Big Foundations & Effective Government Spending

My last post on the way that large, private foundations are dropping the ball by not participating as intermediaries in the Social Innovation Fund (and my worry that they’ll opt out of Pay for Success as well) triggered a number of responses that I’d like to respond to:

“Is one reason for them to avoid these government programs the fact that doing so would open them up to new levels of public accountability for achieving outcomes?”

I think this is very likely the case. If you look at the issue from the self-interest of the foundations (rather than their interest in achieving their mission), then getting involved in these programs offers a number of risks (such as being turned down, needing to be more transparent, etc) without much upside (they don’t need the money). But foundations are suppose to be in this game to achieve impact, not for their own self-interest. Does it really matter if a big foundation gets turned down or otherwise looks bad? They’re the ones with the money and freedom to do what they want. They should be confident enough to put up with some negative jeers if things go wrong.

“I’ve heard from a current participant in the Social Innovation Fund that the process is a ton of work and sometimes they wish they hadn’t gotten involved.”

I can’t say that it surprises me that a brand new government program might be a real pain from a paperwork stand point. Changing how the government allocates resources from a system based on activity to a system based on results is going to require a lot of hard work and paper pushing. Private foundations, which do no external fundraising, are best positioned to handle this increased workload compared to the public charities that are currently carrying the burden for the sector.

“The Social Innovation Fund is only $50 million. Why would large grantmakers care about getting a couple million dollar grant from the government?”

As I’ve written about consistently on this topic, the Social Innovation Fund is a pilot program. The point for large foundations to be involved is not because the program in its current state matters very much, but because demonstrating that there are ways for the government to effectively base funding on results is a huge opportunity. Whether you like the process or not, the SIF and the proposed Pay For Success programs are the US government coming to the social sector and asking for help on figuring out how to base funding on results. Deciding not to participate in the programs because there’s too much bureaucracy or because the money is too small is missing the forest for the trees.

“Sean, large private foundations are participating. Many are co-funders and/or participating in various conversations about what can be learned from the process.”

This is true. Large private foundations are participating, but not acting as intermediaries. Large private foundations believe that their expertise is in program design and grantee selection. A co-funder provides money, rather than due diligence expertise. If a foundation believes that they do not have the expertise to select grantees that can deliver results, than acting as a co-funder makes sense. However, the success of these government programs hinges on whether the SIF grantees or the Pay for Success intermediaries can successful make funding decisions that produce results. Their success hinges on the entities with the most expertise in this area filling this role. While I think that the current slate of SIF grantees has this expertise, it baffles me why expert grantmakers such as the nation’s largest private foundations would decide that it wasn’t worth their time to participate directly and settle for co-funding in which they essentially are outsourcing grantee selection to the public charities that are doing the heavy lifting of working with the government.

The new book Give Smart, by Tom Tierney of Bridgespan and Joel Fleishman of Duke University and formally of the large, private foundation the Atlantic Philanthropies, makes the point that funders are not forced to achieve results. The lack of external pressures, which gives philanthropy great freedoms, also requires them to draw on inner determination and discipline to achieve results. The easy choice with these new programs is for foundations to decide they’re not worth their time. Why bother with all the complications when you’re fully endowed and don’t need the funding? Because if you’re a mission driven organization you make choices based on maximizing impact, not what’s most convenient.


  1. Sean,

    The Council on Foundations believes that by launching programs like the Social Innovation Fund and Pay for Success, the federal government begins to make a serious commitment to incorporating evidence-based strategies into the government’s business model of addressing major social problems. And that is a good thing. Frankly, these new federal initiatives should hearten taxpayers who expect their government to fund solutions to social problems that actually work. The harder part is turning these innovations into ongoing practice by imbedding them into public policy. This is where collaborative efforts between philanthropy and the federal government hold great promise, i.e., bringing the best of philanthropy’s experience and intellectual capital to the government quest to become more effective and results-oriented. It is even beyond foundations acting as grantees of the government.

    Yes, the Edna McConnell Clark Foundation is the only “big” foundation that was designated as a Social Innovation Fund intermediary, and yes, it is now a federal grantee. But we doubt that the only high value of philanthropic participation is at the grantmaking or intermediary level or that the sole metric of success for the government should be how many foundations become intermediaries.

    This isn’t to diminish the contributions of the foundations that serve as intermediaries or match funders. More than 39 foundations provide vital match funds that enable 138 organizations to receive SIF funds that help implement social innovations all across the nation. As a result, many more communities and citizens will be positively affected because of philanthropy’s participation, and that seems to be the better measure of success.

    There are a lot of reasons that foundations shy away from being a government grantee, ranging from government funding rules that do not easily fit the philanthropic business model to the important principle of sector independence to freely use private resources to do public good. In addition, there are good reasons for foundations to come closer to the government and facilitate high-value transactions that the government wishes it could do—such as taking risks on new ideas, testing strategies that affect real change, incubating innovation, and investing in long-term solutions to achieve greater results.

    The growth of interest in public-private partnerships at all levels of government has motivated the Council to increase its work in this area as part of its public policy leadership and service to its members. We now host a Public-Philanthropic Partnership Initiative ( that serves as our transactional entity to assist federal agencies in understanding how philanthropy can serve as a high-value leverage partner and, as you argue, not just a checkbook.

    Stephanie J. Powers
    Managing Director
    Public-Philanthropic Partnership Initiative
    Council on Foundations
    Arlington, VA

    • Hi Stephanie,
      Thanks for your comment. I agree with a fair bit of what you’ve written. But what I feel is missing is any argument supporting why foundations can better advance their mission by not participating as intermediaries. I get that there are other ways to participate such as your program and GEO’s which I referenced in my first post on the subject. But why is it OK that only one large private foundation has applied? EMCF, being the largest grant recipient, shows that large private foundations may very well be the best intermediaries.

      I think the work you’re doing is excellent in that it helps many foundations get involved in various ways. But that shouldn’t preclude a number of large private foundations from getting involved directly as intermediaries.