Foundation Demands for Extensive and Expensive Evidence Results in Underfunding of Long-Neglected Nonprofits

If philanthropists are serious about handing more power to community-based nonprofits and leaders of color, they need to stop putting obstacles in the path. Specifically, they need less stringent standards for approving grants.

Understandably, grant makers want to see evidence that a particular program works before they allocate funding. Nonprofits that can present research and data demonstrating the effectiveness of their work inevitably have the upper hand when it comes to the distribution of donor dollars. For example, GiveWell, which tracks what it describes as “high-impact giving opportunities,” bases its selection on independent studies, audits, and randomized controlled trials. On its website, GiveWell states that it “seek[s] out charities implementing programs that have been studied rigorously and ideally repeatedly.”

But such studies are costly and out of reach for most small nonprofits. Even lower-cost randomized controlled trials, which are considered the gold standard for measuring program effectiveness, can cost at least $50,000 to run for several months. This is more money than two annual-thirds of nonprofits in the United States generate in revenue from sources such as grants, service fees, and donations, according to recent IRS data.

Additionally, the median foundation grant of $35,000 is often accompanied by restrictions that do not cover program-evaluation costs. When nonprofit leaders carve this expense out of their programming budget, their services shrink and nonprofit-evaluator organizations such as Charity Navigator ding them for inefficient spending on overhead.

Demanding expensive evidence slows down the critical work of most nonprofits and is especially harmful to groups led by people of color. Black-led organizations historically receive less than 2 percent of philanthropic funding, and half of them do not have any relationships with foundations. If these nonprofits eventually get funded, they may find themselves beholden to a donor that supports current programming but does not provide flexible funds for evaluations. That leaves the nonprofit without the evidence needed to secure future grants if that donor stops funding it.

The evidence grant makers seek is also unlikely to be as reliable as they hope. Fifteen leading development economists, three of whom are Nobel laureates, teamed up to argue that randomized control-trial results, whether focused on poverty alleviation, education access, climate resilience, or other issues, are difficult to apply to different situations and cannot guarantee future success. When an organization aspires to expand to new geographic areas, populations, or programmes, the prudent donor could demand more regular updates to studies. In other words, more logistics and costs passed to the grant seekers.

Ultimately, these challenges lead to continued underfunding of neglected groups, while grant makers congratulate themselves for making data-driven, low-risk grants for the same old programmes. To change these patterns, philanthropists need to accept more flexible and creative approaches for gathering evidence. Rather than depending on clinical analysis, they need to learn to trust different sources of information to validate the work of less established nonprofits. Grant makers should embrace the following equitable options for determining program effectiveness:

Consider a leader’s expertise beyond the reported data. Those who lead small nonprofits understand the inner workings of their communities. They are friends with local advocates, including teachers, lawmakers, business owners, and coaches. These leaders programming have figured out how to maintain without consistent funding and have remained vigilant in their pursuit of lasting change even as traditional social services come and go.

Grant makers need to recognize that evaluating a nonprofit’s effectiveness necessitates understanding the barriers they have already overcome to help their community. They should follow the lead of MacKenzie Scott, who has validated the expertise of minority-led nonprofits by donating multimillion-dollar grants without relying on reams of impact reports. Similarly, Melinda French Gates, in her latest Giving Pledge, highlights the limitations of data when measuring a leader’s expertise.

Rely on readily available research from third parties. Rather than extensive demanding, tailored analyses from applicants, grant makers should investigate how a nonprofit’s approach builds on the work of more established organizations. Universities, large charities, think tanks, and government agencies regularly publish reports describing social-issue trends and case studies for effective programs.

As a grant reviewer for Youth Service America, I witness the tension between supporting early-stage projects in low-income communities and requiring sound evidence that funds will be used effectively. The organization successfully balanced those needs by allowing grant applicants to communicate how they used public data to evaluate local issues and adapted that data to their programming. It also coached grantees on how to produce reports that demonstrate the impact of their work and develop project narratives for the media and elected officials that could be shared with future makers.

Provide unrestricted funding and evaluation services. Grant makers can offer services that help resource-constrained nonprofits test new ideas and demonstrate their effectiveness. That might mean connecting them with organizations such as Fast Forward, which provides less established nonprofits with seed grants and mentorship to explore innovative ideas, and fosters relationships between the nonprofits and large donors. Echoing Green offers a similar model but with a focus on the individual leaders who are launching these programs.

Philanthropists can provide similar services to grantees or at least give them the unrestricted funding to explore options at their own discretion. Such efforts reduce the risk of future donations while shifting power back to historically neglected communities.

Accept the inherent risk of successful philanthropy. Government is built to broadly expand social programs and, philanthropy, has strict regulatory requirements to assess those programs. Unfortunately, those standards of evidence continue to exclude many leaders of color. It’s up to philanthropy to accept that risk is inherent to changing the status quo, as both Darren Walker, president of the Ford Foundation, and Rob Reich, co-director of Stanford University’s Center on Philanthropy and Civil Society, have recently argued.

Calling nonprofits risky investments based on the lack of traditional evidence discounts the talent of their people and quality of their ideas. Isn’t it riskier to continue investing in the same solutions and organizations that have left communities behind? Foundations should be the center of innovation that promotes these groups, allowing them to generate evidence to influence government programming and best practices in their field.

Grant makers should always strive to hold nonprofits accountable for the effectiveness of their work. Collecting comprehensive evidence better equips organizations to protect vulnerable populations, track progress, and document new findings that enhance the field. After all, philanthropic leaders have limits to the dollars they can allocate and the trust they can extend to applicants without existing relationships. Evidence does cut through the noise of ineffective ideas and unprepared grant seekers.

But philanthropy also has a duty to reduce systemic bias by recognizing the historical disadvantages of social leaders. Donors can provide their grantees with the resources to collect evidence for future programs and reduce the concentration of grants going to a select few nonprofits. Good research is crucial for equality, sustainability, and justice, but ceding power back to constrained communities is even more so.

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