“We don’t want to hire someone and then we have to fire them because the money runs out, right? We want to create something that’s meaningful and potentially self-sustaining.”
“Sometimes managing the dollars is a little more difficult, because it’s not necessarily their background, or maybe they just don’t have the staff to handle it.”
The contrast between what funders think will happen when nonprofit organizations are trusted with large, unrestricted grants and what these organizations actually do with the funds is on full display in a new research report from CEP titled Emerging Impacts: The Effects of MacKenzie Scott’s Large, Unrestricted Gifts. The first quote above is from a nonprofit leader discussing the long-term implications of hiring additional staff after receiving significant funding from MacKenzie Scott. The second is from a funder expressing concerns about how nonprofits, especially grassroots organizations, would utilize such funding.
At Co-Impact, a global philanthropic collaborative focused on improving people’s lives through just and inclusive systems change, we are a grantee and we are a funder. As a grantee, we have received grants from over 65 funding partners, including Scott. As a funder, we provide large, flexible grants to our program partners. Given this unique vantage point, I was eager to learn from CEP’s research.
From the first year’s report, released in 2022, we know that the leaders of nonprofits receiving Scott’s large, unrestricted grants found them to be transformational for their organizations and leadership and that few were experiencing the unintended negative consequences that many worried might come from Scott’s largesse.
In year two of the research, we’re seeing more of the same. Nonprofit leaders continue to describe expanding and improving programs, strengthening operational capacity, and few negative consequences. 90 percent of respondents also report deepening work on equity (racial, gender, economic mobility) in their programming. Significantly, almost all of the nonprofit leaders report that they are better able to achieve their missions, with many already able to report specifically on impact.
This feels right, and it is consistent with our own experience and with what I personally have heard in conversations with leaders of other recipient organizations. For us, Scott’s gift has been transformational in enabling us to be thoughtful in considering whether we are able to accept restrictions from other funders, such as limitations on operating costs; from the data reported, we are not alone.
Yet, there’s a major disparity between what nonprofits report and what other funders believe.
In this new report, CEP shares the results of an additional area of inquiry: funder perceptions, based on interviews with leaders and program staff at private foundations, community foundations, and United Ways. The overall finding is that more than three-quarters of the interviewed funders have concerns about the ability of nonprofits to handle large, unrestricted gifts.
These funders expressed several rationales, all of which are indicative of a lack of trust in nonprofit organizations generally.
Claim: They can’t handle it.
Some funders shared the notion that nonprofit leaders and boards “weren’t built to handle” the organizational changes required to scale up following large infusions of funding or have challenges “understanding the complexity of that infusion of cash.” This rather paternalistic view just doesn’t match what I’ve witnessed in the sector, both in the organizations that we fund at Co-Impact and from my experience serving on the boards of several nonprofit organizations of varying sizes, from very young to very well established.
Instead, what I see time and again is organizational leadership (staff and boards) being extremely thoughtful about the long-term effects of decisions, particularly when it comes to how to handle incoming funds. And the data in this report shows the same. In fact, more than 90 percent of nonprofit leaders shared that Scott’s funding “has or will strengthen the long-term financial sustainability of their organization to some degree.” Reading the report, I’m left with a clear view of organizations that know how to, and do, plan for the long term, including, importantly, avoiding a fiscal cliff when the funding from Scott runs out.
Claim: They won’t work as hard to raise money.
Others suppose that nonprofits will end up “resting on their laurels,” no longer motivated to “hustle” to raise funds. To this I ask, why do we want nonprofit leaders to have to hustle for funds? Shouldn’t we want them to be able to invest more time and energy on programming and on their organizations?
In any case, fundraising is an important function of all nonprofits other than those blessed with a sizeable endowment, and there is nothing in the research that suggests that recipients are ceasing other fundraising. In fact, there is clear data that the funding merely enabled nonprofit leaders to adapt their approach to fundraising in extremely positive ways, including diversifying funding sources, asking for more unrestricted support and larger grants, and seeking funding that is more aligned with values and strategy.
Claim: They can’t be trusted not to steal.
At least one funder imagines outcomes such as “embezzling.” For this, I have no words.
Claim: The funds may not go to their intended purpose.
Funders shared more veiled concerns articulated as a lack of accountability since Scott doesn’t require reports, asking, “Was the money used properly? Did it go to actually doing what you hoped it would do?” This reveals a misunderstanding of the purpose of general operating support, which is to support the entirety of an organization’s mission and strategy, not the specific intended focus of the funder. As a funder, this would mean letting go of control and supporting an entire mission. And for those funders such as Co-Impact that are providing project- or initiative-specific funding, we have many opportunities to lead from a position of trust in the relationship.
Speaking from Co-Impact’s experience, we fund initiatives that work toward more just and inclusive systems; these are initiatives driven and led by our program partners, consistent with their mission and vision, not designed by or for us. We also minimize reporting obligations, asking for reports annually and inviting our partners to submit reports that work for multiple funders rather than bespoke reports for us. And we trust our partners to report on the impact measures that are meaningful to them rather than dictating what we want them to report to us.
But also: Not my grantees!
What is perhaps most telling is this: “While funders voiced concerns about nonprofits as a collective, they often noted that these concerns did not apply when their own grantees had received a gift from Scott, as they had confidence in those recipients.” In other words, the funder — but not MacKenzie Scott — knows best.
Assuming that funder perceptions translate to funder behavior, we have a long way to go as a sector.
I’m not saying we should all drop what we’re doing and adopt Scott’s model of funding. But I am saying that we should all make sure we’re listening to what our program partners are telling us, that we should invest in their vision and their leadership, and that by doing so, we’ll know we have made a contribution to positive impact on people’s lives. And fundamentally, when we have data, as we have here, about how nonprofits are actually handling large infusions of flexible funding, let’s challenge our own assumptions and start to trust more.
Pam Foster is a lawyer and strategic operations specialist with over 25 years of experience in the philanthropic sector. She currently serves as chief operating officer of Co-Impact and is a member of CEP’s advisory board. She also serves on the advisory group for this research effort.
Editor’s Note: CEP publishes a range of perspectives. The views expressed here are those of the authors, not necessarily those of CEP.