Enormous Variability in Foundation Grantmaking Process

The Project Streamline report (see my introduction) points to 10 “flaws” in the system of foundation grantmaking:

In short, a system has emerged—a system that is widely accepted and rarely challenged. Yet
the cumulative effect of countless carefully wrought Requests for Proposals, grantmaker-specific
practices, mission-centered questions, and unique requirements creates a staggering burden on
nonprofit grantseekers…

Our study found ten ways that the current system of grant application and reporting creates
significant burdens on the time, energy, and ultimate effectiveness of nonprofit practitioners.

Flaw #1: Enormous Variability

Nonprofits encounter a dizzying range of practice—both within and among funders—when it comes to the types of information they are required to provide.

For example, according to Center for Effective Philanthropy (CEP) data, some foundations require
financial information from over 90 percent of their prospective grantees, while others require it of only a small fraction or none at all. Even within foundations there is variability. The majority of foundations CEP studied require nonprofits to submit a Letter of Inquiry (LOI) between 34 percent and 55 percent of the time—meaning that even within one foundation, a grantseeker may or may not be asked to submit an LOI.

The report describes various types of foundations (“The Mystery Foundation”, “The Fickle Authority”, etc) who have different reasons for asking for some much info. You can find the full report here.

There has long been talk of a “common grant application”, whereby foundations would adopt a single, common form for grant applications. Many universities have done this to some extent for college applications. But I’m not so sure this is a good idea. As someone who researches investments in publicly traded stocks, I know that there are lots of smart investors that have VERY different criteria than my firm does. There is not a simple, standard approach to grantmaking (or stock market investing) that can be distilled down into a single form. But I do think that it makes great sense for foundations to very clearly lay out their grantmaking guidelines. Then they should reject early and often, explaining clearly why the potential grantee did not make the cut (A paragraph or two of honest feedback is most likely all that is needed). Then request the detailed, customized information that the foundation needs for the small pool of applicants that made the cut.

If you are the kind of foundation that funds 1 out of 3 or 5 or so applicants, than by all means you can have a completely customized process for each one. But if you are trying to screen through 10’s or 100’s of applications for each grantee you fund, let’s create some screens and don’t waste your time or the time of all those nonprofits who don’t have a chance.

As one nonprofit employee says in the report, “Just as foundations don’t want to receive proposals
that don’t fit their mission, nonprofits don’t want to spend time preparing proposals that aren’t going
to go anywhere.”


  1. Kyle Reis says:

    Sean – Thanks for this post. You mention that foundations will have different and often valid reasons for requesting certain information from prospective grantees. However, a larger problem seems to be that different foundations often request the same information in different ways. The budget has to be presented a certain way, or certain documentation has to be submitted to confirm an organization’s nonprofit status.

    If the sector could come up with a few “ground rules” on some of these practices that essentially said: “If you do such and such, this is considered good practice or proper due diligence. Anything over and above this minimum should be strongly justified within your foundation,” I think this would help those who often request additional information “just in case” or because the auditor requires it. This would at least be a starting point.

  2. I agree, especially within the context of what should be expected in a first round information request. Funders might have legitimate reasons to ask for specialized information, but only from those grantees that they are seriously considering funding.

    It seems to me that reviewing information of grantees (or for-profit investments) that a funder is not likely to fund is REALLY boring! So using standard information requests to eliminate most of the applicants who are not really in the running lets programs officers do all the real due diligence on grantees they view as excellent. That kind of work is really exciting.

  3. Kyle Reis says:

    And I completely agree that funders should be as up front as possible about what they do and don’t fund and should let applicants know ASAP if they are not in the running so that fundraising energies can be focused elsewhere. It’s not personal and applicants won’t take it personally as long as funders are timely in their response.

  4. Richard Toth says:

    Sean, thanks for reporting on this project. I am the Chair of the Project Streamline and I am particularly interested in what you and your readers have to say about our conclusions. I think your comparison to the investment industry is very relevant. Do foundations really need data in different formats or is it just ³the way it has always been done?² Is it possible that foundations like investors could all be given the exact same information but the decision making process will be determined by how foundations look at the data? Can you imagine if publically traded companies were required to rewrite their financials for each of their major funders? Or draft a different prospectus for each hedge fund? It seems absurd. Yet, essentially that is what non-profits are facing. The question Project Streamline is trying to address is how can we improve this process?

  5. Adin C. Miller says:

    Sean, I appreciate your comments and thoughts about the report. In response to your first two posts, I think there are some inherent assumptions made about funders and nonprofits alike that eventually will require more attention.

    A funder can tend to operate (although not necessarily think) as if it’s the only significant supporter of a nonprofit organization. Hence, it’s administrative burdens, both during the application and implementation stages, become paramount. From the nonprofit’s perspective, those burdens are multiplied exponentially by the number of funders it already interacts with – and yet, the nonprofit generally lacks a mechanism to inform a new potential funder of the administrative burdens already placed on it. Collectively, we need to find a way to create a more transparent way for this type of information to affect funders.

    As a funder, I’ve wrestled with the challenge of funding a new organization and knowing very little about it. And yet, if I had knowledge of the due diligence performed by that organization’s other funders I could conceivably shortcut a laborious process that would benefit both the nonprofit and my organization.

    I agree with your comment “that it makes great sense for foundations to very clearly lay out their grantmaking guidelines”; unfortunately, within some funders the grantmaking units do not follow the same protocols. Instead, these funders exhibit a sort of multiple personality disorder with respect to their grantmaking operations (e.g., requiring an LOI for one program while not having that requirement for another program). So, in these cases, internal alignment needs to happen as well within the funders.

    I also agree with you and Kyle that funders should reject early and often; however, there are a number of other issues that are also in play:

    1. I’m struck that many funders do not have an online pre-screening tool for potential applicants. And even some of the online screens currently in use lack sophistication: asking an applicant if it’s a nonprofit or not is not a substantial screen. So, I agree that funders should create screens, but those screens should be robust.

    2. Many funders operate under time restrictions that sometimes, I believe, impede good grantmaking processes and decisions. Both the yearly payout requirements as well as field expectations on funding decisions (6-8 weeks seems to be the sweet spot for turnaround on a proposal submission) sometimes work against us. In my own personal experience, I would have loved to provide tailored feedback to each proposal declined by my employer. But do so would have adversely affected the timing of our decisions and elongated the grant review process – kind of a no-win situation.

    I’m looking forward to your next installment.


    Disclosure: I am currently on the GMN Board of Directors, but the opinions above are my own and not necessarily those of the organization. 😉

  6. Thanks Adin,
    I probably have a bit of a blind spot to the fact that funders need to view themselves within the ecosystem of other funders and not behave like the are the only one. Investing in public companies (my background) usually is done without my regard to who else is investing, whereas venture capital investors very specifically have to think about co-investors. I agree with your point completely.

    Thanks for the feedback.