In addition, certain needs of the disabled clients have been met by:

A.

B.

C.

providing group recreational activities that reduce
the clients' sense of isolation (which often leads
to a negative self-image and depression);

better public acceptance through direct contact with
volunteers who have never worked with or been exposed
to this special population before and subsequently
experience attitudinal changes;

by providing opportunities for special education and
other kinds of students to work with this population
as interns, better teachers and specialists will later
be available to work with this group.

There are many hundreds of examples we could have provided on the value of foundation support; we believe the above-described programs indicate the broad spectrum of foundation support to YMCAS and how important they have been. We thank you for your consideration.

STATEMENT OF BRIAN O'CONNELL, PRESIDENT, INDEPENDENT SECTOR, WASHINGTON, DC

Mr. O'CONNELL. Thank you, Mr. Chairman. I do want to indicate that, in support of Jane Freeman's testimony, that Independent Sector-which as you know represents 550 very diverse organizations-has taken a very careful and initially somewhat skeptical look at the legislation. We are obsolutely certain that it will serve the voluntary organizations as well as the philanthropic. We are satisfied that it indeed serves the total sector. There are only four sources of funds for this vibrant sector-individuals, foundations, corporations, and earned income. Foundations, as Tom has indicated, are declining as a source. If we believe very strongly in strengthening this side of American life, we must strengthen the sources of income which very much include foundations. I am for the reporting requirements, but I believe that once a foundation is willing to accept its responsibilities as a public organization, it should be encouraged in the maximum freedom, and I believe that your legislation goes a long way in that appropriate direction. Thank you for it.

Senator DURENBERGER. Thank you. Jack. [The prepared statement follows:]

TESTIMONY of BRIAN O'CONNELL

President

INDEPENDENT SECTOR

My name is Brian O'Connell, president of INDEPENDENT SECTOR, a membership organization of 545 national voluntary organizations, foundations and corporations which have banded together to strengthen our national traditions of giving, volunteering and not-for-profit initiative.

Our Voting Members are organizations with national interests and impact in philanthropy, voluntary action and other activities related to the independent pursuit of the educational, scientific, health, welfare, cultural and religious life of the nation. The range of members includes National Council of Churches, United Negro College Fund, American Association of Museums, Boys' Clubs of America, American Enterprise Institute, Brookings Institution, Catholic Charities, Audubon Society, Goodwill Industries, American Association of Retired Persons, Opera America, National Urban League, Council for the Advancement and Support of Education, American Association of University Women, YM & YWCA's, B'nai B'rith, Native American Rights Fund, American Cancer Society, U.S. Committee for UNICEF, Organization of Chinese Americans, National Puerto Rican Coalition and 525 other equally diverse organizations. The common denominator among this vast mix is their shared determination that the voluntary and philanthropic impulses shall remain a vibaant part of America.

I served previously as Executive Director of the Coalition of National Voluntary Organizations and was for twelve years Executive Director of the National Mental Health Association. From all these vantage points, I have

had full opportunity to learn about the work of foundations and their place in our society.

36-078 0-84--14

A summary of my view of foundations in the American society is as

follows:

1. Pluralism and citizen participation are among the
greatest strengths of America. They spawn the
organizations that give the country and its people
options and alternatives and vehicles for service,
experimentation, creativity, criticism and reform.

2.

To have such pluralism and diversity, voluntary
organizations must have every opportunity to be
independent.

3. Independence requires multiple sources of potential

funding.

4. There are only four sources of independent funding

a.

individuals

6.

5. If in fact we are to have vibrant independent organ-
izations, we have to encourage maximum development of
all four sources of funds including foundations.
Encouragement of pluralism, diversity and maximum
citizen participation require the greatest freedom
of action for both donee and donor organizations.
Protection from abuse of that independence is best
achieved by a requirement of regular and full dis-
closure of the makeup, finances and activities of
all such organizations.

7.

8. Overwhelmingly, almost all foundations are serving

the public good.

In sum, for all of the above reasons, INDEPENDENT SECTOR supports S. 1857. This legislation will result in the birth of a significant number of new foundations. Section 1 would make the incentive for financial gifts to foundations equal with that accorded public charities. As a result, donors will give increased consideration to gifts to foundations. This change is in the long-term best interest of public charities because of the increased number and size of foundations.

There is another major benefit which results from the increased number of new foundations and deserves special note. Foundations have the unique ability to quickly respond to changing needs. More foundations, and quite simply, more grant monies will help nurture the very pluralism on which this society depends. One does not have to go back over the 300 years of our history to find examples of the importance of independent and often unpredictable citizen action. Just in the past 15 years, citizen service and influence have had profound impact on a staggering array of public issues, including: the rights of women, conservation and preservation, education on our free enterprise system, learning disabilities, refugees, Hispanic culture and rights, the aged, mental health, native Americans, the dying, experimental theatre, international understanding, population control, neighborhood empowerment, and on and on.

All of these great efforts have benefited from foundation support to achieve their levels of influence.

This legislation is also particularly timely. At this time in the nation's history, with reduced federal resources for the services of nonprofits and the increased demand for their services, finding new sources of funding is essential. Newly emerging issues and concerns will need start-up funds and traditional services will need new support sources. S. 1857 will supply new dollars for both.

In Section 2 of S. 1857, provision is made for several technical changes which reduce the administrative costs of foundations. One of these changes relates to the requirement that foundations exercise "expenditure responsibility" for grants to organizations that have not yet acquired tax exempt status. Expenditure responsiblity involves added administrative activity for the foundation in the form of pre-grant inquiries, formal agreements, periodic reports, reporting on tax forms, etc. For foundations with limited or no staff, such grants are simply ruled out. S. 1857 would exempt grants of under $25,000 from this requirement, thus freeing up time and dollars to support the activities of newly formed public charities.

We urgently request this Committee to add S. 1857 to any tax legislation it passes this year.

In conclusion, I have probably had as much opportunity as anyone to observe the foundation world and to be frustrated by its diversity and some of its limitations. Through it all, I am extremely positive about the role that foundations play in contributing to our appropriate and indeed necessary diversity and pluralism. As long as such institutions are willing to disclose fully their makeup, finances and activities, I encourage the maximum possible expansion of their numbers, grantmaking size and independence. S. 1857 will contribute significantly to this goal.