In philanthropy, we have been talking a lot about the crucial need for funders to provide more multiyear, general operating support. That’s important, and I also think we need to talk more about the size of grants. Why? At least from what I can see in CEP’s Grantee Perception Report (GPR) data, even though the size of many funders’ grants has grown in real terms over time, a meaningful proportion haven’t kept pace with inflation.

Following the pandemic, rates of inflation were higher than they’d been in a generation, topping out at around eight percent in 2022. Costs rose across sectors, and nonprofits weren’t immune to those effects. CEP’s Nonprofit Voice Panel illuminates that even though many foundation-funded nonprofits maintained balanced budgets in 2022, those that weren’t able to do so pointed to reasons of higher than expected costs and lower than anticipated individual giving (which is also very possibly linked to higher inflation).

But let me start with the good news in our data. Of 72 funders that recently used the GPR and had used it at least once ten or more years earlier, more than half increased the size of their typical grant in real terms between their first and most recent GPR. The median real increase was $8,000 — representing an increase of eight percent. That’s great to see, and it parallels some evidence showing other ways that grantmakers are thinking carefully about how best to sustain crucial nonprofit efforts: Since the pandemic, grantees report increased trust, streamlined processes, and slightly increased provision of unrestricted support.

The story is a little more complicated, though. While a little more than half of the 72 funders examined in this analysis had inflation-adjusted increases in their grant size, just under half had inflation-adjusted decreases in grant sizes. Looking at just the 38 funders with increased real grant size, the typical real increase was actually close to $100K and a median increase of 65 percent. To me that suggests a conscious decision by those funders to increase grant sizes.

On the other hand, among the 34 funders whose grant sizes decreased in real terms, the median size of that decrease was about $50K in real terms, representing shrinkage of about 32 percent. The thing is, some of this is likely invisible. Rather than a choice to decrease grant sizes, some of these funders may simply have let inflation whittle away their value. Why do I think this? More than half of these funders either had stable or even increased grant sizes in nominal terms, suggesting that for at least some of them, they simply weren’t keeping up with inflation.

Read the full article about inflation reducing the value of grants by Kevin Bolduc at The Center for Effective Philanthropy.