Adopting Grantmaking Practices (Foundation Building Best Practice Study Excerpt)

There are a number of different grantmaking methods and types of grants. This section describes four particular practices used in selecting grantees/partners and providing grant support.

Example 1: A Request for Proposals (RFP)
Vamos Foundation (Mexico)
Example 2: Foundation-Initiated Proposals
Puerto Rico Community Foundation
Example 3: Challenge Endowment Grants
Foundation for Higher Education (Colombia)
Example 4: Grants to Individuals
Child Relief and You (India)

What are Different Types of Grantmaking Practices?

Summary Points

The method of selecting grantees/partners will be determined by the program objectives. If the foundation wishes to cast the net widely in identifying potential grantees working in a specific field then an RFP is an appropriate mechanism. It has the advantage of giving visibility to the foundation and providing a clear indication of an open and transparent process. If the RFP is widely disseminated It may also result in proposals from organizations that otherwise would not be noticed. It needs to be recognized however that it can be a slow and expensive process depending on the size of the potential universe and whether site visits and meetings of special selection panels are required. RFPs should clearly describe the type of organization that can apply for grants, other criteria, the type of budget items to be supported and the nature and length of the review process.
Where the potential pool of grantee organizations to perform specific tasks or roles is small, the foundation may select them without a competitive process. If the objective of the foundation is very specific, such as to build expertise in a given area, encourage the development of increased corporate citizenship, build a multi-stakeholder partnership or facilitate the creation of an NGO network, the potential pool of grantees may be too small to warrant an RFP. In those cases the Foundation will be proactive in identifying grantee organizations with the capacity to carry out the required tasks. In either mechanism the foundation has to take care to avoid any hint of favoritism that might damage its credibility. It also has to have clear and consistent policies on what the foundation will and what it will not support in terms of field of activity and type of support (such as the purchase of capital equipment). Such clear statements can reduce the number of proposals that cannot be supported or need to be rewritten.
Careful consideration needs to be given to the type, size and duration of grants. Foundations need to ensure that grantees are given sufficient funds, time and resources of the appropriate type to complete the activity or project being supported. The relative merits of institutional support grants versus project grants, short-term versus long-term grants and one-year versus multi-year grants need to be carefully considered in terms of the program objectives being pursued. In many cases a foundation program will simultaneously require a mix of different types of grants to different institutions.
Where the foundation is developing the capacity of a sector, endowment grants to carefully selected organizations may prove to be an effective approach. Endowment grants to organizations can play a critical role in strengthening nonprofit organizations for which a long-term role is envisaged. The case of FES highlights the important role challenge grants can make in building permanent endowments for nonprofits, thereby supporting their sustainability.

Once a foundation has determined its broad goals and objectives and the programs and strategies it will implement in pursuit of those objectives, its next task is to decide how to announce those programs and select the grantees or partners (many foundations are adopting the term "partner" to avoid the hierarchical difference implied in the terms "grantor" and "grantee"). It is in the interest of the foundation to clearly delineate the precise areas in which it makes grants and by extension those fields in which it does not give grants. This should then be communicated to prospective grant applicants and others in the form of grant application guidelines. How a foundation selects its grantees determines its grantmaking practice.

A review of grantmaking mechanisms shows that different mechanisms are appropriate for different programs. for example, as we will discuss later, in the case of a program to support the work of NGOs and CBOs in implementing innovative micro projects at the community level, a request for proposals (RFP) may be the best mechanism. In contrast, if the foundation is supporting the creation of a new multi-stakeholder partnership or a new initiative to promote local corporate responsibility, then the judicious selection of grantees based on a study of key organizations with relevant skills may be most appropriate.

In either strategy the foundation has to be transparent in its actions and avoid any hint of hint of favoritism. Where selection panels or advisory committees are set up, care must be taken to ensure there is no conflict of interest (i.e. members of the committee should not have a personal interest in any of the organizations being considered for grants).

The choices a foundation makes depend on the objectives to be achieved and on the context, such as the state of the nonprofit sector in the country. In most cases foundations will adopt a mix of mechanisms. The ultimate aim is to ensure that the objectives of the foundation are met in the most efficient way possible. This does not necessarily mean supporting the strongest organizations in a given field. The aim of the foundation may be to strengthen those organizations with less capacity. Some common practices discussed in this section are:

Request For Proposals
When a foundation publicly announces the availability of grants, this method has the advantage of giving visibility to the foundation and at the same time providing an open and transparent process. It also helps identify organizations not previously known to the staff either with existing capacity or the potential to make a contribution in addressing priority issues. RFPs are likely to be directed towards specific types of organizations (e.g. research organizations, NGOs or community-based organizations). The process tends to be time intensive particularly if outside review bodies are involved. The example of the Vamos Foundation is used in this chapter to illustrate the RFP method applied to community-level micro-projects. Even where an RFP is issued, foundation staff often have to play an active role in identifying potential grantees and even providing support in the preparation of proposals. This is particularly true in cases where target grantees are community organizations or small NGOs with little experience in submitting proposals.

Foundation-Initiated Proposals
Another option is one in which the foundation determines that in order to achieve its objectives it needs a specific function or task carried out by a certain type of organization with specific skills. for example, the foundation requires a specific policy study to be prepared, such as a pilot project to be designed and implemented, a network of grantees to be established, a training program to be designed and conducted or a policy conference to be organized. In those cases, foundation staff are likely to have one or more specific organizations in mind with the requisite skills and whom they would ask to submit a proposal. In certain cases they might even assist in preparing the proposal.

In other cases the foundation may see that a new organization needs to be created to carry out a set of tasks. The foundation can play a catalytic role in making this happen by providing critical seed funding and encouraging other donors to contribute. The Puerto Rico Community Foundation has used this approach with effect in order to fill needed gaps in the research field.

Grants to Individuals
We examine the case of a foundation (Child Relief and You -- CRY, of India) which has opted to provide individual awards as part of its mix of grants. This is part of a strategy for identifying, encouraging and supporting leadership in civil society organizations working on issues of prime concern to the foundation. In other cases foundations make study awards available for individuals whose capacity is key to an organization's development.

Making Decisions on the Size, Duration and Type of Grant

Having made the choice of how to identify the potential grantee organizations, the foundation has to face other issues such as the size of grant, the grant period and the type of grant (core support grant, planning grant, program or project grant, individual grant or endowment grant). These decisions clearly relate both to the aims of the grant, the stage of development of the grantee organization and the resources available.

Most foundations determine a range of sizes of grant. The range depends on such factors as the number of grantees/partners the foundation wishes to work with and the resources available. Creative strategies have been developed by some foundations to leverage their resources through matching requirements. Where the matches are requested from the local organization or community, they serve to demonstrate local commitment and "buy-in" and can help to ensure sustainability. Where the grantee is asked to raise matching funds from other donors, corporate or private, matches act as a way to maximize the foundation's resources and move toward increased sustainability.

With regard to the grant period, foundations have to ensure that the resources being granted and the time period are sufficient to accomplish the aims of the project or program. Where the grant is for a specific period and is non-renewable, the foundation makes this clear at the time of approval to avoid any misunderstanding or false expectations. In some cases supplemental grants are made. It is important that conditions for approving these are made clear. Where the foundation is seeking to build and strengthen organizations, particularly at the community level, there are considerable advantages in providing multi-year grants.

Foundations frequently face the issue of whether to provide core support, or institutional, support (as opposed to project or program support) to grantee organizations. Where the organization's long-term survival is seen as critical to the long-term capacity in a given field, or institutional strengthening is the goal of the foundation's program, then core support is often provided. This is the major strategy used by Social Change Assistance Trust, South Africa to achieve its goal of community empowerment.

Institutional support can be in the form of an annual or multi-year grant or an endowment grant. FES (Foundation for Higher Education, Colombia) has designed an innovative approach to providing endowment grants to NGOs that are able to meet a matching requirement. These endowments provide a sustainable source of income for organizations playing a key role in specific fields of interest to the foundation. This is an excellent way of supporting the creation of capacity in other organizations to work on solutions to specific social problems.

In requesting proposals foundations frequently delineate those budget items it will not support. for example, a foundation supporting a small grants program and wanting to ensure that the resources are directly applied to specific projects at the village level may well decide not to support budget items such as the purchase of vehicles and buildings.