Nonprofit Fund Faces Questions About Conflicts and Selection Procedures

The NY Times reported that in late July, the Social Innovation Fund, a new $50 million federal program aimed at financing the replication of nonprofit programs that work, made its first grants.

But what was supposed to have been an emblem of the administration’s commitment to nonprofit groups has become instead a messy controversy over potential conflicts of interest and the process used to select the grantees.

Several of the 48 independent reviewers who vetted the initial 54 applications for the grants were surprised by some of the winners because they had awarded them mediocre scores.

Critics noted that the executive director of the fund, Paul Carttar, had worked at New Profit Inc., a nonprofit group that helps promising social programs. New Profit Inc. received a $5 million grant from the fund.

Similarly, Patrick Corvington, the official who oversees the Corporation for National and Community Service, where the fund resides, previously worked for a foundation that financed a program operated by the Local Initiatives Support Corporation, better known as LISC. The foundation won a $4.2 million grant.

Marta Urquilla, senior adviser to the fund, said Mr. Carttar and Mr. Corvington played no role in selecting the winners. “We knew the things people are saying now would be said,” Ms. Urquilla said, “and so we made sure each application got its fair chance and stood on its own merits.”

But the fund has not disclosed who reviewed the grants — or who applied for them or the ratings the applicants received, information that often is provided by many other government agencies that make grants.

In soliciting applications, the fund published a detailed set of criteria it would use to evaluate them, but the process by which they would be vetted was unclear. Last week, it disclosed more information about the procedures, including that the applications went through four stages, as well as the number of organizations culled after each.

“The bare minimum would be to release the names of the peer reviewers, the names of the applicants and the score they each received,” said Dean Zerbe, a former tax counsel to Senator Charles E. Grassley, an Iowa Republican who has persistently scrutinized the Corporation for National and Community Service’s grants and programs.

The fund was created with the passage of the SERVE America Act last year and quickly became one of the hottest topics for discussion in the nonprofit sector, which saw it as a means of getting government financing for young but promising programs at a time when the economy has crippled much fund-raising and hobbled many endowments.

The 11 winners effectively serve as conduits to channel the grant money to other nonprofit organizations that operate successful programs that can be expanded to serve more people in more areas. The winners must match the government’s money, which also must be matched by the final recipients, potentially trebling the fund’s financial effect.

The broader goal, Ms. Urquilla said, is to develop a network of intermediaries like the grant winners that can identify promising programs and connect them to donors and other sources of financing to allow them to expand.

The criticism has led the fund to decide to publish redacted versions of the winning applications in the coming weeks, together with the ratings they were given by various panels and how those compare with applications that did not win. “We fully embrace open government and the trend toward greater transparency,” Ms. Urquilla said. “We just want to make sure we do it in a deliberative and responsive way.”

The disclosures may not satisfy the critics, though.

Ruth McCambridge, editor of the Nonprofit Quarterly magazine, said that she may file a request for all the applications under the Freedom of Information Act. “This is supposed to be a learning process,” Ms. McCambridge said. “That’s the way the people at the fund have billed it, and applicants for the next round of funding, if there is one, might find it useful to see what didn’t work the first time around.”

She questioned why the fund would not release the names of the applicants or the peer reviewers and why it asked the reviewers to shred their work when it was finished. Read more here.