Private foundations need to become more transparent and accountable, according to a committee of MPs.
A report published today by the House of Commons International Development Committee, which considers the role private foundations play in providing overseas aid, says the largest private foundations spend huge sums, yet there is little detail on how they spend their money.
"The volume, distribution and targeting of foundation spending is currently unclear," it says. "Compared to traditional donors, foundation reporting is weak, especially in Europe."
The committee recommends that private foundations sign up to the International Aid Transparency Initiative, set up in September 2008, which includes a list of data that organisations should provide so they can be compared easily.
The report says foundations in the US have to list every grant they make and spend at least 5 per cent of their endowments each year on charitable activities. The MPs said such mandatory regulation of foundations in the UK could be avoided through increased transparency.
Poor accountability limits the extent to which foundations can collaborate with official donors such as governments, the report says.
It also says foundations spend most of their money on health but should be encouraged to fund education by the Department for International Development.
Malcolm Bruce MP, chairman of the International Development Committee, said foundations did outstanding work. "While their efforts are to be welcomed, there is a danger that private foundations can bypass civil society groups in developing countries and skew aid programmes in favour of big, hi-tech, single-issue interventions," he said. "DfID should work with foundations to maximise their contribution and help them play a bigger part in global efforts to end poverty."
There are no precise figures on how much private foundations give out. The Organisation for Economic Cooperation and Development said $22.2bn, or about £14.4bn, was handed out around the world in private grant spending in 2009, but this is likely to be an underestimate because reporting of data was voluntary.
Dr Noshua Watson, a research fellow at the charity the Institute of Development Studies, said private funders could help at a time of constrained government budgets. "However, the ways in which the development and philanthropic sectors work together are often unclear, so the potential for innovation and greater effectiveness can be missed," she said.
Watson added that the report’s recommendations would help to clarify how the sectors could work together.