January 6, 2010 | Read Time: 6 minutes
The Social Innovation Fund—the Obama administration’s new grants program for promising nonprofit groups—offers a relatively small pot of money. But it has generated a barrel of speculation, debate, and a mix of skepticism and high expectations.
More than two years in the making, the fund, which fulfills a campaign pledge by President Barack Obama, is now about to get under way—and the philosophy behind it will be put to the test.
The program passed two major milestones just before Christmas: Congress allocated $50-million for the 2010 fiscal year, and the Corporation for National and Community Service, the federal agency that oversees the fund, explained how it proposes to spend the money.
Longtime advocates of a government program to help nonprofit groups expand innovative and effective approaches to social problems are exhilarated.
“In some ways, we’re really pinching ourselves,” says Kim Syman, managing partner of New Profit, a group in Cambridge, Mass., that manages America Forward, a coalition of nonprofit organizations that pushed for the Social Innovation Fund. “I don’t think we could have anticipated it would find the resonance that it did with enough people both inside and outside of government to really move it.”
Range of Opinions
America Forward proposed the fund during the 2008 presidential election season, asking candidates to support a program to funnel government and private money to projects that were successfully tackling pressing social problems to spread them nationwide.
Fans hail the Social Innovation Fund as a new kind of public-private partnership, one that focuses on unearthing and supporting projects that work, with a heavy emphasis on measurement and results.
But it has attracted its fair share of critics.
Some observers call $50-million a small sum to solve big problems. And conservative critics see it as another misguided government effort to interfere with civil society.
“There are some things government isn’t very good at, and one of those, it seems to me, might well be finding innovation,” Matthew Spalding, a scholar at the Heritage Foundation, said during a panel discussion last fall.
Some liberal critics worry it will favor larger, well-connected groups over grass-roots or advocacy organizations.
Rick Cohen, national correspondent for Nonprofit Quarterly, in an essay commissioned by the Hudson Institute’s Bradley Center for Philanthropy and Civic Renewal, questioned the emphasis on expanding proven programs. A small organization can be more accountable to the people it serves, he wrote, “than a much larger, more distant, more professional, more bureaucratic nonprofit.”
But for better or worse, the $50-million is set to be awarded next summer—and supporters are urging the nonprofit world to take advantage of a rare opportunity.
“There is a window right now where there is acute attention being placed on this topic,” Marta Urquilla, senior adviser for social innovation at the Corporation for National and Community Service, told a forum in Washington in December. To view it as a chance to just “chase after dollars, a status-quo kind of operation,” she said, “is a wasted opportunity.”
The government’s outline of how it plans to allocate the $50-million in 2010 says it will award grants of $5-million to $10-million to about five to seven grant makers. They, in turn, will award annual grants of at least $100,000 to promising nonprofit groups for projects in regions with high numbers of needy people to improve “measurable outcomes” in the areas of economic opportunity, public health, or youth development.
Both the grant makers and the charities must provide matching funds—which will raise the total pool of social-innovation money to $200-million for the 2010 fiscal year.
Quick Results
The national-service agency conducted extensive consultations and issued its outline for distributing the funds later than originally planned, which officials attributed to the complexity of getting it right. But it leaves a short time for projects to get started before Congress starts drawing up the budget for the 2011 fiscal year.
The agency makes clear in its outline it is looking for quick results. For example, in evaluating two proposals of equal merit, it says, it may give preference to applicants that identify which nonprofit groups they plan to award grants to. Those, it says, are “more likely to have an impact in communities sooner.”
Over all, the Social Innovation Fund’s architects have been working to balance two potentially competing goals—to identify nonprofit groups that can document their effectiveness while also ferreting out what President Obama calls the “hidden gems.”
The agency’s strong emphasis on results could “eliminate a truly innovative idea that hasn’t received sufficient funding or hasn’t had time to develop a history of proven impact,” says Adin Miller, a consultant who was once a program officer at the Corporation for National and Community Service.
At the same time, says Jane Wales, director of the Aspen Institute’s Program on Philanthropy and Social Innovation: “The U.S. Congress won’t have patience for high-risk investments at a time of high deficits and the 24-hour news cycle that focuses on short-term impacts or lack thereof.”
Ms. Urquilla of the corporation acknowledged that tension at the December forum. “If you are someone who thinks of innovation as the latest, creative newfangled thing, that kind of butts up against the notion you’re going to be able to demonstrate impact.” However, she added, her agency has a broad definition of “innovation,” which does not necessarily imply something “new.”
The outline released last month does open the door to some projects that have not been able to measure their results, saying the corporation is “committed to funding promising efforts to build the base of evidence about what works.”
Hoping to Qualify
Nonprofit groups, venture-philanthropy firms, and others are scrutinizing the language in the outline to see if they might qualify for money.
Jeffrey Faulkner, president of Ways to Work, in Milwaukee, says the Social Innovation Fund could help his group expand its work providing low-interest loans to poor people with bad credit so they can buy cars to get to their jobs. Ways to Work provides money to help organizations set up loan operations and already has a business plan to triple its network of 32 offices. Thanks largely to a big grant it received from the Walmart Foundation last year, Ways to Work could provide the required matching funds—and it is about to release a longitudinal study showing that its program has had good results.
“It’s exciting to us to think there’s finally really some oomph going to come behind the concept of taking a good idea to scale,” Mr. Faulkner says.
Some community foundations are also eyeing the new fund—although few would be able to apply for the minimum $5-million grant on their own.
Kevin K. Murphy, president of the Berks County Community Foundation, in Reading, Pa., says it would be impossible to find the matching funds in a small county like his. “The question is, can we figure out among the community-foundation field a way to work together so that some community foundation serves as kind of the ‘master’ intermediary and we could break this up into smaller amounts?”
