One of the city’s most prestigious charities is re-examining its investment practices after drawing the attention of the Senate Finance Committee for multimillion-dollar payments to money managers who are also on the charity’s board of trustees.

“Any time that government officials raise issues we make sure that we take full advantage to review policies as we continue to help poor people in New York City,” the Robin Hood Foundation’s executive director, David Saltzman, said.

With the goal of alleviating poverty in the city, the foundation’s board gives away all donations within a year of their receipt. The board’s 31 members, comprising top hedge fund managers and luminaries such as Gwyneth Paltrow, also pool their own money in an emergency fund to prepare for events such as the attacks of September 11, 2001.

That fund is managed by an investment committee made up of five board members. In 2005, the committee chose to invest part of the fund in 19 hedge funds, including seven that are connected to fellow board members. The foundation paid the 19 hedge fund managers the standard money management fee of 2% of the assets and 20% of the profits, which added up to $14 million for 2005. Senator Grassley, a Republican of Iowa, questioned the committee’s practice of investing in the funds of its own members and the money management fees.

“I don’t remember Robin Hood keeping 2 and 20 as his cut,” Mr. Grassley told Bloomberg News, which first reported the senator’s concerns about the charity yesterday. “I’m worried that more and more, it seems some hedge fund and private equity managers see charitable donations as a chance to do well for themselves.”

Mr. Saltzman pointed to the fund’s growth — average annual returns of 17% at a third of the volatility of the stock market between 1990 and 2006 — as the justification for the fees. The Standard & Poor’s 500 Index, by comparison, had returns of about 11% over the period. Also, he said the managers could not offer their services for less because it would violate contracts with investors that stipulate an equivalent fee.

The investment committee members cannot invest in any funds that they control, but, according to the foundation’s 2005 tax return, they invested in three funds directly controlled by two board members, Paul Tudor Jones II, who manages Tudor Futures Fund and Tudor BVI Global Fund, and Steven Cohen, who manages SAC Capital International. Through spokesmen, both declined to comment yesterday. The emergency fund was invested in a total of 19 hedge funds in 2005, according to the tax return. The portfolio also includes funds associated with other board members and donors.

There doesn’t appear to be anything illegal about the foundation’s investment set-up, the executive director of the National Center on Philanthropy and the Law at New York University, Jill Manny, said.

“As long as the decision to use these money managers was made at arm’s length, it’s unlikely that any laws were violated,” she said. “It’s just an appearance of impropriety. … I suspect they are doing the best thing for the foundation.”

After analyzing the Robin Hood Foundation’s audited financial statements in March 2006, the Better Business Bureau of New York ruled that the charity met its standards of accountability, the director of the bureau’s New York Philanthropy Advisory Service, Melissa Popper, said. The foundation will again be evaluated in March 2008.

Still, the hiring of board members to manage foundation funds raises questions about the possibility of investment practices that take advantage of charity status, the president of the American Institute of Philanthropy, Daniel Borokhoff, said.

“What’s happening here that is of concern is the board members are receiving tax benefits on donations that are later turning into profits,” he said. “It is generally frowned upon to do business with your board. When you give money, you aren’t supposed to get anything back in return.”

Since it was founded in 1988, the Robin Hood Foundation has risen to a position of distinction in the city. The foundation has dispersed more than $550 million in cash, as well as donated goods and services to charitable organizations. The foundation is especially well known for its use of free-market forces to enhance giving, and the use of outside monitors to analyze the effects of the money it donates to charities.

The donations of board members entirely pay for the operations of the foundation and also go to charitable groups.

Mr. Saltzman said $5 million of the emergency fund Mr. Grassley targeted in his remarks helped sustain organizations serving poor people after the September 11 attacks. Another $20 million was recently taken from the fund to help the city in building two high schools in the Crown Heights section of Brooklyn and the South Bronx, Mr. Saltzman said.

“As far as I’m concerned, they are still looking for an issue,” the founder of the Doe Fund, George McDonald, said of Mr. Grassley’s remarks. The Doe Fund, which has received donations from the Robin Hood Foundation, helps formerly incarcerated people become employable and clean up their lives. “Robin Hood has an unbelievably significant role in helping poor people. This is hundreds of millions of dollars that would not have otherwise made it to poor people.”