'Traditional' foundation makes big bet on unrestricted giving. Will it stick post-COVID?

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On the morning of March 16, 2020, as COVID was bearing down on Canada, Laura Manning fired off an email that delighted her foundation’s 30-odd grantees — and made one cry.  

“Effective immediately,” she wrote them, “we are removing restrictions on all current grants…Use the money for WHATEVER you need to — giving staff paid quarantine days, addressing changes in service demand, paying your rent, anything that’s needed. 

“You do not need to seek approval first. Do what you need to do.” 

Pushing back against a decade of charity sector gospel, Manning told grantees they wouldn’t be penalized for missing program targets, changing plans or repurposing funds; that the foundation would provide “maximum flexibility” on the timing of annual reports; and that the institution would give grantees the amount of grant money they’d been promised, even if the market tanked and the foundation’s endowment took a beating. 

The reaction from her grantees was swift. “I cried when I received this email,” one replied. “[We are] so, so lucky to have such fantastic funders.” 

Laura Manning is the executive director of the Lyle S. Hallman foundation, a public foundation based in Waterloo, Ontario, on the territory of the Haudenosaunee, Anishinaabeg and Neutral Peoples, with $102 million in assets, as of 2020. The foundation funds education, healthcare and children’s programs. Their board members include a lawyer, a banker, an insurance executive, and other similarly established professionals. 

They aren’t what you’d consider an “activist foundation.”

And yet, as COVID was making its way across the Atlantic, they went big on unrestricted giving — expanding their share of no-strings-attached funding to 74 percent of all grants in 2021. 

They weren’t alone. A new report from Imagine Canada shows that a cohort of funders across the country made similar moves during the pandemic — motivated by a desire to increase charitable sustainability, drive impact, and shift the power dynamics between foundations and charities. 

As the pandemic enters a new uncertain, middle-phase, a look at the Hallman Foundation provides a glimpse into the decisions of one of the movement’s Canadian leaders — what motivated them, how it’s going, and, most crucially for their grantees: whether the no-strings-attached funding will stick.  

‘What if they spend it badly?’ 

The Hallman Foundation wasn’t always a leader in unrestricted giving. Manning says the first time she broached the idea with the board the conversation took off “like a lead balloon.” 

“It got all of the reactions that you would expect,” she says. Board members asked: “What if they spend it badly?” And how would they assess grantee success if the foundation wasn’t asking them to report on any specific activities?

Prior to a shift in 2018, the foundation took a fairly “traditional approach” to funding, Manning says. Though they worked with grantees in a “relational” way, they offered program or project-based funding, asking grantees to apply for funds by detailing how they’d spend the foundation’s money and the outcomes the foundation could expect to see. 

Over the last two decades, this philanthropic approach has prevailed in the charitable sector aligned with the philosophy of “strategic philanthropy.” This approach encourages funders to maximize the impact of every dollar by setting impact goals, funding initiatives that align with evidence-based best practices, evaluating the outcomes and re-orienting as needed. It’s a strategy that draws inspiration from business practices, and can thus feel comfortable for board members with a private sector background. 

This rise in strategic philanthropy has coincided with a broad decrease in unrestricted funding across the charitable sector in North America. One American study of educational grants found, for instance, that between 1988 and 2018, unrestricted funding fell from 19 percent to 7 percent — a trend noted by Canadian non-profits experts too. 

Widely discussed, this phenomenon has posed significant challenges for many non-profits and charities, who have struggled to secure funds for non-program related costs — funding for staff, technology expenses, building upkeep and so much more. 

Over the past few years however, community organizations and aligned funders have begun to push back. 

Unrestricted funding: motivated by impact and equity

For the Hallman Foundation, pursuing unrestricted funding was about creating a bigger impact. 

Manning says that the foundation, like many others, was initially encouraged by the program and project-related impact they were having. They were investing in kids programs, hospitals and education and their funding was making a difference. But over time, she says, staff and board members came to feel the foundation wasn’t doing enough to change underlying circumstances leading community organizations to need support. 

In parallel, they also knew the foundation would be soon receiving additional funds. The foundation’s benefactor’s estate was being concluded, which meant that the foundation would grow considerably — from assets of about $50 million in 2010, to about $100 million in 2020. 

They engaged a consultant to lead a strategic planning session and discussed strategy. They wondered: Should we focus all of their funds on solving one specific problem? Should we continue to do more of the same? During these workshops, Manning and the consulting team again raised the potential of running an unrestricted funding pilot — with greater success, this time. 

Manning says they talked through board member’s fears about providing unrestricted funding. They discussed, she says, “that if there’s an organization that is going to intentionally try to hide how the money is being spent, they’re going to do that, whether it’s a project grant or an unrestricted grant.” They also talked about the potential for the grants to have a greater impact. 

It was this line of thinking that motivated Elizabeth Witmer, who joined the foundation’s board in 2016, to support a move toward unrestricted giving. “I care greatly about the people in my community and I always have. That’s what motivates me,” she says. Witmer says it was learning about how unrestricted funding could enable organizations to be more adaptable, flexible and ultimately impactful, that made her support the new orientation. 

Steven Ayer, a sector consultant and the researcher behind Imagine Canada’s unrestricted funding report, says about half of the 25 Canadian foundations he interviewed for the study cited the increased potential for grantee impact as a key reason for pursuing no-strings-attached funding. This was more commonly cited as a rationale amongst the private foundations interviewed. 

The other half, more commonly community foundations, he says, were motivated to pursue unrestricted funding to upend power structures that have limited funding for Black, Indigenous and People of Colour-led groups. 

Ayer also says that amongst the group of foundations who pursued unrestricted funding during the pandemic, the biggest enabler was their staff and board, and their willingness to try something new. Witmer says that despite not appearing as an “activist board,” the Hallman board has always been keen to embrace new ideas and concepts when presented with new information. 

To support the board with their decision, Manning and her team did some detailed research on unrestricted funding, meeting with a handful of American foundations who had pursued flexible giving. The board also hosted a half-day session Kathy Reich, director of the BUILD initiative, the Ford Foundation’s 5-year, unrestricted funding program. 

From Reich, the Hallman trustees learned the Ford foundation was providing multi-year general operating support grants to 300 social justice organizations across the country with the aim of increasing long-term capacity and sustainability. Manning says this meeting was a critical turning point: “[Reich] was able to speak to the rationale and the scale at which Ford was operating,” she says, “And you know, if they can manage it, and meet all of their obligations and feel OK about what’s happening, are you really going to tell me we can’t?” 

The board decided to run a general operating support pilot. In doing so, they decided to start small, picking a couple of organizations that were in strong financial standing and who the foundation already had a trusting relationship with. Manning says this second design criterion came from a piece of advice Reich offered, to: “Pick people you’re not afraid to fall down in front of.”  

For local YWCA, Unrestricted funding boosted donations, media attention, D&I work

For years, Kim Decker had been adding items to a list she kept in her desk at the brown brick office of the YWCA in Cambridge, Ontario.  

Decker is the organization’s executive director, a role she’s held for 35 years. Her list detailed the things she’d like to do for the organization if they ever had the money — hire someone to fundraise full-time, hire someone else to do communications and advocacy. 

Then one day, about five years ago, Laura Manning called her up and told her the Hallman Foundation wanted to give them a multi-year, six-figure commitment that could be spent on anything they liked. “Gosh, honestly,” Decker says, “I was completely floored.”  

Decker’s organization was one of three organizations invited to apply (and was approved for) the foundation’s first round of general operating support funding, issued in 2018. YWCA Cambridge, which provides support to girls, women and non-binary people in the southern Ontario community, was approved for $250,000 per year. 

Initially, Decker says, they used the funds to help beef up the organization’s infrastructure. Previously, they didn’t have any core funding, and had struggled to hire beyond program staff. Hallman’s general operating support funding (or “GOS funding”) was thus used to hire both a director of philanthropy and a director of communications. The former was tasked with proactively building funding relationships (rather than Decker and her teammates having to write grants “off the side of their desks,”) and the latter was tasked with telling the foundation’s story — “to increase the voice and visibility of the YWCA in the community,” she says.  

Over the several years they’ve received GOS funding, their director of philanthropy has been able to secure new grants with Kitchener Waterloo Community Foundation, YWCA Canada and Canadian Women’s Foundation — critical funds to support their communities during the pandemic. The latter, Decker says, has been able to drum up increased media attention for the organization, which has in turn both strengthened their fundraising and their advocacy. 

A Hallman evaluation report of their unrestricted funding pilot notes that all three funded organizations have used dollars to support their human resources, and crucially, that GOS funding allowed them to do so “without taking resources away from direct service delivery.”  

YWCA Cambridge, like the others, also used funds to invest in equity, diversity and inclusion training. Decker says previously, it was really tough to find funders willing to put money toward internal D&I training. GOS allowed them to do it, she says, without needing to ask permission. 

In addition, Decker says the GOS funding allowed her organization to “program in real time” when COVID hit. For many women in their community, she says, home wasn’t a safe place. Using the GOS funding, the team assembled isolation and program kits which they delivered door-to-door. “It allowed us the flexibility to transition our work and not worry about how we were going to get the next dollar,” she says.  

Looking at the results from the first cohort, the success was clear for Manning and her board. “It worked!” Manning says, with rye sarcasm: “Like, surprise! It worked really well.” 

Hallman led a wave. Will it last? 

When COVID hit, it was the success of their first two GOS pilots that led the Hallman Foundation to drop restrictions for all of its other grantees. 

In doing so in March 2020, they were one of the first Canadian foundations out of the gate to shift to no-strings-attached granting, but they’d soon be followed. Research from Philanthropic Foundations Canada in 2020 found that more than half of foundations surveyed had lowered granting restrictions. 

But without the crisis energy of the pandemic, will it last? 

Ayer says the non-profit sector is constantly swinging back and forth between extremes — in this case, project-based, restricted funding on one side, unrestricted funding on the other. He believes however, there’s considerable momentum around no-strings-attached giving at the moment, which is likely to drive additional funds in this direction over the coming years. “It’s hard to say how big that increase will be,” he says, “but people [have been] making changes that will make this enduring in their organizations.” 

Laura Manning says she believes unrestricted funding will continue to comprise a portion of the Lyle S. Hallman Foundation’s granting, but that they’re “trying to find the balance” in the restrictions they place on their grants. “I know we’re not going back to 100 percent what it was like in 2016,” she says, but suggests a full shift to unrestricted granting might not also be the best way to achieve maximum impact in their community. 

She points to their funding of hospitals and educational institutions — organizations with large bureaucracies, and says the foundation can actually “do more” by funding more specifically. During the pandemic, for instance, they provided funds to local hospitals to support healthcare worker’s health and wellness — something that might not have been prioritized if funds had been unrestricted. 

Manning also says she believes it’s important that the foundation does not exclusively fund a “closed circle” of grantees — organizations with whom the foundation has an existing lengthy and trusting relationship — and that they continue to issue open calls so the foundation’s exposed to things they wouldn’t otherwise know or hear about. 

With these caveats, board member Elizabeth Witmer says that unrestricted funding is “definitely” here to stay — that the foundation’s experience has shown her that unrestricted funding can be done “just as effectively as with traditional grants.”  

The foundation’s grantees will be glad to hear it. 

With unrestricted funding support, Kim Decker says her desk-drawer wishlist has “reduced significantly,” but that there’s always more to do. 

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