When You Have to Stop and Address Grantee Capacity

For the most part, funders agreed that grantees need to drive capacity building. We heard, “If a grantee doesn’t want it, don’t force them to undertake it.” But what about if you have a long-time grantee that’s a critical player in a field you’re trying to make change in, and you feel you cannot justify renewal funding without the organization addressing a capacity issue. For example, what if its governance or financial management practices are questionable, bordering on illegal? Or what if you fund an organization to conduct a self-assessment and it uses that to show “we’re fine — we don’t need help,” but you know there are very serious issues that must be addressed? What do you do if you can’t renew without the organization‘s addressing issues of capacity?

1. Consider the alternatives. If you’re struggling to justify the grant, you might step back and think about what happens if you make different choices. For example, what happens if you walk away? What do you expect to happen to the organization? What do other funders of the organization think, and what impact might your decision have on the organization’s future viability? What does that mean for the field or movement this organization is part of? For your relationship with that grantee? For that grantee’s relationship with other funders? While we also heard, “In certain circumstances, when there’s a serious capacity-building issue, continuing to give money can perpetuate a grantee’s belief that there’s not really a problem,” make sure you’ve thought through the consequences of continuing or stopping funding. Of course if the grantee is breaking the law, the decision is clearer; however, these situations are usually less black and white.

2. Be specific and ask questions that help the organization come up with an answer that serves its mission and goals. Think about what specifically stands in the way of your ability to fund the organization and stay focused on that. Then start a conversation with the organizational leadership about that issue from a mission and goals perspective.

ROLE-PLAY SCENARIO: A grantee that you’ve funded several times approaches you for a grant to develop a five-year fundraising plan. Through the most recent due diligence process, you discover that the daughter of the board chair is a regularly and significantly paid fundraising consultant for this organization. You also find out that this information has never been properly reported in the organization’s IRS Form 990 and that the organization’s board doesn’t have an adequate conflict of interest policy in place. How would you start the conversation with the organization’s leadership, making sure the executive director understands the seriousness of the issues at hand? What questions would you ask the grantee? How do you strike the right tone of being tough — because they risk losing their tax-exempt status if they don’t fix this — while helping them build long-term capacity so these kinds of activities don’t get repeated? Some talking points to consider for addressing the longer-term issues:

  • Does your board understand the potential consequences to your organization if this doesn’t get addressed?
  • How can I support you as you engage your board on this issue?
  • What approach might help build your capacity on fundraising and financial management, so that as you grow your organization, your financial practices can effectively support that growth?

3. Make a judgment call. It’s not an accident that this section follows the power dynamics section. Not all grantmaking is smart to engage in, but if you have analyzed the possibilities through different lenses, factoring in your foundation’s capacities and your own sensibilities, you’re fairly well positioned to make the call. At the end of the day, grantmakers can say “yes” or “no” to funding. You do have that power, and also, that responsibility.

Takeaways are critical, bite-sized resources either excerpted from our guides or written by Candid Learning for Funders using the guide's research data or themes post-publication. Attribution is given if the takeaway is a quotation.

This takeaway was derived from Supporting Grantee Capacity.