When foundations try to identify obstacles to a grantee’s success, they had better look in the mirror.
That’s according to a new analysis of 102 nonprofit projects that ran into trouble and required cash. Grant makers, government agencies, and other donors were to blame for the disruption in nearly half of these cases, often because they changed their funding strategy or delayed promised money.
“This data suggests that the biggest barrier to effective impact and the greatest pain point for nonprofits and social enterprises are their own funders,” concludes the report.
Maya Winkelstein, executive director of the Open Road Alliance, which produced the report, stressed that donors are causing problems inadvertently. They fail to recognize how even a small change — shifting a grant-payment schedule by a few months, for instance — can have a big impact.
“Things that seem like a routine inconvenience to the funder actually translate into a crisis for the grantee,” Winkelstein says.
‘What Goes Wrong’ Data
Open Road, which launched in 2012, provides grants and low-interest loans to nonprofits with a project that needs an infusion of money to get past a bump in the road. For the report, the organization analyzed applications it received over five years.
These requests are the basis of the first empirical data on “what goes wrong,” according to the report. Open Road tallied the instances in which nonprofits needing its help were affected by natural disasters, violence, public-health crises, or other events it calls “acts of God.” It also examined groups whose “organizational misfortune” — a theft or equipment failure, for example — created an emergency.
The report does not address nonprofits that caused their own misfortune, as Open Road does not help such groups.
In 46 percent of the 102 requests for help, the analysis found that donors had caused the grantee’s problem. In 13 instances, the donor had changed its funding strategy and discontinued its grants. Sometimes grantees were cut off even after they had been reassured that their funding would continue.
In another 12 instances, funding delays had created havoc. And in nine cases, nonprofits came to Open Road because donors’ rules or inflexibility were preventing them from securing needed money. In one instance, a foundation with more than $1 billion in endowed funds couldn’t access the money to provide an interim $90,000 grant that the nonprofit needed simply to make payroll.
The report recommends that foundations and others adjust grant cycles to meet grantee cash-flow needs; include contingency funds in grant-making awards; and ease restrictions on what grant money can be spent on.
It also urges those holding the purse to improve what can be vague communications with grantees. One nonprofit leader quoted in the report warned that program officers sometimes say things like, “I can’t promise anything, but your chances are really good for a renewal.”
“We have to act on those conversations; we have to plan for something,” the leader says. “Ideally, we’d only budget with what we have in the bank, but if we did that, we could never plan more than one or two months ahead.”
