Big foundations are worried about their tax-exempt status but seem oddly silent on apparent corruption uncovered by DOGE in federal grant-making—an enigma

The Wall Street Journal recently published this article: “America’s Richest Foundations Team Up Against Feared Trump Assault”. The article highlights these three key points:

1. Wealthy U.S. foundations are coming together to protect their tax-exempt status from potential challenges by the Trump administration.
2. Some foundations have been covering part of the legal and communications expenses behind the effort, according to a person familiar with the matter.
3. The Trump administration hasn’t explicitly pledged to revoke foundations’ tax-exempt status, though it is exploring ways to challenge the tax-exempt status of nonprofits more broadly.

Let’s consider these one at a time:

• Point # 1: I’m unaware of any “challenges” to the tax-exempt status of any foundations, large or small, by the Trump administration. The article clearly states: “The Trump administration hasn’t explicitly pledged to revoke foundations’ tax-exempt status, though it is exploring ways to challenge the tax-exempt status of nonprofits more broadly.” So, what is the point of this article, which seems to be a scare-piece about a non-existent issue? The Trump administration has, however, picked fights with Harvard and similar universities regarding their tax-exempt status, mostly in reaction to their abysmal recent track record in normalizing antisemitism. Hard to have much sympathy for Harvard, for example, with its $53 billion endowment, which generates giant annual untaxed investment returns and is used to feather its own nest. In some ways, these institutions are hedge funds with universities attached. To quote Shakespeare in Hamlet, “The lady doth protest too much.” By the way, there’s nothing to prevent Harvard from using, say, $20 billion, of its huge endowment to set up a foundation to make grants to nonprofit human service providers, but where’s the fun in that for Harvard?
• Point # 2: These giant foundations have huge endowments, so why not spend lots of money on attorneys and PR types in a preening vanity effort, rather than using the money to make grants to local nonprofits? Nuff said on this one.
• Point # 3: Again, this is an article about a dog that didn’t bark, as, so far, the Trump administration has done nothing to impact the tax-exempt status of these giant foundations. Still, I don’t see anything wrong with “exploring ways to challenge the tax-exempt status of nonprofits more broadly.”

Over the past 32 years, S + A has worked for ~1,000 tax-exempt nonprofits, big and small, old and new, which is a pretty good cross-section of the nonprofit world. Most of our nonprofit clients are ethical and provide a range of human services. I know of six CEOs of former nonprofit clients, however, who’ve ended up in jail, usually related to corruption/misuse of federal grant funds; there are also likely a fair percent of our former clients who, at best, skirt IRC 501(c)(3) regulations.

Here’s a startling fact: as of 2022, there were about 1.5 million active nonprofits with tax-exempt status in the US, and new ones are constantly being formed. Let’s assume that the S + A experience is typical and perhaps 5% of nonprofits are somewhat corrupt, conducting non-eligible political activities, and/or function as thinly disguised businesses —that’s 75,000 nonprofits! In my decades of working for and with nonprofits, I’ve never come across any that had their tax-exempt status investigated, let alone revoked. I simply don’t see the feds, or local prosecutors, investigating nonprofits to be a problem. I think that quality nonprofits should support some investigating, since looking for bad apples in any barrel is always a good idea.

So much for the WSJ article as written. But the reporters ignore a much more obvious question: why are big foundations and entities involved with nonprofits (i.e., The Foundation Center, GuideStar, National Council of Nonprofits, National Association of Nonprofits, etc.) silent on DOGE’s remarkable efforts to rid the grant-making process of apparent corruption? As far as I know, it’s been crickets from all of them. Odd, since DOGE publishes its “receipts” (documentation of its savings) at www.doge.gov for all to read—the running tally is ~$160 million so far. A large percentage of this is composed of cancelled questionable grants and contracts. Let’s assume 50% are grants to nonprofits, which equals $80 billion. Some of the grants are fairly obviously problematic as they were made in the dying days of the Biden administration, in some cases to newly minted nonprofits. My favorite is a $2 billion grant to a nonprofit, Power Forward Communities, made in 2024. In 32 years in business, the largest proposal we’ve ever written is $100 million for a Fortune 500 corporation involved in green energy. In the nonprofit world, $5 million is a big grant, and it’s inconceivable that any nonprofit would receive a $2 billion grant for any purpose unless they’re awfully well connected (i.e., wired in advance, “earmark,” etc.).

I just Googled DOGE news and found dozens of critical articles nitpicking their work but almost none—and zero from the nonprofit community—stating the obvious: every grant dollar that is saved from corruption, silliness (one of my favorites is a $1.2 million grant to study the drinking and sex habits of Super Bowl watchers!), cronyism, etc., is a dollar that could go to a legitimate nonprofit providing critically needed human services at the local level. This is the article the WSJ, WaPo, NYT, etc. should be writing and I can’t fathom why big foundations don’t embrace DOGE. If any foundations out there want to write a guest post telling me why I’m wrong, we’ll publish it.