26 per cent of MacKenzie Scott's grantees are creating new endowments with the billionaire's funds, and 6 other findings from new evaluation report
Why It Matters
A growing cohort of Canadian funders are offering unrestricted gifts to boost impact and restore a more equal power dynamic between grantor and grantee. But does the practice work? Are there unintended consequences? A new report offers insights.
[aesop_image img=”https://futureofgood.co/wp-content/uploads/2022/11/unnamed-3.jpeg” panorama=”off” align=”center” lightbox=”on” captionsrc=”custom” caption=”Joanna Kerr, CEO of MakeWay, a public foundation that received a US $15 million donation from billionaire philanthropist MacKenzie Scott in March 2022. (Photo: MakeWay) ” captionposition=”left” revealfx=”off” overlay_revealfx=”off”]
This independent journalism is made possible by the Future of Good editorial fellowship covering the social impact world’s rapidly changing funding models, supported by Future of Good, Community Foundations of Canada, and United Way Centraide Canada. See our editorial ethics and standards here.
In March, Joanna Kerr got a phone call that fundraisers everywhere dream of.
The CEO of MakeWay, a Canadian public foundation, learned her organization would become the first-ever Canadian recipient of the largesse of billionaire philanthropist and author MacKenzie Scott.
The donation Kerr’s organization would receive, one of Scott’s advisors told her by phone, would be for nearly $19 million. And, bucking foundation industry orthodoxy, the funding would be unrestricted — meaning, MakeWay could use the funds however they saw fit.
In the eight months since that phone call, MakeWay hasn’t wasted any time in putting Scott’s funds to use. In an interview with Future of Good, Kerr says her team has already allocated about a third of the $19 million for use in this fiscal year — and of that sum, about 65 per cent of it will go straight out the door in the form of grants and wraparound support to other organizations, helping to strengthen the organization’s broader ecosystem.
In this re-granting approach, and several other ways the public foundation is using their unrestricted dollars, MakeWay is not alone among Scott donees — this, according to a new report published last week by the Center for Effective Philanthropy.
To generate the findings for the report, the Massachusetts-based research organization surveyed about 275 organizations who have received gifts from MacKenzie Scott during her first three rounds of funding. Their research question was simple: What impact, both good and bad, is coming from all this unrestricted giving?
In this explainer, we check in with MakeWay on how they’re using their Scott funds and highlight some of the key findings from the recent report.
1. For vast majority, Scott funding has not led to ‘chilling’ effect, as some predicted
The report notes that some recipient organizations and sector observers have been wary of the large, one-time, unrestricted gifts, worrying that they might scare other donors off, based on a belief that the organization is well-funded and doesn’t need additional support. For most grantees, however, this hasn’t yet come to pass.
Of the surveyed organizations that receive project or program-based foundation funding, for instance, just 6 per cent have seen a decrease in this type of funding since their Scott gift. By contrast, 36 per cent saw a boost in this type of funding, and 51 per cent said their funding of this kind stayed about the same. (The researchers did not publish findings related to overall budget growth or reductions, but rather asked about specific funding lines, for instance, program-based, foundation funding.)
Kerr says it’s tough to say whether Scott’s gift led to a boost in donations at MakeWay — “there’s no counter-factual,” she says. But she also says it’s clear their organization hasn’t seen a donor chill. If anything, she says it helped to boost the organization’s profile, leading some donors, perhaps, to pay more attention, and leading to an increase in the number of organizations keen to partner with the public foundation.
[aesop_image img=”https://futureofgood.co/wp-content/uploads/2022/11/Screen-Shot-2022-11-16-at-4.43.32-PM.png” panorama=”off” align=”center” lightbox=”on” captionsrc=”custom” caption=”A new report found billionaire philanthropist MacKenzie Scott’s unrestricted grants offered the biggest boost to organizations’ work on racial and economic justice. ” captionposition=”left” revealfx=”off” overlay_revealfx=”off”]
2. Unrestricted dollars benefitting racial and economic justice projects most
The report found that Scott’s unrestricted grants have offered the biggest boost to grantee projects focused on racial equity and economic mobility. Of the 170-odd survey organizations working on racial justice, 68 per cent said the unrestricted funds “significantly” boosted their work. This tally was similar for the 135 grantee organizations working on economic mobility. Among them, 65 per cent said the grant offered a significant boost.
By contrast, while all 80 of the grantee organizations working on LGBTQ+ equity specifically said the funding was helpful, just 34 per cent said it provided a “significant” boost. The report did not offer a rationale for the discrepancy.
3. Organizations using funds to lift up their peers
In addition to using funds to support new programs and boost the number of constituents served, the report found that 80 per cent of survey respondents say they have or will spend some of the grant funds on collaborations and partnerships.
40 per cent, too, say they have or will use a portion of the funds to re-grant to other organizations or individuals. Taken together, these two findings demonstrate Scott’s support is benefitting organizations well beyond their direct recipient organizations and their constituents.
MakeWay, for their part, is using about 65 percent of this year’s grant allocation for re-granting or providing support to other organizations, Kerr says. This includes boosting funds for a re-granting program focused on food security and increasing the available “wraparound supports” for the 70-odd organizations that are members of the public foundation’s shared platform. The shared platform program provides small and grassroots organizations with shared human resources, technology, finance and fundraising tools and systems that small organizations are often not able to purchase on their own.
4. 26 per cent of grantees creating new endowments with Scott funds
It’s been a contentious couple of years for the philanthropic endowment model, with some Canadian philanthropic advocates arguing foundations need to “spend down”. The new report found, however, that some Scott grantees are using a portion of the philanthropist’s funds to double-down on this model with long-term financial security in mind.
The survey found that 26 per cent of respondents are using the philanthropist’s funds to create new endowments and 27 per cent are using funds to contribute to an existing endowment. (Prior to receiving Scott’s grant, just 41 per cent of grantees had an existing endowment.) A further 54 per cent said they plan to use some of the funds to build financial reserves.
Notably, organizations led by people of colour were more likely to say that they planned to use a portion of the funds to address their organization’ financial stability, including paying down debt and address financial gaps, when compared to non-POC-led organizations. (The report also noted that prior to receipt of Scott’s gifts, POC-led organizations tended to have a smaller annual operating budget and were less likely to have a board-designated reserve fund in place, when compared to their non-POC-led peers.)
Unlike some of their fellow grant recipients, Kerr says MakeWay is not using funds to create a new endowment. In fact, the public funder is trying to get all of Scott’s money out the door within three years. The aim of this approach, she says, is to use the Scott funds to draw other grantmakers to the table, boosting the overall volume of available dollars, now.
Notably, MakeWay is, however, allocating some money to support their organization’s systems — “the unsexy stuff that’s very hard to raise money for,” Kerr says. The public foundation has set aside about a quarter of their total gift to ensure the organization has a “strong core” including funding for technology, research and development, and other operational costs.
5. POC-led organizations driving more money into staff salaries and benefits
About 90 per cent of surveyed grantees said they have used or plan to use a portion of their funds to support their staff, but the survey found organizations led by people of colour were even more likely than their non-POC-led peers to do so, or say they planned to do so.
Seventy-three per cent of POC-led organizations said they were using funds to raise staff salaries or improve staff benefits compared to 53 per cent of organizations led by a staff member who did not identify as a person of colour.
Across all organizations, 46 per cent say they have used or plan to use funds to address pay equity issues for staff, 46 per cent to increase staff salaries, and 35 per cent to improve benefits for staff. Notably, 6 per cent also say they have used or plan to use funds for staff sabbaticals, a relatively rare practice in the non-profit sector. A further 19 per cent say they have used or plan to offer staff a one-time bonus — a feature certain to make Scott popular with executives and staff alike.
For MakeWay, however, Scott’s gift isn’t being used to fund staff salaries, Kerr says. Prior to receiving the gift, the organization underwent a compensation review that they were in the process of implementing, she says, noting that doing so in advance meant the organization didn’t need to “pull from” Scott’s grant in order to ensure staff salaries were competitive
6. Scott’s grants are boosting the profile of racialized leaders
In her granting, MacKenzie Scott has prioritized giving to teams led by people of colour. Though not necessarily a finding related to unrestricted giving, an executive of colour who spoke with the research team for their study said the philanthropist’s granting choices are helping to make staff like her an advantage for their organizations.
“I’m coming into an industry where I’ve been told about two million times that organizations led by women of colour get less than others,” the executive said. “So I was nervous about this because I’m thinking ‘I hope that who I am doesn’t cheat this organization out of opportunities, you know?’ And that’s a sad thing to even admit to you,” she told the researcher. “But I did think that.”
“This grant really helped because what it did was it also positioned being a woman of colour leader as an asset, not a liability.”
[aesop_image img=”https://futureofgood.co/wp-content/uploads/2022/11/Screen-Shot-2022-11-22-at-3.48.45-PM.png” panorama=”off” align=”center” lightbox=”on” captionsrc=”custom” caption=”The majority of Scott’s grantees who responded to an external evaluation survey report using a portion of the philanthropist’s grant dollars to launch new programs. ” captionposition=”left” revealfx=”off” overlay_revealfx=”off”]
7. 84 percent using funds to launch new programs
The vast majority of surveyed grantees are using a portion of Scott’s funds to launch new programs (84 per cent), to increase the number of people served by existing programs (84 per cent) and to improve existing programs (84 per cent).
For MakeWay, about a quarter of their budget is being allocated for new initiatives.
Among them, the public foundation has invested funds to learn from and support Indigenous communities in Saskatchewan. This work, Kerr says, aims to help address the sore lack of philanthropic activity in the prairie province. In addition, they’ve offered some seed funding to an Indigenous community in Northern Ontario.
In reflecting on the impact of the unrestricted funds, the public foundation leader is unequivocally positive. “The power of trust-based, unrestricted [funding] is that it has so much more capacity to shift systems than any other type of funding,” she says.
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