With most foundations, the board and senior management set all funding priorities. Nonprofits that seek money from these funders must, in turn, demonstrate their intent to do work consistent with these priorities. The same system prevails with many wealthy individual donors.

Any nonprofit that receives a grant must follow the funder’s priorities and comply with all of their reporting requirements – which, with some foundations, can be time-consuming.

Donors, rather than the communities they aim to support, hold most of the power in this arrangement. This can steer priorities in the wrong direction, as organizations that primarily or exclusively deal with these issues are likely to be more aware of what’s going on and what works best.

I study the growing number of foundations that oppose this traditional model. Instead of calling all the shots, these funders are adopting what is called trust-based philanthropy. This approach emphasizes building collaborative relationships in which funders are accountable to their beneficiaries, not just the other way around.

How it works

You might think that a lot of paperwork is required due to tax regulations. But the Internal Revenue Service actually gives foundations and other large donors considerable discretion over how to manage their application process and reporting requirements without jeopardizing tax breaks that can amount to hundreds of millions. dollars or more.

While onerous grant reporting requirements have been imposed for accountability reasons, some experts say they can unnecessarily burden nonprofits and favor organizations whose programs and priorities align with donor priorities. This approach can result in organizations led by people of color receiving less money.

Trust-based philanthropy can be executed in a variety of ways. It draws on ideas as old as philanthropy itself, such as almsgiving – giving money or goods to the poor.

Trust-based practices acknowledge the deep-rooted history of racial inequality in philanthropy, a history in which people of color have been actively marginalized and in which social interventions have often been designed with white people in mind. Through relationship building, collaboration and learning, trust-based practices seek to dismantle the inequitable social systems that organized philanthropy has helped to sow.

The idea gained momentum in 2018, when a group of foundations came together under the banner of the Trust-Based Philanthropy Project to make the sector more inclusive. Since then, experts have sought to define best practices and emphasize racial equity as a fundamental principle.

A different mindset

The philosophy behind trust-based philanthropy is about changing the culture and core organizational values ​​of funders. In practice, trust-based philanthropy can take many different forms.

It can include unrestricted funding, which means the money is provided to charities who choose how to spend it.

Funders can also limit application and reporting requirements or make the reporting process a two-way conversation between the funder and the cause the funder supports.

Another option is to let the beneficiaries and the communities who are meant to benefit from the funding influence the decision-making processes regarding the granting of grants.

But, of course, trust-based philanthropy is not about ending beneficiary liability or flouting IRS requirements.

An unexpected boost

Trust-based practices accelerated at the onset of the Covid-19 pandemic in early 2020, as foundations scrambled to respond quickly to the needs of groups they were already supporting, as well as some new organizations. Donors also had to immediately revise their requirements, some of which were no longer practical or achievable, and they needed to get a better sense of the challenges faced by specific communities.

For example, instead of the type of annual reporting process required by most foundations, the Sheng-Yen Lu Foundation, which funds groups that help low-income immigrant and refugee communities in Washington state, asked grantees to provide a single paragraph describing the work they were doing and how it might best help them moving forward. He has focused on building supportive relationships with the groups he funds to better help those in need.

Since then, the Sheng-Yen Lu Foundation has also provided recipients with several reporting options. They can choose to track funding over the phone, submit a grant report they have written for another foundation, or write a brief paragraph about their ongoing progress and needs.

But this foundation has operated trust-based approaches since 2018.

Rachel Allen, its vice-president, says one of the ways this shows up is in the emphasis on reflection and learning. To determine what information they need from grantees, foundation leaders ask themselves, “What do we need to learn? How can we do better?”

Other funders that have taken this approach include the Durfee, Satterberg and Stryker Johnston foundations. Together they have approximately $600 million in total assets. They paid out over $73 million in grants in 2019.

Some prominent megadonors, like MacKenzie Scott, are also taking trust-based approaches.

It is unclear how much money foundations and donors give through trust-based approaches, largely because the scope and scale of this approach to giving has not been systematically studied until now. Moreover, the variety of trust-based philanthropic tools, including unrestricted funding, participatory governance, and grantmaking, makes it difficult to identify them all as the same larger trend.

Nonetheless, trust-based philanthropic practices are clearly growing in popularity, a shift that many nonprofit advocates welcome.

Editor’s Note: This article is part of a Partnership the Chronicle forged with the Conversation to expand coverage of philanthropy and nonprofits. The three organizations receive support for this work from the Lilly endowment. This article is republished from Conversation under Creative Commons license.