“Trust the nonprofits,” we tell funders. “Realize that the people who are closest to the problem are the ones with the solutions. Just write those checks and get out of the way.” But then the news hits. We’ve seen recent allegations of misspending by the executive director of GLAAD, which advocates for fair media coverage of LGBTQ people. Former National Rifle Association CEO Wayne LaPierre was convicted of fraud. The former executive director of two consecutive California nonprofits was arrested on July 30 on allegations of theft. The organizers behind Black Lives Matter faced misspending allegations, and then BLM accused its former fiscal sponsor, the Tides Foundation, of mismanaging $33 million of BLM’s money.
This kind of news could be enough to send at least some donors and foundations running back to the perceived safety of strict overhead limits and other controls in their grantmaking, while funders who have never let go of those restrictions may well feel justified.
Why take the risk of providing multi-year, general operating grants, or allowing the community to have a hand in deciding where grants will be awarded, when some of that money might end up being spent on a chandelier, designer suits or a California mansion? Foundations and wealthy individual donors alike may wonder, in many cases sincerely, just how far nonprofit leadership can be trusted — particularly with grants that are larger, ongoing and/or made without restrictions.
The answer to those concerns is easy to state, but it’s harder to actually follow through. First, look beyond the headlines. As a journalist, it shames me to admit it, but the fact is that misspending or theft by nonprofit leaders draws views and clicks, particularly when we’re talking about large sums of money. Meanwhile, the vast majority of the estimated 1.8 million nonprofits that are honestly going about their business of serving their communities rarely rate a headline. I’m not saying that news organizations shouldn’t air our sector’s dirty laundry. Far from it. But when the scandals are most of what we hear and read about, it takes an effort to remember that those scandals are noteworthy in part because they’re so relatively rare.
Next, pay attention to the numbers. Ninety-seven percent of nonprofits run on less than $5 million a year, with 92% having bottom lines of under $1 million a year and 88% living on under $500,000 annually. These are not numbers that generally lend themselves to five-figure vacations.
Meanwhile, the nonprofit burnout and hiring crisis continues to be real. So are figures suggesting that operating budgets of at least 35% beyond program costs are necessary for nonprofits to do their best work. Those California homeless service workers I wrote about last year, the people who, despite working full time, are themselves housing insecure? It feels extremely safe to say that not one of those folks, or their executive directors, for that matter, will buy a chandelier or a closet full of designer suits should funders finally provide grants that include living wages for their hard work.
As organizations like the Institute for Policy Studies and the Donor Revolt for Philanthropic Reform have been saying, funders should examine their own spending behavior before casting stones at nonprofits. Foundation leaders should ask themselves: “How well would we function with the kinds of restrictions on operating budgets we impose on our grantees?” Likewise, funders that count the travel expenses of wealthy heirs toward their annual payout total or warehouse money in DAFs deserve at least the same scrutiny and criticism as the rare nonprofit leader who misspends funds. The vast majority of organizations that are doing their best to keep the lights on, serve their communities and pay their employees enough to live on, on the other hand, should be applauded and supported generously. Forcing them to live on tightly restricted scraps serves no one.
Our society allows some individuals to be obscenely wealthy and others to have control over absurdly large amounts of money. In return, wealth holders and managers alike share a responsibility to steward that money wisely, which extends to giving it away. But wise stewardship does not equal keeping grantees in a financial stranglehold. Instead, a better answer is for foundations and donors to do their own homework, including researching nonprofits’ publicly available financial information. It means learning how to implement community-based leadership in giving as much as possible to ensure that the money truly addresses the problems it is meant to help solve.
And once that homework is complete and community-based leadership is established, truly wise stewardship means providing grantees with full funding of all their costs through multi-year, general operating grants that include provisions for paying living wages and benefits to all of their employees.
Look at it this way: Funders have known about their own role in the nonprofit starvation cycle for at least three decades. Likewise, soliciting and managing grant income has been a restrictive, burdensome process for grantees for a very long time. We’ve seen the results: a struggling sector with few outright wins, to the extent we’ve become used to thinking of key issues targeted by philanthropy as intractable when at least some of them could probably be solved through a more consistent, generous application of money.
The occasional nonprofit misspending scandal aside, it seems to me that at this point, the only thing wealthy donors and foundations stand to lose by trying more open approaches wholesale is their own sense of control and irreplaceability. Given the life-and-death nature of many of our society’s problems, that seems like a more than reasonable trade.
When she isn’t urging funders to live up to their responsibilities, Dawn Wolfe covers issues including racial and economic justice and abortion rights/women’s & girls’ issues. You can reach her at: dawnw@insidephilanthropy.com
