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Trust, race, and grants data

By Jacob Harold
December 8, 2020

Hands joined together and people's silhouettes against an urban background

Reprinted from the Center for Effective Philanthropy.

Research suggests that U.S. foundations trust Black-led organizations enough to give them money, but not enough to give them control. A recent analysis by Bridgespan and Echoing Green looked at a set of comparable grant-funded organizations and found that the unrestricted net assets of the Black-led organizations were 76 percent lower than the white-led organizations. As the authors note, “The stark disparity in unrestricted assets is particularly startling as such funding often represents a proxy for trust.”

This failure of trust sits at the intersection of two live debates in philanthropy. First, foundations are being called to give more to communities of color. Second, they are also being called to give capital that shows trust: long-term general operating support (GOS).

Foundation leaders can choose to do both. Long-term GOS could empower organizations in communities of color and better position them to address racial equity. If we are not careful, however, these two important efforts could work at cross purposes.

The challenge is a subtle one and has to do with how grantmaking is tracked. The field’s understanding of the distribution of philanthropic dollars by beneficiary group—including race—is limited by the available data. To address this, some have called for foundations to explicitly call out which population group they hope to benefit with each grant. Unfortunately, this push for clarity could create an accidental disincentive for providing GOS grants. Here’s how.

Foundations might choose to highlight their commitment to racial equity by giving project grants that focus on specific communities, instead of GOS grants to organizations that serve multiple communities. Or, more subtly, funders may change how they document their unrestricted support. If, for example, a funder adds language to a GOS grant agreement letter that doesn’t apply to the nonprofit as a whole, the grant can become, in legal terms, a project grant.

This may seem like a tenuous connection. But new evidence reminds us that subtle forces drive foundation decisions about grant type. A recent report from the Center for Effective Philanthropy (CEP) shows that foundation leaders overwhelmingly recognize the strategic and moral logic for providing more multiyear GOS. And yet, practice appears to lag far behind belief. Why? The report’s authors were unable to find any compelling answers in the data. “Given the lack of a common barrier, or even a strong rationale for not providing multiyear GOS … it is frankly difficult to comprehend the lack of change in practice over time,” they write.

In many cases, foundation staff may be captured by the inertia of past practice. That is entirely understandable. In all organizations, processes reproduce themselves. For example, a board book will be formatted a certain way until someone makes the intentional decision to change it. And formatting often includes subtle cues to repeat past grantmaking practice, regardless of the effectiveness of that practice.

In the same way, a simple change in instructions to foundation staff (“please highlight the beneficiary group in grant descriptions”) could create cues that result in fewer GOS grants.

But the field can advance both goals—advancing racial equity and providing more GOS—with a few simple steps.

First, when advocates call for greater racial equity in philanthropic giving, they can reiterate the importance of GOS as part of their message. A key principle of equity-oriented grantmaking is addressing power dynamics. Unrestricted grantmaking is a chance for funders to put that principle into practice.

Second, when foundations add additional text about a GOS grant, they should refer to the nonprofit’s work as a whole. If funders put overly specific text into a legal document, like the Form 990 or grant agreement letter, they run the risk of turning a GOS grant into a restricted grant. Funders that share why they support the organization’s overall strategy have no need to worry about that.

Third, foundations can help the public better understand their work by proactively reporting grantmaking data. This can often be done directly through grants management software. This kind of transparency helps reveal the full story of a foundation’s strategy. Consider multiyear grants. In the Form 990, foundations report on grants paid, not grants authorized. When funders proactively report, they can explicitly share grant type, duration, and population served.

And fourth, nonprofits can encourage GOS grants by updating their organizational profiles—and thus take control of their own GOS-worthy stories. Ultimately, if nonprofits share high-quality, comparable data about their organization-level strategy, they make it easier for funders to give GOS.

The formal description of a GOS grant often simply says “for support.” That generality is a signal of trust in the leadership of the grantee organization. Funders can reinforce that message by telling the world why they believe a grantee deserves unrestricted support. As a field, we can demonstrate trust by sharing information—and by sharing control.

Tags: Foundations and grantmaking; Equity