Recent increases in capacity building funding have signaled a shift in how foundations, grant-making entities, and donors approach giving.
Capacity building grants refer to grants made specifically to strengthen, bolster, and/or build an organization’s effectiveness and systems. This could be funding to support hard costs such as computers or new office equipment, funding for staff or programmatic training and hiring, or funds to build a website or update an online system, among other things. Capacity building often goes hand in hand with the concept of ‘trust-based philanthropy,’ or the belief that an organization, rather than an outside foundation or donor, truly knows where and how funds will have the greatest impact.
Traditionally, capacity building grants have been deemed less attractive to funders who might seek to support a specific project and be able to track measurable outcomes. Funding the more intangible needs, such as improved and reliable internet access or a redesigned website, has been historically marginalized as less enticing priorities to funders.
However, as the pandemic and subsequent social movements shook up an established world order, there has been a shift in recognizing the need for capacity building funds and greater attention paid to the value of trust-based philanthropy.
While capacity building grants are most frequently used for community and civic nonprofits, some of the principles of capacity building can also be applied to higher education, health systems and other complex charitable institutions.
Exposing gaps in funding
Across the board, the Covid-19 pandemic exposed societal inequalities and uncovered gaps in funding. In nonprofits specifically, the pandemic revealed how thinly these organizations had been stretched.
Notably, prior to the pandemic, many organizations had been operating without crucial funds to support and grow their infrastructural needs. Research conducted by the Center for Effective Philanthropy found that nonprofit leaders consider capacity building grants one of the more effective forms of funding. However, in the decade before the pandemic, only 30% of nonprofits reported receiving capacity building support.
Post-pandemic lessons & changes
Rebecca Lemos Otero, the Executive Director of HumanitiesDC, which provides grants to DC-area nonprofits, has been a driving force in supporting organizations in their capacity building since stepping into her role mid-pandemic. “As an organization, we really were wanting to find ways of giving support to the humanities [nonprofit] community, not just individual projects. The thought was we would like the funding that we do to be able to both support programs and support the overall community, and what it means to us to support the overall community is to ensure that there’s healthy organizations out there.” She adds that as the pandemic receded, funders like HumanitiesDC were able to take a step back to assess the health of nonprofit communities.
Of supporting organizations with capacity building grants and a trust-based approach, she notes, “It’s even easier to make the argument now [as we move past the pandemic] that you shouldn’t have organizations that are continually struggling or working in subpar conditions. Your expectations shouldn’t be that they can then produce amazing work time after time—even though they tend to.” She notes that HumanitiesDC has seen a significant growth in the number of organizations seeking both capacity building and general operation support grants, and given the dramatic increase in demand, has only been able to support less than a quarter of those seeking funding.
Other organizations and donors have taken note of these needs as well. As the Center for Effective Philanthropy reports, the vast majority of nonprofit leaders who have received capacity building grants find the support hugely important in being able to invest in staff and their work.
Trust Based Philanthropy
For Rebecca Lemos Otero, the pandemic was not so much a turning point in her approach to funding, but a confirmation of the need for capacity building support. “I am a strong believer that if you are in the business of providing support and funds to nonprofits, then you also need to be trusting when they say they need funding for infrastructure,” she says. She doesn’t believe HumanitiesDC is alone in moving in the direction of implementing a trust-based approach, noting “You hear the buzzwords [trust-based philanthropy] more and more. There are a lot more foundations and grant-making entities that are thinking about that. So that’s fantastic to see.”
A study by the University of Washington that looked at the effects of the pandemic on nonprofits found that emergency relief funds and donations were instrumental in preventing greater financial loss. Gifts made by larger foundations helped by loosening restrictions around applying for and using funds, and eased the rigors of reporting evaluations. The study concluded its findings by noting that nonprofit organizations were able to work more closely with their communities and impact change both by the influx of funding and the change in the parameters around those gifts. The study recommended that less-restrictive, trust-based giving was the most helpful and effective form of support for nonprofits.
Moving forward
Being able to support an organization that is well-run, has systems in place to do their work, and can thrive is the guiding philosophy behind the work of capacity building grants and a trust-based approach. And while capacity-building support may still be a new form of funding for many organizations and grant-making entities the work shows that even a small trust-based gift can significantly contribute to its ability to affect change and advance its mission.
Solid trend numbers for the amount and frequency of capacity grants are still hard to come by, in part because of the lag time between change in foundation policy and the awarding of grants. Nevertheless, there is a growing awareness and expectation that capacity grants are becoming more numerous and impactful. Time will tell….
