A National Imperative: Joining Forces to Strengthen Human Services in America (Jan 2018)

CHALLENGE #2 Constraints imposed by private philanthropy

Philanthropic funders placing restrictions on donations want to ensure that their dollars go toward causes and activities they care most about. In this way, their donation restrictions are similar to stipulations in government contracts and create the same issues. In addition, restrictions may direct valuable funding toward programs that were once important but are no longer relevant or needed by the community. As one human services CEO in Louisiana explained, “Donors can’t see the future. They don’t know what the needs of the community are going to be five, ten years down the line. Restricted donations can leave me with a bucket of money I can’t use unless I waste it on things that nobody needs or wants anymore.” Funders may not support human services CBOs’ efforts to generate earnings to support investment and innovation. For example, a major philanthropic organization in the United States routinely reduces its support of human services CBOs able to retain earnings and build reserves (the rationale being that because the organization has reserves, it has less need of philanthropic funding.) These practices leave CBOs with limited opportunities to gain from their own efficiencies. As a result, human services CBOs face considerable difficulty investing in critical capacities and innovation, as well as building up reserves and capital and liquidity cushions to protect against financial stress. A CBO leader fromWisconsin iterates a common theme amongst CBO interviewees: “With no margin, there is no mission! People may not understand that all of our savings get reinvested into our organizations and the impact they provide, not shareholders!” SPENDING NEWMONEY Resistance to allowing human services CBOs to “earn a profit” among government agencies may be due in part to agencies failing to understand the financial needs of CBOs. In the National Imperative Survey, we asked human services CBOs what actions they would take first if they were to receive additional flexible funding. We posed the same question to government agencies, asking them to predict what CBOs would do with additional funding. Among CBOs, most of the top responses focused on capacity-building and organizational strength, including “invest in strategy and innovation” (43% of CBOs), “increase salaries” (37%), “invest in staff and leadership development” (30%), and “create or add to endowment or reserves” (27%). By contrast, top responses among government agencies focused on service delivery: “improve current services provided” (55%), “provide current services to more people” (52%), “expand type of programs/services provided” (42%), and “hire more people” (42%). This divergence suggests that leaders of human services CBOs recognize that improving their own organizational capacities is critical to their ability to deliver more effective and efficient services. NATIONAL IMPERATIVE SURVEY RESULT:

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