Correction: A previous version of this article incorrectly referred to the Social Innovation Fund as the Social Impact Fund. The editors apologize for this error.
A former staffer with OMB Watch and former vice president of the Alliance for Children and Families, Patrick Lester has been running his own shop, the Social Innovation Research Center, devoted to tracking and reporting on nonprofits that are engaged in social innovation or social impact work. One of his major interests has been tracking the work of the Social Innovation Fund at the Corporation for National and Community Service. Through diligent work, involving a lot of FOIA requests, Lester has produced a report on the current status of the Social Innovation Fund, examining what seem to be its successes and areas where it may not have yet reached its intended results. In addition to reviewing information from SIF, Lester interviewed current and former SIF staff as well as 17 of the 20 SIF grantmaking intermediaries.
Although it has been six years into the Social Innovation Fund program which was established in the Serve America Act in 2009, Lester suggests that the information he has gathered address the “early results” of SIF and he declares them “promising,” particularly five “project evaluations with positive evidence-based findings.” (In fact, “promising” is Lester’s word of choice, appearing 21 times in the full report.)
It may be happenstance, but Lester’s largely positive assessment of the Social Innovation Fund’s work to date coincides with decisions of appropriators in the Republican-led House and Senate to slash funding for the Corporation for National and Community Service. The House appropriations budget not only cuts the agency by 42 percent, but it apparently eliminates funding for the Social Innovation Fund and the authority for the Obama administration’s Pay-for-Success program. Lester’s largely positive commentary about SIF and PFS is likely to be referenced in the coming days and weeks in efforts by the administration and CNCS’s nonprofit partners and supporters. But what Lester actually said and what his findings really mean about social innovation may contain nuances likely to be missed by legislators, who will see “positive” and “promising” salted through his text, but of importance to nonprofits with questions about the value of SIF. These comments of Lester’s are important, particularly since this is one of the few third-party analyses of SIF documentation.
- SIF has focused its attentions on programs that already have at least preliminary levels of evidence, leaving the development of truly new and innovative programs to other programs and philanthropy. It defines its own success largely in terms of its ability to advance the level of evidence for initiatives that already have a significant evidentiary track record. Although it has the word “innovation” in its name, evidence trumps innovation in SIF’s current design. (Page 9)
Innovation is the common currency of public policy and the nonprofit sector, the 25-cent term that everyone feels compelled to use, but despite all the “innovation” language in SIF, the focus of SIF funding is on organizations and programs that, to SIF administrators, have already proven their worth. The emphasis is on finding grantees that have designed programs that allow and may be structured for “rigorous” third-party evaluations as opposed to programs that are searching for and testing potential innovations.
- Two sets of resources made the most difference: (1) the size of the SIF grants; and (2) the pre-existing capacities of the SIF intermediaries and their subgrantees. Because of SIF’s high matching requirements, these two were highly correlated. In general, organizations that had greater capacity to begin with were also more able to raise significant match dollars and to receive larger SIF grants. This combination of resources greatly affected the success of SIF projects, particularly with respect to their ability afford expensive, high-level evaluations.
This conclusion is self-evident. The structure of the SIF program is to fund organizations with the ability to bring matching funds to the table, and the organizations most likely to do that are those with significant capital to begin with. SIF joins much of mainstream philanthropy in exacerbating the gap between the big “haves” and the smaller community-based “have-nots” in the nonprofit sector. (pages 13 and 16)
- Small, geographically-focused intermediaries faced the greatest hurdles. These intermediaries typically received SIF grants at or near the $1 million per year minimum and provided subgrants at or near the $100,000 minimum. Often located in mid-size cities or rural settings, these intermediaries and subgrantees had smaller funding bases to begin with and were often approaching the same local funders to raise their match. (page 16)
In an era of disintermediation emphasizing greater community connection to the sources of funding, SIF’s emphasis is toward building and funding larger national intermediaries. The smaller, regional intermediaries also had challenges with the matching fund requirement (page 29): “While the match appears to have worked as intended for the best-funded intermediaries, smaller regional intermediaries and their subgrantees often struggled.”
Not surprisingly, Lester noted (page 20), When asked, all of the intermediaries said they thought the intermediary model was one of SIF’s central strengths, as opposed to identifying themselves as potential problems in the structure of the program. When asked why, two reasons—both of which are closely aligned with idea of venture philanthropy—stood out: (1) their ability to find and choose the best possible subgrantees; and (2) their ability to build the capacity of their subgrantees after they were chosen. SIF is putting resources into national intermediaries and finding that, for SIF’s purposes, the larger ones function best.
Lester put the question to a representative of SIF’s learning and dissemination partner who answered revealingly:
“When you look at the nonprofit sector, the big ones get a lot of attention, but most nonprofits are small, less professionalized and not candidates for scale or for the SIF,” said Meghan Duffy at Grantmakers for Effective Organizations. “Given that, the intermediaries were really the only way that this was going to work.”
The SIF model is not to lift the smaller nonprofits, but to expand the resources of the larger ones, and in doing so, to strengthen the nonprofit sector’s layer of intermediary grantmakers.
To his credit, Lester puts out a challenge to intermediary grantmakers that were supposed to conduct open competitions for selecting potential subgrantees:
- The model is threatened, however, by one potentially critical weakness: a lack of transparency in the intermediary grantmaking process. At present, the subgrantee selection process is not as transparent as the federal process for selecting the intermediaries. Whereas SIF publicly posts winning applications, lists of reviewers, and application materials from past competitions online, most of the intermediaries have not. While there is no evidence that there have been any problems to date, the lack of transparency among intermediaries presents a potential threat to the program and should be addressed. (page 39)
Cautiously, Lester is broaching the question of whether the intermediary re-grantmaking structure leaned toward having intermediaries pick organizations they already knew and were comfortable with, with little opportunity for other nonprofits to realistically compete.
- In general, initiatives that tried to do more, particularly those that were launching new programs with new staff in new settings, faced the greatest hurdles. Those that were more incremental, expanding existing services in existing locations, were more likely to succeed. (page 17)
It may be a completely logical step for the funded groups, but it contradicts the image of SIF: the programs that work best are the ones that used SIF and matching funds to simply add on to or expand what they were already doing.
Social Velocity’s Nell Edgington had this insight in response to Lester’s report:
“The SIF has struggled to determine whether it is funding innovation (new solutions with limited capacity), or proven solutions (with a long track record and the corresponding capacity). It seems the two are mutually exclusive.”
In a way, she has captured the nub of Lester’s analysis: SIF is building the capacity of organizations that are already quite capable, funding programs that largely already exist to build out a bit more, and supporting the politically attractive concept of leverage through matching funds when it isn’t totally clear that the funds SIF leveraged wouldn’t have existed but for the advent of SIF.
Legislators reading Lester’s report will come away with information to help them argue for continued SIF funding, modifications in the matching fund requirements, reductions in SIF regulations (although almost all of the regulations other than criminal background checks were largely federal regulatory requirements of OMB), and adding some transparency to the intermediaries’ grantmaking processes. Congress might not learn much, but nonprofit readers of Lester’s report should find important lessons about trends in government, foundation, and intermediary funding, not all to the positive.
For more information or background on this topic, please take at look at our previous coverage: