Operations and Activities of Private Foundations

GAO testified on the impact of rules enacted by Congress in 1969 to ensure that only private foundations operating for the public benefit enjoy favorable tax treatment. As requested by a congressional subcommittee, GAO determined the financial well-being of private foundations on the basis of several indicators and the degree to which private foundations use their financial resources for charitable purposes. Data show that the market value of foundation assets and foundation disbursements have declined in recent years. However, a large proportion of the funds disbursed by the private foundation community has been for charitable purposes, and the charitable disbursements of many foundations equaled or exceeded their net incomes. GAO believes that a balance must be achieved between the benefits to be derived from the operational freedom of private foundations and the need for regulation to ensure that public purposes are served. GAO concluded that proper balance can best be determined through the legislative process and public debate.