Tuesday, October 18, 2016

The Effectiveness of the Clinton Foundation

While everyone  focusses on the potential conflicts of interest between Hillary Clinton, Bill Clinton and their family charity "business", a very interesting document from the Podesta email release which is addressed to both John Podesta and the Board of Directors of the William J. Clinton Foundation (now the Clinton Foundation) provides us with an inside look at the effectiveness of the Foundation.  The 22 page "Privileged, Personal and Confidential" is from Victoria B. Bjorklund and Jennifer I. Reynoso at Simpson, Thatcher & Bartlett LLP and looks at the results of a 22 question survey that was given to 38 people closely affiliated with the Foundation including the President, Bruce Lindsey, John Podesta, members of the Foundation's Board of Directors, members of the Immediate Office of the President, the Chief Financial Officer and Chief Operating Officer of the Foundation, the heads of the Clinton Global Initiative, Inc. the Clinton Health Access Initiative and the Alliance for a Healthier Generation, Inc. as well as employees who worked in the Foundation's scheduling, marketing, advance and correspondence areas.

As background, the Foundation, which was incorporated in 2005, is an Arkansas Nonprofit Corporation and is subject to the laws under the Arkansas Nonprofit Corporation Act of 1993 even though it is authorized to operate in the state of New York.  It is exempt from federal income taxes and is classified by the IRS as a public charity rather than a private foundation.  The Board of Directors was very small and was composed of insiders (i.e. paid employees or contractors, family members etcetera) when this report was written in 2011; for example, Bruce Lindsey, the Chief Executive Officer now Board Chair, was Bill Clinton's assistant and general counsel through his two terms in office.  Things have changed since then, however, with board members like Dr. Eric Goosby who served as Bill Clinton's Acting Deputy Director of the National AIDS Policy Office in the White House and director of  HIV/AIDS policy at the Department of Health and Human Services, Dr. Cheryl Saban, one of Hillary Clinton's largest donors in the 2016 cycle and Cheryl Mills who was the deputy White House Counsel for Bill Clinton during his impeachment trial, one wonders how much has really changed.  

Back to the survey.  The interviewees were asked to rate the efficiency and effectiveness of the Foundation's operations, the effectiveness of the process by which operations were prioritized, the effectiveness of both the budget and employee review processes, who had the most substantial influence over the Foundation, whether they had disclosed actual or potential conflicts of interest within the Foundation, what aspects of governance or operations they would recommend for change and where they saw the Foundation in 10 years.  Here are the key findings:

Almost all interviewees recommended the following:

1. Stressed the need for a stronger Board and stronger management - The Board of Directors was very small and was composed of insiders (i.e. paid employees or contractors, family members etcetera) when this report was written in 2011; for example, Bruce Lindsey the Chief Executive Officer (now Board Chair) was Bill Clinton's assistant and general counsel through his two terms in office.  Things have changed since then, however, with board members like Chelsea Clinton (Vice Chair), Dr. Eric Goosby whom served as Bill Clinton's Acting Deputy Director of the National AIDS Policy Office in the White House and director of  HIV/AIDS policy at the Department of Health and Human Services and Cheryl Mills who was the deputy White House Counsel for Bill Clinton during his impeachment trial, one wonders how much has really changed. 


2. Stressed the need for the Board and the managers to meet, lead and manage - The Board of the Foundation met only once annually until 2007 when this was changed to two yearly meetings and functioned without a Board Chair.  When it met, it would approve the annual budget but would do so mid-way through the budget year.  Board minutes were "cloned" from one year to the next and the minutes were not signed.  By way of comparison, according to the Wall Street Journal, the average number of annual board meeting for a public charity is 7.4, far more often than the Foundation met.


3. Called for strategic planning - The Board was not involved in either strategic planning or program evaluation and does not have an opportunity to pre-approve new projects and programs.    The lack of strategic planning also leads to both duplicative and wasteful work and expenses. 


4. Called for sustainability planning - The Board has not engaged in any succession planning and has not determined what would be required to ensure that the Foundation continued to exist if Bill Clinton were no longer evolved.


5. Called on the Foundation to develop the infrastructure of a best-in-class charity

Let's look at some additional details of problems at the Foundation.  Conflict-of-interest policies were in place but not implemented or enforced and any conflicts were not disclosed in a timely fashion (i.e. at the time that the individual is aware that there is a conflict).   Individuals were required to sign and return an annual conflict of interest disclosure questionnaire however, some interviewees reported conflicts of those raising funds or donors, some of whom may have an expectation of quid pro quo benefits in return for gifts.  Interestingly, Clinton Global Initiative offered approximately 1298 complimentary memberships compared to only 500 paid memberships with the normal cost of a membership being $20,000.  Of the complimentary memberships, 160 were offered to celebrities and 276 were considered discretionary.  Interviewees stated that there was no transparency in how the list of complimentary memberships was created.

Interviewees also stated that there was a lack of internal controls, noting that certain employees weree allowed to abuse expense account privileges and did not follow the Foundation's travel expense policy which stated that employees use the lowest commercial class airfare unless travel time exceeds 14 hours.  Additionally, employees were to use the lowest available rates when booking lodging.  Public charities are permitted to pay for ordinary expenses including the cost of travel and all expenses must be documented and, according to law, must not be "lavish or extravagant".  Problems with these  types of expenditures were noted by numerous interviewees as well as expenses incurred for non-employee family member travel companions. 


It is interesting to see how the Clinton Foundation functioned during the period up to 2011.  While an updated survey is not available (at least not publicly), it certainly appears that the management of the Clinton Foundation at the time was rather ineffective and amateurish with a board of directors that was considered weak and composed of insiders, conflicts of interest that went unchallenged and a lack of internal fiscal controls that led to abusive expense spending by Foundation employees.  This gives us a sense of much regard the Foundation had for its donor base, both large and small.

1 comment:

  1. Excellent fact based post. I wish more people would dig into the vast trove of emails and create non-biased fact and information driven articles such as this.

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