What's on the minds of foundation leaders?

Commentary: How we fail culturally specific arts groups

John R. Killacky, BlueAvocado.org, 6/23/11

As Program Officer for Arts and Culture at the San Francisco Foundation, I and philanthropic colleagues often bemoaned how fragile many culturally specific organizations were. As changed demographics transform the country, we should be seeing a burgeoning renaissance for artists working within specific cultural traditions in communities of color.  But where is that renaissance?  Is our society so racist that these artists and organizations cannot thrive?  In hindsight, many funders did not feel equipped to judge quality outside of their own world views and experiences. As a result, a separate "other" track was created for these organizations, a kind of affirmative action track with far less resources.  By creating this separate track, we may have unintentionally entrenched a two-tiered caste system.  In addition, support to culturally specific organizations often focused on administrative infrastructure building and considered artistic quality a lower priority. This was a mistake, resulting in further undercapitalizing artistic efforts.  Maybe philanthropy should have taken a page from venture capitalists' playbooks, investing more deeply at a significant level over a five- to eight-year time frame, as well as offering a range of non-cash, value-added assistance by sitting on boards, mentoring, and coaching of senior managers, in addition to artistic support.  In retrospect, I wish I had presented this kind of framework to the San Francisco Foundation trustees; instead I followed a dispersal method of distributing small amounts of money to as many organizations as possible. There is a crisis here, as arts funding remains disproportionately skewed toward the behemoths.  I worry that precious philanthropic resources will be further diverted to maintaining what was, instead of capitalizing a more representative future.  By merely preserving the past, we fail as cultural stewards and act irresponsibly.

Commentary: Why don't more of us give general operating support?

Paul Brest, president of The William and Flora Hewlett Foundation, GIA Blog, 6/20/11

In 2004, I worked with Independent Sector to draft a statement, unanimously endorsed by its Board of Directors, that called on funders (1) to opt for general operating support (GOS) when the goals of the two organizations are "substantially aligned," and (2) to pay their fair share of administrative and fundraising costs for projects.  The statement observed:

• Reliable, predictable, and flexible support is the lifeblood of nonprofit organizations.
• A funder can often achieve its strategic goals by providing core support to nonprofit organizations.
• A funder can evaluate an organization much as the organization evaluates its own success.
• The focus on project grants [prevents] grantees [from] focusing on building institutional capacity.
• Overhead costs, including the costs of fundraising, are as real to an organization as the costs of activities directly associated with a project, and must come from somewhere. .

Since then, Independent Sector's statement has been echoed by other organizations, including Grantmakers for Effective Organizations, the National Committee on Responsive Philanthropy and, most recently, Grantmakers in the Arts' research on capitalization. I have not come across anything opposing the presumption in favor of general operating support, or opposing the proposition that funders should pay the actual overhead incurred by project grants.  The trend is ambiguous. Data from the Foundation Center from 2004 to 2009 (the most recent year reported), shows only a slight increase in the percentage of GOS grants to arts organizations, but a nontrivial 8% increase in the percentage of grant dollars. Where have the funds come from?  Perhaps from capital grants which decreased about the same percentages that GOS increased. If so, I wonder how great an improvement this is for arts organizations.

Commentary: How to get donors to focus on results, not overhead

Philanthropy.com's The Giveaway blog, 6/14/11

In the genteel world of philanthropy, people rarely say out loud that some nonprofits are better than others, and some donors are better than others.  But those two notions are often lurking in the conversation, because sometimes even the best donors give money to bad organizations, Jacob Harold, a program officer at the William and Flora Hewlett Foundation, told a meeting of nonprofit officials.  The growth of online information through services such as Charity Navigator and GuideStar has made it much easier for donors to find financial information about nonprofits. But donors often use those tools to focus exclusively on how much money is spent on salaries and overhead.  Mr. Harold suggests that nonprofits should help donors understand how to focus on what matters more -- whether their methods work.  Brian Walsh of Liquidnet for Good pointed to a recent study that showed 85% of donors say they care about performance [but] only one-third say they conduct research before they make a donation and only 3% say they make gifts based on a charity's performance.   Cynthia Strauss at Fidelity Charitable Gift Fund [commented] the pressure to focus on results won't matter until it affects a charity's bottom line. "That is a real challenge for our sector."

Commentary: Should foundations do more to strengthen grantees' boards?

Rick Moyers, VP at Meyer Foundation, Philanthropy.com's Across The Grain blog, 6/20/11

Last fall, an old friend e-mailed me to share his thoughts about what needs to change before we will see widespread improvement in the effectiveness of nonprofit boards.  My friend is a very savvy retired chief executive with decades of experience working with boards, so I respect his opinion, which is that boards are never going to improve significantly unless, in his words, "foundations demand it."  I'm skeptical.  Foundations are a smaller player in the nonprofit world than most people realize (and than those of us who work at foundations are sometimes willing to admit). Grants from foundations represent only a small fraction -- just 13% in 2009 -- of total charitable giving to nonprofits. For many organizations, government grants and contracts, contributions from individual donors, and fees and other "earned" income are much more significant revenue sources than foundation grants.  This raises questions about whether foundations by themselves have enough financial leverage to demand large-scale change.  Beyond the math, foundations already have a reputation for occasionally being unreasonable or overbearing in what we require of grantees, and I hesitate to call for anything that would make us even more so.  However, I also recognize that foundations have a voice and a leadership role that go beyond the value of the grants we make. And many foundations have the flexibility to define their own priorities and set their own requirements, along with the ability to dedicate financial and human resources to address the issues they deem critical.  I'm not yet convinced, but I did promise that I would raise the question to readers, and I'm eager to hear your responses.  Should foundations do more to strengthen nonprofits boards?  And if so, what?  [You can read the responses to Rick Moyers' blog post here.]