Making Grant Dollars Go Further
Funders must take the lead in the lobbying work of grantees, or else give short shrift to their own missions.
Each year foundations across the United States give billions of dollars in grants to support the important issue and service work of charities, advocacy groups and other nonprofit organizations, but many do so with restrictions that needlessly inhibit grantees' effectiveness and give short shrift to funders' own missions. Too many grant officers unnecessarily curtail their grantees' public policy work and lobbying, under the misconception that such activities should not be supported by 501(c)(3) funds. That is simply not the case.
Federal law allows private foundations to support nonprofit organizations that actively pursue public policy work. With a clear understanding of the definition of lobbying and the safe harbors that the law offers foundations, grantees can use grants for lobbying activities.
Since 1990, Internal Revenue Service (IRS) regulations have provided guidance to foundations about ways to support policy work, including lobbying. Grantmakers can fund projects that involve lobbying so long as the grant is not specifically earmarked for lobbying and at least as much of the grant is used for nonlobbying purposes in the same year.
Despite the IRS' lenience, many grant agreement letters still contain unnecessary language that prohibits grantees from using any foundation money for public policy work. "Grantee shall not use any portion of the funds granted herein to carry on propaganda or otherwise to attempt to influence specific legislation, either by direct or grassroots lobbying," is a typical restriction. Why do so many foundations still prohibit such activities in grant agreement letters? There are two possible reasons.
First, some foundations may fear that they will be held liable if a grantee lobbies with foundation funds or goes beyond overall legal limits for lobbying expenditures. The IRS regulations address these concerns: A funder may rely on information provided by the grantee about a special projects budget, unless the funder has reason to believe that information is inaccurate. Moreover, the foundation is not held accountable if a grantee exceeds its overall expenditure limits for lobbying. Foundations can also opt to provide general support grants, which do not require the funder to review the grantees' budget.
A second concern is that, if grantees work too aggressively to influence legislative branch or executive branch officials, those officials will either seek retribution from the funder or take steps to tighten the rules. This is unlikely, as the current IRS rules are based on Congressional legislation, which suggests that Congress fully intended for foundations to have the flexibility to fund organizations that lobby.
Funders Must Take the Lead
Policy work maximizes foundation dollars and dramatically increases nonprofits' ability to advance their missions and serve their constituencies. Through public policy work, including lobbying, nonprofits provide policymakers with useful information based on experience; research and analysis regarding program and policy effectiveness; and a firsthand view of changes in the use of services. Their information and recommendations are particularly helpful to policymakers in crafting or considering legislation. Policy work also allows nonprofits to assist in the drafting of legislation that affects populations whom they represent and serve. Many foundations are already supporting such work. Many more should.
Some funders, such as the Turner, Rosenberg and Joyce foundations, are taking the lead in helping their grantees to participate effectively in the development of public policy. Others could learn by taking a page from their books. In addition, affinity groups can play a role for funders and their grantees. Grantmakers in Health, for example, provides programming on the relevance of public policy to grantmaking and keeps its members informed about current policy issues and their implications for funders and their grantees. At the group's 1998 Washington briefing, discussions centered on significant roles for health grantmakers in informing and responding to public policy changes. In fact, between 1990 and 1995, foundations have tripled support for healthcare policy grants.
Foundations that use the generous and flexible IRS rules can dramatically increase the effectiveness of their grantees' issue work on behalf of diverse constituencies. By providing more general support grants, foundations can increase support for organizations that lobby. When providing project grants, they should use grant agreement letters that make full use of the current law and allow some lobbying, as intended by Congress.
In his November/December 1992 Foundation News & Commentary article "Playing It Too Safe," Council on Foundations Senior Vice President and General Counsel John Edie asked: "Why do private foundations insist on their [grantees] signing a written grant agreement that prohibits any of the funding from being used to influence legislation?... Since most grantees are permitted to lobby, why are the grant letters so strict especially when the law does not require such a limitation?" There is no legally binding reason and perhaps no good reason. There is important work to be done on many fronts. To truly advance their missions, foundations must take the lead and fund public policy work to the extent allowed by law.
The Alliance for Justice's Foundation Advocacy Initiative provides foundations with training workshops, handbooks and technical assistance related to the legal funding of advocacy. For more information, contact Susan Hoechstetter at 202/822-6070 or firstname.lastname@example.org.
Nan Aron is executive director of the Alliance for Justice.