One-time large contributions to nonprofits, no matter the amount, can be perceived as risky because they’re not recurring and might leave a gap once the funds are spent. The likelihood of a financial cliff may prompt some organizations to prioritize a diverse base of backers over one-time contributions. However, a recent Center for Effective Philanthropy (CEP) study, titled Breaking the Mold: The Transformative Effect of MacKenzie Scott’s Big Gifts, which surveyed nonprofits that received MacKenzie Scott’s mega-gifts, pushes back against this narrative, concluding that recipients of Scott’s gifts—with a median grant amount of $5 million—strengthened their long-term sustainability after funds were spent.

“We heard in the last two years concerns about organizations hitting a financial cliff,” said Elisha Smith Arrillaga, vice president of research at CEP and one of the authors of the report, in a March webinar to discuss the findings. This financial cliff, in theory, makes it difficult to raise funds or maintain a budget. But according to Arrillaga, “What we see in the data here is that less than 10 percent of nonprofit leaders expect a lot of difficulty covering ongoing expenses once their grant funds are spent.”

Over five years, beginning in 2020, Scott contributed $19 billion in unrestricted grants to more than 2,000 nonprofits (CEP, 4). The three-year CEP study is the result of survey responses from more than 1,000 grantees—including 813 nonprofit leaders and 243 foundation leaders—along with financial data from tax filings from more than 1,000 organizations, including Scott grant recipients and comparable nonprofits that did not receive a grant.

The report offered four main takeaways.

1. MacKenzie Scott’s mega-gifts strengthened recipients’ long-term financial health.

The CEP study reported that 90 percent of grant recipients said MacKenzie Scott’s mega-gifts have “moderately or significantly strengthened” their organization’s financial health (14). More than half of nonprofit leaders surveyed said they used the funds to strengthen their organization’s reserves or grow its investment assets.

Strengthening funding reserves—an opportunity many nonprofits don’t usually have—allows these organizations navigate future uncertainty by allocating a portion of the Scott grants to longer-term needs, including strategic growth in a constrained funding environment. Investing in financial reserves also placed recipients in a significantly more favorable financial position compared to counterparts that did not receive such a grant. Developing a clear reserve policy—including how much to hold and which investment vehicles to use—is key, industry observers say.

Read the full article about MacKenzie Scott’s mega-gifts by Suman Bhattacharyya at Nonprofit Quarterly.