands of pages of answers of
foundations submitted in response to the questionnaires; (7) studied
the available literat tire on foundations. The,committee's findings and
recommendations are based upon a consideration of the information
and data assembled in the manner and by the methods stated.
FINDINGS AND CONCLUSIONS
1. NUMBER OF FOUNDATIONS, THEIR AGGREGATE CAPITAL AND INCOME
The committee was unable to arrive at any definite figures relative
to the number of foundations, their aggregate resources, income, and
expenditures. The 1950 Cumulative List of Organizations published
by the Bureau of Internal Revenue lists more than 30,000 tax-exempt
organizations. The number of these which can be classed as founda-
tions varies according to the defintion of a foundation. Estimates
ranged as high as 32,500 under the broadest possible definition. For
those organizations having a permanent endowment of $50,000 or
more and embarked upon a program of philanthropic giving the
estimate was slightly more than a thousand with total assets of
approximately $2,600,000,000 and expenditures of approximately
$133,000,000 in 1950. Informed sources estimate the number of
foundations having assets of $10,000,000 to be between 60 and 100.
This estimate excluded colleges, universities, and religious organi-
zations. The committee was unable to obtain an Executive order,
which would have permitted an examination of the returns required
of tax-exempt organizations. A constructive effort which promises
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REPORT OF SELECT COMMITTEE TO INVESTIGATE FOUNDATIONS
to throw much light on these questions is now being made by the
American Foundations Information Service, the results of which will
be published in 1953.
It must be borne in mind that foundations range in size from the
giants, such as the Ford and Rockefeller Foundations with assets of
half a billion and 300 million, respectively, to those with no, or prac-
tically no, permanent endowment but with incomes .from annual or.
sporadic contributions of a few hundreds or a few thousands of dollars.
The committee knows of no manner in which even a reasonably
accurate estimate of the aggregate assets, annual income, and ex-
penditures of foundations can be obtained at the present time with-
out (1) an Executive order permitting an examination of returns now
filed with the Bureau of Internal Revenue, pursuant to the provisions
of the tax laws, or (2) examination of these returns in the offices of the
various directors of internal revenue where the returns are filed. The
committee has received estimates which it considers reliable to the
effect that all foundation expenditures aggregate only 3 cents of the
annual American philanthropic dollar.
Despite the fact that there are notable foundations in foreign
countries it may be said that modern foundations are confined largely
to the United States and that they are the products of the last 50
years. While there has been a tremendous growth in the numbers
of small foundations in the past 10 years it is unlikely that existing
tax levies will permit the creation by individuals or families of large
foundations (in the sense that the Ford, Rockefeller, and Carnegie
Foundations are large) after the next 10 or 15 years. The small
foundations which have mushroomed in the last decade are largely
vehicles for the distribution of permissible tax-deductible philan-
thropies of modestly well-to-do individuals and families. There is a
significant ground swell in the area of corporation giving with promise
of the establishment of considerable numbers of sizable foundations
to be established in the future by business corporations. Another
significant development is to be found in the community trusts or
foundations such as those in New York, Cleveland, Boston, and
Chicago.
Foundations are almost as old as civilization. They were under-
stood and used by the Egyptians, the Greeks, and the Romans. In
one form or another they have played an important part in the
development of the civilization of Western Europe. They have had
their ups and downs. They have been regulated, abolished, reestab-
lished. They remain today an important and vital force in American
life and their influence is felt in Europe, Asia, and South America.
While the important part they play and have played in palliative
measures-that is, in relieving existing areas of suffering-must not
be overlooked, their dominant and most significant function has been
displayed in supplying the risk or venture capital expended in advanc-
ing the frontiers of knowledge. The large foundations are peculiarly
well suited to play this role and it is doubtful if any other agency
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4 REPORT OF SELECT COMMITTEE TO INVESTIGATE FOUNDATIONS
could perform their part as well as they have performed and are
performing it. With trained professional staffs drawing upon the
knowledge gained through decades of experience, with the ability to
attract and hold men of great competence both in their governing
boards and their staffs, with large sums of money to back their judg-
ment and with complete freedom to spend the money on calculated
risks, they are able to do that which neither government nor indi-
viduals, nor even small foundations, could or probably should attempt.
The record of their accomplishments gives ample proof of their value
to civilization.
While the impact of the foundations upon modern society cannot
be accurately gaged, it is safe to say that they have rendered great
and significant services in many fields. Their contributions in the
field of medicine and public health are too well known to require
enumeration. The results of their campaigns against hookworm and
yellow fever have been repeatedly told and extolled until they have
become almost legendary. Less well understood but of great import-
ance is the part played by foundations in raising the level of education
in our colleges and universities, and, most strikingly, of elevating
medical education in this country to a position of world eminence.
In the field of the natural sciences, their contribution has been
equally significant. In these days when an awareness of the needs for
national security is uppermost in our minds we cannot fail to acknowl-
edge our debt to the foundations for the assistance and support they
have given to all branches of the natural sciences. Of recent years
the foundations have given increasing support to the social sciences.
This area of endeavor might be designated as the study of man's
relationship to man. While the field has often proved controversial
it is entirely possible that in a time when man's mastery over the
physical sciences threatens Mira with possible extermination time
eventual reward from the pursuit of the social sciences may prove
even more important than the accomplishments in the physical
sciences.
But these are not the only fields in which the foundations have
given support. and aid. They have pressed forward in the fields of
international relations, public administration, and government,
the humanities, race relations, the arts, adult education, recreation,
and economics.
We have referred briefly to the past accomplishments of founda-
tions and the importance of their role in modern-day life. It appears
that the present need for foundations is even greater than it has
been in the past and that there is great likelihood that the need will
prove an increasing one in the future. Despite the vast sums being
poured by Government. into the various fields formerly occupied by
foundations and into fields in which the foundations and Government
are cotenants or at least coadventurers, the need for the basic research
so largely supplied and supported by the foundations continues to
increase. Every new headland of human knowledge which is won
opens up new vistas to be explored. As each mountain peak of dis-
covery is scaled, vast new areas are laid open to exploration. Aside
from the pressing needs of national security there are ever-widening
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and lengthening avenues of knowledge that require research and study
of the type and kind best furnished or assisted by foundations. The
foundation, once considered. a boon to society, now seems to be a vital
and .essential factor in our progress.
On all points thus far raised there has been such a mass of provable
data and such a unanimity of opinion among informed persons that
the committee has no hesitancy in presenting its statements without
qualification or reservation except where reservations were specified.
It now approaches problems on which widely divergent views are
held by responsible and informed persons. On some points the com-
mittee has little doubt; on others considerable.
The committee has striven to give careful attention to the major
criticisms leveled at foundations. These criticisms have come from
persons, groups, and organizations of widely different backgrounds
and from all parts of the country. While some few complaints have
been motivated by personal grudges or fanciful imaginings, the great
proportion of them have come from well-meaning and sincere indi-
viduals or organizations whose integrity, loyalty, and patriotism
cannot be questioned. The committee has earnestly endeavored to
give sympathetic consideration to every communication, written or
oral, to follow every lead which offered even slight promise of revela-
tion, to acknowledge all letters and telegrams and to answer those
where answers could be given. These complaints and criticisms,
viewed broadly, raise the following questions:
1. Have foundation funds been diverted from the purposes
established by the founders?
2. To what extent have foundations been infiltrated by Com-
munists and Communist sympathizers?
3. Have foundation funds been channeled into the hands of
subversive individuals. and organizations, and, if so, to what
extent?
4. Have foundations supported or assisted persons, organiza-
tions, and projects which, if not subversive in the extreme sense of
that word, tend to weaken or discredit the capitalistic system as
it exists in the United States and to favor Marxist socialism?
5. Are trustees of foundations absentee landlords who have
delegated their duties and responsibilities to paid employees of
the foundations?
6. Do foundations tend to be controlled by interlocking
directorates composed primarily of individuals residing in the
North and Middle-Atlantic States?
7. Through their power to grant and withhold funds have
foundations tended to shift the center of gravity of colleges and
other institutions to a point outside the institutions themselves?'
8. Have foundations favored internationalism?
9. To what extent are foundations spending American money
in foreign countries?
10. Do foundations recognize that they are in the nature of
public trusts and are_ therefore accountable to the public or do
they clothe their activities in secrecy and resent and repulse
efforts to learn `about them and their activities?.
H. Rept. 2514,.52-2-2
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fi REPORT OF SELECT COMMITTEE TO A
11. Arc foundations being used as a device by which the control
of great corporations are kept within the family of the founda-
tion's founder or creator?
12. To what extent are foundations being used as a device for
tax avoidance and tax evasion?
In dealing with these questions the committee recognizes all too
clearly that which must be apparent to any intelligent observer
namely, that it was allotted insufficient time for the magnitude of
its task.
Four successive royal commissions sat over a period of 18 years
while engaged in the task of investigating and reporting on 28,880
charitable trusts existing in England well over a century ago. This
committee was given a similar task and directed to complete its work
in the less than 6 months remaining, after funds were appropriated
for the work. It is obvious that the committee could not investigate
thousands of organizations within the limitations of the time allotted.
Expediency compelled focusing attention on a small segment of the
whole. Individual attention was given to a small number of the
largest foundations, but even here investigation could not be made
with the thoroughness the committee desired. For example, the
Rockefeller Foundation alone has made almost 30,000 grants---approx-
imatelyy G 000 of which were in the form of scholarships awarded to
individuals. The committee has endeavored to make as thorough a
survey as time permitted. Its findings and conclusions must, under
the circumstances, be general rather than specific. It has endeavored
to bring into this inquiry such information as it could assemble and
to apply to this information, incomplete though it is, its best judg-
ment. With these observations the committee will attempt to deal
with the following ruajor questions raised by criticisms received:
1. Have foundation.fands been diverted from the purposes established by
the founders?
So far as we can ascertain there is little basis for the belief expressed
in some quarters that foundation funds are being diverted from their
intended use. Thera: have been instances of such diversion but we
believe that the criticism is unwarranted in the main. It has been
suggested that the smaller foundations, particularly those established
to receive the allowable, annual deductions of an individual or family
and having no endowment other than that accumulated from yearly
contribution from the individual donor or his family, have sometimes
been used to take care of members of the family or of family pensioners
by placing them on the payroll as employees or by granting to needy
relatives scholarships; if (lone by outright gift of the individual creating
the foundations, these would not be deductible contributions. That
this is possible must be conceded. That it is a widespread practice is
doubted. Nevertheless it is a possible abuse which should be guarded
against. The committee believes that public accounting would go far
toward eliminating such abuses.
2. To what extent have foundations been i iltrated by Communists and
Communist sympathizers?
:3. Have foundation funds been channeled into the hands of subversive
individuals and organizations, and, if so, to what extent?
Questions 2 and 3 will be considered together. There can be no
reasonable doubt concerning the efforts of the Communist Party both
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to infiltrate the foundations and to make use, so far as it was possible,
of foundation grants to finance Communist causes and Communist
sympathizers. The committee is satisfied that as long as 20 years ago
Moscow decided upon a program of infiltrating cultural and educa-
tional groups and organizations in this country, including the founda-
tions. The American Communist Party, following the program laid
down in Moscow, went so far as to create a subcommission of the
Agit-Prop (Agitation-Propaganda) or Cultural Commission which
gave specific attention to foundations. The aims were to capture the
foundations where possible, and where this proved impossible, to
infiltrate them for the purposes (1) of diverting their funds directly
into Communist hands, and (2) procuring financial assistance for
projects and individuals favorable to communism while diverting
assistance from projects and individuals unfavorable to communism.
A few small foundations became the captives of the Communist Party.
Here and there a foundation board included a Communist or a
Communist sympathizer. Occasionally a Communist managed to
secure a position on the staff of a foundation or a staff member was
drawn into the Communist orbit. Our investigation, hurried by lack
of time, indicates that very few actual Communists or Communist
s mpathizers obtained positions of influence in the foundations.
However, there are some unhappy instances where the committee is
convinced infiltration occurred. There remains the ugly unalterable
fact that Alger Hiss became the president of the Carnegie Endowment
for International Peace. And this despite the fact that his nomination
and election came about through the efforts of men of proven loyalty
and broad experience in public affairs.
So far as the committee can learn, during his term as president of
the Carnegie Endowment, Hiss took no official action to further the
Communist cause.
There is also the indisputable fact that Frederick Vanderbilt Field
became the secretary of the American Council of the Institute of
Pacific Relations. The whole unhappy story of the IPR, which was
largely supported by foundation funds, has been so fully revealed by
the investigation of the McCarran committee that there is no need
to make further reference to it here.
There have boon other less dramatic incidents, few in number but
startling in their implications. That the Communists succeeded in
obtaining from the foundations financial aid and assistance for numer-
ous members and sympathizers seems conclusive to the committee.
In the aggregate, the number of such grants and the amounts in-
volved are alarming. Proportionately, when viewed in the light of
the total grants made, they are surprisingly small.
Despite the fact that in all but a very few cases these unfortunate
grants were made prior to the time that the individual grantees were
exposed by duly constituted Government agencies, the responsibility
for proper selection rests upon the foundations, not the Government.
The foundations should be alert to the dangers of this situation as a
result of this experience. We are impressed with the fact, however,
that. most of these malodorous individuals were selected under politi-
cal conditions very different from those that now exist and the deci-
sions were taken in a political and emotional climate very different
from the present.
There are certain other aspects to be considered which, if not a
defense to the charge of laxity on the part of foundations, offer, at
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least, an understandable explanation of what occurred. It has been
pointed out that the foundations operate on the frontiers of knowledge.
'T'hose foundations granting fellowships are seeking intellectuality of
the highest order. It has been said in these hearings that there is no
necessary correlation between political sagacity and scientific emi-
nence, and it. also has been said that there is a correlation between
academic eminence and political naivete?. Irrespective of whether
these generalizations can be taken literally it may safely be said that
many individuals of unusual talent, particularly artists, poets, novel-
ists, playwrights, and musicians, are often nonconformists. That this
is apt to be the case is illustrated by the record of the John Simon
Guggenheim -Memorial Foundation. The Guggenheim Foundation
restricts itself to the granting of fellowships to individuals. This
obviously renders it more vulnerable than those foundations which
make all or a part of their grants to institutions or organizations, for
these latter are more easily cataloged than the individual, and with
greater accuracy.
This greater vulnerability is attested by an examination of the
Guggenheim grants. _kdniittcdly? this foundation has done an out-
standing job in its selection of fellows. Literally scores of its more
than 2,000 fellows have made outstanding records, including 3
Nobel prize winners. Y et despite this notable record, 40 of its fellows
have received unfavorable mention by established governmental
agencies and 41 additional Guggenheim fellows have received 10 or
more citations; this is sufficient to render them, in the committee's
opinion, extremely bad risks.
The foundations, for the most part, have made no secret of their
mistakes, and have stated frauldly that in recent years they have recog-
nized the increasing need to be constantly alert to avoid giving un-
intended aid to subversives.
The committee believes that on balance the record of the founda-
tions is good. It believes that there was infiltration and that judg-
nments were made which, in the light of hindsight, were mistakes, but
it also believes that many of these mistakes were made without the
knowledge of facts which, while later obtainable, could not have been
readily ascertained at the time decisions were taken. It further be-
lieves that the foundations are aware of the ever-present danger and
are exerting and will continue to exert diligence in averting further
mnistakes. While unwilling to sa - the foundations are blameless, the
committee believes the, were guity principally of indulging the same
gullibility which infected far too many of our loyal and patriotic citi-
zens and that the mistakes they made are unlikely to be repeated.
The committee does not want to imply that errors of judgment con-
stitute malfeasance.
The committee feels that it should warn foundations against what
it considers to be evidence of a willingness to disregard danger signals
as exemplified in the testimony of one witness given before the com-
mittee during the bearings. Intellectual assurance, if pushed too far,
may become intellectual arrogance with all the dangers it entails.
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REPORT OF SELECT COMMITTEE TO INVESTIGATE FOUNDATIONS 9
4. Have foundations supported or assisted persons, organizations, and
projects which, if not subversive in the extreme sense of the word,
tend to weaken or discredit the capitalistic system as it exists in
the United States and to favor Marxist socialism?
This is the criticism most frequently made against foundations and
it is the one urged with the greatest vehemence. If, for the purpose
of this report, we treat the term "subversive" as synonymous with
"communism" or "communistic," or as applicable to the apparatus
of communism, we can differentiate with greater exactitude between
that which is definitely subversive and that which represents merely a
criticism of the existing order or the advocacy of a change in the
economic-political-social order by constitutional methods. Hereafter
we shall treat the term "subversive" as characterizing the illegal and
the conspiratorial and as being deeply inimical to this country, its
traditions and its way of life. In the preceding paragraphs we have
discussed the efforts of the Communists to capture, infiltrate, and
influence foundations, and have indicated our view of the measure of
success or failure their efforts met. We now pass to the question of
whether the foundations have used their resources to weaken, under-
mine, or discredit the American system of free enterprise either by
criticism, ridicule, or pale praise while at the same time extolling the
virtues of the socialistic state.
The testimony does not establish this to be the case as to the founda-
tion system in general. It has been established that some foundation
funds have gone to the support of the Communist line or to proved
Communists or Communist sympathizers, but where this occurred it
is our belief that it occurred inadvertently or through the stealth and
deceit of Communist "infiltrees." To these instances must be added
those few isolated cases where foundations became captives of the
Communist Party. What we are expressing here is our belief that
the foundations, with the exception of the captive foundations noted
above, have not deliberately thrown their support to the Marxist
philosophy and against what we have come to regard as the American
system of capitalistic free enterprise.
In refutation of our position will be cited the instances of founda-
tion support for the Russian area studies at various universities, for
the translation of Russian books, for studies in the social sciences
deemed socialistic by some critics. We think the testimony given
before the committee made clear the distinction between "study" of
a subject and the "teaching" of it. The one embraces objective
analysis. The other contemplates the advocacy of principles.
Area studies such as this should be made only after meticulous
screening of those entrusted with the task and under constant safe-
guards.
The same reasoning must be applied to the new fields of inquiry in
the social sciences which are receiving the support of foundations.
Many of our citizens confuse the term "social," as applied to the
discipline of the social sciences, with the term "socialism." And
since the social sciences may be defined as the study of man's relation-
ship to man, the problem of every man considering himself an expert
in the field is ever present. Few individuals feel themselves qualified
to express an expert opinion on nuclear fission or the value of isotopes
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10 REPORT OF SELECT COMMITTEE TO INVESTIGATE F
but most of us will not hesitate to express our opinions on such homely
subjects as divorce, the causes for the increase in the cost of living,
the psychological effect of segregation, the increase in juvenile delin-
quency, or the impact of television on the study habits of children.
But these and other subjects within the orbit of te social sciences are
proper subjects for objective study and analysis under conditions of
control which give promise of revealing scientific facts.
The committee is impressed With the testimony of the foundations
that their area of usefulness is to some extent in what they describe as
controversial fields. In entering these fields, they knowingly invite
criticism and thereby assume the calculated risks incident to exploring
new fields of knowledge. They regard such risks as justified because
of the great good that may evolve for mankind. The committee
finds no fault with the general policy of the major foundations of pro-
moting experiments designed to help men to live peaceably together,
so long as they are conducted with devotion to the American tradition
of freedom.
But there are additional arguments urged in favor of the founda-
tions' work in the social sciences. 'Many studies in these fields have
benefited government. as well as business, Among these are studies of
our national income, our markets, our productivity, our business
cycles, the relationship between the productivity of the worker and
the standard of living. It has been said in the hearings that the
foundations, both in their conception and their work, give support
to the capitalistic system. It seems paradoxical that in a previous
congressional investigation in 1915 the fear most frequently expressed
was that the foundations would prove the instruments of vested
wealth, privilege, and reaction, while today the fear most frequently
expressed is that they have become the enemy of the capitalistic
system. In our opinion neither of these fears is justified.
6. Are trustees of foundations absentee landlords who have delegated
their duties and responsibilities to paid employees of the foundationsf
6. Do foundations tend to be controlled by interlocking directorates
composed primarily of individuals residing in the North and Middle-
Atlantic Statesf
Questions 5 and 6 may be discussed more conveniently if grouped
together. The idea that the office of trustee or director of a largo
foundation is a sinecure involving little work, enormous prestige, and
not inconsiderable power which is traditionally delegated to the paid
members of the staff seems to have obtained widespread acceptance.
In part this idea is true but in larger part it is the child of mis
information. The position of trustee or director of one of the largo
foundations undoubtedly carries with it dignity and the badge of
achievement. This is due not only to the prestige which foundations
themselves enjoy in the public mind but also to the distinguished
company of men who traditionally have held these positions of trust
and responsibility. But the belief that a trustee has few if any duties
connected with his office is contrary to all that this committee has
been able to learn.
It appears that the duties and responsibilities of trustees of the
large, foundations are onerous to the point that they would seriously
interfere with the work of the average businessman. As a group,
trustees of the larger foundations are men of outstanding achievement,
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REPORT OF SELECT COMMITTEE TO INVESTIGATE FOUNDATIONS 1L
broad interests, and proven competence who have demonstrated
their capability for and willingness to assume heavy burdens of work.
This latter qualification is an important one, and is well utilized by
the foundations. Since many of the larger foundations have their
headquarters in New York and since availability is an important
consideration it is only natural that the great ma ority of trustees
should come from New York and nearby areas. It is also under-
standable that the services of an outstanding man should be sought
by more than one foundation and that we should therefore find a
number of,individuals serving on the board of more than one founda-
tion.
Despite these considerations, all of which are persuasive, the com-
mittee feels that a wider geographical distribution would go far
toward establishing greater public confidence in the foundations and
would dispel much of the distrust which shelters under a traditional
fear of Wall Street. It is also entirely possible that a sustained
search for qualified individuals residing west of the Hudson River
might assist the foundations to maintain the freshness of approach,.
flexibility, and breadth of vision for which they profess to strive.
If, as the foundations maintain and the committee believes, founda-
tions are public trusts then the public in its widest sense, including
the geographical, should be fairly represented.
This observation leads naturally to a question which has given the
committee some concern. Since practically all foundation trustees
serve without compensation and since the duties of the trustees of
the larger foundations require considerable expenditure of time and
effort, are not foundation trusteeships largely limited to the very
wealthy, the retired, or the academic circles? The committee recog-
nizes that there are arguments both pro and con with respect to
compensation of trustees but it feels that the question posed is worthy
of consideration by the foundations.
As to the delegation by trustees of their duties and responsibilities,
the problem is basically the same one that confronts the directors of
a business corporation. Both must rely in large. measure upon their
staffs. There is this one important difference, in the opinion of the
committee. The trustees of a public trust carry a heavier burden of
responsibility than the directors of a business corporation. In fairness
it should be said that in the opinion of the committee this principle is
fully recognized by the trustees of foundations and that they make a
determined effort to meet the challenge.
7. Through their power to grant and withhold funds have foundations
tended to shift the center of gravity of colleges and other institutions
to a point outside the institutions themselves?
This question arises from a criticism which has come to the com-
mittee from persons well informed generally and situated in positions
from which a strategic view of the situation can be had. The com-
mittee does not consider itself sufficiently well advised on this point
to hazard a view.
8. Have foundations favored internationalism?
9. To what extent are foundations spending American money in foreign
countries?
Questions 8 and 9 present common problems and are discussed
together. While the expenditure of money in foreign countries might,
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12 REPORT OF SELECT COMMITTEE TO INVESTIGATE FOUNDATIONS
in and of itself, be considered evidence of a bias toward international-
ism, Lite committee does not feel that this is necessarily so. Those
foundations which have made substantial foreign expenditures are
frankly and openly- in favor of international cooperation along cultural
and educational lines. The Ford Foundation, for instance, has made
the promotion of peace one of its major objectives and it believes this
can best be achieved by international cooperation. To that end it
has appropriated large sums of money for assistance to certain foreign
countries and thin bulk of this money is being, spent in those countries
where assistance is being given. The officials of the Ford Foundation
have stated flatly that they believe the interests of Lite United States
are being advanced by these expenditures and that if they did not
so believe they would not make tlie expenditures.
The Carnegie Endowment for International fence is committed by
the very purpose for which it was founded to international coopera-
tion. To the extent that it implements its avowed purpose it is in a
sense internationalist.
~Ir. Rockefeller once said that he had made his money all over the
world and that he wished it spent on behalf of Mankind throughout
the world. The Rockefeller Foundation has followed the founder's
thinking in this respect and approximately one-third of its grants are
spent abroad. However, the thinking behind these grants does not
appear to be internationalist in the sense in which dint. term is usually
used. The committee gathers that the Rockefeller Foundation is
thinking internationally in terms of culture, education, and public
health rather than in terms of politics. The quest for total elimina-
tion of yellow fever has carried it across international boundaries and
into other continents. Once on the scent it cares not where the trail
leads. These are but a few instances. We think it a, fair statement
to say that activities on an international scale and foreign expendi-
tures in significant amounts are limited to only the very largest of
the foundations. Some of the smaller foundations cross international
boundaries in connection with the granting of fellowships and grants-
in-aid.
Considering the picture as a whole, those foundations operating on
an international scale are very few in anumber, but because they are
well known and their expenditures comparatively great, the attention
focused on their foreign activities is disproportionate. Those founda-
tions which tire concerned with internationalism along political lines
appear to center their activities around projects Which support the
Government policy of participation in United Nations activities.
All foundations deny participation in politics or political propaganda.
The committee believes that these international activities and foreign
expenditures of the foundations are motivated chiefly by consideration
of Lite welfare of the Aanerican people and as such are entirely praise-
wortlhy.
10. Do foundations reeoyni_^e that they are in the nature of public trusts
and arc therefore accountable to the public or do they clothe their
activities in secrecy and resent and repulse efforts to learn about
them and their activities?
All foundations questioned have, without exception, stated that
they consider themselves to be public trusts. At that point unanimity
ceases. The larger foundations take the position that as public trusts
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REPORT OF SELECT COMMITTEE TO INVESTIGATE FOUNDATIONS 13
they are accountable to the public and that the public is entitled to
know in detail about their resources, income, expenditures, personnel,
and programs. Stated in the words of one of their trustees "founda-
tions should not only operate in a goldfish bowl-they should operate
with glass pockets." In short the larger foundations favor public
accountability and public accounting. To this end most of the
larger foundations publish detailed annual reports which are given
wide distribution among the various media of mass communication,
public libraries, schools, and colleges.
On the other hand, many of the small foundations, particularly
those designed to receive the deductible contributions from individuals
and privately owned corporations, oppose public accounting on the
ground that they do not wish the public to know the amount of con-
tributions made by the donor and his family, or by corporations
owned or controlled by the donor. To a lesser extent many of the
smaller foundations oppose public disclosure of their expenditures.
They argue that public disclosure of contributions and expenditures
will cause the abandonment of many of the small foundations now in
existence and will discourage the formation of new small foundations.
The committee recognizes that public disclosure of the names of
contributors and the amounts contributed to foundations might result
in an unfortunate curb on philanthropic giving. It does feel, however,
that such information should be made known to the Bureau of Internal
Revenue where it would also be available to the appropriate com-
mittees of Congress. It feels also that full public disclosure should
be made by such organizations of all grants made so that the public
will be in a position to determine whether tax-exempt moneys are
being used for the purposes for which those organizations were created.
11. Are foundations being used as a device by which the control of great
corporations are kept within the family of the foundation's founder
or creator?
12. To what extent are foundations being used as a device for tax avoid-
ance and tax evasion?
The committee regards questions 11 and 12 as matters for the con-
sideration of the Committee on Ways and Means. It therefore has
made no attempt to find the answers to these questions. We feel the
questions are of sufficient importance to warrant inquiry by the Ways
and Means Committee and this committee wishes to make its files
available to the Ways and Means Committee if the latter believes they
will be of assistance to it.
The committee's recommendations are as follows:
1. Public accounting should be required of all foundations. This
can best be accomplished by amendment of the existing laws in sub-
stantially the form herewith submitted as appendix A, to which we
direct the attention of the Eighty-third Congress.
2. That the Ways and Means Committee take cognizance of our
finding that the maintenance of private sources of funds is essential
to the proper growth of our free schools colleges, churches, founda-
tions, and other charitable institutions. respectfully suggest that
the committee reexamine pertinent tax laws, to the end that they may
be so drawn as to encourage the free-enterprise system with its re-
wards from which private individuals may make gifts to these merito-
rious institutions.
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14 REPORT OF SELECT COMMITTEE TO INVESTIGATE FOUNDATIONS
The Committee has received material assistance from numerous
Government agencies, and especially from the Bureau of Internal
Revenue, the Library of Congress, the Committee on Un-American
Activities, the McCarran committee, the Office of Education, the
Banking and Currency Committee, the Committee on Labor and
Education, and the Federal Bureau of Investigation.
The committee wishes to acknowledge Lite cooperation afforded it
by the foundations. There has been no instance of obstruction, de-
lay or resentment on the part of the foundations,
The committee was fortunate in securing Lite, services of Harold M.
Keele, of Chicago, as general counsel. Upon his approval by the
committee, ?tlr. Keefe arranged to devote his full time to this study
and has rendered an outstanding service in directing the surveys and
legal inquiries necessary to carry out Lite mandate of Congress. The
committee appreciates his devotion to this task and the excellent
service which Iie has rendered.
The committee desires to give recognition to Lite able and unre-
mitting work of the following members of its staff:
Thomas J. Feeney, staff director; Edward C. Kennelly, attorney;
Joseph C. Kiger, director of research; Mary E. Searight, clerk; Edith
M. Knight, administrative assistant; Russell McFarland, investigator;
Roger 1I. Mudd and William II. Shape, Jr., research assistants;
Sarah Jatic Billingsley, Mary L. Taylor, and Clarence A.1fcGillen, Jr.,
clerical assistants.
The foregoing report is respectfully submitted this 1st day of
January 1953.
BROOKS HAYS,
Acting Chairman.
DONALD 7L~. O' l ooLE.
AIAiE J. r GRAND.
RICHARD M. SIMPSON.
ANGIER L. GooDwiN.
B. CARROLL REECE.
(As pointed out and stressed in this report, the select committee has
had insufficient time for the magnitude of its task. Although I was
unable to attend the full hearing I fecal compelled to observe that, if a
more comprehensive study is desired, the inquiry might be continued
by the Eighty-third Congress with profit in view of the importance of
the subject, the fact that tax-exempt funds in very large amounts are
spent without public accountability or official supervision of any sort,
and that, admittedly, considerable questionable expenditures have
been made.-B. CARROLL REECE.)
APPENDIX A
AN ACT To provide for public accountability by tax-exempt organizatfonu, and other purposes
Be it enacted by the Senate and IJottee of Representatives of the United of America
in Congress assembled, That this Act may be cited as the "Public Accountability
Act for Tax-Exempt Organizations" and
That Section 153 of the Internal Revenue Code is hereby amended to read as
follows:
"SECTION 153. Information Required From Certain Tax-Exempt Organiza-
tions and Certain Trusts.
"(a) Cs11TAIN TAx-ExEMPT ORcANIZATIONs Every organization described
in section 101 (6) which is subject to the requirements of section 54 (f) shall
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furnish annually information, at such time and in such manner as the Secretary
may by regulations prescribe, setting forth-
(1) Its total contributions received during the year;
(2) Its gross income for the year;
(3) Its expenses attributable to such income and incurred within the year;
(4) A breakdown of such expenses to show its administrative overhead,
including the annual salaries of any trustees, directors, officers or employees
receiving more than $4,000.00 per year;
(5) Its disbursements out of income within the year for the purposes for
which it is exempt;
(6) Its accumulation of income within the year;
(7) Its aggregate accumulations of income at the beginning of the year;
(8) Its disbursements out of principal in the current and prior years for
the purposes for which it is exempt;
(9) A balance sheet showing its assets, liabilities and net worth as of the
beginning of such year;
(10) A complete list of all contributors and amounts contributed during
the year where the amounts of such individual contributions exceed $200.00;
(11) The names and addresses of all persons or organizations receiving
grants during the year and the amount and general purpose of each such
grant.
"(b) TRUSTS CLAIMING CHARITABLE, ETC., DEDUCTIONS UNDER SECTION
162 (a).-Every trust claiming a charitable, etc., deduction under section 162
(a) for the taxable year shall furnish information with respect to such taxable
year, at such time and in such manner as the Secretary may by regulations
prescribe, setting forth-
(1) the amount of the charitable, etc., deduction taken under section
162 (a) within such year (showing separately the amount of such deduction
which was paid out and the amount which was permanently set aside for
charitable, etc., purposes during such year) ;
(2) the amount paid out within such year which represents amounts for
which charitable, etc., deductions under section 162 (a) have been taken in
prior years;
(3) the amount for which charitable, etc., deductions have been taken in
prior years but which has not been paid out at the beginning of such year;
(4) the amount paid out of principal in the current and prior years for
charitable, etc., purposes;
(5) the total income of the trust within such year and the expenses
attributable thereto; and
(6) a balance sheet showing the assets, liabilities, and net worth of the
trust as of the beginning of such year.
"This subsection shall not apply in the case of a taxable year if all the net
income for such year, determined under the applicable principles of the law of
-trusts, is required to be distributed currently to the beneficiaries.
"(C) INFORMATION AVAILABLE TO TIIE PUBLIC.-The information required to
be furnished by subsections (a) and (b), with the exception of that required by
subsections (a) (4) and (a) (10) above, together with the names and addresses
of such organizations and trusts, shall be made available to the public at such
times and in such places as the Secretary may prescribe.
"(d) PENALTIES.-In the case of a willful failure to furnish the information
required under this section, the penalties provided in section 145 (a) shall be
applicable. In addition exemption under section 101 (6) shall be denied for the
taxable year."
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