Although foundation leaders increasingly support the idea of providing multi-year grants for nonprofits’ general operations, relatively few do so regularly because of organizational inertia, suggests a study released Wednesday.
The study found little evidence that the “tried and true myths” about what is preventing foundations from offering multi-year general operating support were actually limiting grant makers, says Ellie Buteau, vice president for research at the Center for Effective Philanthropy, which surveyed foundation program officers and chief executives as well as grantee leaders.
For instance, program officers often view their bosses as lukewarm on the practice, Buteau says. However, both executives and program officers say they are widely supportive of long-term general operating support, the study found.
On a scale of 1 to 5, with 1 being “strongly in favor of a decrease” in multi-year general operating support and 5 being “strongly in favor of an increase,” foundation chief executives gave themselves an average score of 3.9, indicating they’d like to increase unrestricted grants. They perceived their boards as slightly less in favor, with an average score of 3.4 but still in support of an increase over all.
Program officers gave themselves a score of 4.4. They ranked their executive leadership’s interest at 3.7.
What’s stopping foundations from providing such grants? The study, Buteau says, suggests that the idea that others in the organization are against doing so is inaccurate. The reasons, she suggests, are a little more vague: Many don’t seem to believe multi-year general operating support is a “fit” with the grant maker’s practice or think it hadn’t yet been prioritized.
“It simply boils down to choices foundations want to make,” Buteau says.
The result, the study says, is a “sobering disconnect” between the attitudes of foundations, which are increasingly embracing multi-year general operating support as a concept, and the experience of nonprofits, which do not regularly receive such grants.
The Data
About 41 percent of nonprofits surveyed by the center receive multi-year general operating support. Of those, less than one-quarter of their foundation funding consisted of nonrestricted grants.
The report notes that organizations led by people of color are especially affected by the lack of general support because a larger share of their revenue typically comes from foundation grants.
Foundation leaders have changed their views on unrestricted grants since a previous Center for Effective Philanthropy survey done in 2006 that is directly comparable to the study just published. In their responses to that survey, foundation leaders more frequently said support for a specific program was a better way for a foundation to ensure that its trustees are engaged, to allow for the measurement of results, to sustain a nonprofit’s operations, to spur innovation, and to hold grantees accountable. In the recent study, foundation leaders indicated that both program support and general operating support over multiple years were effective.
Arguments Against General Operating Support
Foundation leaders, quoted anonymously by the center, gave a number of reasons they didn’t give multi-year general operating support. Some community foundation leaders said their pool of discretionary funds was not large enough to support as many nonprofits as they would like to. Other grant makers said their founders had not envisioned giving unrestricted grants. And others suggested general support wasn’t consistent with their foundation’s approach.
“Resources cannot be used simply for general support,” responded one foundation leader. “Our resources are for conducting the work.”
Surveys for the study were conducted in late 2019 and early 2020, before the outbreak of the coronavirus pandemic in March. Fifty-seven percent of nonprofits were unable to cover essential operating costs — or at least considered themselves at great risk of being unable to do so. The center tabulated survey responses from 273 foundation chief executives and program officers and 212 grantee chief executives.
Since the spread of Covid-19, which stretched more nonprofits even closer to the breaking point, many foundations nationally have reconsidered how they provide support. More than 780 foundations pledged to, among other things, provide more general support and give grantees flexibility to use dollars previously earmarked for specific programs to support basic operations to stay afloat.
To see whether those practices stick beyond the first year of the pandemic, the center, supported by the Ford Foundation, will survey grant makers again next summer, using this latest report as a benchmark.