USC Study: Few Foundations Support Capital Campaigns for Nonprofits

While foundations are doling out dollars to buy sandwiches for the hungry, they aren’t likely to pay for the buildings that house food banks, a new study by the USC Center on Philanthropy and Public Policy found.

Only 5 percent of the Southern California region’s 3,064 foundations state that they are willing to consider capital grants for buildings, renovations and land acquisition, according to the study, “Foundation Support For Nonprofit Capital Needs in Southern California.” Based on a sample of larger foundations, only 15 percent of grant dollars support the capital needs of the region’s nonprofits.

“Nonprofits have to respond to changing revenue sources,” said James Ferris, director of USC Center on Philanthropy and Public Policy within the USC School of Policy, Planning, and Development. “What this study tells us is that nonprofits with a need for capital will have to look beyond foundations.”

Ferris, who conducted the study with students in the school’s Master of Public Policy program, Anne Ferree and Minsun Park, said this wasn’t always the case.

“There has been a trend over time where foundations have a greater interest in making the biggest difference in an individual’s life,” Ferris said. “If you go back in time, there was more attention to bricks and mortar.”

Through interviews with key foundations combined with data from the Foundation Center, the study stated that foundations believe they are unable to meet the growing needs of the nonprofit sector.

The increasing number of nonprofits, combined with the high cost of capital in Southern California, helps push the foundations to focus their goals on programs and operations.

Despite the general trend, there are a handful of foundations that are important sources of capital support for nonprofits. In addition, there are some foundations that provide capital support but only for nonprofits with which they have an long term relationship and a history of support.

Those foundations which have been providing capital support aren’t likely to increase capital grants in the coming years. And when foundations do provide money for building, they do so only once a majority of the funds have already been raised, the study found.

“Before you launch a capital campaign, you need to identify sources other than foundations,” Ferris said. “Nonprofits need to identify individual donors or corporations for their capital support, and look to funders with whom they have established relationships built on the success of their programs.”

This study examined data on capital support for 2004. This study was funded by The Ahmanson Foundation and Weingart Foundation.

Contact: Eddie North-Hager at (213) 740-9335 or edwardnh@usc.edu

From University of Southern California Media Relations
Los Angeles, Calif.
(213) 740-2215