Advanced Grantmaking Trends
It’s a new year and if refreshing your philanthropy in 2023 is on your list of resolutions, it can help to first understand where your giving fits into the bigger picture. Over the past few weeks, we’ve been sharing insights from our latest annual trends report and our CEO recently spoke with Family Wealth Report to discuss how these trends and others helped set the stage for giving in 2023.
In this issue, we’re taking a deeper dive into the advanced grantmaking trends that have emerged over the past two years. While combing through the activities of a sample of nearly 1,000 private, non-operating foundation clients, our subject matter experts noticed a shift in grantmaking strategies in this post-pandemic world. Read on to see what they discovered.
General vs. Specific-Purpose Grants
Grants can be made as general operating support (funds that can be used to sustain an organization’s overall operations) or for a specific purpose (support for a designated program or initiative). General operating support is particularly treasured by nonprofits because it can be used as they wish, either to pay basic expenses that help keep the lights on, to launch a new program, or to address new or unexpected needs such as a sudden call for emergency aid. (In 2020, nonprofits saw a larger number of general-purpose grants in response to the COVID-19 pandemic.) Funders, however, typically favor specific-purpose grants because they want their resources devoted to programs that further their own charitable objectives.
In 2021, foundations increased their giving of specific-purpose grants by roughly 3%, in turn decreasing their general-purpose grants by the same amount. This shift, too, signals a return to pre-pandemic conditions as donors felt less compelled to give with fewer restrictions as they did in 2020 when they hoped their general-purpose funding would enable grantees to deploy resources more quickly in response to COVID-19 and other emerging needs.
General vs. Specific-Purpose Grants by Foundation Size
Funding for general operating support versus specific purposes varied by foundation size. Smaller foundations gave nearly equal amounts for each in 2020, yet in 2021, all foundations favored specific-purpose grants. Larger foundations favored them the most; 72.4% of their grants were specific-purpose and may be linked to bigger gifts where funders have explicit goals.
Other Tools for Giving
While gifts to public charities are the cornerstone of foundation giving, the features of a private foundation allow funders to deploy assets in a wide variety of ways that gives them an extraordinary and flexible toolkit to pursue their missions. Some of these tools include:
Advanced Grantmaking Activities by Number
The foundations in our study took advantage of all these capabilities. The most notable change on a year-over-year basis is the 64% decrease in gifts to individuals in 2021, which foundations used abundantly in 2020 to get charitable aid quickly and directly to the people and places that needed it most during the height of COVID-19. As the world began to recover in 2021 and urgent need tapered, foundations used grants to individuals far less.
Did You Know?
2021 saw fewer yet larger grants to non501(c)(3) organizations and fewer emergency grants to individuals.
Advanced Grantmaking Activities by Dollar Amount
It’s also notable that while the numbers of all alternative gifts decreased in 2021, the dollars earmarked to non-501(c)(3) entities increased by $4.1 million. Again, this trend suggests a return to pre-pandemic activity in which foundations make larger grants to fewer recipients within their core missions.
Want to Learn More?
We hope you have enjoyed our annual trends report series, and be sure to subscribe to our Blog to stay up to date. In the meantime, whether you’re looking for support for your existing foundation or want to create a private foundation, our philanthropic specialists are here to help. To learn more, schedule a call with us here or reach us at 800-839-0054. Together, let’s #begiving.