Will the Ford Foundation Lead the Way?

In 2015, the Ford Foundation started to talk about inequality in a big way. Ripples of intrigue and hope spread through the fundraising and nonprofit community, and many people eagerly awaited the foundation’s next move. I know I certainly did. Ford Foundation President Darren Walker publicly acknowledged that he has heard the community loud and clear: “Time and again, the organizations we support have said that our prioritizing project support, as opposed to general operating support, tends to stifle their work, forcing them to focus on incremental outputs rather than long-term organizational strategy and effectiveness.”

Walker, in his role as president since 2013, is making a name for himself as an exuberant, compassionate champion of global equity. His background and his outspokenness position him as a potential game changer in national and global philanthropy. The New Yorker profiled him and his work recently – Larissa MacFarquhar’s article is worth a read. Of the discussion the foundation is having around how to increase nonprofit sustainability, she notes their acknowledgment of the dark side of general operating support, “You could drown an organization with too much money the way you could drown a plant.”

Admirably, Walker has worked through a complicated web to bring the Ford Foundation’s work home to Detroit for the first time in decades, brokering a new bond between the foundation and the Ford family. And, he clearly grapples with the starkly unbalanced power dynamic between the Ford Foundation and the grantees – or more explicitly, the people served by the grantees. MacFarquhar describes, “It was a strange and uncomfortable thing to be a social-justice person in a social-justice foundation committed to ending inequality and yet to find yourself every day in relations that could scarcely be less equal…He was perched on the top of a mountain of money so high that he could barely see the bottom.”

Grantstation’s most recent “State of Grantseeking Report” brings to light some data that illustrates these challenges from the other side. Collecting feedback on a broad variety of grant-related issues, the report consolidates roughly 2,500 responses from around the country, representing a wide range of nonprofit organizations in size, sector, and types of revenue sources.

Grants for project support were reported as the most frequent type of grant 44% of the time – compared to only 20% of the time for general operating support. Eleven percent (11%) of respondents reported that non-government funders would not cover indirect costs. Meaning that most non-government funders do cover some portion of indirect costs. Any executive director knows that allowing 10% or 15% indirect costs in a project budget is not the same as a general operating gift. Restricted gifts versus unrestricted gifts: the former is more focused on the funder’s needs and priorities, while the latter provides unparalleled freedom for the grantee to do the work. Nonprofits to foundations: “We need the freedom to do our work!”

Uncertainty around indirect cost support is rampant; even this partial assistance is not utilized most effectively. 21% of respondents who receive government grants were unsure of exactly how much indirect costs were supported by those grants, and 12% were unsure of the indirect cost allocation in their non-government grants. I can tell you that it’s quite a challenge to make a case for indirect cost support – or general operating support – when the applicant is not clear on these kinds of details. Foundations to nonprofits: “Show us that you will be reliable stewards of large, unrestricted amounts of money!”

The Ford Foundation is onto something, because while foundation grants were reported as the smallest revenue source for indirect funding (13%), this figure has doubled over the last 12 months. Individuals still reign as the most frequent source of indirect funding at 37%. When Walker announced the Foundation’s official new goals and priorities, he proudly highlighted the fact that they will now double their overhead allowance from 10% to 20%, calling out the “overhead fiction” that his own organization is complicit in perpetuating.

Seattle’s own Vu Le (of Rainier Valley Corps and Nonprofit With Balls) has called this practice to the mat loudly and publicly for many years now. The push for nonprofit sustainability is in direct conflict with the reality that project support is the main type of funding available. “Many funders and business people seem to believe that if nonprofits just try hard enough, they’ll reach this state of funding Nirvana and be self-sufficient and “sustainable.” And if they’re not actively working toward reaching fiscal enlightenment, they shouldn’t be supported.”

So, we are at an impasse. It is easy to understand Le’s conundrum – the chicken-and-egg syndrome that infuriates many nonprofit fundraisers and leaders into the wee hours of the morning. And, if the Ford Foundation is representative of a new brand of forward-thinking, equity-driven grantors, then we see that while they understand the need to increase support for overhead, they are not overtly committed to fund general operations (for fear of drowning the plant). The revolution has not arrived.

But it may be brewing. A 2007 report from Grantmakers for Effective Organizations, “General Operations,” goes into great detail about the purpose and benefits of general operating funding

Why don’t more grantors provide general operating funding? Program grants are easier to connect to measurable outcomes. What is needed to encourage more general operating grants? Trust between grantor and grantee. There is a national discussion being had about these issues, and Grantstation’s report shows that general operating funds are increasing at a rapid rate, although still a very small piece of the whole picture.

But more importantly, a fundamental change in the beliefs of the role of the philanthropic sector will help to push the general operating initiative into the mainstream. The Ford Foundation did not invent this idea, and I don’t see that they have made any drastic changes in their priorities that speak directly to this need. However, they have the ability to bring this topic to the forefront, and they have demonstrated a willingness to do so, even when it is uncomfortable. They are clearly going to great lengths to remind those who need reminding – themselves and others – that philanthropy and social justice are two faces of the same beast. Jennifer Teunon, Executive Director of the Medina Foundation, recently chimed in on this discussion with one of the most encouraging perspectives yet: “We always need to remember that we are investing in their work, not ours…We contributed to them; we can’t take credit for them. And, unless we are fully funding the work, that has to be enough.”

Equitable practices really have to come from everywhere – they rise up from the people in the trenches, and they trickle down from the positions of power. Here’s hoping they run into each other somewhere in the middle, in a land where all those involved are meeting their greatest potential – rather than pass each other by like ships in the night.

ByAli Marcus

Ali’s role at Ostara focuses on maximizing our potential to benefit the community. Her expertise lies in helping clients draw those connections clearly and build an understanding among the team about why we do that.