September 28, 2006 | Read Time: 2 minutes
Foundation grants to help charities improve the way they operate rose sharply from 1998 to 2002 and are now on the decline, according to a new report from the Human Interaction Research Institute, in Encino, Calif.
In 2004, more than $5.9-billion in such grants were awarded, down from $6.5-billion awarded by foundations in 2002. The 2004 figure, while down from two years earlier, was still significantly greater than the nearly $3.7-billion given out in 1998.
The report says that a dip in the economy is one reason for the decline, but that in general foundations have had less interest recently in making grants to help nonprofit groups improve their operations, often referred to as capacity-building grants.
The report is based on information from 360 grant-making programs. Among the report’s other findings:
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Nearly 90 percent of the capacity-building grants include money to provide services to charities, such as training and education, help assessing the needs of an organization, and referrals to consultants and others.
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Approximately 10 percent of capacity-building funds went to support organizations that provide assistance to charities, such as the Alliance for Nonprofit Management and the Aspen Institute, both in Washington.
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Roughly two-thirds of grant makers pay for an evaluation process to determine the results of their capacity-building grants.
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Nearly three-quarters of grant makers plan to continue making grants to improve nonprofit operations, either giving the same amount they do now or increasing their support.
A survey of both foundations that award capacity-building grants and organizations that help charities operate more effectively identified differing possible trends that will influence future grant making.
As foundations increasingly develop new and better ways to evaluate their own performance, they may be more likely to give nonprofit groups money to improve their operations. But if nonprofit groups face a decline in financial support from other sources, foundations may be obligated to increase money for charitable programs at the expense of efforts to strengthen management operations.
The report, “Exploring Foundation Financial Investments in Capacity Building,” can be obtained free from the Human Interaction Research Institute’s Web site.
