Nonprofits choking on red tape

By Todd Cohen

Data are philanthropy’s latest addiction.

To kick their data habit, funders need to be smarter about the information they demand from nonprofits.

They also must invest more money to be sure they get the data they actually need.

To track the impact of funders’ compliance-reporting requirements, RAND Corporation spent a year studying a single nonprofit social-services agency in Western Pennsylvania.

Rand found employees of the agency spent nearly half their time collecting information required by funders, and that compliance work consumed 11 percent of the agency’s annual budget.

Separate research shows the average nonprofit spends over 60 hours in administrative time for every grant, including 20 hours simply in applying for the grant.

Foundations are required by law to make annual grants totaling at least 5 percent of their assets, but they can and should spend more.

A prime focus for that increase in spending should be to help nonprofits strengthen their internal operations.

And instead of forcing nonprofits to waste precious time feeding feed their data fetish, funders should consider hiring consultants to track the impact of their grants.

Funders need to stop hijacking nonprofits and demanding data they do not need.

Todd Cohen is the Editor and Publisher of the Philanthropy Journal.

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