In this piece, PILnet’s US Development Officer, Darlene Bos, utilizes her 19 years of experience in the sector and PILnet’s unique position as an intermediary between nonprofits and funders to analyze the critical funder/grantee relationship during this unprecedented moment.
It took a while for the frantic expressions of fear in board rooms and the chaos of senior staff emergency meetings to settle out into actionable data. But even as we crunch the numbers to understand how US nonprofits are navigating this unprecedented moment for the sector, we can begin to identify trends that could help funders rethink how they support their grantees.
Funder concerns over their grantee’s operational health is nothing new. However, prior to the current situation, the concern focused largely on elements that ensured a stable and steady future—diversified funding sources, solid employment practices, and thoughtful succession plans. In the last two years, the focus has shifted to legal and compliance issues as the regulatory landscape takes on new politicization.
In the recently released report by the Center for Effective Philanthropy, A Sector in Crisis: How US Nonprofits and Foundations Are Responding to Threats, the authors highlight that despite concerns permeating the sector over legal and compliance issues that should trigger nonprofits to seek legal advice, only 32% of survey respondents have consulted an attorney.
To those of us who have spent decades in the sector, the lack of legal consultation does not come as a big surprise. Mid- to small-sized nonprofits are in a near constant battle for capacity and resources, and their spotlight is always trained on programmatic needs. The system was built to encourage that. Long-standing ideology around the need to have the smallest possible percentage of funding allocated to operational and administrative support has created a ballooning infrastructure crisis that is putting the essential work of nonprofits at great risk.
As a two-time executive director of small nonprofits and experienced senior staff of mid-sized organizations, I can say from personal experience that many organizational leaders know they have vulnerabilities but don’t know what they are or how to address them. Others may have a clear understanding of their legal and operational gaps but don’t have the resources or capacity to attend to them, especially when they are swamped with programmatic needs as communities experience crises.
Because PILnet connects nonprofits with pro bono legal support, we sit at the intersection of law and the sector’s most pressing operational challenges. Our data reveals clear patterns in nonprofits’ legal needs especially around fundraising, conflict and crisis management, and external communications. These insights allow us to do more than match nonprofits with legal support; we help the sector anticipate risk, strengthen resilience, and target support where it matters most.
While nonprofit leaders understand the need for funders to have a clear picture of their legal and compliance needs, they may not want to share their specific vulnerabilities. At PILnet, we serve as an intermediary, providing confidentiality to nonprofits and—by holding virtual trends analysis events that provide a fuller picture of the landscape across the US—also ensure useful and impactful data gets to funders.
In the report from the Center for Effective Philanthropy cited earlier, the authors noted that, “Half of nonprofit leaders indicate that, in the coming year, they hope foundations will assist them in building skills, cultivating relationships, gaining knowledge, and acquiring resources that will enable them to best respond to challenges posed by the current context.” By supporting grantees participation in PILnet’s Legal Health Check program (as one example), funders support nearly every aspect of this request. Through the program, grantees build skills and gain knowledge about the gaps in their operational health, they cultivate relationships with pro bono law firms that can support them with future legal needs, and they acquire the legal resources needed to address immediate issues.
It is crucial that funders not only recognize the problem, but put into action support for grantees to increase the capacity and resources needed to ensure operational and legal health, a key element in the funder/grantee relationship that can create true and lasting operational resilience.