Funding Nonprofit Infrastructure Amplifies Impact

By Markets Fool.com

To the Boston nonprofits who receive them, a Barr Foundation grant is highly coveted. The Barr is a family foundation, established by Barbara and Amos Hostetter Jr., who made a considerable fortune in the nascent cable industry. The Barr Foundation is highly networked in the Boston area, and primarily focuses its giving there on arts and culture, climate, and education.

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This foundation is unusual in its willingness to fund nonprofit infrastructure improvements, because it believes that this support amplifies the value of other grants it provides. These capacity-building grants might fund things like organizational assessments, various types of technical assistance, professional development, or planning capital projects.

Building the West Seattle Bridge. Source, Flickr user: Seattle Municipal Archives.

A number of years ago, a primary measure of the effectiveness of nonprofits -- in fact the sine qua non for many donors -- was a low level of administrative cost. Even today, it's common for potential donors to want all of their gifts to go directly to recipient programs, and for nonprofits to tout the high percentage of donated resources that goes to beneficiaries. This is, in essence, the opposite philosophy of donating to support nonprofit infrastructure or capacity building.

A just-released study by The William and Flora Hewlett Foundation, with the Foundation Center, found that donations to benefit nonprofit and foundation infrastructure has slowly rebounded since 2010 from the dip associated with the recession of 2007-2009. Although it's nearly back to 2006 levels, infrastructure's share of giving has decreased as overall giving totals have grown, and the number of foundations and nonprofits has increased. Much of this funding is concentrated with some of the most prominent foundations in the country, including The William and Flora Hewlett Foundation, the Bill and Melinda Gates Foundation, and the Ford Foundation.

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If you are associated with a smaller foundation, or even a private donor, you can also benefit the causes you care about by helping to fund capacity building or infrastructure grants. If you do, here are some ideas you might consider.

The capacity needs of every nonprofit are unique. If you're running a small, local food pantry, what you might need to expand services or geographical areas will be significantly different than if you're running an educational initiative across an urban school district.

The best way to find out what those infrastructure needs might be is by getting to know the organization. Look at its strategic plan or annual report; or better yet, get to know some of its leaders, and ask what the organization needs to grow or more directly meet its mission.

Improving infrastructure will not happen with one action; it takes time, and probably multiple steps. For that reason, consider making a commitment for a number of years, to see the project through. This may take some philanthropy planning and strategy.

Set up regular communications, as the organization should give you regular updates on how things are going. And keep in mind that, like strategic improvements to a corporation, or even a family home, realities may challenge the original timeline and cost estimates -- so be flexible.

As the Barr Foundation demonstrates with its colleagues in Boston, partnerships across sectors make all of the partners more effective. That means the nonprofit must engage other donors, government agencies, academics, and even other nonprofits to ensure those infrastructure projects are successful and not duplicative.

Should you be concerned if a nonprofit seems to have extremely high expense ratios? Yes. But keep in mind that sometimes they are temporary, and due to a strategic expansion in the organization's capacity or infrastructure.

The only way to find out is to gain a deeper understanding of the nonprofit. That is what prominent players like The Barr Foundation do. And on a smaller scale, you can do the same.

The article Funding Nonprofit Infrastructure Amplifies Impact originally appeared on Fool.com.

Fool contributor andGiving CoachMark Ewert is as serious about charitable giving as you are about investing, so he wants to help Fool readers to be skillful givers. You can purchase his book,The Generosity Path: Finding the Richness in Giving,through his website or at your local bookstore. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.