Global Policy Forum

From Intelligent Funder to Intelligent Recipient:


By Svitlana Kuts*

November 21, 2008

Civil society organisations (CSO) were traditionally considered intermediary bodies for the effective and efficient realization of funders' vision of community or society change. In this respect and with the development of new paradigms on funding and the recipient arena, and in the context of globalization, democratization and reforming, it is necessary to look closer at several key issues to define the interaction of Intelligent Funder and Intelligent Recipient of funds in developing democracy. This paper focuses mostly on the activity of grant-makers in the post-communist region, and touches on the funding experience of local funders, mostly wealthy companies and individuals in my country, for whom philanthropy is becoming a popular phenomenon. I do not say anything here about multiple small donors, who give mostly for social cause and are reactive to appeal, but rather strategic funders. In the context of the Intelligent Funder approach I would like to address the following concerns:

  • Commitment to public good or civil society role: is an NGO a proper structure to invest into or are there other forms of civil society that function as active agents of innovation and change in the life of communities? Are NGOs organizationally capable to sustain the role of donor-driven social innovation?

  • Essence of change: does the intended funding of system change lead to change in people's life? How much is the recipient's depicted vision of a change part of the vision mosaic of a funder? Do all parties have shared insight into the kind of social change they have committed to, and shared responsibility for the end result?

  • Mutual trust and procedures that funders establish to assure it: How to manage envisioned impact, escape from subjective grant-making and assure trust and mutual respect when delegating power to funders' personnel?

    Civil society and funding intelligently.

    Ukrainian civil society has come into existence just some 20 years ago, slowly taking root in the society, and largely following the governments' agenda. Relative political liberalization of the last years gave birth to real freedom of association, advocacy and charitable activity. Still, it is more related to a political agenda of the state rather than frank initiative and the need of citizens. Western donors were supportive in grounding the notion of NGO/ SCO in the local culture. Yet, there is a lot of discrepancy in the approaches used by Western donors and the local needs: many NGOs are following the donor's agenda instead of using the donor's funds to follow their own; donors prefer funding well-known NGOs and usually the circle of grantees does not change for years. Although there are attempts to take local circumstances into account when introducing new directions in funding, these attempts are guided by the same circle of grantees, who are clever enough to say what donors would like to hear. This leads to a situation where millions and millions are invested and the output is far from expected. The key to this one may find in the "unpredictable nature of Slavs" but the answer lies, in my mind, in the lack of local organizational capacity, the inability to partner instead of dominate, and the inability to formulate a vision of change.

    The organizational weakness of Ukrainian civil society is currently one of the impediments to efficient mobilization of people and resources to bring about detectable change. A lot of civil society activities traditionally happen outside of any organized structure. The same feature is inherent to CSOs of the whole post-Soviet area. What's more, most post-communist countries experience low levels of citizen participation in civil society activities and very few CSOs can boast a widespread membership. In 2008 the Center for Philanthropy conducted research on the organizational capacity of regional NGOs and found that only 50 % of donor-supported organizations and none of non-supported ones have a strategic plan. Many of them do not understand the importance of being strategic, but the majority does: they would like to conduct strategic planning and are stopped by the lack of time and resources allocated for this activity. The same occurs when we speak about fundraising plans, ethical codes, financial and daily management.

    It may be that I am dropping out of the chorus of donor-driven NGOs critiques, but I think that in some aspects, a donor-drive may be very useful, especially when it comes to organizational capacity building in an environment where such institutions as NGOs are traditionally absent. It is true that many donors put the issue of civil society building on their agenda. But how many of them put the issue of organizational capacity building (improving strategic planning, fundraising, board development, management, etc.) on the agenda of civil society building? Doesn't building organizational structure of civil society suit the very agenda of civil society development? Yes, there are several programs providing training on these topics, which is obviously insufficient. Firstly, training is not enough for applied learning: organizations need consulting, coaching, study exchanges, learning networks. Secondly, donors support only part of the organizational activity, that which deals with the funded project, thus putting project management higher in the rank of organizational development issues.

    Why are NGOs' projects happily supported but no money is allocated to develop the NGO's core organizational functions, e.g., to hire a professional fundraiser who can built relationships, access donor resources and manage these with integrity and efficiency? Fundraising is the activity that can not only bring financial independence and unrestricted resources for the organization's administrative spending, but can also form a circle of supporters, thus rooting NGOs in the social realm and involving citizens into socially beneficial activity.

    CSOs hypothetically are unique institutions as power is delegated to them not through elections but (financial) support of other people. In other words, people vote with their resources for the public good. To develop and maintain this unique representative power it is necessary to create an environment that is supportive of people to donate time, money and talents to CSOs. The intelligent funder may play a role in this by encouraging grantees-NGOs to involve people through resource mobilization, membership and volunteering. Fundraising as a professional activity, which is developing rapidly all over the world, can bring progress. But still, this activity hardly receives the attention of funders, and only international NGOs are quite active in developing fundraising within their networks and affiliates. Look at the activity of INGOs like WWF, Greenpeace, Everychild, Amnesty International, and Heifer International in post communist countries: Internet, direct mail, and sms fundraising is developed rapidly by these organizations, leaving competitive but smaller community based initiatives in the vicious cycle "no-money-no-fundraising-no money". In fact, they monopolize the donor market leaving suspicion, frustration and irritation towards "foreign trespassers". Living the issue of CSO sustainability aside, let's look at the other initiatives and groups that might replace weak organizations. The choice is not big: individuals, informal initiative groups, government maintained institutions, companies and strong organizations. In the case of individuals, donors could provide support to some outstanding personalities and leaders of public opinion, but de jure it will be in the realm of the private not the public, and de facto donors will use public money for private benefit. Technically a lot of arguments are needed to justify gift transfers to individuals in the eyes of the public and a lot of effort is necessary for the disbursement of funds to multiple recipients so that individuals in need are well supported by charitable organizations. Informal (not registered) initiative groups, which are traditionally very popular in my country, are the seeds of civil society and worthwhile to support as they bring together committed activists, but it is technically difficult to support them as they do not have a legal status allowing them to accept funds. They are organizationally as weak as smaller CSOs, but they have the potential and civil energy, when properly supported along organizational development lines, to grow into strong and powerful civil society bodies. This requires a lot of understanding of the value of organization, time and patience from both sides, but may bring good results in an environment of weak organizational culture.

    Government maintained institutions are the largest players in the arena of public goods in the Ukraine . The system of social service provision, which remained from pre-communist times, is the largest and most ineffective consumer of public money. This is a powerful set of educational, health, research, social protection, cultural and other institutions, that has a non-profit status and is eligible to receive charitable income. Their agenda is governed by the state (when funded by the state), and they have some independence to get funds from the public for additional activities (which should be approved by the state). Due to their strong capacity, such institutions may be funded intelligently, which requires a specific approach from the funder. For example, libraries were supported by the US government to establish computer information centers in the Ukraine , an experiment which turned out to be successful. The program placed a lot of effort not only on providing computers and IT education, but also on training in capacity building for librarians so they could get funds for the future existence of the centers when the grant expired. The other example comprises orphanages that are heavily supported by Ukrainian businessmen. The funders provide orphanages with major material resources, like equipment, clothes, food, etc., in fact, products that are already assured by the state. This means an absence of a strategic vision from the side of the funder and even raises suspicions of corruptive interaction between parties instead of frank philanthropy. Only recently were programs that meet the need in the orphanage sector announced by two company foundations: they will provide legal support and prepare orphanage graduates for life outside the orphanage, a need which is obvious and clear today.

    System change, common vision and mutual responsibility of intelligent funder and recipient.

    Each organization, funder or recipient, is driven by its own vision, mission and strategy. We won't analyze the strategic techniques of NGOs: as can be seen from the above strategic planning in the sector is quite a rare occurrence. Let's look closer at the strategic vision of a funder. When a donor agency says "we provide funding to alleviate poverty", this is followed by a description of activities like raising employment, improving food supply, etc. But is there any description of what kind of "lack of poverty" they expect to meet at the end? Or democracy building missions: is there any description of what kind of democracy there will be at the end of the grant making program? Yes, democracy will flourish when citizens take power in their hands, civil society and rule-of-law will become a reality. Let's think rationally: will it happen in, say, two years of the grant making program? The Intelligent funder should be realistic about his or her expectations and develop benchmarks to measure success – that's what is demanded from the grantees, after all! This is a risky task for the funder's managers, but many of them do it already. The practice of strategic planning, with clear indicators of what should be achieved will improve relationships between funders and grant recipients, even though there is the fear that grantees will simply copy the indicators and adjust their organizational strategies to them. This practice is very important for both the grantees' strategic development (at least, each indicator of the funder's output may become a goal for the grantee) and for sharing the responsibility for an end result among funder and funds recipient.

    I would like to quote an example from my expert work in the evaluation committee of one grant-maker. The grant competition aimed at establishing community information and resource centers. The donor nicely prescribed the objectives for the community centers and even gave a list of the potential activity that a center should carry out. What was lacking was the image of the center: how it worked, who attended the center, how many people should use the center according to its capacity, who should work there, how it should become a resource generating and sharing facility and how the center would change the lives of the people in the community. This was considered as obvious. No wonder then that clever applicants followed the structure narrated by the donor with the same objectives and activities. Experts in the evaluation committee assessed the applications according to guidelines provided by the donor, and those projects that were proposing innovative activities instead of those proposed by the donor, or activities which the center could potentially carry out due to the available facilities and personnel, were eventually declined funding. Misfortunate applicants paid the price for an independent view on the issue and the needs, and so lost the chance of funding.

    There is a prevailing common wisdom that when designing an assistance strategy and action plan in the developing world it is necessary to root the strategy to the local need and environment. It is true when assistance deals with direct service provision. In the case of system change the strategy is better based on (policy) research and analysis rather than on the presumptions and individualistic views of certain groups. System change feasibility studies have to include an analysis of the problem expressed by local constituencies and a proper assessment of their recommendations, a comparison to the other more successful countries/contexts, and both a domestic and international expert view. Funding strategy preparation may be a good basis for partnerships between a funder and a receiver: while the funder can provide a wider and analytic view, local NGOs can express what is actually needed on the ground to develop a benchmark system for future planning, managing and assessing.

    The first funders (international donors) that arrived in the Ukraine in the early 1990s to achieve system change eventually changed the mindset of the people: they mostly supported the wider distribution of unpopular topics like democracy, reforms, people's participation, civil society, free elections, fight of corruption, etc. They distributed grants among NGOs that promised to pursue the funders' vision of system change. Technically it worked but, as one NGO leader said, grant recipients "forgot" about including the wider population because they were mostly concerned about securing grant funding and brilliant reporting. So the expected system change was not associated with the target of changing people's life and vision by both donors and grantees. NGOs and their funders were changing the system outside society, clandestine from ordinary people, however ridiculous this might sound. A further factor that promoted a certain "conspiracy" of NGOs was a general fear of change within society, which shaped the communication between government, NGOs, mass-media, academia and people in general. Consequently, the vision of change was not clearly formulated and communicated which gave ground for speculations and guesswork: gossip about intelligence service instead of intelligent funding, "grant-eating" instead of realizing socially important tasks.

    International donors could not create an example of intelligent funding for Ukrainian new philanthropists, who often were more interested in being "sweet" to political leaders, seeking quick results rather than looking for social impact of their initiatives. As mentioned earlier, they prefer funding well-known institutions like state kept orphanages, hospitals, elderly care homes etc. There is more trust in these agencies compared to NGOs. Instead of funding innovation and change often brought by independent citizens' initiatives they prefer funding traditional institutions and issues: health, education, children, sports, invalids, culture and religion.

    Corporate social responsibility is in vogue among local business that is more and more entering new markets. The corporate philanthropist is posed with the dilemma whether to complement or implement tasks that the government has been traditionally doing. When funds are invested in the government owned field, a lot of courage is needed to overcome government plutocracy and to advocate the innovation. It is thus understandable that many companies prefer a traditional track when implementing what the government should do.

    When a local funder has a strategic view on the problem he/she intervenes by establishing their own program or foundation. Delegating funds to NGOs is still a rare practice due to the low trust, the vigor to keep control, and the absence of proper delegating mechanisms. The responsibility of local philanthropists lies in the equation "I am giving money therefore I am a responsible entity in the eyes of the public and it's my choice how to spend it". There is no understanding that philanthropic investment bears more liability than even business investment, for in the last case risks are posed to an individual, while in the case of philanthropy risks are posed to the community as a whole. The excuse for lack of responsibility is a hypertrophied feeling of ownership and a lack of mechanisms of control over public spending in society.

    The issue of control goes hand-in-hand with the issues of transparency and accountability of funders. Transparency among funders in the Ukraine is understood as opening public access to information, e.g. publishing annual reports, disclosure of financial information, media announcements about programs, etc. In fact, transparency is equated with accountability, which is a more one-sided and internal mechanism of establishing procedures in accounts administration and bending them towards public expectation. Transparency is a two-way process: it requires openness from both funder and grantee to the extend that they evaluate joint efforts in solving problems/bringing community change against established indicators. Technically it may be hard to implement but the enjoyment from shared work may bring much more strategic impact for society and the recipient's work in the future than the publication of glossy reports.

    Today we can say that the funder wears Prada: more expressed frankness, openness, equality and solidarity in achieving common goals is needed. Partnership as is declared is not realized, even understood by funders. The power of money distorts relationships to the extend that people moving to donor organizations from civil society organizations even outshine their new colleagues in imposing bureaucratic demand at their former equals.

    Intelligence in my region has always been a sign of respect and a stratum of intelligentsia were educated, progressive people, bearing the best values of citizenship and seeking mostly policy change. Can we state that the Intelligent Funder is expected to meet these criteria? Is it not too idealistic: expecting civil stance from those delegated to control? But the existing problem affects both funders and recipients. Grantees often feel that funders pave their way to change organizational policy. There are lots of humiliating things that happen between people in the field when it comes to grant delivery, when too much decisive power is delegated to the program officers. When this power is abused, it can undermine accountability and efficiency and represent a narrow and individualistic view on how to best address important issues.

    How to ensure that intelligence values that are articulated are properly implemented and the people in the funders' offices follow them? There should be a fine line between involvement and interference. Donors should state their interests up front at the start of any interaction, otherwise grantees have the right to demand compensation of the time and energy they spent on reporting and providing details. There should be an underlying wisdom that if you trust a CSO enough to give money then you need to trust it to do the right thing with it.

    Where the strategy of the funder and the indicators of success were developed with the involvement of the local constituency, it is important to ensure that the funder's personnel acts in the same way as their partners in civil society. For this special personal characteristics and knowledge of organizational work is needed from the people serving in the funders' offices. Very often funders are afraid of the leadership skills of their personnel, thus developing the charity bureaucracy stratum. The risk here for the (often brilliantly developed) program success lies in the people at the entry point, who may be resistant to bright ideas and innovation.

    Active listening skills are needed for the Intelligent Funder: isn't it more secure to develop proper relationships with the grantee and plan a joint project prior to the realization of the project rather than designing and using sophisticated monitoring instruments? Clever funders that develop long-term relationships with grantees do quite the same with the only difference being that such relationships emerged through years of evaluations. Taking cultural environment and values into consideration can also enhance the productivity of the program as well as the active involvement in context building for change. The Intelligent Funder should be an active citizen rather than a posh merciful giver acting out of a noblesse oblige approach.

    So, what makes a funder intelligent? First of all, a willingness to listen to people on the ground, be a part of the culture, share values and act as civil society there, where funding is invested. The funder should develop an intelligent grantee able to carry out a joint strategy. This power of mutual responsibility for the common result, collaboration and equal sharing will support philanthropy and funding to become intelligent.

    About the author: Svitlana Kuts is President of the Center for Philanthropy in Kyiv, Ukraine.

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