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Fair and Responsible Granting

Fair and Responsible Granting

A hot topic among charities is anonymous grants from foundations with donor advised funds.  Charities receive grants but they often don’t know the identity of the donor or fund that recommended the grant. This prevents the charity from saying thank you and stewarding the donor.  Unfortunately, there is deep charity frustration.  It is an important for both foundations and charities to work together to make the process better.

Pandemic Upheaval

The frustration was born in the pandemic. The world – and much granting – went from physical to digital.  In the “before time” grant cheques and letters arrived together in the same envelope. Charities had clear processes for handling and recording each document.  And then EFTs (electronic fund transfers) and emailed letters replaced paper.  Employees were working remotely.  Processes fell apart.  Payments arrived without attribution.  Emails went to the addresses of departed employees. Fundraisers were annoyed.  Finance teams were expedient. Charity databases are littered with incomplete records.

Anonymous Grants?

I have great empathy for charities, especially the fundraisers.  Many grants are quite large, and it is the fundraiser’s job to know the donors, express gratitude, and report on outcomes.  It’s bewildering to receive anonymous donations; indeed, it may seem like a foundation has a deliberate policy to prevent charities from having contact with their donors.

But if you speak to foundations, you get another story.  The foundations report that 95% of grants made are not anonymous.  The name of the donor or the donor advised fund is shared.  True, sometimes EFTs are cryptic, but letters are being sent.  All of which is to say, there is a real gap in perception between grantor and grantee, and I suspect neither is solely at fault.

Fair & Transparent Granting

To fix this situation both foundations with donor advised funds and charities need to do a bit of work.  To start, foundations need to publish their granting process on their website, so charities don’t have to guess. Foundations need to adopt fair and transparent granting practices.  Here’s some things that would help:

  • Explanation of the foundation’s approach to granting. Are grants all donor advised or are can charities apply?
  • Clear explanation of how the foundation typically makes grants and what information it discloses. For example, the EFT and the grant letter are sent on the same day.
  • Commitment by the foundation to send a cover letter for every grant. If the letter is emailed, it should go to the general email box of the charity, not to a particular fundraiser.
  • Disclosure about what an EFT from the foundation looks like. Some EFTs have limited note fields and are sent by a custodian that works for the foundation.
  • The letter should provide the contact information of a person at the foundation, on foundation letterhead, and invite the charity to send a “thank you” letter to the initiating donor. The letter should also include the foundation’s website and granting FAQs.
  • State that no tax receipt should be issued for a foundation grant.

Charities should review their donation processes.  They should communicate which email address should receive grant letters. Best practice is for fundraisers to check internally to see if a grant letter has been received to match an EFT.  It’s more productive for everyone to do an internal review before contacting the suspected grantor or donor advisor.

Good Will

Finally, charities should assume that foundations want to share information about donors and grants.  There is not a deliberate campaign to withhold information, but there is a need to improve processes and communication.  Both grantor and grantee should assume the best of each other.  A bit of good will goes a long way.

While this is an administrative topic, it is important in terms of donor trust. Both foundations and charities want engaged, happy, well-informed donors – and trust in charitable giving comes when everyone works together.