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Cover image for Philanthropy Dynamics In Nonprofits
Rootable, by Food Rescue Alliance

Philanthropy Dynamics In Nonprofits

becks profile image Becks Boone ・8 min read

This is the first post in a two-post series from Hayden Dansky @hdansky . Dansky shares their experience as the Executive Director of Boulder Food Rescue and took the organization from an underfunded grassroots effort to a sustainably funded nonprofit. This post explores 1) the history of philanthropy 2) challenges associated with using philanthropy as a funding source, and 3) alternatives to the traditional philanthropic funding source. The second post in this series explores revenue sources typically available to nonprofits.

Like many of the U.S.’s great institutions, philanthropy also has a deep history in white supremacist and patriarchal values, many of which still persist today. Yet, there are movers and shakers flipping charity on its head and giving power to people, communities, and nonprofits organizing for a better future. To understand fundraising and philanthropy models, we are going to look at: the history of philanthropy, the dynamics that still persist today, and radical changemakers in the philanthropic space.

Ready? Let’s dive in!

I. History of Philanthropy

Before the Civil War, individuals, not institutions, did most charitable work. The acceleration of industrialization coincided with increased poverty, violence, and income inequality. Organizations formed to assist individuals thought to be “deserving” of assistance. They were focused on ameliorating the effects of poverty but did not address poverty on a systemic level. Specifically, they addressed the impacts of low wages (lack of housing, hunger, disease) but didn’t organize or campaign to raise wages.

Many foundations were created in the early 1900s to support charitable giving, such as the Andrew Carnegie Foundation, The Rockefeller Foundation, and the Russell Sage Foundation. Oftentime, white men set up foundations while their wives ran charities. We still see the remnants of this in the nonprofit sector today through racial and gender demographics of nonprofit leadership, with most Executive Director staff consisting of white women.

These foundations started to support the charities and got the sweet benefits of being able to: (1) shield their earnings from taxation, (2) determine what issues and organizations money got directed towards, including those that support personal wealth building, (3) portray a positive, charitable image of businesses or industries, even if they don’t serve a social good and (4) address symptoms of social issues in ways that don’t challenge capitalism.

Let’s look at an example from these historical times to better understand this. If you drive down I-25 in Southern Colorado, you’ll pass a sign that says “site of the Ludlow Massacre.” It’s a marker of the hypocrisy of philanthropy.

In 1914, Colorado miners went on strike to protest dangerous working conditions at Colorado Fuel and Iron. John D Rockefeller was a majority stockholder in that company. Colorado militia entered the camp, and violence broke out. The militia set fire to the tent colony. At least 26 people were killed, including the women and children camped there, which gained national attention. Rockefeller provided and publicized humanitarian aid to fire victims while suppressing reports about the massacre itself.

Sound familiar? Many of these issues still persist today, so let’s take a look at nonprofit organizations’ troubles seeking out funding.

II. Challenges of Philanthropy and the Dynamics that Persist Today

  • Disconnect from what’s happening while maintaining a paternalistic attitude: Often, funders don’t know the lived experiences and challenges of people facing the issues they are trying to solve. This video created by the Chinook Fund (specific to sharing about their Giving Project model) helps cover some of traditional philanthropy’s problematic nature. If you want to understand this better, watch up until 4:30. Ultimately, this can result in a lot of wasted dollars supporting communities with things they don’t need and not addressing the things they do.

  • Power Dynamic: Money is power. Not only do these foundations often not understand the needs, but they also have the power. Nonprofit and grantmaker dynamics can feel sticky and hard to navigate, especially if the funder wants a specific outcome that isn’t in line with what the nonprofit would do otherwise. Nonprofits have to stay firm in their values and theories of change to ultimately not drift away from their mission to chase funds. That can be difficult when you’re struggling to keep your doors open. Connected to the first point listed above, you can see how this is really problematic.

  • Looking for “low overhead”: There’s a societal conception that you are not supposed to give to nonprofits that have a “high overhead.” Your money should go directly to programs and the people they serve. However, to run effective programs, the organization needs basic things to keep them functioning, like an office, management software, insurance, and great personnel. These administrative and general operating costs are absolutely essential to get the work done. Where it is especially problematic is when the concept extends to payroll. Nonprofit staff is expected to serve the community on low wages and hard work, leading to saviorism and burnout. We deserve to live in the world we are trying to create. If donors want to see effective programs, they should value treating people well so they can run effective programs. I could write an entire separate article on this alone! One more resource for this concept is Dan Pallotta’s Ted Talk that explores the problematic nature of “low overhead.”

  • Program Specific Funding: Individual donors, foundations, and government agencies are all guilty of this. It’s connected to low overhead and funders’ desires to see specific programs run. It helps put money where the donor wants to see it. It doesn’t help the nonprofit fund general operating expenses. Fundable programs might reflect ideas attractive to funders instead of the best ideas or those that deserve support. It can also take a lot of time to organize and track dollars to specific programs.

  • More data, more numbers, more programs, more people served, more: Year after year, nonprofits feel pressure to increase their deliverables. How many more people will you serve this year? How many more pounds of food will you distribute? How many more people will you educate? If the goal is to grow, this can be a great way to measure success. But sometimes, that goal is set by the funder, not the nonprofit. For example, at Boulder Food Rescue, where I’m executive director, we actually started serving people better when we reduced the number we served. We put more time and energy into building relationships, which takes a lot of time. It means we don’t have higher numbers, but our work is so much more in line with our values and respects the dignity of the folks we work with. That should be valued even though it’s not quantifiable.

  • Crisis Funding:

    • Communities left behind: When a crisis hits, donors can suddenly unlock dollars and flood nonprofits to respond to emergencies. Where the hell were these dollars previously, and why have we not had access to them all along?! We see time and time again that charities show up to communities to “serve” them, and then when the funding runs out, they leave. The community is left in the same situation they were in before. Crisis funding for disaster relief is essential. However, damages of crises last long after the problem. Without a long-term restoration plan, people who are already disproportionately affected by oppression will carry the weight of that for many years to come.
    • Crunched timelines: Furthermore, donors set goals and timelines around this crisis money that can be really restrictive. The flooding of money does support short-term relief, such as thousands of people being able to go to a food bank in a pinch. However, the long-term solutions will not be addressed. Hunger, among other oppressions, are long-term systemic problems and will continue to persist regardless of how awesome our short-term solutions are. We do need the crisis funding and expansion efforts. However, restrictions on spending won’t help nonprofits build sustainable systems for the next disaster.
  • Tax evasion vs. changing systems: Spoken about before, foundations started to support the charities and got the sweet benefits of being able to: (1) shield their earnings from taxation, (2) determine what issues and organizations money got directed towards, including those that support personal wealth building, (3) portray a positive, charitable image of businesses or industries, even if they don’t serve a social good and (4) address symptoms of social issues in ways that don’t challenge capitalism. What are the implications of mega-wealthy people being able to evade taxes for the general social good by donating vast amounts of money to a charity they choose? We know that lower-income people donate a more significant percentage of their income, but it’s also a really big deal for a person with a lower income to donate $100 to a cause they believe in and might benefit from. What does it mean for charitable efforts, meager benefits, and crowdfunding to be the effective social safety net for people with low income? Especially considering the absence of comprehensive social safety nets or more equitable economic systems.

III. Alternatives in the Space: It's not all Bad!

Some foundations are changing things up. In fact, their mottos are “Change, not charity.” They work to dismantle bias. They give grantmaking decisions to the community, fund general operating support, and let organizations be the knowledge-holders of what their communities need most.

A great example, and my biggest philanthropy crush, is the Chinook Fund. I participated in one of their programs, the Giving Project. It helped deepen my understanding of racism and classism, gifting me an opportunity to unlearn internalized identities, both in terms of oppression and superiority. The Chinook Fund uses community members to allocate funds, focusing on constituent-led, community-wide organizations and systems change. This results in a shift of power that is inclusive and diverse of all identities and recognizes the importance of long-term organizing. They prioritize Black and Indigenous-led groups and fund younger and smaller organizations. There are actually budget limits on the high end, which is radically different than most foundations who want to see you are “sustainable” before they fund you. They believe in people!

Besides the Chinook Fund, here are some examples of foundations that are socially just, work together and collaborate to share ideas, models, and more.

Some organizations exist to help individual donors give in ways that are ethical and make a significant change. For example, Resource Generation facilitates the equitable distribution of wealth, land, and power. They help donors under 35 learn how to move their wealth and resources to changemakers, organizations, and movements. They help these donors find organizations that align with the values of equity and wealth distribution. Resource Generation supports giving to community-based groups that decide how funds are distributed instead of those decisions being in the hands of people with access to wealth.

Even beyond individuals with access to wealth and class privilege, most people genuinely believe in an organization’s mission and vision and will give, without restriction. Lower-income people often give higher percentages of their incomes to nonprofits they believe in.

All radical organizations aside, there is starting to be a shift in philanthropy, even in the most basic foundations. It’s slow, but it is happening. Community Foundations are certainly trying to understand the needs and landscapes of the organizations they support. For example, the Community Foundation of Boulder County does its own research on trends and experiences. Many are looking to see an increase in DEI work at nonprofits, sit down and talk to nonprofits, build relationships, and ultimately want to change to better their practices. Sometimes it may feel slow, but change is happening. And hopefully, over time, as radical nonprofits keep pushing funders to question the power dynamic and look at some of these issues, we will see the shift.

Our research is exploring how web monetization might fit into these dynamics.

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