Providing capital grants: a case study

Capital grants are not popular with grantmakers, but one US grantmaker found that there was strong demand for them. After all, every organisation needs somewhere to base itself. When the Donald W Reynolds Foundation evaluated its program, it found that capital grants had had a positive impact on grantees, on the grantees' clients and on the communities in which the facilities were located.

What are capital grants?

Capital grants cover buildings - building works, building leases and rental costs. Many grantmakers - in Australia and elsewhere - do not like funding buildings. A significant number explicitly exclude capital projects from their grants.

The US-based Donald W Reynolds Foundation (which will wind up by 2022) is one of the few foundations that has run a dedicated capital grants program.

What are the benefits?

  • Capital grants enable not-for-profit organisations to operate, by housing them and by giving them a venue where they can present their programs and services.
  • They can enable Not-for-Profits to introduce new programs or expand existing programs because their previous facility was too small or inaccessible.

How can we make capital grants work?

Different strategies will work for different grantmakers in different locations, of course, but some of the approaches that worked for the Donald W Reynolds Foundation were:

  • Eligible organisations having to demonstrate a record of outstanding service to the community, strong program and financial management, significant private support, committed volunteer and staff leadership and an entrepreneurial spirit.
  • Applicants having to demonstrate that the capital project would offer extraordinary potential for a transformative impact on their organisation and the community it serves.
  • Funding all furnishings, fixtures and equipment, as well as funding the building itself.
  • Requiring applicants to raise money for a restricted fund for programs (about 20% of the value of the capital grant), the earnings from which were used solely to support the organisation's programs.
  • Matching those funds to create a restricted fund for building maintenance, repair and equipment, with the earnings used for facility maintenance.
  • Offering planning and technical assistance grants to help organisations that were considering beginning a capital project but that couldn't afford specialised planning. These grants were intended to help a group establish whether they really did need a new facility.
  • Being cautious about the potential grantee's ability to cope with any increased capacity and demand that might result from the new building. The Donald W Reynolds Foundation found that a new building's capacity to accommodate increased services, coupled with that new building's visibility, could increase demand for the organisation's services.