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Foundations And Nonprofits Should Be Held To The Same Standards
As I travel around the country engaging the veteran-serving community, I hear the same thing all the time: “Not another nonprofit.”
This comment is most often from a foundation leader or government employee who is frustrated by the creation of new veteran/military-focused nonprofit organizations. Analysis of the IRS Exempt Organizations Business Master File Extract indicates more than 42,000 nonprofit organizations registered with the IRS are identified as “W30,” or military/veterans’ organizations. Given this volume there is some truth to the comment. It stems not only from the difficulty funders and government agencies have in determining qualified grant recipients or partners, but also from the realities rooted in risks of inefficiency and perceptions of ineffectiveness.
It’s reasonable to expect creating additional organizations leads to duplication of efforts and a waste of limited resources. These organizations are small businesses after all, and need to pay their leaders, market their services, create meaningful programs, and care for legal and accounting fees. Forthcoming research by Phil Carter and Kate Kidder at Center for a New American Security will show more than 29,000 (69%) of the W30 organizations had revenue less than $100,000 listed in their most recent tax filing. There is clearly room for efficiency by consolidation rather than development of a new nonprofit service provider.
Yet, you never hear anyone say, “Not another foundation,” aka not someone else who wants to give out money. Why not? Establishing a new foundation (a philanthropic organization created, in most cases, to provide grants to nonprofit organizations, fund research, or drive social impact through donated resources) has the same potential for inefficiency and duplication as creating another nonprofit service provider (an organization usually focused on providing social impact through programs and services not intended for making a profit). Like their nonprofit counterparts, philanthropic foundations also require resources to pay their leaders, market their services, create meaningful programs, and care for legal and accounting fees. Could those monies have instead been earmarked for the cause of choice via an existing foundation as a restricted grant? Such an approach would eliminate a large portion of overhead expenses while still giving the donor brand credit for the investment. Yet, we hear no clamoring for a reduction in the number of foundations investing in the social needs in America.
If the underlying concerns have more to do with wasted resources than the difficulty in navigating services, there are some ways to ensure philanthropic investments and social services provided by the nonprofit community have more impact. Funders and service providers alike can adopt a few important principles to improve effectiveness and efficiency on both sides of the social impact equation.
Tips for foundations.
Get smart and invest smart. If you want to drive long-term impact for veterans and military families, do some research. No, you don’t have to build out a military competent staff arm of your foundation, but you do need to make time to understand the evolving needs of veterans and military families, learn about quality programs and services meeting those needs, and connect with and learn from peers who already invest in veterans. You can do most of this through the Council on Foundations’ Veteran Philanthropy Exchange or by reading academic articles and empirically based research available online from credible organizations.
Demand and fund excellence. We often hear frustration from funders who are concerned about the return on their investment as measured by long-term outcomes. Sure, foundations are great at measuring the fiscal health and governance of potential grant recipients to ensure donated funds will be used responsibly, but many funders complain they can’t determine if the monies actually have a long-term impact. As a check writer, you get a vote. Expect more from your grant recipients. Hold them accountable by expecting program evaluations that confirm qualitative and quantitative results. If you want to have a higher degree of confidence in your grant-making, you should expect more than a one-page summary in return for your $100,000 "investment" in the organization. Avoid, however, inserting your resources and views into the day-to-day operations. Taking this approach may mean you need to fund program evaluations as part of your grant-making. These can be costly as well as time consuming and nonprofits often lack the capacity to do them well. If you want excellence, add 8% to 10% to your program grant to ensure the organization can build evaluation capacity or offer in-kind support to meet this need.
Tips for nonprofits.
Compete and partner smart. Yes, I said, “compete AND partner.” It’s okay for nonprofit organizations to compete vehemently for donor attention and resources to drive the mission of the organization. However, that doesn’t mean nonprofits can’t partner in the delivery of services. Veterans and military families have complex needs that require holistic solutions. No one organization or agency can meet all these needs and trying to do so results in poor customer care in the short term and failure of the nonprofit long term. Creating and maintaining quality programs and services that best suit your organization’s strengths and resources, and in turn serves those in need, is more efficient and effective for your organization. A best practice strategy is to focus on core programs and services, then partner with and refer to like-minded organizations that have complementary services. These partnered services, in concert with your own, can help meet all the needs hindering your veteran’s successful transition and reintegration.
Run a TAB. I recently heard a nonprofit leader say, “If we keep running this organization like amateurs, we’ll continue to get amateur results.” How true. Instead, run your nonprofit for what is really is: a tax-advantaged business, or TAB. Get smart on accounting, legal issues, marketing, governance, insurance risks, human resources, etc. By doing so, you’ll be more likely to build a longer-standing, sustainable business model that will afford you the opportunity to help veterans and military families for decades to come, not to mention you will build donor confidence. While you may not be able to afford a full-time staff to implement all of these professional services, there are plenty of resources to help you get these services free or reasonable, per project rate such as CauseEngine, Google for Nonprofits, Microsoft’s Technology for Good, LinkedIn for Nonprofits, Taproot Foundation, and TechSoup. Leveraging these resources allows organization to tap into cost-effective measures and ensures the organization acquires important business capabilities that ensure viability.
Together, interested parties — nonprofit service providers, philanthropic organizations, and government agencies — can find better ways to improve sector effectiveness and efficiency that ultimately lead to improved services for veterans and military families. By doing so, we can ensure we’re fostering their successful transition out of the military and into their home communities, as well as being good stewards of public and private dollars aimed at helping our military and veteran families.
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