Fair Exchange: Public funding for social impact through the non-profit sector

Screen Shot 2013-07-09 at 11.21.13 AMAfter more than three decades writing grant proposals in the non-profit sector, I switched sides to work as a public funder. For many years I held a granting portfolio with the Ontario Trillium Foundation, and participated in the funding reform discussions of the federal and Ontario governments. In the text Fair Exchange: public funding for social impact through the non-profit sector,  I offer the result of those experiences – a funder’s perspective on how we might do the work of public funding more effectively and increase the potential for impact as a result of our investments.

The world is changing faster than before. Civic organizations, often swifter than government policy, are emerging as the knowledge brokers pointing the way to the future and offering solutions to the “wicked” problems facing communities. How they finance that work – their access to public capital to generate public benefit – is a critical preoccupation. Governments and citizens’ organizations have a shared interest in ensuring that public funds flow in a way that best creates the conditions for recipient organizations to achieve social impact. This matters more than ever now in times of constrained public funds and increasing social need.

Good funding process is a matter of public trust

Public funders bear the responsibility of ensuring that what we fund is the best option on the table – but also of ensuring that how we fund is directly focused on enabling social impact. It simply makes no sense to spend more on the funding process than necessary, to create delays, limit other funding opportunities, or increase recipient costs with excessive red tape. It is a matter of public trust that funding processes and practices be cost efficient and geared to support outcomes of public benefit.

The case for public funding reform

Although we have an almost two decade history of discussion on public funding reform – and a comprehensive literature of sector critique – no single organization champions the reform discussion. There is no little red schoolhouse for public funders to learn their trade, few opportunities to look across programs for the best ways of doing business, and almost no theory of good design for funding programs. Also, funders seldom generate cost-to-disbursement ratios – a basic accountability measure that tracks how efficient funding processes are at distributing funds entrusted to their care. As a result, practice reform efforts have been far from stellar. Now, when every nickel in the treasury counts, high disbursements costs mean less money out the door to solve social problems.

As civic organizations begin to tap into a much broader funding economy of social finance, corporate social responsibility, crowdsourcing and the like, organizations are diversifying their revenue sources, some drawing funds from as many as a hundred different sources. Consequently, their needs as recipients have changed. Often they are also working collaboratively, bringing unusual partners to the table to increase innovation in their approaches to public issues, taking up opportunities as they arise. You can see these emerging resourcing trends through Ajah’s Fundtracker initiative, a web based directory of who is funding who. As the non-profit sector’s opportunities to contribute increase, funding practices must shift to account for the more complex financial environment in which they work. 

Evaluating funding programs for how they disburse funds

Funders often evaluate recipient’s efforts at outcome achievement, but seldom examine their own processes for how they enable, or hamper, efforts to produce social impact. Taking a design approach to funding programs enables us to be deliberate about the elements of process, and evaluate the effectiveness of administrative processes, risk management, and the funding relationship. Recipient critique tells us that funding programs must be more predictable, more flexible, reduce administrative burden, and develop stronger relationships with applicants and grantees. These elements of program performance can be measured.  Too much red-tape, for example, is an almost inevitable result of longevity of a funding program. We can predict it, track it, and shift practices to reduce it. “Streamlining” is not just about web portals, but also about how good people working in well-designed programs make use of strong relationships to understand the sector they fund and constantly evaluate how their work contributes to the ability of organizations to generate impact.

A Fair Exchange

In Fair Exchange, I offer a beginning theory of practice for public funders in Canada. I suggest language and frameworks common to all public funders and consolidate the most effective practices from prior reviews. It is my hope that this paper will help public funders to build a richer theory of design and practice that not only accounts for internal risk management but also evaluates funding processes for practices that are most effective in supporting the production of social outcomes, which is the reason why we fund.

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About Marilyn Struthers

Marilyn Struthers holds the inaugural John C. Eaton Chair in Social Innovation and Entrepreneurship at Ryerson University.

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