By Dan Parks NOVEMBER 16, 2021 – The Chronicle of Philanthropy

The pandemic spurred foundations to change their grant-making practices in ways long sought by nonprofits, although many philanthropies have already started to reverse some of those changes, according to a new study of nearly 300 grant makers.

The changes sought by nonprofits include more unrestricted funding, simplified reporting and record-keeping requirements, and a greater focus on racial equity.

Fifty-five percent of foundations say their grant making changed somewhat in 2020 in response to the pandemic, and 42 percent reported their practices were “very different.” However, only 21 percent of foundations said they had sustained all of those changes in 2021. Forty-one percent said they had sustained most changes, and 35 percent just some changes.

The report was produced by the Center for Effective Philanthropy, based on survey and interview data collected in mid-2021. The center surveyed 900 foundation leaders and received 284 responses and interviewed 33 foundation leaders. Researchers also interviewed 32 nonprofit leaders to get perspectives from grantees.

Ellie Buteau, vice president for research at the Center for Effective Philanthropy, acknowledged there could be “response bias” in the survey results, meaning that foundations that had made lasting changes may have been more likely to respond to the survey. That kind of self-selection bias may mean that the study underrepresents foundations that were more resistant to lasting change.

Still, Buteau said the findings offer evidence for optimism.

“Most foundation leaders have experienced a shift in how they work and their mind-set for the work,” Buteau said. “The data definitely points to change.”

Hilary Pennington, executive vice president of the Ford Foundation and a board member of the Center for Effective Philanthropy, said the study shows “cause for cautious optimism” in terms of progress toward greater permanent grant-maker flexibility and responsiveness to community needs. Ford was one of the participants in the study.

Pennington noted that the pandemic forced foundations to upend years of established practices to respond quickly to the pandemic, and they need time to make those changes permanent. “It’s hard to figure out how to turn an exception into a rule,” Pennington said.

One area where Pennington wants to see more progress is in multi-year unrestricted grants. “There is still more talk than there is widespread adoption,” she said.

Foundation Practices

The report took a closer look at the fate of some specific foundation practices:

• 65 percent of foundation leaders say they will continue to provide more unrestricted support than before the pandemic and 10 percent won’t. A quarter were undecided.
• 22 percent said they will sustain all changes to the reporting process, 31 will sustain most of those changes, 36 percent will sustain some, and 5 percent none. Six percent were undecided. The results were similar for the application process. Leaders interviewed for the study said some of the more flexible processes they will continue include accepting email or video applications and reducing the number of questions they ask of grantees.

Philip Li , CEO of the Robert Sterling Clark Foundation, said that one of the things his organization does to make it easier for grantees to apply for money is to accept any written materials the grantee may have provided to other grant makers to show their work and their value. Li said nonprofits should be able to fill out grant applications in 15 minutes.

Satonya Fair, CEO of PEAK Grantmaking, a membership organization of grant managers that helps promote equitable and effective foundation practices, noted that sufficient trust in nonprofits is still lacking at many foundations. “It’s tenuous at best as to what philanthropy will do from here,” Fair said.

She said nonprofits are in the process of proving they are worthy of more trust, and she believes that they’ll succeed, but it will take time for some grant makers to feel comfortable permanently loosening grantee requirements.

She noted that when her own organization seeks foundation funding, it still runs into the traditional kinds obstacles that grant makers say they are working to eliminate.

PEAK was among the organizations that reviewed the report and provided feedback before publication.

Sam Graddy, diversity giving officer at Jackson Laboratory, urged caution in the rush to permanently open up restrictions on grant making.

“If I’m a grant maker, I’m not going to give money away blindly and use hope as a strategy,” Graddy said. “Money is a valuable asset and it can make a tremendous difference. I don’t want to squander it.”

Graddy added that it hurts philanthropy when money is misused, and it’s important for foundations to help maintain the integrity of the field by ensuring their money is being spent wisely.

Post-Pandemic Funding Trends

The report found that most foundations have post-pandemic plans to maintain or increase support for groups that serve people of color:

• 45 percent said the share of grant dollars going to organizations that serve Black people will increase, 36 percent said it will stay the same, and 19 percent were undecided.
• 35 percent said the share of grant dollars going to organizations that serve Hispanics will increase, 43 percent said it will stay the same, and 21 percent were undecided.
• For other groups, including those that serve Asian Americans and Indigenous people, the share of foundations expecting increased funding was lower than for Black people and Hispanics.

More Diverse Board Members Needed

Nonprofit leaders interviewed for the report said they appreciated foundations’ increased focus on racial equity. However, the report also noted that “about one-third of interviewed nonprofit leaders reported experiencing a gap between foundation rhetoric and actual efforts.”

In particular, the report noted a need for more people of color on foundation boards.

“Foundations that have boards with more racial diversity tended to adopt more practices to support grantees and the communities they serve,” the report states. “Nearly half of leaders say that their boards are the biggest impediments to their foundation’s ability to advance racial equity.”

Other findings:

• 67 percent of foundation grant-making budgets increased in 2021, 24 percent stayed the same, and 9 percent decreased.
• About 40 percent of foundation leaders said that since the beginning of 2020, they have begun or intend to collect more demographic data about the nonprofits they fund and the people they serve.
• More than 80 percent of foundations have been doing more to incorporate racial equity into their operations, with more than half saying they have been conducting training for staff and board members, undertaken audits, or taken other steps to promote “a more inclusive, equitable and supportive organizational culture.”