Some Funders Still Think Nonprofits Can’t Handle MacKenzie Scott’s Gifts. Nonprofits Disagree

As someone who is mystified by funders’ reluctance to embrace trust-based practices like providing unrestricted support and dialing back onerous reporting requirements, I found the Center for Effective Philanthropy’s latest study on MacKenzie Scott’s philanthropy, “Emerging Impact: The Effects of MacKenzie Scott’s Large, Unrestricted Gifts,” both illuminating and, well, mystifying.

Illuminating because the report lays out reasons why some surveyed funders are leery about Scott’s norm-shattering brand of giving. Mystifying because funders’ main concern with Scott’s approach — a perceived inability to absorb large, unrestricted gifts — is negated by the very same report, which found that 88% of nonprofits encountered “no challenges” related to the use of Scott grants.

On December 6, this concern was further discredited by Scott herself, as she shared a list of the 360 organizations that received a total of $2.2. billion in 2023 from her outfit Yield Giving. Four groups netted their second mega-gifts since 2020, suggesting that while funders in the CEP report had reservations about nonprofits’ ability to handle a large and unrestricted gift, Scott had no qualms about giving some organizations two such gifts within a three-year timeframe.

Other funder concerns expressed in the CEP report included a lack of transparency into Scott’s grantmaking process and the fact that her approach isn’t replicable. This latter concern turned my mystification into disappointment. Remember — Scott’s brand of giving is an amalgamation of four distinct tactics: large gifts, unrestricted support, no reporting requirements and no timelines. As I made my way through the research, I couldn’t shake the feeling that some grantmakers look at Scott’s eye-popping outlays and reject her approach out of hand instead of considering ways to replicate certain powerful aspects of it.

The CEP, which received a $10 million gift from Scott in 2021, posted a video of a recent webinar exploring findings from the report. I encourage readers to check it out. In the meantime, let’s look at why some funders aren’t sold on Scott’s approach and how CEP’s research undercuts these perceptions.

Hard to handle

The report is the product of year two of CEP’s three-year study on the impact of Scott’s gifts on recipients and her influence on other funders. The authors analyzed responses from 632 recipient organizations and conducted interviews with 40 nonprofit leaders and 37 funders. Insights gleaned from funders are especially trenchant because up until now, we’ve often has to rely on conjecture when attempting to explain why grantmakers haven’t implemented elements of Scott’s approach, like providing unrestricted support.

The report states that more than 80% of interviewed funders “praised Scott’s approach and view her giving as contributing to ongoing discussions in philanthropy, including those about trust-based giving.” However, they also expressed deep reservations about her model.

The most striking data point is that 76% expressed “concern about nonprofits’ ability to handle large, unrestricted gifts.” These concerns are rooted in the idea that nonprofits — especially “smaller, newer or grassroots” organizations — would be “less well positioned to handle a large, unrestricted gift capably.” Other funders “expressed the view that nonprofits in general cannot be trusted to handle large funds wisely or independently.”

Readers may recall that CEP’s year one report on Scott’s giving documented the exact opposite phenomenon. It found that nonprofit leaders grappled with “self-imposed pressure” and rolled out abnormally inclusive decision-making processes to make sure they allocated the money as effectively as possible. CEP’s latest report affirms leaders’ measured approach, showing that only 9% of organizations surveyed in the spring of 2023 have spent all of the grant money, and 22% hadn’t spent a dime yet.

Capable and wise

The fact that only a fraction of nonprofit respondents have spent all of Scott’s grant money suggests leaders haven’t been recklessly burning through cash (and to be clear, spending it all doesn’t signal recklessness, either). But the report also examines whether grantees that do spend the funds are doing so “capably” and “wisely.”

These are, of course, relative terms. And on that note, the most gripping part of the CEP webinar was the panelist discussion around defining “impact” in a trust-based setting. Setting aside this conversation — as well as the fact that there are certainly ways funders can themselves gauge the impact of an unrestricted gift — let’s see what recipients had to say about how they allocated Scott’s funding.

“Nonprofit leaders,” states the report’s first key finding, “describe expanding and improving programs to pursue opportunities — often related to equity — resulting in what they increasingly see as demonstrable impact.” Seventy-nine percent of leaders are using some portion of Scott’s funding to “improve or expand programming to better serve communities,” while 90% report their organization used it to advance equity.

In addition, a resounding 95% of surveyed nonprofit leaders said the grant “has or will strengthen the long-term financial sustainability of their organization to some degree.” This suggests that Scott recipients are doing what any decent funder would hope they would do with an unexpected windfall — expand programming while “planning for the long term to minimize risks of a financial cliff,” according to the report.

Now, a cynic could argue that nonprofit respondents were incentivized to provide a Pollyannaish take, lest they kill the golden goose or call attention to any managerial shortcomings. But even the very funders who expressed concerns about Scott’s approach seemed to inadvertently back up nonprofits’ insistence that they could handle such gifts. The authors noted that while funders expressed concerns about nonprofits’ abilities as a collective, “they often noted that these concerns did not apply when their own grantees had received a grant from Scott, as they had more confidence in those recipients.”

This is perhaps the study’s most confounding takeaway. Funders attested to how their own grantees responsibly handled Scott’s large and unrestricted gifts. Nonetheless, a whopping 76% of them expressed reservations about her approach due to the potential malfeasance or ineptitude of some hypothetical nonprofit leaders.

“Difficulty of replication”

The report does go on to list a set of funder concerns unrelated to a nonprofit’s ability to handle Scott’s money. For one, about a quarter of interviewed funders worried that nonprofits might be less likely to get support from other grantmakers due to a perceived lack of need. But CEP’s research shows that 80% of organizations reported that none of their funders said they would dial back support because of Scott's gift.

The study also notes that roughly 25% of interviewed funders cited “concerns about Scott’s lack of transparency in selecting recipient organizations,” and I will concede this point, to an extent, since we here at IP have raised similar concerns. Scott’s process has become more transparent and accessible over time, as evidenced by her Yield Giving site and an open call for applications, although we still don’t have any visibility into how, exactly, she and her team select grantees. Then again, we can say the same thing about the vast majority of her peers.

The final source of funders’ skepticism worries me the most. CEP defines it as “difficulty of replication,” or the idea that “not every funder can or wants to give in the way Scott has given.” In other words, many philanthropies seem to view Scott’s project as a kind of one-off anomaly, rather than a demonstration of what’s possible.

It is undoubtedly true few funders can give exactly the way that Scott gives. But this lets funders off the hook for experimenting with aspects of her approach, like rolling out more unrestricted funding, which, according to the CEP, still constitutes an underwhelming 20% of total grantmaking dollars. The outlook is more disconcerting as it applies to the segment of funders that don’t want to give like Scott, despite the growing body of evidence attesting that her grantmaking and trust-based practices drive impact. Who knows? Maybe the CEP report will sway some of the nonbelievers.

I don’t want to make it seem like I’m glibly brushing aside funders’ concerns with Scott’s approach. It’s possible that a huge and unrestricted gift could somehow devastate a young organization — the analogy of the lottery winner who ends up broke in 10 years comes to mind — or that a nonprofit leader, to quote a funder from the report, might be “embezzling” Scott’s money. But I’m having trouble squaring these qualms with CEP’s findings, which include, most saliently, funders’ trust in their own grantees’ ability to handle such funding.

As thought leaders in the burgeoning field of trust-based philanthropy, the authors likely share my frustration, although, to their credit, they do a great job of refraining from full-blown editorial exasperation. “The data from experiences of nonprofits,” they cooly note, “stands in stark contrast to many of the concerns from funders.”

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