Grantmaking: The Arcus Learning Journey
Since joining Arcus in 2006, Cindy Rizzo has served the foundation in a range of capacities, including Organizational Learning, Evaluation, Strategy Development, Grantmaking and Grants Management.
When it comes to our grantmaking, we at Arcus know how important it is to explain clearly and consistently what it is we fund in our mission areas of LGBTQ social justice and the conservation of great apes and gibbons. We also proudly share the important work and achievements of the hundreds of grantee organizations advancing change around the world.
Now, as Arcus enters its third decade, it is an appropriate moment to reflect upon what we have learned thus far and what we are currently exploring in terms of HOW we go about grantmaking.
These days, we are hearing many from within philanthropy and from within our grantee networks advocating for change in grantmaking practice. They are asking for a greater number of general operating and multi-year grants. They want us to fund more organizations that are “closer to the ground,” i.e., those with lived experience of the challenges we are working to address with our funding and with the most efficacious ideas for how to overcome them. They want us to devote more of our resources to grantmaking instead of adhering inflexibly to the 5% legal payout requirement. And they want our proposal and reporting processes to be less cumbersome and more relevant to their realities.
When taken together, these voices are telling those of us in philanthropy that traditional methods of philanthropic practice do not help them advance social change and instead often hinder it by imposing upon already busy grantees unnecessary proposal and reporting requirements, and narrow project funding that limits their ability to adapt and respond to change.
At Arcus, we are actively listening to colleagues and partners advocating for new philanthropic practices. And we are responding, making important changes, and piloting some new processes. In some cases, we’ve actually been ahead of the curve, instituting what are now just emerging as best practices throughout our 20-year history.
It’s helpful to examine how we at Arcus have addressed or are addressing the specific practices that are the subjects of much of the discussion going on in our sector.
Spending more than 5% on grantmaking: The U.S. Tax Code requires that “Each year every private foundation must make eligible charitable expenditures that equal or exceed approximately 5 percent of the value of its endowment.” Currently, the Arcus Foundation’s endowment is approximately $275 million. While 5% of that amount is $13.75 million, Arcus’ grantmaking budget is $28 million, a little over 10% of our endowment, and 70% of our total foundation budget. Our commitment to exceeding the 5% payout—as we did in 2020—has been consistent throughout our 20-year history.
Multi-year grantmaking: Our Great Apes & Gibbons Program has a long history of awarding multi-year grants. Over the past eight years, between 50%-63% of the number of grants awarded by the program covered multi-year periods, many up to three years. The Social Justice Program has only recently moved to increased multi-year awards, exceeding 50% for the first time in 2019 and increasing to 66% in 2020.
General operating support: It is important to note that IRS regulations place some limitations on the ability of a private foundation to award general operating support to organizations that do not have tax-exempt status under Sec. 501(c)(3) or its equivalent for organizations outside the U.S. This puts a limit on our ability to make general support grants in our international Social Justice portfolio and in our Great Apes & Gibbons Program. In addition, grants to large organizations with many program areas where only some of their work aligns with Arcus priorities are not appropriate for general support. We see this with large, environmental NGOs that focus on a range of species conservation across the entire globe while Arcus prioritizes conservation of ape species in specific range state landscapes in Africa and Southeast Asia. For these reasons, general operating support grants comprise less than 20 percent of our conservation grants budget. In the Social Justice Program, where there are fewer of these constraints, general support grantmaking has increased each year, with 33 percent of our budget devoted to general support in 2020.
Funding those with “lived experience:” Both Arcus mission areas pursue our work with a values-based approach. In the Great Apes & Gibbons Program, there is a long-term and increasing focus on Indigenous populations living in and adjacent to ape habitats. The program seeks to ensure that Indigenous conservation practices and land rights are honored and protected, and that conservation does not come at the expense of the economic survival of these populations. Grants to organizations like the Forest People’s Program exemplify this values-based approach. In the Social Justice Program, we center communities most pushed to the margins, typically LGBTQ communities of color, transgender people, and, most recently, Indigenous queer communities like the muxe in Oaxaca, Mexico. As our grantmaking in social justice transitioned in 2019 to priority states in the U.S. and priority countries in international regions, funding those closest to the ground became a greater priority. Grants to groups like the Transgender Resource Center of New Mexico and the Solutions Not Punishment Collaborative in Georgia are good examples.
New processes under discussion: I’ll be the first to admit that we don’t yet have it all figured out and we’re still working on a few changes we’re hoping to introduce in the coming months and years. For example, we have some feedback from our recent grantee survey through the Center for Effective Philanthropy that is helping us focus on how to make it easier for organizations to use our online proposal forms. We are learning more about best practices for making our processes more accessible for people with disabilities. We are also experimenting with verbal grant reporting methods as an alternative option to submitting written narrative reports. We approach these potential changes with much enthusiasm and, as always, with a mindset of learning and improving.
It is true now more than ever that there are many ways to put philanthropy into practice. Wealthy donors like Mackenzie Scott can make large general support grants that come to organizations “out of the blue” with few if any requirements and without the need for grant applications. Many public charity funders, i.e., those who raise their money to then award as grants, involve community members in the process through allocation committees. Some of the intermediaries that Arcus funds, such as UHAI in East Africa and the Contigo Fund in Central Florida, use these kinds of participatory processes. Still other funders take a more restrictive approach, holding grantees to very specific deliverables and outcomes and requiring ongoing reporting.
As a strategic grantmaker with clear program goals and objectives, and annual monitoring and evaluation processes that include specific measures to assess change, Arcus sits somewhere in the middle. We’re very disciplined about making sure our grantmaking is aligned with and advancing our strategies, but we also operate with very strong values that necessitate an ongoing awareness of the funder-grantee power dynamic and the respect for and trust in those we fund, i.e., those who are actually doing the work on the ground. In many cases, we are achieving this balance consistent with emerging best practices in philanthropy. In some cases, we have a road ahead of us we need to travel. But in all cases, the commitment is there.
We invite you to engage with us on these issues so we can improve. As the great poet and thinker Maya Angelou said, “Do the best you can until you know better. Then when you know better, do better.”
“The Five Percent Minimum Payout Requirement,” Council on Foundations