Nonprofits Welcome Billions in Pandemic Giving but Wonder if Support Will Last

The global reach of Covid and its staying power both as a killer disease and an economic menace attracted a philanthropic response of $20.2 billion last year, more than double the amount given to the previous top 10 disasters combined, according to preliminary estimates released Wednesday.

“The dollars that have been donated are staggering, just staggering,” says Regine Webster, a vice president at the Center for Disaster Philanthropy, which, along with Candid, compiled data on Covid-related giving last year.

For many nonprofit leaders, however, the true measure of philanthropy’s response to both the pandemic and the racial-justice uprisings that followed the killing of George Floyd in May will be in whether foundations and other donors continue the less restrictive approaches to grant making they adopted during the pandemic’s early weeks. By one measure tallied in the report — the growing use of general operating funds — a single donor, MacKenzie Scott, was responsible for most of the change.

Private foundations awarded $4.7 billion in grants last year earmarked to respond to the pandemic, and community foundations gave $500 million, according to the report. Anchored by Scott’s $4 billion in unrestricted gifts, wealthy donors gave $5.8 billion. And corporations made a total of $9.4 billion, about a quarter of which was in the form of food, safety gear, and other products rather than cash.

Grace Sato, Candid’s director of research, says when the pandemic hit the six-month mark, she thought giving might begin to taper off. But donations in the second half of the year nearly matched the initial months. The need for more money and a change in how donors approach their gifts are still pressing, she says.

“The magnitude of generosity that came through in 2020 is impressive,” Sato says. “At the same time, we know that vaccine delivery, the protracted effects on the health-care system, people’s mental and physical health, as well as on the economy are going to be long-standing issues.”

Human-service organizations received the largest share of money at 28 percent, followed by health (26 percent) and education (20 percent). A number of groups benefited from large gifts from individual donors, including Feeding America, which received $100 million from Jeff Bezos.

Responding to the Threat

As it became clear that the pandemic was a persistent health concern that couldn’t be shrugged off, many philanthropy experts saw the crisis as a moment to reinvent how foundations give.

In March, about 800 foundation leaders signed a pledge circulated by the Council on Foundations to change their ways. In what looked like nonprofit wish list, grant makers said they would rush money to grantees ahead of schedule, support advocacy work, boost grants to people hit hardest by Covid, and allow grantees to bypass much of the time-consuming paperwork usually required to land a grant and report on how money is being put to use. Other foundations leaders who didn’t sign the pledge still experimented with those changes, and some did other things to make life easier for grantees like provide multiyear grants.

According to the data collected by Candid and the Center for Disaster Philanthropy, along with interviews of philanthropy leaders, philanthropy still has a long way to go to thoroughly transform itself. Only 39 percent of gifts were for general support rather than specific programs, according to the report. If the gifts from Scott are excluded, that figure plunges to 9 percent.

The Scott effect was also in play in the proportion of support given to benefit people of color who were hit hardest by the pandemic. Foundations made 32 percent of their grants to those groups. Some 44 percent of the money given by wealthy people went to those groups, a number almost solely driven by Scott’s largesse, according to the report.

Digging Deeper to Give More

The Candid and Center for Disaster Philanthropy data most likely undercounts the amount of foundation giving for general support because it relies on self-reported data from foundations. It is likely that some unrestricted grants were not captured by the study. It also doesn’t count the amount of say that grantees had in how to use grant dollars that were previously awarded because it only tracks new grants.

The report does not shed light on how much money foundations kept in their endowments, rather than giving to charity, another hot issue amid the pandemic. That’s because the study only tracked Covid-related grants, not overall grant making, and didn’t compare outgoing grants to total foundation assets.

Anecdotally, it’s clear that some grant makers dug deeper. The Wallace Global Fund for example, pledged to increase its payout to 20 percent of its assets in 2020, far above the federally required 5 percent minimum. The Barr Foundation made about $10 million in Covid response grants in 2020. This year the Boston grant maker plans to increase its grant making budget, which was $95 million in 2021, by 25 percent.

Some grant makers took extraordinary measures last year in response to the pandemic. For example the Ford Foundation was one of nine foundations that increased their grant-making budget by issuing bonds. In total, private foundations have issued $3 billion in debt since last summer.

Hilary Pennington, Ford’s executive vice president for programs, says that the pandemic and the reckoning on race following the killing of George Floyd and Breonna Taylor should have convinced foundations that they need to take more risks and pay out more in grants.

“It’s hard to justify being overly cautious,” says Pennington, who is one of the chief architects of the Council on Foundations pledge. “There is really no excuse, given the level of need in the society and the performance of the stock market.”

In addition to tapping the bond market, Ford made a number of internal changes designed to help nonprofits endure the crisis. Grants were front-loaded so that grantees wouldn’t have to wait until later in the year for another check. They were allowed to use grants at their own discretion, and Ford raised the dollar limits for grants that could be awarded on an expedited basis and for additions to existing grants.

Moving Faster

Across the country, other foundations made changes.

The Laird Norton Family Foundation in Seattle, which signed the pledge, decided in April to distribute grant money reserved for the entire year to grantees by the end of the summer. In most cases, grantees could use the money to cover whatever they wanted, with some exceptions. For instance some large organizations, like the Kennedy Center, were required to direct their grant money to Laird Norton preferences such as the Turnaround Arts program, which aims to ensure students are given equitable access to performances.

The Luminal Theater

Laird Norton’s board also voted for the first time to allow multiyear grants. This year, grantees will also have the option to report on their progress in a variety of ways. They’ll be able to fill out a form provided by Laird Norton, use a paperwork they’ve already filled out for another foundation, or simply talk with a Laird Norton staffer on the phone.

Katie Briggs, Laird Norton’s managing director, says the changes are an attempt to allow grantees ample time to work with young people or push for the reduced use of fossil fuels, two of the foundation’s main priorities.

Entering 2021, the foundation, which controls about $40 million in assets, remains in an emergency posture. Imagining a post-Covid future, Briggs says she thinks the foundation will continue to try to make life as simple as possible for grantees. But she isn’t sure if the newly instituted changes will become permanent.

“I don’t fully know what it will look like,” she says. “Some of them will probably stick.”

The Central Carolina Community Foundation also loosened its approach. It gave nonprofits the option of using existing grants to stay afloat rather than for a specific program. About 20 of the Columbia, S.C., grant maker’s beneficiaries took that offer, according to Erin Johnson, the foundation’s vice president for community investment.

Instead of requiring nonprofits to submit a report, Johnson and the foundation’s staff spoke with grantee leaders about their work, took notes, and then composed a report themselves that they submitted to the grantee for approval. The foundation also added the ability for donors who give to its donor-advised funds to search Central Carolina’s website for nonprofits that are led by people of color.

The regional grant maker also provided multiyear support for the first time to a group of eight human-service and education nonprofits led-by people of color. The groups will each get $10,000 annually for the next three years.

Johnson is confident that the grants will improve the lives of people in the area, but she doesn’t expect Central Carolina to make a significant turn to multiyear support. The reason, she says, is that the foundation supports hundreds of grantees in the area with relatively small grants. Pledging money over several years would lock in much of the foundation’s budget and make it difficult to add new grantees as needs in the area change.

“We probably won’t do it across the board,” Johnson says. “My goal is to have a more targeted approach.”

Fewer Restrictions

Early signs indicate that many foundations are likely to fall back to their old ways as the pandemic wanes. In a survey of more than 200 private foundations, including both grant makers that had signed the Council on Foundations pledge and those that hadn’t, the Center for Effective Philanthropy found that an overwhelming majority had loosened restrictions on how grants were to be used and on reporting requirements. A much smaller proportion, about 20 percent, had started making multiyear grants available.

“We saw that foundations could rapidly shift the way that they were working and change practices that have been sort of the default setting,” says Phil Buchanan, the center’s president.

But Buchanan says it’s too soon to be certain whether any changes will last. When asked last summer, slim majorities said they would incorporate grantee-friendly practices, but those practices may be limited to certain programs. Many foundations are still loath to commit to new practices because the pandemic turned so many people’s world upside down, says Buchanan, adding that the center plans a follow-up survey this summer.

“With so much happening, so many interlocking crises, some foundations were just hesitant to tie up funds and future commitments because they didn’t know what 2021 would bring,” Buchanan says.

A spot check of about 50 smaller foundations conducted in January by Exponent Philanthropy revealed a similar uncertainty, according to Henry Berman, the membership organization’s chief executive.

Roughly a quarter of the grant makers contacted by Exponent said that during the second year of the pandemic they will allow grantees the flexibility to use program grants for general operations, delay reporting deadlines, and make extra emergency grants. About half said they were still considering their options.

Foundations discovered that when they veer from traditional practices and accede to the longstanding demands of grantees “the sky did not fall,” Berman says.

Still, Berman says some regular foundation requirements, including the provision of project grants instead of general support and the requirement of a stringent reporting process, provide needed accountability for the use of philanthropic dollars.

“I think there’ll be some pullback,” Berman says, “but I don’t think it will revert all the way back to what it was.”

Testing Ground

Philanthropy’s response to the pandemic may prove to be an ideal testing ground for proponents of what is known as “trust-based philanthropy,” which served as the template for the Council on Foundations pledge. The idea is that foundation leaders need to minimize the power imbalance between cash-poor grantees and foundations that control huge endowments.

Since last March, the Trust-Based Philanthropy Project, a network of foundations using the approach, has fielded hundreds of calls from interested foundations, wealth advisers, donors, and nonprofits, according to Shaady Salehi the project’s director. The project is in active discussion with 50 foundations interested in changing their practices, she says.

One of them, the California Endowment, is hoping to make lasting changes in how it makes grants. In 2019, 9 percent of the foundation’s grants were for general operating support. Last year, the foundation bumped that share up to 19 percent. Hanh Cao Yu, the endowment’s chief learning officer, says the increase was a prelude to an even bigger boost to 40 percent this year.

The grants will be largely unrestricted, although the endowment’s legal team is working to craft grant agreements that forbid endowment grants from supporting lobbying. And grant agreements to national organizations will still stipulate that money must be used to benefit Californians, in keeping with the Endowment’s stated mission.

Those processes can be accomplished relatively easily, Yu says. What will take longer is educating staff and outside collaborators about the broader tenets of the trust-based approach, and ensuring it is baked into the foundation’s work.

“These kind of innovations don’t happen very fast,” she says.

Michael Theis contributed to this article.