More Grant Makers Support Efforts to Help Charities Operate Effectively, Study Finds

A growing number of grant makers nationwide are taking innovative steps to ensure good governance in the nonprofit world, says a new report.

While grant makers have pushed nonprofit groups to do a better job of getting results over the past decade or so, they more recently have started to finance specific efforts to strengthen and clarify the role of boards of directors, a crucial component of what the report calls “the leadership equation.”

There is no “one size fits all” approach to promoting effective governance, caution the report’s authors. But they say that grant makers should focus on helping boards provide oversight of a charity’s programs and finances, guarantee openness and ethical accountability, assist chief executives in managing day-to-day operations, and protect their organization’s long-term viability.

The new publication is a joint project of BoardSource, a Washington organization that works to improve nonprofit governance, and FSG Social Impact Advisors, a research and consulting group in Boston.

Asking Questions

The report says such efforts are more important than ever given increased scrutiny of nonprofit boards by the Internal Revenue Service, the Senate Finance Committee, and some state attorneys general. At the same time, the bad economy is putting pressure on many organizations to prove their effectiveness as they compete for shrinking grant dollars and other contributions.

Kathy K. Hedge, strategic-initiatives adviser at BoardSource and one of the report’s authors, says that over the past few years her organization has fielded more and more questions from grant makers about what information to seek and which policies to include in grant requirements and evaluation.

For the report, the authors interviewed individuals from 54 grant-making organizations, including corporations and community, family, and private foundations. Based on the interviews, the report offers a framework of three “contexts” for grant makers to consider in their dealings with nonprofit groups: “governance and the grantee,” “governance and the community,” and “governance and the field.”

While the report offers advice on each area — outlining advantages, challenges, and ways to overcome those challenges — it says many of the grant makers surveyed are involved in two or three of them.

For example, the New Hampshire Charitable Foundation, in Concord, has worked with the state attorney general’s office and others to develop a set of recommendations that resulted in two publications, one outlining all legal requirements for nonprofit groups in the state, and one focusing on board responsibilities and conflict-of-interest guidelines. In addition, the foundation helped run workshops on those themes throughout New Hampshire.

The report advises grant makers to ask themselves three questions:

• How do investments in governance align with our mission, values, and grant-making style?
• Who is our audience and what are its needs?
• What resources can we build on to improve governance?

Asking those questions can be particularly helpful when grant makers are dealing directly with a single grantee, says Ms. Hedge. She was struck, she adds, by the extent to which survey participants were aware of the “power dynamics” that affected their work and by how they worked to bridge that gulf with candor and open-ended, “exploratory” questions.

“They were clear in terms of their expectations, but weren’t being prescriptive,” says Ms. Hedge.

She adds that most grant makers weren’t concerned with “just pure due diligence, not just a checklist, but how best to educate their grantees. It’s not just about, Is the board meeting their legal requirements, but going beyond that in the spirit of trying to be helpful. You don’t go into it trying to find the right answers, you’re not trying to get to just Yes or No.”

‘Walk the Talk’

Ms. Hedge says another finding of the report was that many grant makers feel compelled to “walk the talk” with regard to their own boards. Particularly those grant makers that work in smaller geographic regions, she says, have said in conversations with local grantees, “I know it’s not always easy, but look, we’ve done this too.”

She cites Teri A. Hansen, chief executive of the Gulf Coast Community Foundation of Venice, in Florida, who is quoted in the report as saying, “I don’t see how someone could think it is a good idea for others to engage in board development if you haven’t gone through it yourself. It would be like working for Ford and driving a Chevrolet.”

The project was supported by a $60,000 grant from the Evelyn and Walter Haas Jr. Fund, in San Francisco, and a $30,000 grant from the W.K. Kellogg Foundation, in Battle Creek, Mich.

The report, “Advancing Good Governance: How Grantmakers Invest in the Governance of Nonprofit Organizations,” is available online at http://www.boardsource.org and at http://www.fsg-impact.org.