Could the Social Innovation Fund Generate More Foundation Transparency?

Happy New Year everyone! We are one step closer to the release of the official guidelines for the Social Innovation Fund (SIF). On December 18, the Corporation for National and Community Service (the Corporation) released its draft Notice on Funds Available (NOFA) for the $50M SIF; the comment period is open until January 15. Several people who have carefully followed the developments related to the SIF will engage in a conversation on the subject on Sean Stannard-Stockton’s Tactical Philanthropy blog. I’ll post comments there as well on Twitter using the #SIF hashtag. To start my part of the conversation, I’ll use this space to follow-up on my original post on the SIF and outline both the issues I identified in my review of the NOFA and questions I’ll submit to the Corporation.

My general conclusion is that the Corporation did a tremendous job in clarifying and outlining its expectations. There are still some fundamental issues related to the SIF – notably the tension between focusing on proven approaches versus innovation – but it’s alignment with the Department of Education’s $650M Investing In Innovation Fund is a positive step forward. In reviewing the SIF, two things immediately stood out as having changed from previous communication from the Corporation:

 

  1. The original information from the Corporation indicated that $2.5M of the SIF funds would be set aside for research and evaluation with the remaining $47.5M being distributed to local organizations. Of that amount, the Corporation intended to provide up to $4.75M in direct funding to community organizations. The draft NOFA does not indicate that the Corporation will now fund local organizations directly.
  2. Originally, the Corporation intended to award grants ranging between $1M and $5M to intermediaries. The draft NOFA has now increased that range to $5M to $10M with an average anticipated award of $7M to intermediaries. As a result, the Corporation will issue less grants while also raising the barrier for foundation participation.

In looking to provide comments on the draft NOFA, I have focused my attention on issues related to timing, impact on foundations (especially transparency), match requirements, and evaluation. The SIF will provide grants from the federal government to intermediaries – broadly defined as grantmaking institutions or local government partnerships involving a grantmaking institution. For this post, I’ll primarily refer to foundations as the intermediary grantees.

Timing

How long will the Corporation provide from the final release of the NOFA to the actual application due date? For example, the Corporation provided three months for applicants to prepare their proposals for the AmeriCorps State / National competition. Will the Corporation duplicate this for SIF? If not, what would be a reasonable period of time for intermediaries to appropriately to respond to the NOFA?

My concern relates to a potentially very tight schedule. The Corporation must award its SIF FY2010 funding by September 30, 2010. The final SIF guidelines will be published in February and should have at least a six-week window before the proposal deadline. With 150 – 200 applicants expected for this round (see NonProfit Times article), the Corporation may take two to three months to conduct the review, which may include telephone discussions and site visits.

Roughly calculated, the Corporation could expect to announce its grant recipients in June or July and then would need to launch into award negotiations. Those selected intermediaries that had not preselected their grantees prior to applying to the Corporation would then need to run their own local competitions. What’s unclear is if the Corporation can finalize the award grants to intermediaries while their local competitions are still pending or if their grantees must be identified and contracted by September 30, 2010.

Impact on Foundations

Several of the draft NOFA provisions could potentially have significant impact on how foundations operate. Foremost, foundations that receive funding through the SIF will have to become more transparent with their grantee selection process. Commonly, a foundation’s selection process is cloaked in secrecy: it may involve staff members, external experts or a combination of both and the mechanisms of the review process are not publicly disseminated. 

As a SIF intermediary, however, a foundation would need to demonstrate its ability to conduct a robust grantee selection process, which will undoubtedly include its past experiences in conducting such selections. The foundation will have to demonstrate its history in conducting open or otherwise competitive programs to award grants. It will also have to use and engage experts and leaders in the selection process. Last, the SIF provides the Corporation with the ability to review the results of an approved intermediary’s selection process for compliance and appropriate outcomes. Taken together, these provisions will shed much more sunlight on how a foundation manages its grantee selection process. Conversely, it might lead some funders to not engage in the SIF in order to protect the anonymity of their selection process.

A second potential impact area on foundations derives from the high barrier to participation. With a minimum grant award of $5M to intermediaries that requires a one-to-one cash match, a foundation would need $10M in order participate in the SIF. Only a small number of foundations probably have the cash available or unallocated to participate in the SIF (more on that below).

However, the draft NOFA also encourages funding collaborations. As such, the potential increases for collaboration between grantmaking institutions that pool resources in order to qualify for the minimum match requirement. The collaborations could also potentially involve local government units. The funding threshold and match requirements as well as the opportunity for funders to collaborate in order to focus on significantly philanthropically underserved areas might foster new partnerships between foundations and build additional support for rural and underserved communities.

Cash Match Requirement

As mentioned above, the draft NOFA states that the Corporation will award grants ranging between $5M and $10M. Both intermediaries and their grantees are expected to provide a one-to-one cash match. It addition, the draft NOFA states that SIF applicants must demonstrate the ability to meet 50% of their cash match requirement at the time of the application. Assuming a foundation can also provide the match requirement for the local nonprofits that will receive SIF funding, it might expect to have to provide $5M to $20M in a cash match (with 50% of that amount in hand at the time of the application to the Corporation).

That’s a tremendous amount of money that a foundation will have to quickly allocate and distribute. Hopefully, a foundation applicant would not reallocate funds already targeted for community efforts in order to apply for SIF funding. However, I suspect that many funders do not have so much surplus money available at their immediate disposal. And while community foundations would be natural partners in the SIF, I suspect that the cash match requirement might prevent most from participating.

Interestingly, the draft NOFA also includes a one-line clarification that states that foundations are also encouraged to provide matching funds in excess of the minimum requirement. The Corporation, however, does not indicate how it would adjust the review process for a foundation’s proposal that provides excess matching funds.

Evaluation

The draft NOFA outlines a very strong emphasis on evaluation and outcomes, which creates a tension in prioritizing funding of established and proven programs versus truly innovative and disruptive efforts. For example, the Corporation places an emphasis on funding a foundation whose grantees have strong evidence of strong impact. Those grantees must also include overview of their evaluation efforts in the SIF application to the Corporation. Is it reasonable to expect innovative projects that need funding support to grow in scale or those that have struggled to find significant funding to date to have recently completed evaluations that attest to their impact? Is it possible that the strong focus on evidence to date may invalidate the truly innovate programs from being funded?

The draft NOFA also indicates that the Corporation expects its intermediaries and their grantees to carry out significant evaluation efforts. Interestingly, the Corporation intends to be involved in the final evaluation plans, which includes its review of the research design proposed by the evaluators hired by the intermediaries and the specific questions the evaluator will ask. I wonder if this might forestall any possible foundations and evaluators from participating in the SIF. The Corporation flagged impact assessment as a key question it needs feedback on, so I suspect this will continue to evolve before the final guidelines are published.

General questions

Most of the above focuses on key issues I identified in the review of the draft NOFA for the SIF. Below are the specific questions that I’ll submit to the Corporation during this comment period. 

  1. Could the strong focus on “proven initiatives” automatically eliminate the truly innovative idea that has not received sufficient funding or had sufficient time to develop a history of proven impact?
  2. The draft NOFA requires both grantmakers and their grantees to match the grants on a one-to-one ratio. Can the grantmakers cover the match requirements for both the intermediary and local organizations or does the Corporation require a separate founding source for the latter?
  3. The draft NOFA places a strong emphasis on evidence. How will the Corporation evaluate foundations and their grantees’ efforts to achieve measurable outcomes?
  4. The definition of an intermediary remains vague: it could be a foundation or government agency but also a “high-engagement philanthropy organization” – what kind of organization is that?
  5. If a foundation is selected and needs to run a competition to select its grantees, must that selection and awarding process be complete by September 30, 2010?
  6. What’s involved in the Corporation’s due diligence review of a foundation? How much transparency will foundations be required to provide?
  7. The Corporation states that “final SIF award decisions also may be weighed based on the outcome of other large Federal grant competitions.” Is that limited to only other Corporation grant competitions or does that include grant competitions managed by other federal agencies?
  8. Who will carry the burden of the evaluation expenses? The intermediary grant recipient or the Corporation? Does the Corporation expect grantees to set aside a minimum percentage of funds to fund evaluation efforts? If not, might funders be expected to cover these expenses on their own? Can foundations use SIF funds to underwrite expenses related to Learning Communities or must that be covered by direct program expenses?
  9. Will the Corporation penalize foundations that have not had a historically transparent approach to identifying and selecting innovative projects to fund?
  10. The draft NOFA states that foundations will also need to ensure that their grantees are not receiving “large amounts of other Federal innovation funds.” How does the Corporation define both “larger” and what constitutes other Federal innovation funds?

 

Feel free to add your own questions and please join in the conversation about the SIF both here and at Sean's blog.

 

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