Foundation Friday: It Isn’t Just For Money Anymore

A new report from the Foundation Center looks at the "direct charitable activities" of the nation’s grantmakers–that is, where they’re spending their money other than on grants.  Though such expenditures might include, oh, direct charitable activities (like providing services to people who need them), the report finds that fewer than 10% of grantmakers actually do that.  Instead, most foundations divert money from grants for the purposes of

  • convening conferences and other events that serve a broad audience;
  • providing technical assistance or training to grantees; and
  • supporting the service of their staff on advisory boards of other charities or public commissions.

All very worthy causes, no doubt; as a consultant, the Nonprofiteer is particularly enthusiastic about the sums spent on technical assistance to grantees.  But now that we know where funders direct their non-grant money, would it be possible to learn whether that money is actually more effective than it would be in the hands of grantees? 

PhilanTopic reports that an American Enterprise Institute scholar disapproves of foundations’ actually providing services.  (What a surprise, when the Institute exists to disapprove of having social services provided by anybody.)  But the Nonprofiteer disapproves of "direct charitable activities" because that’s mostly a misnomer.  If foundations aren’t providing services and they’re not giving grants, why exactly are these people getting a free pass from the Federal treasury?

Note that while the report purports to document a "growing" use of devices other than grantmaking, it’s a baseline study so there’s no point of comparison from which to assess growth.


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4 Responses to “Foundation Friday: It Isn’t Just For Money Anymore”

  1. Rick Cohen Says:

    Dear Nonprofiteer: Some years ago, as the new executive director of NCRP, I debated Barry Gaberman of Ford and Kirke Wilson of Rosenberg on foundation payout in front of an audience of a couple of hundred rather antagonistic attendees at a Council on Foundations meeting. The argument raised by angry members of the audience was that the non-grant charitable activities were the charitable equivalent of grants and therefore merited equal treatment in private foundations’ qualifying distributions. That was the issue that stumped me. Do nonprofits who receive the benefits of foundations’ direct charitable activities and should the public which functions as shareholders in these tax exempt corporations view foundation conferences, foundation-provided technical assistance, and other direct activities of foundations as the dollar-for-dollar equivalent (in payout terms) as grants and PRIs? My interlocutors certainly did, rejecting my argument for an all grants (or grans plus PRIs) payout rate. And when I challenged Gaberman on the foundation TA question (e.g., the value of the advice and assistance offered and delivered by foundations’ program staff), we both agreed that there was no good data on exactly how good and how valued and how effective (especially as compared to non-foundation TA providers) that TA was. Given data I’ve seen on how differently foundation execs and nonprofit recipients view the value and effectiveness of TA mandated (and generally paid for) by foundations (some older studies by Paul Light contain some nuggets on this score), comparisons of the volume of foundation grantmaking versus foundation direct charitable activities should be not simply an issue of measuring how much, but asking how comparatively worthwhile. And then there’s the issue of when foundations’ direct charitable activities, e.g., foundation “initiatives”, actually compete with nonprofits that would otherwise be grant recipients in those arenas of activity, but that’s another question worth exploring. Keep up the good work, Nonprofiteer!

  2. Nonprofiteer Says:

    Rick, Thanks as always for the historical perspective. I’m less concerned than you are, I think, about whether foundations’ own initiatives compete with those of their grantees. If in fact the Annie E. Casey Foundation (to choose one of the few doing actual service-providing with its non-grant money) knows more about service to children than its grantees–not inconceivable considering the access it has to the trials and failures of those grantees–then I’m happy to have it providing the services instead; because as you say the issue in grants vs. other activities is not just how much but how comparatively worthwhile.

    Like you, I’m also struck by the wide gap between funders’ view of the value of advice to nonprofits and the nonprofits’ own view. In general I think we give charities too much advice and too few resources, and yet I’ve also worked with clients who were too busy being furious that the funders had inflicted me on them to notice that they had no idea what their groups were supposed to be doing or for whom. So those are cases in which the funders are right that their money is better spend on advice than on largesse.

  3. Rick Cohen Says:

    Dear Nonprofiteer: You’re right that the foundations would be well-advised to run their own stuff if they really do know more than the grantees, but there’s a problem. As most people know, foundation staff are routinely told by their grantees (or grant applicants) how brilliant, witty, charming, good-looking, and insightful they are, and rarely told that they’re misguided or wrong, because for some, the consequence is that the discordant message means you don’t get the grant. It’s the power imbalance and the behaviors that support it that make foundation people often think they know more than they actually know (Ed Skloot among others has written about this in the past). So my problem is not whether AECF knows more than its grantees, but whether it (or, not to pick on AECF, any other funder) knows how much it really knows and doesn’t know.

  4. Nonprofiteer Says:

    I’d make a distinction between what program officers imagine they know because of the piles of flattery they wade through day-in day-out (something we joke about but which is a serious problem whose solution remains wholly obscure to me) and what data foundations have had the opportunity to collect over years of funding in a particular area–its knowledge capital, to use the private sector’s buzz-phrase. One of the big management consulting firms used to make its associates write reports to its in-house Knowledge Capital data base when they weren’t actually out on a client gig, so that (by hypothesis) consultants on later gigs would be able to look up “Data base merger: things to guard against” rather than have to repeat mistakes. Maybe foundations don’t do anything like that–I don’t know–but they could; in which case, after looking up “Literacy program: things that don’t work” 55 times and finding something very much like the proposal in front of him/her, a program officer could reasonably suggest that the foundation just set up something effective itself.

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