Nonprofit Finance Fund’s (NFF) 2022 State of the Nonprofit Sector Survey didn’t hold many surprises for BIPOC-led organizations. But it does hold some lessons for funders looking to decrease racial disparities — and become more effective — in their giving.
First, a look at the results. After soliciting input from more than 1,100 nonprofit leaders across the country about the impact of the COVID pandemic and the calls for racial justice over the past two years following the police murder of George Floyd, NFF found continued funding disparities between white and BIPOC-led groups in 2020 and 2021.
Nonprofit Finance Fund, founded in 1980 as the Energy Conservation Fund, provides financing (loans) to nonprofits, consults with nonprofits and funders, and works with “community-centered organizations, networks, organizers, funders, and financing partners to support community-led solutions,” according to its website. NFF has been conducting the survey since 2008, and published its first results in 2009.
Its latest survey dropped earlier this summer, and identified some familiar funding patterns that we’ve seen in other datasets, including 70% of groups reporting increased funding and relatively high levels of general support (36% in FY2021). But NFF also found that racial disparities in funding persisted following the summer of 2020.
Fewer than half as many BIPOC-led organizations received funding from federal, state and local government sources as white-led groups. Individual donors similarly prioritized white-led over BIPOC-led organizations, and the disparity in money moved by corporate donors was particularly notable: 71% of responding white-led groups were on the receiving end of corporate funds, while only 58% of BIPOC groups could say the same.
The one bright spot in terms of racial disparities in giving occurred among foundations, where the gap was much smaller. Eighty-two percent of BIPOC-led organizations received foundation money, while 86% of white-led groups got foundation checks. Further, 53% of BIPOC-led groups reported an increase in foundation giving, as opposed to 48% of white led groups.
When it comes to the kind of funding that nonprofits have been saying they need for decades — unrestricted funds — the disparity was more extreme. In 2021, according to NFF’s report, 41% of white-led nonprofits received 50% or more in unrestricted funds. Only 26% of BIPOC-led organizations were similarly entrusted to know how donors’ money should be spent.
Advice for funders
While the 2022 NFF survey doesn’t hold many surprises for BIPOC-led nonprofits, the survey’s results — and the feedback that BIPOC leaders provided to NFF about concrete steps all funders should take to eliminate funding disparities — hold some important lessons. They also offer powerful advice for funders that want to become the dynamic forces behind positive change that they so often claim to be.
In a conversation with IP, Jen Talansky, NFF marketing and communications VP, and Larry McGill, founder and principal of Ambit 360 Consulting and one of the 2022 survey’s researchers, highlighted three important takeaways for funders that want to do better.
One is to stop being so hung up on paperwork. Smaller organizations, including BIPOC-led groups, frequently can’t afford the kinds of resources, like specialist grantwriters, to allow them to jump through funders’ hoops. Talansky said, “We had some respondents who said, ‘Please don’t reject us because of small errors or omissions in our applications, because we don’t have a whole giant department with expertise in doing this.’” This includes not holding the lack of an audited financial statement against grantseekers “because they can’t afford to pay an auditor.”
Talansky likened the practice of rejecting groups because of paperwork issues to her former practice, as an English Lit major who supervises marketing communications, of rejecting job candidates for any minor errors in their cover letters. Since ending that practice, she said, she has found and hired many good candidates who wouldn’t have got a foot in her door if she had continued.
Another suggestion, McGill said, is to be aware of “the Rolodex issue.” BIPOC-led organizations aren’t as visible, and funders who persist in staying inside their usual bubbles will just continue to give within the boundaries of their own existing, overwhelmingly white, networks.
Fortunately, greater visibility is starting to happen. Before last year, McGill said, there wasn’t real data on the percentage or number of nonprofits led by BIPOC individuals; but in 2021, the Urban Institute released the results of a study on diversity and representation in the sector, which found that 21% of nonprofit executive directors and 21% of board chairs are people of color. Further, McGill said, foundations are starting to ask about nonprofits’ leadership. Historically, they didn’t necessarily have a sense of the leadership demographics at organizations they’re supporting “because they don’t regularly collect data on the leadership of these organizations. And that’s changing.”
Talensky urged funders that are serious about diversifying their giving to get out of the office and get into the communities that they want their money to serve. Other suggestions include proactively introducing BIPOC-led groups to other funders in your existing network, and providing assistance like grantwriting training.
Some of the most compelling suggestions, though, came from the survey’s BIPOC respondents themselves. In addition to urging funders to loosen the purse strings on unrestricted, multiyear funding, one respondent simply said: “TRUST US. We are the experts in our work. ... We are looking for partnerships, not oversight.”
Further, the respondent wrote, stop “mak(ing) promises you can’t keep — if you say you want to fund us, don’t make us chase you. If you have a question about an RFP, please ask us, don’t just dump the application.”
Another wrote, “We need the time and the trust it takes in order for us to build. It seems as though most grant requirements are written for those who already have access and an incredible infrastructure. If there is a sincere desire to change the common culture in philanthropy and to achieve some type of equitable practice, funders must get rid of inherently racist structures deeply embedded in the ‘traditions’ of the philanthropic sector.”
One respondent even specified a grant amount of more than $500,000 “to allow us to incentivize top talent.” This respondent also urged donors to develop an understanding that “diversity is not inclusion, and inclusion is not equity.”
Giving for equity = more effective giving
Both the NFF researchers I spoke with and the survey’s respondents had suggestions for ways that funders can and should do a better job of equitably funding BIPOC-led nonprofits. But, funders may well ask, what would they get out of the deal?
The clear answer seems to be: more bang for their buck. “BIPOC-led nonprofits are deeply connected to their communities,” Talansky said, and further, the NFF study found that 57% of the leaders in BIPOC-led nonprofits have lived experience in one or more of the communities they serve. Only 18% of the leadership in white-led groups have relevant lived experience with the communities they aim to serve.
From a purely practical standpoint, McGill said, “unrestricted funding should go to organizations that are the best equipped to make a difference in their communities. That may be the most important variable to consider.” Considering the vast difference in lived community experience between white and BIPOC-led groups, he said, “I’m gonna turn my money over to the organizations that have that lived experience. And I’m gonna say, ‘Do with that money what you need to do, because you know the situation on the ground better than I will ever know it.’”