Nonprofits that received large, unrestricted donations from MacKenzie Scott have experienced few challenges or unintended negative consequences, despite grant makers’ concerns that the gifts might cause financial and operational problems in the near or long term.
That’s according to year two of a three-year study by the Center for Effective Philanthropy, which sent surveys to 1,545 nonprofits that Scott identified as grant recipients on her Yield Giving website since 2020, the first year she started giving large gifts to charities. The survey includes responses from 632 nonprofits as well as interview excerpts from leaders of 40 of those groups, half of whom identified as people of color.
Interviews with private and community foundations and United Ways were also added to this year’s study to examine how other donors see Scott’s giving. The Center for Effective Philanthropy received $10 million from Scott in 2021 but did not include itself in the survey.
“From the moment news of MacKenzie Scott’s giving and the way she was doing her giving broke, we have heard so many different perspectives from funders about whether this is the best thing since sliced bread or a train wreck that was about to happen or something in between,” says Phil Buchanan, president of the Center for Effective Philanthropy. “We thought it would be helpful to interview funders and hear what they thought about what might happen but also the degree to which MacKenzie Scott’s approach was or wasn’t influencing their thinking.”
While more than 75 percent of the funders interviewed expressed concerns about nonprofits’ ability to handle and manage Scott’s large, unrestricted donations, most of the nonprofit leaders surveyed said they had the right infrastructure to handle the gifts, and 80 percent said they did not encounter any challenges. Eighteen percent reported experiencing a minor challenge using Scott’s donation, and only 2 percent of respondents — representing 11 nonprofits — reported encountering a major challenge related to the donation.
Among the study’s other findings:
- As Scott’s philanthropy progressed, she gave to somewhat smaller nonprofits and the size of her donations also got slightly smaller. For example, Scott’s median grant size in 2020 was $9 million, but in 2021 and 2022 it was $5 million.
- Nearly half of the organizations Scott funded from 2020 to 2022 were direct-service groups, and 25 percent were advocacy organizations. In 2022, she added K-12 schools to her list of recipients and donated more money than in previous years to nonprofits that re-grant to smaller groups working within the same or a similar cause.
- Almost all of the nonprofits that received a gift from Scott — 90 percent — used some of the money to advance equity, with two-thirds directing it toward racial equity and about half directing it to efforts that address economic mobility. Roughly 40 percent used the money to address gender equity.
- More than 90 percent of nonprofits that received a grant from Scott have decided how they plan to use some or all of the money. Nearly 70 percent said they spent some of the grant money, and 9 percent said they spent all of it. Twenty-two percent said they have not yet spent any of the grant money.
Expanded and Improved Services
Nearly 80 percent of Scott’s grantees reported the ability to expand and improve existing programs. For example, one group said Scott’s money increased the number of people it serves by 30 percent, and another charity said it went from being able to help 65,000 people to aiding 165,000. Almost 70 percent said the money is giving them the chance to pursue opportunities not previously possible.
Blue Star Families, a nonprofit focused on improving the lives of military families, received $10 million from Scott last year and is using some of that money to broaden and strengthen several programs, hire more staff, and make investments toward future financial health, says Margaret Davis the group’s executive vice president of development.
Davis says the $10 million grant is enabling Blue Star Families “to address some of the key interlocking issues that are so prevalent in our service population, our veterans, and all military families.”
Those issues include a profound sense of isolation and lack of belonging. According to the organization’s data, about 70 percent of active-duty military families don’t feel connected to the communities where they live, says Davis. Many also struggle to afford adequate housing and food, and repeat deployments and moves place considerable strain on families and make it hard for spouses to hold on to jobs, resulting in the loss of additional income to supplement an often low-paying military salary.
Davis says her group is using Scott’s money to augment the nonprofit’s career-development programs for spouses, its research projects, and its programs aimed at alleviating isolation by connecting military families to each other and to their nonmilitary neighbors. The donation is also being used to expand the organization’s chapters throughout the country, which provide military families with a range of in-person and online support services that can include programs for children, food assistance, and access to local events and activities.
Blue Star Families operated 11 chapters before receiving the Scott grant, and Davis says the group plans to add two more full chapters and 10 outposts or mini-chapters by the end of next year in 25 states, Washington, D.C., and Guam. Previously, the chapters were mostly led by volunteers or a program manager, but with Scott’s donation more of the chapters can now hire a professional executive director and a program manager. In all, the charity has been able to hire 18 additional staff since Scott’s grant.
To safeguard the nonprofit’s future, Davis says the charity is also saving and investing some of the money and using it to attract donations from others, including a $10 million donation from Craig Newmark Philanthropies. She balks at concerns expressed by some grant makers that charities funded by Scott might soon fall off a financial cliff.
“That shows a lack of faith in the ingenuity and determination of nonprofit organizations to take on huge challenges every day,” says Davis. “These are outsized challenges compared to their revenue, budget, or staff capacity.”
Hiring and Financial Stability
Seventy percent of respondents said the money from Scott will significantly strengthen their organizations and improve their ability to carry out services. That’s proving especially true at the Urban League of Nebraska, which received a $2.9 million grant from Scott last year.
The 97-year-old nonprofit primarily serves north Omaha, which is largely populated by people of color and immigrants. The charity provides educational offerings for local elementary, middle, and high school students, job programs for thousands of adults, and a range of other support services for financially struggling families. Nine decades has left some wear and tear on the organization’s headquarters, so some of Scott’s money is going toward repairs and building improvements, says CEO Wayne Brown.
He is also in the process of directing some of the money toward expanding and deepening the nonprofit’s programs. A big part of that effort will include something Brown could not afford to do until receiving Scott’s money: pay for full-time employees to receive intensive training in financial coaching and restorative practice, the latter of which focuses on creating healthier communities by decreasing crime and antisocial behavior, repairing harm and restoring relationships, and building up social capital.
Brown says the pandemic had a profoundly negative effect on many of the youths and families his team serves.
“They were stuck at home, and for the first time their families had to start going to food pantries and stand in blocks-long lines for food,” says Brown. “Their parents were laid off during that time, the lights were cut off, they had to rely on rental assistance, and that poverty piece was so hard on them, and then the isolation from not being able to be with their friends and be in a community for months at a time. So when they returned to school the level of violence, bad behaviors, suspensions were really [extreme].”
Once the organization’s staff has received restorative-practice training, they will work with families on restorative practices at home and within Omaha public schools to reduce trauma and violence. The organization is using some of the Scott grant to hire a consultant to help the organization research and evaluate its programs and implement improvements, and, Brown says, the organization is creating a financial empowerment program that aims to reduce the racial wealth gap in Omaha.
Brown says concerns that a large grant would result in unintended negative consequences give him pause.
“I can’t speak for every nonprofit who’s small and receives these funds, but I can tell you when we received it, it was a vote of confidence that somebody out there saw we could do this work,” Brown says. “We’re not incompetent. We’re not helpless. We just need the ability to level up, and that’s what this this gift allows us to do.”
Transparency Concerns
Buchanan of the Center for Effective Philanthropy notes the study’s findings are not longitudinal. Yet he also says that funders have historically underestimated the abilities of nonprofits and their leaders.
“These nonprofits were carefully selected and vetted, so why is it surprising [they] would have a really clear idea how to responsibly use unrestricted resources to advance their programmatic work, to invest in their internal capacity, and to shore up their long-term financial sustainability?” says Buchanan.
Philanthropy historian Ben Soskis says he thinks much of the funders’ skepticism is rooted in trust-related issues and speaks to donors’ anxieties about whether they can solve big societal problems by donating large sums to nonprofits.
“Funders are probably still waiting to see if this model has had a discernible impact,” says Soskis, a senior research associate at the Urban Institute’s Center for Nonprofits and Philanthropy. “Right now, there’s not enough evidence of the impact of these gifts to dislodge the longstanding funder expectations that they could know precisely how their money is being spent.”
Scott started giving big gifts in the summer of 2020 with her first round of unrestricted, mostly one-time donations to hundreds of charities. For many nonprofits, the seven- and eight-figure gifts were the largest they had ever received, and her subsequent giving has continued to follow that model. So far, she has given more than $14 billion to at least 1,600 nonprofits, according to a recent Chronicle tally. Scott named the organizations that received grants from her in 2020 and part of 2021 but later decided to leave it up to the nonprofits to announce the gifts. She was then roundly criticized for what some perceived as a lack of transparency.
Scott launched her Yield Giving site last December in response to that criticism. The site lists most of her grants from 2020 through 2022, but it hasn’t been updated since its launch last year. So far, only 46 nonprofits have publicly announced receiving a Scott grant this year, though many more charities may have landed donations.
Scott has signaled she is open to experimenting with new giving strategies. In March, she announced a $250 million open call to community-focused charities to apply to Yield Giving. Scott and her team brought on the nonprofit Lever for Change to oversee the application process, and she plans to give $1 million apiece to 250 charities. Winners will be announced early next year.
For the most part, Scott has refrained from describing how she and her team decide which nonprofits to support, a source of frustration in the nonprofit world.
About 25 percent of the funders interviewed in the study mentioned concerns about Scott’s lack of transparency in selecting grantees. And philanthropy experts have continued to sound alarms about how little information Scott and her team are willing to provide the public.
Scott’s unorthodox approach to large grants makes it impossible for people to scrutinize and question the role of big philanthropy, says Rob Reich, a political science professor at Stanford University. This is especially problematic, he says, because Scott has written essays about how she wants to diminish the power she wields as a person of extreme wealth by giving big donations to overlooked charities and empowering them to solve big social problems.
“MacKenzie Scott’s distinctive and bold approach to philanthropy attracts attention,” says Reich, “in contrast to the much more technocratic approaches that are common among other big philanthropists. But her lack of transparency is disempowering ordinary citizens from exercising their own agency to understand the role that big philanthropy plays in American democracy. Ordinary citizens deserve more insight into the methods, strategies, and mechanics of her extraordinary giving.”
Reporting for this article was underwritten by a Lilly Endowment grant to enhance public understanding of philanthropy. The Chronicle is solely responsible for the content. See more about the Chronicle, the grant, how our foundation-supported journalism works, and our gift-acceptance policy.