Common Ground?

I heard something intriguing at last month’s Not-for-Profit Corporations Conference at IIT Chicago-Kent College of Law: that giving general operating support can be the best way for foundations to assure that their tax-exempt status isn’t jeopardized by any advocacy activities of their grantees.  While I’m doubtless doing violence to the subtleties of statutory interpretation, I confirmed with speaker Joshua J. Mintz, general counsel of the John D. and Catherine T. Macarthur Foundation, that I had understood him correctly: granting general operating support to charities is a method for protecting foundations.  It prevents them from being tarred with the brush of any advocacy the grantee may be doing–general operating grants are simply presumed to be going for something else.  Support restricted to a single program risks associating the foundation with any advocacy done in connection with the program.

Could this be a mechanism for breaking the stalemate between charities who want operating money and philanthropies who seek restricted uses of their support?  If every 501(c)(3) steps up its advocacy efforts, it will then be in a position to ask foundations for general operating support "for your protection" (like the wrapped water glasses in hotel rooms). 

And contrary to popular belief, 501(c)(3)s are allowed to be active politically, provided they stop short of endorsing a candidate or a particular piece of legislation currently under consideration.  So this suggests that charities take a bolder stance in pursuing advocacy as well as a slightly different posture in requesting general operating support.  Highlight advocacy in grant proposals, and then go on to say, "We do not want the foundation’s money for advocacy, of course, though any individual ‘project’ might be tied to advocacy by an over-zealous IRS agent. So it’s for your safety, foundation, that we’re asking for general operating support."

Grantwriters, foundation people, please find the holes in my logic.  The idea of a solution to the stalemate is too good to be true.

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One Response to “Common Ground?”

  1. Maureen O'Connor Says:

    Oh, be still my barely beating grantwriter’s heart. The idea of leverage to get foundations to support nonprofits’ general operations—instead of the typical short-term project funding (with the inevitable question along the lines of, “how will you keep this going when we move on to the next big thing?”)—sounds heavenly.

    But after 15 years in the grantseeking trenches, here’s my fear. With the proliferation of nonprofits (and cuts in public funding, etc.), foundations are inundated with requests. A surprising number of foundation staff have said explicitly (including this past week on a panel I moderated at a conference) that they must look for reasons to throw proposals in the trash. I’m afraid that any mention of advocacy could put the applicant’s proposal in the trash—unless they already have a strong relationship with the funder. With such a relationship, it could be a great conversation.

    It’s also worth noting that the MacArthur Foundation has shown unusual willingness to make significant grants based on past performance and future potential rather than explicitly delineated projects. Their so-called genius grants for individuals are a well-known example; more recently they’ve instituted annual awards of up to $500,000 for “small, creative and effective institutions” worldwide—nine of them this year. Talk about a way to build capacity.

    An article in this summer’s Stanford Social Innovation Review, “The Leadership Deficit” by Thomas J. Tierney of Bridgespan Group, presents another interesting argument for general operating support: the coming nonprofit leadership shortage described perhaps most notably in the “Daring To Lead 2006” report referenced by the Nonprofiteer in a previous post. Tierney states that the low level of foundation funding for general operating support “reflects the implicit belief that spending on leadership—recruiting expenses, training costs, salaries and benefits—should be held to a bare minimum, as should the number of senior positions. But not all overhead is equal. Leadership capacity is what matters most to the long-run effectiveness of any organization, including nonprofits.” In other words, solely funding programs and neglecting to support the long-term health of the organizations that deliver those programs, is, to put it politely, an unsustainable approach. I’m sure that foundation leaders want their investments to be a little smarter than that.

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