Here’s How Funders Can Get Serious About Systemic Injustice
Every few months I see a headline about a major funder or foundation announcing a 9- or 10-digit funding stream for racial justice causes. That’s great, but cutting a check (or 100 checks) does not make a society anti-racist. No matter how many huge pledges are made or equity statements are released, the fact is that only 10% of grant funding goes to BIPOC (Black, Indigenous, and People of Color) communities.
1. Instead of a “color-blind” selection process, focus giving to organizations that serve communities of color and other marginalized groups that are led by BIPOC folks.
2. Increase your payout. The “Payout Rule” was established by the IRS and mandates that private foundations pay out a minimum of 5% per year. Though this rule is just for private foundations, giving the bare minimum has been adopted widely and, quite frankly, a 5% annual payout isn’t enough. In order to fight the injustices and overcome systemic racism, foundations should consider spending more money — over 5% and possibly over 10% per year.
3. Give more of the money as unrestricted funds. If the pandemic has taught us anything, it’s that nonprofits have to be nimble and ready for anything.Tying money to a specific purpose does not allow for flexibility and hinders organizations that would be in a good position to serve urgent community needs. While we’re at it, do away with reimbursement style grantmaking. Don’t make nonprofits front the money!
4. Expand grant timelines. Instead of one-year cycles, try two-, three- or four-year cycles. Longer grant cycles allow nonprofits greater sustainability and the freedom to spend less time chasing down money. This gives them more time to fight inequality!
5. Grant duration isn’t the only timeline that is in need of change. Grantmakers should also shorten the decision and turnaround timelines before delivering the first check or payment.
Waiting six months from submission to first payment is difficult on nonprofits cash flow management and budgeting, to ease the burden on nonprofits shorten the process as much as possible.
6. Streamline application processes that take a lot of time to fill out, and survey grantees on how long the process really took them. Then, make changes to bring that time to under five hours. Do away with complicated templates and allow nonprofits to submit budgets in whatever format they already use, instead of creating new ones. It’s not just the application process that arduous; streamline reporting requirements too. The more time staff spends waxing poetic about their work, the less time they have to do the work!
7. Don’t require nonprofit leaders to jump through a bunch of hoops, meetings, and dinners. Even if you pay for meals and travel costs, it’s an undue burden for the organization and individual/their family and takes key players away from crucial work. So unless you are going to send an honorarium to the organization for their staff’s time, don’t require in-person meetings for grantees.
8. Stop requiring grantees to find matching grants or diversify their funding streams. While diversification is important and should always be a goal, it's harder for organizations focused on serving BIPOC communities to diversify funding, which of course is connected to the systemic injustices they are trying to fight. Forcing these organizations to diversify funding might also force them to focus on tactics that are ineffective for their organization.
Foundations need to quit creating funding instability with short grant cycles, give more money specifically to organizations that serve and are led by BIPOC people, and eliminate processes that force nonprofits to spend considerable time and resources chasing grant funding. This is how grantmaking organizations can break flawed systems and start making a deeper impact.