Assessing the Impact of the Social Innovation Fund

The Social Innovation Fund (SIF) is the Obama administration’s major philanthropic effort, with the White House requesting $50 million for the program earlier in 2009. While it is clear that the administration is interested in innovation within the nonprofit sector, organizations are uncertain about how the program will impact their work.

America Forward [1], the coalition of nonprofit organizations that made the policy recommendations that led to the Edward M. Kennedy Serve America Act [2], which authorized the program, says the SIF is "intended to increase the impact of social entrepreneurs and innovative nonprofit organizations by scaling proven programs and investing in promising new ideas. In essence, it enables a new role for government to partner with social entrepreneurs and philanthropy to fundamentally improve our nation’s problem-solving capacities." It will achieve this by providing "grants to existing grantmaking institutions that will in turn invest in growing innovative, results-driven nonprofits. Both grantmaking institutions and the nonprofit grantees will match the Fund’s investment, generally resulting in a 2:1 match."

The impact that the SIF will have on the nonprofit sector remains to be seen. However, it may not impact the sector in ways initially imagined. For instance, it is widely believed that a $35 million expenditure (the appropriation proposed in the House, a $15 million decrease from the White House's request) toward the nonprofit profit sector will really benefit community organizations. Details of the SIF, however, put that premise into question. "Of the total amount, 5% comes off the top for evaluation and R&D, and only 10% will go as grants awarded directly to 'community organizations,'" according to an article [3] by Rick Cohen, a columnist for Blue Avocado and the author of the "The Cohen Report" for Nonprofit Quarterly.

Community organizations can receive funds that are regranted from foundations, but they will have to match the dollar amount of the funds received. This will make it difficult for local, community-based groups to receive these funds, because many of these organizations "are neither funded by nor visible to private foundations," according to Cohen. Then, even if they manage to get on the radar of the private foundations, providing matching funds can prove to be a major obstacle.

"Unless they’re already in the embrace of well-connected foundations and their initiatives, community nonprofits – at the heart of social innovation – are unlikely to find themselves winners in the foundation-dominated Social Innovation Fund," says Cohen. Furthermore, the statutory requirements for measured effectiveness, evidence-based decision making and so forth may sound good on paper, but in practice, "this provides an institutional mandate for centralized regulation and extensive paperwork," according to a blog post [4] by Jeff Trexler, a professor at Pace University. This level of regulation and paperwork could be another barrier for small community nonprofits.

"Many entrepreneurial leaders of the nonprofit sector toil for small organizations in out-of-the-mainstream locales. They may not be in line to get much from the Social Innovation Fund unless they are willing to sign up as local affiliates of the designated national innovators," commented Cohen in a May article for Nonprofit Quarterly [5]. "It would be important for the administrators of the fund to ensure that they make special effort to find innovation wherever it occurs in the nonprofit sector – and to build the networks and 'infrastructure' that support and sustain nonprofit innovation," he continued.

Foundations, on the other hand, stand to benefit tremendously from the SIF. Of the total amount of the SIF, "85% will go in grants sized between $1 million and $5 million to 'grantmaking institutions'," according to Cohen. The foundations will have to match the grant funds before they regrant anything, but this will likely not be an issue for large foundations. Foundations are interested in the program to gain access to the administration and to receive the administration’s endorsement, not to receive the funds, said Cohen.

Vince Stehle, a program director at the Surdna Foundation, wrote in an article [6] for the Chronicle of Philanthropy that the SIF can become a distraction if the sector focuses all of its energy on this small fund. "For foundations, the more important point is to challenge the conventional wisdom that philanthropy uncovers great new programs and the federal government will always bring the big money to carry out the great ideas on a larger scale. That’s not always the case," wrote Stehle.

Stehle cites several examples where the federal government and not philanthropy led the way in new, innovative ideas. He cites the Internet as an example of a federally supported program that "sparked the most sweeping generation of innovations in the history of information technology. In that case, the government was the sole sponsor of development work for 20 years before most people in philanthropy had even heard of the Internet," wrote Stehle. Thus, with a public-private partnership, innovative ideas can come from either direction. Sometimes it is useful for philanthropy not to lead, but to follow federal money, wrote Stehle.

In remarks [7] given at the White House in June, President Obama spoke about the importance of the nonprofit sector in addressing societal ills and in creating and implementing innovative programs. "Solutions to America’s challenges are being developed every day at the grass roots – and government shouldn’t be supplanting those efforts, it should be supporting those efforts," Obama said. These remarks appear to show that the administration understands the importance of the innovations that solve our communities' problems and that those solutions originate from grassroots or community-based organizations. It remains to be seen, however, if those same organizations will have the opportunity to secure some of the SIF funding to bring such innovative ideas to a larger audience.