Social Innovation Fund: Where Is the Money Going?

With this issue, we inaugurate a new column from Washington's pithiest, most independent critic: Rick Cohen. Although many of us aren't deeply involved with policy matters, all of us do want to have a general view of what's going on. In future every-other-issue columns Rick will report on the role of foundations in tax cuts, how the Obama administration sees the nonprofit sector, and the apparent disappearance of faith-based funds. His first column takes on the much-publicized, little-analyzed new federal Social Innovation Fund:

Despite the fact that President Obama's staff is still trying to figure out what social innovation really means, we've got a pretty good idea on what will be in the $50 million Social Innovation Fund -- and what won't be. For starters, it's now the $35 million Social Innovation Fund (more on this below).

First, grants to regrantors

Because the program needs non-governmental grantmakers that can provide matching funds, the Fund is largely structured to pass money to and through established grantmakers, particularly community and private foundations.

Of the total amount, 5% comes off the top for evaluation and R&D, and only 10% will go as grants awarded directly to "community organizations." The remaining 85% will go in grants sized between $1 million and $5 million to "grantmaking institutions."

It is not yet clear how much the regrantors can use for their own initiatives and administration.

Both regrantors and the community organizations that receive regrants (at $100,000 or more for three years) will each have to bring matching moneys to the table on a 1:1 basis. For example, if a foundation receives a $1 million award, it must match the award with another $1 million. For the moment assuming no administrative fee, that means the foundation would be granting $2 million, and the organizations that receive those grants would also need to match them with $2 million. Thus, the $1 million from the SIF will be matched by an additional $3 million in non-governmental funds.


The Corporation for National and Community Service sees grantmakers as attractive partners noting that "Grantmakers know the nonprofit community and possess the skills necessary to find the most promising approaches and help develop them." Presumably true in some cases, but plenty of nonprofits might not agree -- and most local nonprofits are neither funded by nor visible to private foundations.

The $35 million in SIF is approximately what foundations such as Surdna, Edna McConnell Clark and the Minneapolis Community Foundation each grant out in a year. So for many foundations, the few millions in SIF money are bubkis (next to nothing); then why are large foundations so interested in SIF? It's obvious, say the experts: Imagine taking your much ballyhooed (by you) foundation initiative and landing the imprimatur of Barack Obama's endorsement. People in the know are whispering about foundations lining up for SIF access and influence.

Government capital meant to trigger philanthropic funds

The White House is animated by the concept of using the Fund's dollars for "growth capital" that will help groups "scale up."

The idea is a reverse twist to the historic Ford-Rockefeller-Carnegie model of philanthropy: fund an organization, give it growth capital, and when it reaches scale, put big federal money into it for replication across the nation.

Except with the Social Innovation Fund, the initial money isn't from philanthropy, but from the government, and is meant to trigger philanthropic matching dollars.

In various White House conversations about the emerging SIF program, including a June 30th convening, the models in mind are well-known and already well-funded, such as the Harlem Children's Zone, Teach for America, and Nurse-Family Partnership.

The good news is that the funding is flexible and it's for growth and operations, not for strings-attached specific programs. But moving to scale works for some kinds of groups and programs but not for others, particularly those community organizations whose power and legitimacy come from their community roots.

Congressional dissatisfaction with the Corporation for National and Community Service

In July, House appropriators did the unthinkable after months of social innovation hoo-hah: They cut $15 million from the $50 million White House request for this high profile program.

Does this unusual reduction reflect congressional distrust of social innovation and nonprofits? Although they also whacked other nonprofit programs (zeroing out the Strengthening Communities Fund in FY2010), Appropriations Committee members gave a green light to plenty of other programs close to President Obama's heart and message.

But there is no question regarding a high degree of antipathy in Congress toward the Corporation for National and Community Service (CNCS) where the Fund will be lodged.

And for the moment, it is leaderless. The President's nomination to head the Corporation, Maria Eitel of Nike, withdrew her name as a candidate citing health issues. But some observers think her and Nike's connections to overseas sweatshop operations might have also been in play. The absence of a CEO weakens an organization in the Capitol Hill scramble for appropriations.

The Corporation also lost points for dismissing its Inspector General in the wake of his findings concerning the misuse of AmeriCorps funding in Sacramento, California. And beyond his findings about that organization, the now-dismissed IG's most recent report on the Corporation's overall operations paints a devastating picture of the agency's internal operations.

House appropriators cut $90 million from President Obama's FY2010 request for the Corporation, criticizing the Corporation's budget formulation, human capital management, contracting, and information technology process, and called for a comprehensive plan for closing these "management gaps." But these cuts should be understood not as a slap to Obama, but as a Congressional shot across the bow of the Corporation to get its ship in order.

Why doesn't the Social Innovation Fund get more scrutiny?

The Social Innovation Fund may be the signature philanthropic effort of the Obama era. And the competition is not among nonprofits applying for new money, but among foundations and other large intermediaries vying for the Administration's coveted seal of approval.

With a blend of large private foundations, the highly mobilized service community, and President Obama in the mix, the Social Investment Fund garners just about no critical commentary.

And where does all of this leave community nonprofits -- where so much real social innovation is initiated and incubated? Unless they're already in the embrace of well-connected foundations and their initiatives, community nonprofits  -- at the heart of social innovation -- are unlikely to find themselves winners in the foundation-dominated Social Investment Fund.

Rick Cohen is Blue Avocado's newest columnist; his columns will appear in every other issue. Rick's background includes community organizing, municipal government, executive positions at LISC, Jersey City government, and the Enterprise Foundation, and eight years as Executive Director of the National Committee for Responsive Philanthropy. He is National Correspondent for the Nonprofit Quarterly, and lives in Washington, D.C. where he never has a shortage of things to be grumpy about.

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Comments

How is the R&D allocation used?

Don't know, but I'll try to find out. The Obama Administration has made a big thing out of evidence-based program design and implementation, so I suspect the R&D and the evaluation funds are geared to generating quantitative documentation of results and impact. Given the amount of money and effort that has been spent by foundations and others to generate robust quantitative evidence and proofs of impact and outcome, sometimes with little to show but glossy reports, one hopes that the SIF implementers come to see that there are potential SIF investments into good community-based nonprofits that may not lend themselves to quantitative measures but may be important investments nonetheless.

Absolutely terrific piece.  We’re completely in agreement on this one, and for the same reason. If $35 million could be gotten to genuine community groups, this might be worth it, but in fact it’s just an Oscar Award to the largest and hippest foundations and nonprofits.

--Bill Schambra, Bradley Center for Philanthropy and Civic Renewal, Hudson Institute

It would be nice if large and hip automatically translated to "innovative". The weakness in the model is that much of the innovation and entrepreneurship within the nonprofit sector occurs in small(er) grassroots, community-based nonprofits. Sometimes, there are lessons to be learned from their innovations, but they aren't necessarily stamp-'em-out replicable and scalable (and sometimes "scaling up" occurs at the expense of some of the grassrootedness, so to speak, of these community-based groups. When I worked for a large national nonprofit intermediary, one of the big lessons we continually learned was that innovation almost always came from the field offices, not the national headquarters. What would be nice for the SIF is to see it invest in supporting the local and state infrastructure that supports the frequently struggling, undercapitalized, hardly hip but incredibly important community groups that are the backbone of the nonprofit sector's innovative contribution to our society.

Great comment Rick. One question though, could you clarify what you mean by the "local and state infrastructure?" I looked at the SIF Notice of Funding and it appears that local governments can apply too, not that they are the infrastructure you meant, but a piece of it.

I've just heard another horror story about Teach for America. This program seems to look good on the resumes of people who do it, but it doesn't help the poor students in the classrooms of these naive but untrained short-timers. Why do they continue to get so much money and credibility?!

This merits an article, not just a quick comment. To its credit, TFA has brought some important attention to the issue of urban, inner city education. Hopefully, some of the young people TFA has attracted to urban education will stay in the field as opposed to using their TFA slots to burnish their resumes or find temporary low-wage employment to ride out the recession. But some of what I read about TFA concerns me--that preparation for teaching kids can be reduced to a matter of weeks, that somehow TFA participants are the "best and the brightest" as opposed to public school teachers being somewhat less than that, that the high turnover of TFA participants is an acceptable substitute for building a cadre of long term, committed teachers, that school districts are increasingly laying off long time (higher paid, unionized) teachers while keeping or expanding TFA slots in their stead, etc. TFA has done a good job of getting support from Democrats and Republicans in the White House, people of multiple ideological stripes, largely because of the public's frustration with the public school system. TFA has scored lots of government funding, including a remarkable run of earmarks, as I described in an article I wrote in my regular column for Nonprofit Quarterly (http://www.nonprofitquarterly.org/cohenreport/2009/02/13/social-entrepre...). But your TFA question is, to me, only partly a question of how groups like this get money and credibility. A bigger issue is how do we make sure that the nonprofit sector and stipended short-term community service jobs don't get used or misused as convenient substitutes for good jobs with good wages and long term career development prospects (see my article on this topic at Nonprofit Quarterly, http://www.nonprofitquarterly.org/cohenreport/2009/02/26/nonprofit-jobs-...).

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading.

Thank you so much. Do suggest themes and topics in the future. There's much to cover regarding what is happening for or with or to nonprofits within the Beltway.

Update: Here's something of interest: The Senate Appropriations Committee doesn't agree with its counterpart in the House of Representatives. The Senate committee's recommendation for the Social Innovation Fund is the full $50 million (and the House-zeroed Volunteer Generation Fund would get $8 million per the Senate appropriators). The Senate even restored the $2 million for the nonprofit capacity building initiative that had been authorized in the Serve America Act but left out of the White House's budget recommendations. The Senate Committee on Appropriations report addressing the Corporation for National and Community Service (http://thomas.loc.gov/cgi-bin/cpquery/?&dbname=cp111&sid=cp111KNgeV&refe...) does not reference any of the managerial problems of the Corporation nor the findings of the Inspector General. One might think that the Senate's strong endorsement of the CNCS budget is attributable to the fact that the Serve America Act which created the Social Innovation Fund, the Volunteer Fund, and the capacity building initiative was sponsored by two lions of the Senate, Ted Kennedy (D-MA) and Orrin Hatch (R-UT). After the recess, the differences will be sorted out in conference committee.

I would love to have you do several interviews with prospective foundations (community and private) that are likely to receive this funding to find our their philosophy, goals, and "accountability" plans for this funding once they receive it.

Rick
This is a great piece and I hope you'll keep watching. Here's a question for you - given that the money isn't enough to move mountains, what about the bully pulpit aspect of it? Is it only ever going to be an "Oscars" as Bill claims or is there a chance that a real policy discussion about "where change comes from" might be sparked by, led by, or otherwise result from the SIF?
Lucy Bernholz

Oh, I missed a comment from Lucy Bernholz! My apologies. Yes, Lucy, there is a bully pulpit possibility, hopefully one that leads to a real dialogue about where change comes from. I worry about dialogues tied to governmental programs where so much is riding not on the dialogue, but on proving the value of the government investment. We continue to hear foundations saying that they are willing to tolerate failure for the purposes of learning, though most grant recipients are reluctant to ask for refunding based on what they learned from failure. For governmental programs, when an administration has a four-year timeframe for demonstrating that an appropriation works or not, there's a possible limitation on the openness for dialogue and learning versus showing results, having ribbon-cuttings, issuing congratulatory press releases. Let's hope that there's more appetite for learning and discussion this time around.

It's now April (2010) and it appears there are 69 applications to the Fund:

http://www.nationalservice.gov/about/newsroom/releases_detail.asp?tbl_pr_id=1709

The blarney coming out of this office continues to amaze. Maybe I'll nominate them for a "Justie" next year. 

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