March 19, 2012

Tight Years Toughened Grant Makers, Survey Finds

Funders spending less but backing nonprofits' core fundamentals

The financial crisis wreaked havoc on the nonprofit sector as the grant makers it relied on were forced to do more with less. But in the past three years, those benefactors have actually maintained or increased their grants in some critical areas and even sped up the granting process, according to a study.

The findings are reported in “Is Grant Making Getting Smarter?”, a survey of 755 foundations conducted last year by Grantmakers for Effective Organizations and the TCC Group.

In the three years since the previous survey, 51% of respondents cut back their total grant amounts. But 32% of them increased fuding of general operating support while only 15% reduced it. Thirty percent of benefactors increased contributions to help grantees build capacity, while 12% cut back in that area. These two funding categories are highly sought after because most grant money goes to individual projects.

Grant makers also made applying for grants easier and sped up the process of reaching a decision and delivering the cash — from a median of 90 days to 60 days.

At the same time, according to the survey, grant makers have not changed practices in some critical areas. The proportion of total grant money going toward general operations has hovered near 20% over the past three years. 

Grant makers also did not significantly change their stakeholder engagement practices, with around two-thirds assessing the needs of communities and about half inviting stakeholders to address board members or provide input on foundation strategy or grant proposals.

Seventy percent of respondents said they evaluated grantees’ work. The focus of their scrutiny is still proof and accountability, rather than the nonprofits' contributions to knowledge in their cause or their achievements in strengthening public policy. The respondents were less likely than in the previous survey to name deciding whether to strengthen future grant making as an important reason to conduct evaluations.

The survey found that multi-year support, another key to nonprofit success, has suffered over the past three years. Twenty-eight percent of respondents reported that they had decreased these donations because of the economy. Funders also made multi-year awards much less frequently than they had in 2008.

 “Unfortunately, these reductions came at a time of volatility in investments and unreliable donor commitments, shifting the burden to grantees at a time when their funders could have been a stabilizing force for the nonprofit sector,” the report said.

But that finding contained a sliver of good news. Fifty-four percent of those who had decreased their multi-year commitments said the changes were temporary.

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