April 29, 2004 | Read Time: 5 minutes
Charity officials give the highest marks to foundations that have approachable and responsive staff members, clearly articulated goals, and demonstrated expertise in the causes they support, according to a new report. Less important to nonprofit leaders in gauging their satisfaction with grant makers: the size and type of grants they receive.
“We’ve punctured some myths here,” says Phil Buchanan, executive director of the Center for Effective Philanthropy, the nonprofit research group in Cambridge, Mass., that published the report. “What grantees value most in funders is not about money, but about the quality of interactions, clarity of communication, and expertise of the foundation.”
The lesson for foundations aiming to improve relations with charities, the report says, is that they must “make the necessary investments in administrative costs” to meet the charities’ needs. To be more responsive to organizations they support, the report says, grant makers may need to add staff members. Or they may have to spend more money on training employees, or on demonstrating proficiency and leadership in the causes they support, for example by conducting research or advocacy campaigns rather than simply making grants.
Debate on Spending
Such conclusions make it likely that the center’s report, published this month, will add fuel to one of the foundation world’s hottest debates: how much foundations should spend on administrative costs. In an effort to to keep such expenses down, Congress last year considered a measure that would have prohibited foundations from counting operating costs like rent and salaries when they calculate the 5 percent of assets they must distribute each year to charities. The legislation ultimately failed, but Congress is expected to take up the issue again.
And, by finding that charity officials don’t necessarily judge foundations by the type of support they offer, the survey may also have implications for the debate over whether foundation grants ought to come with fewer strings attached. Over the years, charities have become increasingly vocal about wanting less foundation money earmarked for specific projects, and more for general expenditures.
Project grants, some charity officials contend, force nonprofit groups to tailor their programs in a way that is likely to attract the project dollars, and make it hard for charities to cover the basic costs, such as salaries and utility bills, of running an organization. Foundation officials who favor project grants say such support keeps charities focused and accountable, and encourages them to try new programs.
Just this month, Independent Sector, a coalition of nonprofit groups and grant makers, weighed in on the topic for the first time. The coalition released guidelines that call on foundations to give charities, whenever appropriate, general operating support rather than grants for specific projects. The guidelines also recommend that when foundations do give project support, they pay a fair share of the administrative and fund-raising costs associated with the project.
Operating Support
Paul Brest, chief executive officer of the William and Flora Hewlett Foundation, was one of the chief authors of the guidelines, which were created by a group of foundation and charity leaders as a way to encourage grant makers to offer broader and more flexible support to charities.
Mr. Brest says he had not yet read the new report, but that he would be surprised to learn that a charity’s satisfaction with a foundation would not be based in large part on what type of grants the foundation offers.
“We’ve heard so much from grantees about how much they value operating support,” Mr. Brest says. “Maybe it’s that at this point they are so used to not getting it that they don’t think about it when evaluating their funders.”
The Center for Effective Philanthropy’s report examines charity officials’ perceptions of the foundations that support them based on a written survey of nearly 3,200 charities that received grants from at least one of 30 large American foundations. The report also relied on information gleaned from four in-person meetings with groups of nonprofit officials and from follow-up telephone interviews with survey respondents.
According to the report, charities that consistently received program support gave slightly lower marks to their grant makers than the marks given by charities that more often received general support. But the difference was so slim — just one or two percentage points — that the report concluded that the type of grant charities receive is not an important consideration in assessing their overall satisfaction with foundations.
Nor do charity officials focus on other factors that are perceived to be important to nonprofit groups, such as the turnaround time for grant requests and the duration of grants, the report said.
What Charities Want
What matters most when charities are judging their grant makers, the report says, are less-tangible factors. They want foundation staff members who are responsive, fair, and approachable. They want clear and consistent articulation of the foundation’s goals. And charities want the foundation and its employees to demonstrate and share their expertise.
Meeting those expectations, the report says, means that foundations are going to have to spend more money on administrative costs — a suggestion that is expected to roil many critics, including members of Congress, who are intent on reining in foundation expenditures.
But the center’s Mr. Buchanan says the report may help put into perspective the debate over what types of foundation spending are appropriate.
“People very simplistically equate administrative costs with waste,” Mr. Buchanan says. “The survey shows that there are many things grantees value and many important roles that foundations play which require foundations to spend money beyond grant making. As long as it is done responsibly, it will improve foundations’ key relations with their nonprofit partners and the impact they have.”
The report, “Listening to Grantees: What Nonprofits Value in their Foundation Funders,” may be downloaded free from the Center for Effective Philanthropy’s Web site at http://www.effectivephilanthropy.com. Paper copies can be obtained for $10 each by contacting Alyse d’Amico at (617) 492-0800, ext. 206, or alysed@effectivephilanthropy.org.
Independent Sector’s “Guidelines for the Funding of Nonprofit Organizations” can be found on the group’s Web site at http://www.independentsector.org/issues/buildingvalue/opsupport.html.
