Measured by their assets, American foundations are on a scale unique among the nations of the world. There are 68,000 foundations in the US which give away in excess of $35 billion (€27 billion) a year.

The foundations represent huge pools of money administered according to the charitable urgings, more or less, of the founding donors. They have been a dynamo of social change, in the US and abroad, for the last century, providing buildings, institutions, scholarships, reports and research programmes.

The biggest are often the only institutions in a position to introduce significant change in society. Foundations step in where governments fail.

If it weren't for the Julius Rosenwald Fund, a generation of black children in the Deep South would not have had the benefit of the 4,977 schools it funded. The impact of philanthropy is also felt beyond US borders. The Rockefeller and Ford foundations initiated research on maize that reduced hunger and starvation in India and Pakistan.

The baby-boomer generation in the US is now participating in the largest transfer of wealth in history, passing its enormous assets to the next generation. The biggest and most dramatic example is Warren Buffett's gift last summer worth some $31 billion to the Bill and Melinda Gates Foundation.

Despite their huge impact on the US civic sector and further afield, little is known about how these powerful institutions work. Foundation staffs are accountable only to trustees, and trustees are accountable to no one. At the same time, they enjoy tax benefits amounting to some $20 billion a year.

Joel Fleishman, professor of law and public policy at Duke University, makes the point in The Foundation: A Great American Secret, that their decision-making and operations are inscrutable to the point of obscurity. Foundation leaders enjoy the broadest imaginable freedom, "having large amounts of money to spend on unspecified social problems that they are free to define as they see fit". The best-run foundations perform responsibly and well. Drawing on more than 100 case studies, Prof Fleishman illustrates how some are very successful at what they do, and open about what their priorities are - such as like the Gates Foundation's focus on healthcare in Africa - but they still don't give assessments of their operations.

And some foundations are arrogant, misguided and prone to hiding their failures. Their leaders often behave as if it was their own money.

Research shows that 28 of the 30 largest US foundations paid out less than the legal minimum five per cent of assets in grants in 2005 - and some of that went on expenses such as first class travel.

And there have been some spectacular missteps by foundations, such as the decision by the Carnegie and Rockefeller organisations to support Nazi Germany's eugenics programmes in the 1930s.

In 1933, $500 million of publisher Walter Annenberg's foundation money was wasted in an effort to improve US public schools. However, the author could identify only four foundations that had ever publicly admitted to failed initiatives.

One of the great problems for philanthropists and their foundations is finding good and worthy causes for their money. It is easy to write cheques. But foundations are only as good as the beneficiaries they identify.

Although Fleishman praises Buffett fulsomely for not seeking perpetual glory with a foundation named after himself - he suggests the "sage of Olaha" will perhaps be known as the "saint of Omaha" - the Berkshire investor took the straightforward option of being a donor rather than a philanthropist.

Donors can set conditions and Buffett has stipulated that his vast wealth be disbursed within a specified time. The Gates Foundation, also time-limited, has now to spend at least $3.5 billion a year starting in 2009. As Buffett himself said, making money is a lot easier than giving it away wisely.

The rich give to foundations for a range of motives: an urge to "give back"; a sense of religious duty; a desire to receive fawning coverage in the media and invitations to stylish parties; the need to redeem a negative business reputation; a yearning for the "immortality" that goes with the purchase of naming rights for a public building, or simple altruism - the human desire to help others.

As Ireland becomes more like the US, the very rich, for whichever reason, will be expected to play their part in realising social and policy change. As reported last week, Ireland's four wealthiest men now have combined assets of $10.6 billion.

Some sectors in Ireland are already dependent on philanthropy. The universities were rescued from near-penury in the 1990s by Atlantic Philanthropies (Fleishman ran its US arm for some years) and still rely on generous donors, and some 17 significant foundations registered with Philanthropy Ireland are already providing essential funding in health and welfare programmes.

What is needed for all foundations to fulfil their potential, Fleishman argues, is a good strategy, high-quality leadership, greater transparency and openness to critical review. He makes the case that it is perhaps time for newspapers to appoint philanthropy correspondents to dig a bit deeper into this unaccountable sector of civic life - for its own good and that of civil society.

Conor O'Clery's biography of American philanthropist Chuck Feeney, founder of Atlantic Philanthropies, will be published in the autumn.