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Taking Measure of Georgia Grantmaking Trends: Lessons from our second survey of foundations and nonprofits

In the latest Taking Measure survey, part of an ongoing cross-community conversation led by GCN, Foundation Center–Atlanta, and the Georgia Grantmakers Alliance (GGA), we uncovered encouraging news for the state’s grantmakers and nonprofits—including rising alignment, stronger communication, and growing opportunities.

At the GCN member event presenting the findings of Taking Measure 2014, CEO Karen Beavor called the survey an effort to “better explain both sides of the community, philanthropy and nonprofits,” to document challenges as well as signs of progress, and to better establish “the kind of two-way communication that is absolutely critical” to building stronger relationships between grantmakers and grantees.

The top takeaways, as reported by event speaker Erik Johnson, past GGA Chairman and secretary and treasurer at the Robert W. Woodruff Foundation, included largely good news:

Georgia foundation investment largely stays in Georgia. Over 77% of grantmaker dollars go to Georgia organizations, far more than in California (55%) or New York (41%).

Foundation giving follows community needs. Georgia foundations are largely responsive to the issues that nonprofits bring them.

Foundations are on common ground with nonprofits. In most cases, grantmakers and grantees are in agreement regarding funding priorities, expectations, and communication.

Foundation grant dollars make a small portion of nonprofit funding, but demand may be on the rise. Though lots of money is being granted, nonprofits are relying on other funding sources far more heavily—though that may be changing. (45% of surveyed nonprofits expect to rely more on foundations in the coming year.)

Plenty of opportunity lies ahead. Grantmakers are dedicated to supporting our state’s nonprofits and meeting community needs, and their investment is growing, with 64% projecting increased giving in the next year (up from 56% in our first survey).

This year’s survey, conducted in mid-2014, got full responses from 61 grantmakers, mostly independent, family, and community foundations. Though that’s a fraction of the total number of Georgia foundations (there are 1,533 throughout the state), survey respondents together distributed $668 million in 2013—about two thirds of total grant money dispensed annually in Georgia, (which, according to the Foundation Center, is approaching $1 billion.) Also taking part in the survey were 426 nonprofits, all GCN members, from across the state.

Like all research, the survey has its limitations: Though the nonprofit sample is an excellent reflection of the state subsector makeup, as reported by Beavor, both samples are weighted slightly in favor of larger organizations. Johnson explained the sample bias as a matter of organizational capacity: “The larger your organization, the more people you have to respond to surveys like these. Smaller foundations [and nonprofits] just don’t always have the time or people to spare.”

 

WHERE GRANT MONEY GOES: CAUSE AND NEED

Using giving data from 2013 (dollars actually distributed, rather than pledged), foundations provided a breakdown of subsector organizations supported and the particular organizational need that support addressed.

Topping the subsector list was education, netting more than a third (35%) of dollars distributed; health and human services followed, each capturing almost a quarter of grant money spent. Johnson indicated that this falls in line with conditions on the ground: “Education grantmaking is higher in Georgia than elsewhere, because foundations likely are trying to be responsive to state needs.” Higher education takes the major portion (70%) of those education investments, Johnson said, due to a combination of pricier capital needs and well-organized fundraising campaigns. For similar reasons, the majority of giving in health (71%) goes to hospitals.


GRANTMAKER GIVING BY SUBSECTOR


35% — Education
23% — Health
22.5% — Human Services
6% — Arts and Culture
5.5% — Environment and Animals
1.5% — Religion
1.5% — Public Affairs/Society Benefit
<1% — International Affairs
4% — Other
 

In terms of organizational need, more than half of all grant money went to “general program and operating support,” which both funders and nonprofits ranked the most important funding need. Johnson speculated giving for this “catch-all” category was on the rise in the wake of the 2008 recession, which put a hold on construction (a distant second by 2013, with 33% of dollars granted).

Asked to rank organizational needs by importance, funders and nonprofits answered largely alike, with the same top four priorities (though they reverse numbers 2 and 3: Grantmakers put capacity building in the second spot, while nonprofits favor support for new programs and initiatives). The survey also asked how likely foundations were to fund a particular organizational need; answers largely tracked with their perception of its importance. For an audience member wondering how to find support for a need seen as less important (like IT or debt relief), Johnson recommended communication: “It could be that foundations have specific practices of not making grants for certain uses, or it could be that foundations just aren’t getting those requests.”

 

WHAT GRANTMAKERS LOOK FOR: DEALMAKERS AND RED FLAGS

Just like everyone else, Johnson noted, grantmakers are working in an environment of scarcity, with an eye toward sustainability: “Many foundations were created to exist in perpetuity, but they have limited resources they must allocate in the most effective way possible. That usually requires making decisions amongst competing requests and assessing the health and attributes of the nonprofits making those requests.”

Because most foundation respondents (and Georgia foundations in general) are interested in Georgia and the local community, they look first to organizations affecting change in their area. Beyond that, the most important factors in their calculations are also the most obvious: leadership and finance.

Topping the list of “dealmakers,” characteristics respondents named “most important in assessing whether to award a grant to a particular organization,” were strong executive and board leadership, evidence of program sustainability, and financial stability. Johnson pointed out that those qualities far outweighed some of the more common grant applicant hang-ups, including the quality of the grant proposal, having an established relationship with the foundation, and a long operating track record.


TOP DEALMAKERS

- Strong executive leadership
- Strong board leadership
- Evidence of program sustainability
- Financial sustainability


TOP DEALBREAKERS

- No evidence of financial sustainability
- History of frequent leadership turnover
- Significant debt

“It doesn’t matter if you’ve been around forever, or if you’re a young nonprofit,” said Johnson. “It’s much more  important to have strong leadership and finances.”

The warning signals that most trouble grantmakers fell into the same two categories: “no evidence of financial sustainability,” “significant debt,” and a “history of frequent leadership turnover.”

“Grantmakers are looking to make long-term bets on the nonprofit community,” said Johnson, which is why sustainability ranks so highly. Similarly, he said, a history of frequent leadership turnover “may say something about the organization as a whole,” though a recent leadership turnover in itself isn’t necessarily considered a red flag.

 

HOW GRANTMAKERS SPEAK: COMMUNICATION AND ADVOCACY

Johnson admitted that some evidence of the “hard-to-reach foundation” stereotype can be found in the survey data: “For instance, respondents said they were more likely to use printed brochures than online social media.” (Community foundations being the exception, Johnson said; they frequently engage with community members where they gather online.) The lesson, however, is for nonprofits to meet foundations where they are, not necessarily where they think foundations should be.

The methods of communication nonprofits rated most valuable were the same methods foundations reported using most often: email, in-person meetings, and phone calls—“all one-on-one communication,” noted Johnson, “which is very effective.”

In terms of communication requirements grantmakers put to their grantees, three-quarters of respondents require some kind of regular report. (Not quite half of those respondents require that report yearly.) Most nonprofits are using those reports to ensure compliance with grantmaking objectives (72%) and to keep foundation trustees informed  (60%). Far fewer, however, are using them to help grantees understand their success and failures (36%), or to share lessons learned with other grantees (18%) and funders (13%).

Advocacy, though it remains a priority for some foundations, is an arena most respondents (82%) only participate in through the grants they make, rather than through direct efforts to affect public policy.

 

CHALLENGES NONPROFITS FACE: NEED AND PERCEPTION

Most nonprofits surveyed—more than three-quarters—rely on grants for less than one-third of their budget. The greatest number of respondents (44%) reported that grants make up less than 10% of their budget. At the same time, however, 45% of those surveyed predicted they’d be relying more on foundations in the coming year. (Only 8% anticipated a decrease.)


TOP 10 NONPROFIT CHALLENGES


1. Raising unrestricted revenue or general operating support.
2. Raising funding that covers the full cost of programs.
3. Diversifying funding sources.
4. Achieving long-term financial sustainability.
5. Not enough staff.
6. Meeting community demand for services of programs.
7. Marketing, outreach, and community engagement.
8. Developing cash reserves.
9. Having regular, reliable cash flow.
10. Measuring impact.
 

Asked whether reliance is a good or bad thing, Johnson said that it depends on the kinds of support you’re receiving: “If you’ve got a long relationship with a foundation,” one that gives year after year or has pledged a multi-year grant, “that’s helpful. But if you’re overly reliant on foundations that are episodic in their giving, that can be problematic. You can’t rely on a one-time investment.”

Not surprisingly, six out of the 10 challenges most often cited by nonprofit respondents, including all in the top four, were financial. Fortunately, foundations seem to be responding to these needs; down the line, in fact, the funding needs reported by nonprofits were largely aligned with foundations’ perceptions of those needs and likelihood to fund them.

This indicates, again, the responsiveness of the grantmaking community. Johnson said that getting grantmakers to respond to challenges further down on the list of needs—staffing, IT, and marketing among them—is, again, a matter of communication: “Grantmakers want to know your specific needs. We rely on you.”

Nonprofits were also generally pleased with the way foundations communicate their priorities and procedures, with more than three quarters finding them at least moderately clear. Respondents found communication around grant decisions slightly less “clear and helpful,” but reported a significant increase in the number of grantmakers responding to unsolicited inquiries.

WHAT’S NEXT

In the next year, 64% of responding foundations project an increase in giving—great news for the 45% of nonprofit respondents expecting to increase their reliance on grants in the coming year.

Foundation respondents also said they plan to focus heavily on education and health, both major Georgia issues, and therefore of particular concern for our locally-minded grantmaking community.


TOP 5 COMMUNITY ISSUE AREAS FOR FOUNDATIONS
 

1. Secondary & primary education effectiveness
2. Early childhood education availability & quality
3. Healthcare access & affordability
4. Child welfare
5. Higher education access & affordability
 

Less pressing for grantmakers are issues seen largely as the responsibility of government, like transportation, immigration, water quality, and affordable housing. Arts and culture funding, meanwhile, may be rebounding from a post-recession lull in grantmaker attention: foundations report themselves about as likely to fund arts as they are to fund workforce development, despite rating arts far lower in “importance.”

More immediately—beginning right after the Taking Measure presentation with lively roundtable discussions— nonprofit and philanthropy pros will use the survey results as a way to start and deepen conversations about the experiences, opportunities, expectations, and frustrations revealed by the data. GCN and its research partners plan to keep that conversation going, and put your feedback to work, as we gear up for the 2016 edition of the survey.

“We are developing an interesting dataset to look at how things change over time,” said Johnson, joined by Beavor

in urging even broader participation in the third survey. As the dataset grows, they said, so does the strength of the partnership between philanthropy and nonprofits, and the impact we’re able to make as a result.

 

Marc Schultz is managing editor of NOW.

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