Online charity marketplace needed

The charitable world should create a centralized online “philanthropy exchange” that nonprofits, individual donors and funding organizations can use to share financial data and conduct the business of finding and giving away charitable resources.

The latest call for such a marketplace, long advocated by the Philanthropy Journal, comes from Paul Brest, president of The William and Flora Hewlett Foundation.

In the foundation’s new annual report, Brest says donors would benefit from an online marketplace that provided information comparable to the resources readily available to private investors.

Brest’s idea is on the money: When it comes to online data critical to making decisions, the commercial world makes effective use of technology to make data available and to transact business.

Individual charitable organizations have made effective use of online technology to publish specialized data on nonprofit finances, programs and needs.

But the charitable world as a whole has failed to rally behind creation of institutions like the U.S. Securities and Exchange Commission and New York Stock Exchange to serve as a central source of comprehensive charitable data or provide a universal marketplace to handle charitable transactions.

Websites such as GuideStar feature financial data on nonprofits organizations, but those data are far from comprehensive and can be badly out of date.

Some community foundations have created spaces on their websites where donors can find information nonprofits post on their finances and needs, but that information can be spotty and reflect the needs only of a small set of local groups.

Other organizations like DonorsChoose and AidMatrix operate online charitable exchanges that let donors make contributions to address needs posted by teachers or relief organizations, but those sites target only specific kinds of causes.

On the demand side of the charitable world, 14 regional associations of grantmakers have spurred development of a common application form,” and some also use a corresponding “common grant report” form.

But as is only too painful to many nonprofit grantwriters, the job of seeking grants from multiple foundations can be a major headache, requiring hours of work filling out separate applications that all ask for the same information.

In a complex and fragmented world with no shortage of urgent social needs, the work of raising money and giving it away can and should be a lot easier and more efficient.

Organized philanthropy needs to invest now in the creation of a comprehensive “philanthropy exchange,” possibly consisting of a network of regional, state and local exchanges, that will provide the financial and operating data nonprofits and givers alike need to make smart decisions and transact business effectively.

Ford takes a chance on change

In picking Luis Ubiñas as its ninth president, the Ford Foundation has given itself an opportunity to move beyond organized philanthropy’s fixation with business as usual.

That’s good news because, while it commits over half-a-billion dollars a year to addressing critical social needs and their root causes, Ford also devotes funds and its considerable clout to fighting change in the way foundations operate.

Ubiñas, 44, can work to change that.

The native of the Bronx in New York City comes to Ford from outside the closed and clubby world of philanthropy.

An 18-year veteran of McKinsey & Co. who leads the media practice on the West Coast for the global management consulting firm, Ubiñas has studied the impact of new technologies on business and society, and has worked both with traditional media companies and emerging technology companies.

He also is no stranger to nonprofits, having advised and served on the boards of groups like Bay Area United Way and Family Services of Greater Boston.

Urgent social problems, sweeping technological change and growing mistrust of social institutions have increased pressure on foundations and nonprofits to be more open, efficient and entrepreneurial.

Nonprofits also face huge challenges paying bills, strengthening operations and engaging their boards to help secure resources and build their organizations.

But while quick to demand change and improvement from nonprofits, too few foundations will invest in nonprofit operations or change the way they themselves do business.

And too many foundations, in denial about serious flaws in the charitable marketplace, or simply in defense of their turf, wealth and power, have fought efforts to strengthen regulation and policing of that marketplace to make its operations more fair, open and efficient.

Once he begins his new job in January, Ubiñas can be a voice and force for change.

He can guide Ford and enlist other foundations to support more effective regulation of the marketplace and to pay out more of their assets in more innovative ways to provide the capacity-building support nonprofits need while continuing to address critical social problems and their causes.

Rural philanthropy needed

Struggling with urgent social problems, rural America lives on the wrong side of the philanthropic tracks, with U.S. grantmakers targeting almost all their funds to urban America.

Roughly one in five Americans lives in a rural area – regions with less than 500 people per square mile – but fewer than one in 100 U.S. grantmaking foundations allocated money for rural development between 2001 and 2002, according to a 2004 report by the National Committee for Responsive Philanthropy.

In a new report, NCRP notes that a separate study by the Southern Rural Development Initiative in 2004 found rural foundations’ assets represented only 3 percent of all U.S. foundations’ assets and were concentrated in a sliver of non-metro counties.

NCRP also notes the Big Sky Institute for the Advancement of Nonprofits found the 10 states with the fewest foundation assets, and those receiving some of the fewest grant dollars per capita, were mostly rural, while the states with the most foundation assets, and those receiving some of the most grant dollars per capita in 2006, were largely urban.

In its new report, NCRP calls on funders to help plug rural America’s philanthropic gap.

Based on focus groups and interviews with nonprofit directors and rural foundation leaders, the report says grantmaking in the U.S. is heavily skewed to programs based in or focused on urban areas.

Urban foundations provide little rural funding either because they are not aware of rural needs or believe those needs outstrip their ability to make an impact with their funds, the report says.

Foundations prefer densely-populated urban areas because their funds can have the greatest impact there, the report says.

Funders also see limits in the effectiveness and sustainability of rural nonprofits because they lack organizational capacity and savvy.

And while foundations believe nonprofits should build relationships with them to secure funding, rural nonprofits lack access to big foundations and to the kind of support systems urban nonprofits enjoy, the report says.

To overcome the gap in rural giving, the report offers a series recommendations, calling on funders, for example, to provide long-term operating support and technical-assistance funding; create metrics appropriate to measuring the impact of grants to rural areas; fund “intermediaries” that can direct dollars to rural groups and help build their “capacity” when the funders themselves lack the staff and expertise to meet rural nonprofits’ needs; create funding collaboratives to get more “flexible” funding to rural areas; and work to build rural endowments.

As North Carolina think-tank MDC Inc. made clear in a study earlier this year on philanthropy in the South, strategic philanthropic investment in underserved regions is critical because, in an increasingly competitive global economy, Americans all sink or swim together.

To help America thrive, foundations need to spread their wealth, making investments that will help tap and develop the assets of rural America and help make the American dream a reality for all Americans.

Nonprofits need investment capital

Foundations and government need to help make investment capital more accessible to nonprofits, which in turn need to better equip themselves to secure that capital.

Those are the conclusions of experts convened by Johns Hopkins University to talk about a study last year by researchers there that found the lack of investment capital posed a critical challenge for nonprofits.

The follow-up talk reinforced the study’s finding that nonprofits find it tough to get access to the investment capital they urgently need.

While some nonprofits can get some capital, it mainly is for “hard” purposes, the experts say.

And while some capital providers are offering innovative ways to make capital available to nonprofits, much work remains, they say.

“Clearly, with nonprofits emphasizing that they cannot access sufficient investment capital, and providers indicating that capital is available and financial instruments exist that can meet nonprofit needs, a major disconnect exists between these groups,” the Hopkins researchers say.

They conclude that nonprofits need to better understand capital resources, investing, debt and business planning, while capital providers need to better understand nonprofits and create tools “more appropriate” to assessing nonprofit risk.

And foundations in particular must “be better educated about nonprofits’ capital needs,” the researchers say.

“As foundations generally expect more than what they fund and fail to help nonprofits understand their economic models, they inadvertently set up their grantees for failure,” they say.

Foundations also should develop a range of financial instruments that extend beyond grants to include products like loans and loan guarantees, or even offer below-market-rate loans through “foundation banks.”

If foundations devoted only 1 percent of their total assets to such an enterprise, the researchers say, it could add nearly $5 billion in investment capital to the charitable marketplace.

Government also needs to step up, developing new tax credits to spur capital providers to invest in nonprofits, while more “intermediaries” also are needed to connect potential sources of investment capital to nonprofits needing capital.

Despite some promising innovations, the charitable marketplace is limited by its dependence on traditional grantmaking.

By better understanding how investment capital works and the critical role it can play in how charities do business, and working to make capital more available and accessible in the charitable marketplace, foundations, capital providers, nonprofits, government and intermediaries can help that marketplace more effectively address urgent social needs.