For the Ford Foundation as for all American institutions 1973 was shadowed by the growing crisis of confidence in our national political process. It is too soon for any of us to know the full meaning of this crisis, but it is time for all institutions, private no less than governmental, to explore the character of their relation to questions of public policy.

A special reason for reporting on the engagement of the Ford Foundation in questions of public policy is that we are entering the fifth year of life under the regulatory framework established by the Tax Reform Act of 1969. The legislative process of that year demonstrated both to foundations and to Congress that in addition to recognized dangers of real abuse of the tax exemption privilege there were important difficulties of communication and understanding. In the Ford Foundation we concluded that the primary responsibility for increasing communication and improving understanding rested with the foundations, and in the intervening years we have tried hard to explain both our programs and our ways of work to the public, to members of Congress and to public officials generally. Because we have been encouraged by members of both Houses and both parties to expand this process, it seems appropriate now to attempt a general review, both for the public and for the public's representatives in government, of our relation to public policy.

Before turning to particular lines of programmatic activity, I should report briefly on the nature of our experience with the Act of 1969. We have had one extensive federal audit, and another has recently begun. We have also asked for opinions from the Internal Revenue Service on a number of special questions left uncertain by the regulations. The process is not usually rapid, but the spirit of the regulatory process has been consistently fair and we have encountered no evidence that the regulatory process has been bent to partisan purposes.

The 1969 Act is complex, and we do not believe that all of its detailed provisions serve the public interest. In one or two places, for example, it tends to inhibit investments, both financial and charitable. And we continue to believe that insofar as it exceeds the costs of regulation, the 4 per cent excise tax on foundation income is an unwarranted penalty on those to whom foundations make grants. Finally, we think the law could be amended in a few particulars so as not to discourage the establishment of new foundations. When the Congressional committees review the tax laws on charities, we will present these points for reconsideration.