At the Tower Foundation, we are almost at the year and a half mark of a two-year pilot program looking at ways to assess the impact of general operating grants. We selected seven nonprofits with whom we had worked for some time to receive a grant of $70,000 ($35,000 for each of two years). More on that shortly. First, a little context relating to general operating grants.
For several years now, groups like Grantmaking for Effective Organizations (GEO) and Center for Effective Philanthropy (CEP) have been urging funders to make more grants that support nonprofit’s general operating needs, and that are, preferably, multi-year. CEP defines “general operating support” as grants in support of a nonprofit organization’s mission rather than specific projects or programs. General operating support is the “working capital” nonprofits need to sustain their day-to-day operations.
Multi-year, general operating grants are highly valued by nonprofits for many reasons, and here are a few key ones:
- Grants that are tied to a specific project may divert work from what an organization feels is actually needed (and they are in the best position to know what that is)
- Project or program-based grants can be a drain on resources and may not provide sufficient overhead to support the effort
- General operating grants provide non-profits with the flexibility to respond to both unexpected crises and new opportunities
- Multi-year grants alleviate some fundraising pressure
- Multi-year grants can provide more security for staff positions that are supported by grant dollars
CEP’s pre-pandemic data suggests that foundations have been slow to broadly embrace multi-year general operating grants. In the year before the pandemic, only 41 percent of grant recipients reported receiving multi-year general operating grants at all. And those that did see these kinds of grants reported that they made up less that 25% of total foundation funding. CEP’s data further suggests that grants that are both general operating and multi-year are infrequent. In the 10-years prior to the pandemic, 12.4% of grants were both multi-year and general operating.
Why the reticence towards multi-year, general operating grants on the part of funders? Grantmakers point to the challenge of assessing the impact of general operating grants or the difficulty in determining whether or not grant dollars are spent in ways that align with a Foundation’s primary focus.
The COVID-19 pandemic pushed many foundations to relax restrictions on grants, recognizing that flexibility was key as nonprofits reacted to the safety needs of their staff, delivered more services via telemedicine and remote platforms, offered hazard pay or overtime, and generally got creative to keep their doors open. What remains to be seen is whether general operating grants will be more prominent as a result or if funders will revert to former practices.
At the Tower Foundation, for most of its years in business, the program grant has been the go-to product. Multi-year grants were common, in recognition that one year is a tight window to accomplish much of anything. The Foundation also allowed overhead (up to 20%) to support indirect costs related to the program or project. But we kept hearing what the rest of the sector was hearing: general operating grants are more likely to help a nonprofit thrive than other types of grants.
The Pilot Program
So in January of 2021, we awarded those general operating grants to seven organizations that we had come to know well. In our Western New York funding area, grant partners included an agency supporting parents of children with disabilities, a mental health anti-stigma campaign, and a provider of a range of social services to the Native American community. In Eastern Massachusetts, grants went to a provider of services to youth in recovery, to a broad-based social services provider in the Cape Cod region, to an art therapy-based program for youth, and to a regional prevention/wellness coalition.
The goal was to demonstrate that we could, in fact, assess the impact of grants that are not necessarily tied to any one initiative. We decided, in lieu of written reports, that we would have several structured conversations over the course of two years. We borrowed the framework for these conversations from Results-Based Accountability (RBA). RBA is a process management methodology that starts from the positive change you hope to see in a community, collects information about what trends and forces can affect that change, then backs into appropriate partnerships and strategies. With the pilot program, the idea was that an organization’s underlying mission (its “North Star”) could be a proxy for the more tangible goals that are generally associated with a program (for example, the number of people enrolled or clinicians trained). RBA uses a five-question structure to look at any given enterprise, and we felt that it could work for broader organizational goals, not just more specific outputs.
Slightly past the one-year point, we checked in with each grant partner. With their leadership team, we revisited their organizational North Stars and talked about how our grant dollars may be helping their organizations to navigate accordingly. Most applied funds quite broadly, though one grant partner focused the grant pretty exclusively on a program to incentivize and retain its early childhood programming staff.
Here are a few key takeaways from these conversations.
- Several grant partners mentioned that their grants relieved fundraising pressure, and that they could invest more creative energies into growing existing programs.
- COVID-19 put a big strain on maintaining adequate staffing; general operating funds helped organizations be more flexible with short-term solutions (e.g. interns, bookkeepers).
- Some back-burner projects (new website, data management improvements) were able to move ahead thanks to flexible funding support.
- Grant dollars supported timely responses to emergent workforce training needs and internal imperatives in service of inclusion and diversity.
At this point in the experiment we feel that some pretty significant observations can already be shared. For one, it turned out to be genuinely possible to talk about the impact of general operating grants. These conversations were effectively supported by the framework of Results-Based Accountability, even if the principles were sometimes applied rather loosely. It is also worth noting that our program staff discussed these grants with executive leadership (not always the case with more programmatic grants) and feel that they are getting to know the organizations better than might typically be the case. Finally, even in the face of a global pandemic, most participating grant partners tried new things – new things that might otherwise have been deferred. The early returns of this grantmaking experiment are promising, and we look forward to potentially expanding general operating awards in 2023.