Few Foundations Offer Grants to Deal With the Unexpected
This post was originally featured in The Chronicle of Philanthropy.
January 28, 2016– Spark MicroGrants was on the verge of a big success in eastern Uganda when a crucial line of cash went dry.
Spark works with communities in the developing world to prioritize and support projects like building schools, constructing latrines, and establishing small businesses. Specialty coffee maker Keurig Green Mountain had been backing the nonprofit’s work in East African coffee-growing communities, but in early 2014 the firm decided not to continue its support. Spark had expected $97,000 from the coffee company to finish its work and test its results in 16 communities in Uganda.
To help see its projects in the region through to completion, Spark sought contingency funds — something many donors have available but many grantees are nervous about asking for. The organization applied for a contingency grant from Open Road Alliance, a private philanthropy that supports nonprofits that experience unexpected roadblocks.
Open Road’s support helped Spark MicroGrants expand from about 50 communities to 134 villages and towns in Burundi, Rwanda, and Uganda. The nonprofit has charted a 57 percent increase in the participation of women in project areas and found that 70 percent of the communities where it worked went on to design their own projects independently.
“The funding allowed us to prove our model in various regions and community types,” says Sasha Fisher, who co-founded Spark in 2010. “Without it, we would have been driven way off course.”
The Keurig hiatus was temporary; Ms. Fisher says that after a pause the coffee firm reinstated its support last year. (Keurig said it supports Spark projects that are “aligned with our sustainability focus.”). But the bind in which it put Spark isn’t unusual. An Open Road survey of 400 nonprofits split evenly between grant makers and grant recipients found that more than 20 percent of projects need contingency funding.
The poll, designed by Boston Research Technologies, showed that foundations and other donors have the financial capacity to make add-on gifts outside of their normal grant cycles. Despite the ability to make contingency grants, only 17 percent of donors say they have a specific budget for off-cycle requests, and only 35 percent have a policy for handling them.
“There doesn’t seem to be any standardization across the foundation world,” says Maya Winkelstein, Open Road’s executive director.
The survey found that donors and grantees hold widely divergent views on how a donor will respond to a request for contingency funds. Nearly half of the grantees feared asking for more money would hurt their chances of being awarded grants in the future. Donors held a different view — about 90 percent said such requests have no bearing on future funding.
Laurie Michaels, Open Road’s founder, suggests that donors and nonprofits explore in detail the risks to every project before a grant is made. Donors, she says, should set aside money in case it is needed, and communicate to grantees specific policies on how extra funds will be allocated.
Contingency funding, Ms. Michaels says, isn’t “last mile” or “top of the thermometer” support. Each of the projects in Open Road’s portfolio of 60 grantees had been given enough support to reach completion until an unforeseen variable gummed up the works. An existing donor might suddenly pull support, or a change in government could result in canceled contracts, putting a nonprofit’s mission in jeopardy.
Last year Open Road made 22 contingency grants and loans totaling $1.6 million. Turnaround is quick — often a check is cut within weeks of a request. By parceling out grants when they are needed most, Ms. Michaels hopes to push projects to completion and get a large return on her philanthropic investment.
“We need to know whether this is just a stopgap and they’re going to go under in six months whether or not we give them money,” she says. “If this is a hail Mary and it’s not going to help them in the long run, we don’t want to waste anybody’s time on that.”
Foundations with just a few staff members tend to understand the risks facing the organizations they support, says Henry Berman, the chief executive officer of donor network Exponent Philanthropy. Because smaller grant makers often have a close relationship with grantees, and don’t have expansive bureaucracies, they can provide additional support on the fly.
“It’s not just, ‘Here’s a check, it’s one-year cycle, send us a report and have a nice day,’” he says.
But having a clear policy is still helpful for some smaller grant makers.
Each year, for instance, the Tracy Family Foundation receives two or three requests from grantees to either increase or make changes in grants. Jean Buckley, president of the Illinois grant maker, asked her board to develop rules for handling such follow-on asks.
“We wanted to be responsive,” she says, “but we didn’t want to fly by the seat of our pants.”
The foundation’s grant-variance guidelines now allow grantees to make a written request for additional funds. Ms. Buckley can approve requests for $10,000 or less; the board must authorize grants exceeding that amount. And grantees “know there’s no strike against them if they make a request,” she says.
Responding to Crisis
Sometimes, funding is needed not because a donor pulled out or because of a change in policy, but because the situation on the ground dictates it.
Last August, community leaders, health professionals and social workers from the Oglala Lakota tribe on the Pine Ridge Indian Reservation in South Dakota canceled a week-long training session provided by the Center for Mind-Body Medicine. They couldn’t travel to Minneapolis for the training because they were experiencing a crisis: 20 children on the reservation had recently committed suicide, and more than 100 children had attempted to kill themselves.
The center, which works to heal people experiencing trauma by exploring the connection between physical, mental, and spiritual states through meditation, biofeedback, and other techniques, decided to take the training on the road.
Going to the reservation would cost $56,000 more than providing the training in Minneapolis. The center’s original donor, the Swift Foundation, had already provided more than $70,000 over two years for the group’s work in Pine Ridge. But the training was pretty far afield from the foundation’s main work on the reservation, which was focused on job creation. Getting additional funding from Swift wasn’t an option.
“It was a stretch for us,” says Jennifer Astone, the foundation’s executive director.
The center approached Open Road in August and secured a grant to travel to the reservation in October. There, staff members trained 70 people, rather than the dozen leaders who originally planned to travel to Minneapolis.
The support from Open Road was quick and came when it was needed, says James Gordon, the center’s executive director.
“They enabled us to keep our promises to the Indian people” in Pine Ridge, he says. “So many promises to them have been broken.”
Want to know more about Open Road Alliance? Learn more about us HERE.