March 12, 2012

Foundations Didn't Increase Focus on 'Nonprofit Success' in Downturn, Study Finds

As charities face a continuing struggle to raise funds in the slow economic recovery, they will not find lots of new sources of unrestricted aid or other help to make it through the tough times, according to a new study.

A survey of 755 foundations conducted in 2011 by Grantmakers for Effective Organizations and the TCC Group found that 83 percent of foundations said they devote money to general support, compared with 80 percent in 2008.  And the median amount of foundations' budgets devoted to unrestricted support held steady at 20 percent.

But another finding suggests that some foundations are giving more in unrestricted support. Thirty-five percent of foundations surveyed said they gave more money in general operating support in the past two years, compared with 15 percent that gave less.

Thirty percent said they spent more to help charities strengthen their operations, while 10 percent spent less.

But as general operating support became slightly more common, multiyear grant dollars, another form of more flexible financing that appeals to charities, became less so. Twenty-eight percent of foundations surveyed said they gave less money away in long-term grants, while 13 percent gave more.

One way foundations do seem to be getting more responsive to nonprofits' needs: the amount of time it takes them to approve a grant. In 2008, foundations said that it took a median of 90 days; last year, the median time was 60 days.

The study, Is Grant Making Getter Smarter?, also found a connection between foundations that solicit grantee feedback and those that offer multiyear grants and general support.

Foundations that say they always use their grantees' reports about their work to improve their practices were three times more likely to increase multiyear giving than those that never did, according to the study.

Over all, the report concluded that the harsh economy had done little to persuade foundations to change their ways. "Whether you view the absence of movement as a disappointment, or whether you view stability during turmoil as a success in itself," the report said, "it is clear that the field at large did not change practices in many critical areas that support nonprofit success."