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Multi-Year Grants

By The NonProfit Times - August 30, 2013

The National Committee for Responsive Philanthropy’s The State of Multi-Year Funding 2011 shows that the more things change the more they stay the same when it comes to the long-term, flexible grant dollars that nonprofits need to succeed.

Since 2004, only one-tenth of sampled funders reported multi-year grantmaking. The same is true of 2011: Fully 89 percent of sampled funders reported no multi-year grants.

Though multi-year funding amounted to $7.2 billion or 29 percent of grant dollars, the Bill & Melinda Gates Foundation alone provided 60 percent of those dollars. In short, multi-year grants remain scarce despite the broad acknowledgment of the benefits of having predictable levels of support over several years.

Grantmakers’ aversion to multi-year giving debunks several hackneyed myths about institutional philanthropy.

 

The Myth of Independence

When NCRP published the first The State of Multi-Year Funding, covering giving from 2004-2010, one grantmaker responded simply: “VUCA.” VUCA is a military acronym that stands for volatility, uncertainty, complexity and ambiguity. It has entered our lexicon to reflect the ever-changing, uncertain conditions in which we must operate.

To this executive, as long as grantmakers feel comfortable making multi-year commitments, they’ll make them. But as long as VUCA conditions persist – whether it’s in the aftermath of a recession or otherwise, they won’t. Multi-year support reached $6.9 billion in 2008 (44 percent of grant dollars authorized), before falling to $5.5 billion (25 percent) in 2009, presumably because of the economic downturn. In 2011, as foundation assets recovered, multi-year grant dollars have increased. This suggests that the fraction of grantmakers that reports multi-year grants does so when they feel circumstances permit.

This is where one aspect of philanthropy’s self-image begins to unravel. Part of philanthropy’s enduring mythos is that it is an independent force for social change, one that isn’t influenced by the ballot box or bottom line. How independent are we if, as we say to grantees, our hands are tied to the market?

 

The Myth of Risk

If philanthropy’s situation is VUCA, how VUCA’ed up are things for non-grantmaking nonprofits?

We often see philanthropy referred to as charitable “risk capital.” If this were true then we should expect to see flexible, multi-year grants increase, especially in times of need. Philanthropy certainly can support the new, the different and the innovative, but whether it does when the chips — and assets — are down, is debatable.

Multi-year support is precisely the type of funding that nonprofits need: flexible, long-term fiscal resources to best meet the changing needs of our communities. Although the recession offered an excuse for the fraction of grantmakers that curbed their multi-year giving, the vast majority of grantmakers did not engage in multi-year grantmaking.

Thus, at precisely the time when long-term, general operating commitments were essential for nonprofits to continue operating, foundations were either reducing these grants or not providing them at all. This is not so much managing risk as it is shifting risk by leaving nonprofits to bear the brunt of changes in the marketplace and in governments.

Clearly, philanthropy’s appetite for risk has its limits. It will not take a chance with its own assets to provide multi-year support — even at the cost of permanent damage to the nonprofits and communities it claims to help.

 

The Myth of Commitment

Foundations often respond that they are indeed committed to their grantees and their economic stability. One grantmaker claimed that multi-year grantmaking is more prevalent than our numbers would suggest; after all, he had grantees that he’d been supporting for ten years or more.

“[T]he number of new organizations entering the funding portfolio of a foundation is far less than the number of grantees who are renewed year after year,” Bradford Smith, president of The Foundation Center, has pointed out. “Foundations are more faithful than you may think.”

How do we reconcile this notion of faithful foundations with their record on multi-year giving? Simple: the grants are renewed annually. Many grantmakers undoubtedly maintain their support for current grantees, but “continued support” is fundamentally different than a multi-year grant. As any professional athlete or coach will tell you, a one-year deal with an option to renew is hardly a vote of confidence, much less a real commitment.

When nonprofits have repeatedly advocated for the long-term, flexible capital they require, and grantmaker associations have repeatedly noted its benefits, what does it say that this request, this best practice, is ignored by as many as nine in 10 grantmakers?

Perhaps, foundations are not looking for a long-term commitment. Not wanting to be tied down is perfectly acceptable. Foundations must be nimble and responsive after all.

Philanthropy cannot have it both ways. We can’t make overtures about trust, solidarity and a commitment to work with grantees over the long haul when it seems that grantees work for foundations one year at a time.

It is time to be honest with grantees and with ourselves. Philanthropy can think of itself as independent but only if it acts independently. Foundations can and should protect their assets as they see fit, as long as it’s understood whose assets they’re protecting. Foundations are free to operate in their own interests as long as we’re clear about whose interests are being served.

Perhaps, with greater honesty, we can improve philanthropy’s broken record on multi-year funding.  NPT

Niki Jagpal is research and policy director and Kevin Laskowski is senior research and policy associate at the National Committee for Responsive Philanthropy (NCRP). They frequently blog about the role of philanthropy in society. Follow NCRP on Twitter (@ncrp).

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