Comment by montrose | Hacker News Reader

Comment by montrose | Hacker News Reader

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It is huge that they give unrestricted grants. I've been involved in the nonprofit world a lot in the last few years, and the most surprising thing I've learned is how depressingly common restricted grants are.

Restricted grants are when you give money to a nonprofit to do what you want, rather than what they want. Usually this is some highly visible thing that the donor can then claim credit for. These projects are almost never what the nonprofit would have chosen to do themselves. Often they damage the nonprofit significantly. I was talking to a nonprofit a few months ago that had branches in two different cities quite far apart. I asked them why they'd chosen to expand to another city rather than expand in the city they were in. Wasn't it a distraction? They said it was, but that they'd gotten a restricted grant to open a branch in the new city.

The less powerful nonprofits have no choice but to take such money. And they don't dare complain about it, which is why you've never heard about this issue. Exactly the opposite, in fact: they have to issue press releases lauding the generosity of the donors. Which then perpetuates the problem, by making it seem to future donors that restricted grants are how you're supposed to do charity.

I don't know how Dropbox figured out that they should do unrestricted grants. It's a remarkably sophisticated insight for beginners.

> Restricted grants are when you give money to a nonprofit to do what you want, rather than what they want.

Spot on.

The picture is often worse than the one you have painted -- Hey there, here's a few million dollars to help your country tackle AIDS. BTW, you can only spend it on drugs manufactured by US pharma.

At that stage its creative accounting to route tax money to your base of choice, with PR for free. Works the same for defense related grants.

As a counterpoint, I'm involved with a private foundation that donates a total in the mid-six figures to various organizations each year (foundations like ours and probably Dropbox's have to donate 5% of their assets annually), and most of our donations are restricted in one way or another.

The way things usually go is we get interested in an organization and ask them if they need funding for any specific projects or initiatives this year, they send us a list of options, and we choose from the list. Usually we'll get an email later on about how the project went. If we don't care for any of the options but we still like the organization, we might make an unrestricted (albeit probably smaller) donation instead.

We do it this way for a lot of reasons, but one is that nonprofits can be as flawed as any corporation and in many cases they have all kinds of stuff they'd love to spend money on if they could that isn't directly related to their mission, or rather is related enough that they can book it as "program expenses" for the purposes of maintaining a five-star Charity Navigator rating when a reasonable person might look at it and see some amount of wastefulness. (That probably sounds more cynical than I actually feel about it, but it's a real issue.) Examples would be things like fancy office spaces and parties, questionable executive travel or compensation, optimizing for metrics that make the CEO sound good but aren't as impactful to the core mission as what they could be doing, etc.

Anecdotally, I'd say this is more commonly an issue with mid-sized organizations: huge charities usually have a big nest egg (like an endowment) to cover regular operating expenses, while very small charities are more likely to be entirely staffed by volunteers and thus have negligible overhead.

Anyway, we basically just want to know where our money's going. I can't speak to how gigantic foundations operate, but I'm sure there are a whole lot of individual donors and smaller foundations who do things the way we do (with no desire to claim credit).

Many US universities seem to be major offenders (or victims, I suppose). There are far too many buildings being renovated or entirely replaced that are already one of the newer buildings on campus, and they're of course named after some donor.

It's pretty hard to put your foundation or key donor's name on "janitorial operating budget for 2018-2020"

There is a selection bias here: you only hear about the self-aggrandising donors. A lot of people want to donate for the sake of it, not for the reputational value. They will be more likely to give to the boring every day things, and don't want their name attached anyway.

This happened at my alma mater. I stopped donating.

Sure, but that's only if you actually trust the non-profits in question to do actual good with unrestricted grants. Consider the example of the UNH librarian who ate frozen dinners and vending machine burritos for decades and donated his life savings to the school, only for the school to squander it on a scoreboard for their terrible football team:

https://deadspin.com/how-unh-turned-a-quiet-benefactor-into-...

This is exactly what's happening with Khan Academy. Not only they get restricted grants from Google but Eric Schmidt (among others) is on their board directly influencing the direction of the organization

In a bad way?

> The less powerful nonprofits have no choice but to take such money.

Why can't they just say no if it's a not useful to them? How do the donors force them to take the money? I can't donate money to you and tell you to spend it on something - you'd just tell me to get lost.

This comes up regularly when a big natural catastrophe (a tsunami or such) happens somewhere in the world, the TV stations ask for donations with a "codeword" like "Tsunami relief South-Asia" andf donations pour in.

And then the Red Cross or whoever cannot use all that money sensibly. Maybe the catastrophe turned out to be a bit smaller than expected. Maybe there is need for more tents and food and water, but for some reason there is limited transport capacity available. Maybe there is an armed conflict breaking out or going on and they don't dare to go fully in.

And then... there are lots of other worthy causes. Other natural catastrophes. General anti-hunger initiatives.

But they are forced to leave the money laying around because they are not allowed to use it for another crisis. Even if most of the donors would probably shrug and say "well, too bad, but sure, go ahead and help where you can".

For this reason: always refrain from designating a specific use. If you don't trust the organization to do good, give to someone else.

But it's tough when much of the available grants of size are restricted. Sure, you could just shut down the nonprofit due to lack of funds.

But sitting in the nonprofit's shoes, when that grant is what you need to stay alive, and is related to your mission, but doesn't reflect your priorities within that mission, you're still going to take it unless you want to lay everyone off and move on. And many nonprofits are in that position.

Right so the grant is helpful and welcome, that’s why they accept it.

What/who are you arguing against?

The idea that charities take donations that damage them. They must be a net benefit, as otherwise they are free to turn them down and they would do.

People are using language like ‘damaging’ and ‘no choice’. What they really mean is the donations are useful but they could be more useful if unrestricted.

Well yeah lots of things are more useful when you don’t have any responsibilities along with them.

I think this is meaningless pedantry. It's like saying if I hold a gun to your head and tell you to dance, you always have a choice. Technically true but diluting the term choice past the point of usefulness.

More subtly, it's assuming that costs and benefits are somehow quantifiable in a single "benefit function". This is a modelling assumption that is often not true. There can be a benefit ("at least we can get some money to some people") that you can't turn down ("ethically can we turn down some money for some people like this?") while also being deeply damaging ("we are 'selling our soul' by acting as a PR arm for companies that want to improve their reputation rather than lives. This is damaging the ethical undeprinning and structural integrity of our organisation").

Summarizing this complex situation as a net benefit is naive and a bad model that will lead you to incorrect conclusions (like: "well they must get a net benefit, so it can't be that bad" rather than "we need to eliminate the structural factors that lead to such situations.")

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