Annie E. Casey Foundation
+ Community Connection for Youth
Video by Paul Johannessen
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Annie E. Casey Foundation
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Community Connections For Youth
The Annie E. Casey Foundation: Bringing Equity to Scale
Jim Casey’s Legacy
Jim Casey, the founder of the United Parcel Service (UPS), was the son of Irish immigrants and raised by a single mother who was widowed at a young age. He credited his success to her perseverance and enduring support. In 1948, Jim and his siblings founded the Annie E. Casey Foundation in her name with the mission to strengthen families, build stronger communities, and increase access to opportunities so that children and youth can thrive.
To achieve Jim’s vision of a brighter future for families, equity is foregrounded in the foundation’s operations and, as the sector becomes more responsive to the needs of grantees, is woven throughout its evolving grantmaking approach.
“Significant disparities exist when it comes to overall child wellbeing for kids of color compared to their white peers. For this reason, advancing equity is very important to achieving the foundation's mission. We think about equity in terms of the organizations that we fund, the way we operate our foundation, and the policies and practices that we put in place.”
Katie Tetrault, VP, Finance & Grants Management, the Annie E. Casey Foundation
Swiftly Moving from Awareness to Action
In the fall of 2019, the foundation (“Casey”) came across a series of articles, “Ending the Nonprofit Starvation Cycle,” that detailed the work of the five-funder collaborative – which would later become the Funders for Real Cost, Real Change (FRC) collaborative, the basis of the Funding For Real Change Website – to generate evidence and address the chronic underfunding of grantees’ indirect costs.
At the time, Casey had a policy in place that capped indirect costs in project grants at 10 percent. The articles sparked awareness and precipitated consensus among staff that this rate was too low. The collaborative’s findings were leveraged to secure leadership buy-in to address the issue head-on. As an immediate remedy, the policy was increased to 15 percent on January 1, 2020. To develop a long-term solution, Casey consulted other foundations – including those in the FRC collaborative – that provided valuable guidance on how devise a plan of action to improve equity in grantmaking, emphasizing the importance of a data-driven approach to policy change. The crucial next step was to engage consultants to analyze the foundation’s grantee portfolio and unearth insights that would serve as blueprints for a new policy.
Budget size and indirect cost rate were inversely related, meaning smaller organizations tended to have higher indirect cost rates.
The analysis found that the median indirect cost rate of grantees in aggregate was 19 percent, exceeding both the long-standing policy and interim change. To understand grantees’ differential needs, the data was stratified by organizational budget size. This revealed a critical insight:
The median indirect cost rate of Casey grantees is 19%. Smaller organizations tend to have higher rates than larger organizations.
| Budget Size | Meridian IDC Rate |
|---|---|
| Under $1m | 22% |
| $1m - $2m | 20% |
| $2m - $5m | 23% |
| $5m - $10m | 17% |
| $10m - $20m | 17% |
| $20 - $100m | 17% |
| More than $100m | 14% |
| All Grantees | 19% |
Source: Philanthropy New York, “A Fireside Chat on ‘True Cost’ of Nonprofits.” June 14, 2022. Presentation by Katie Tetrault, VP, Finance & Grants Management, The Annie E. Casey Foundation
Using demographic data collected from grantees, the analysis further revealed disparities based on race. Casey defines an ‘organization of color’ as one that meets two criteria: 1) more than 50 percent of staff identify as people of color, and 2) it is led by a person of color. Organizations of color were more than 40 percent smaller than organizations that did not meet those criteria, and their median indirect cost rate was 21 percent.
The New Policy: Three Principles, Three Tiers
On January 1, 2022, Casey implemented a new indirect cost policy that is grounded in three key principles to ensure its nonprofit partners are more financially resilient and better positioned to succeed:
Principle #1: Equity
Responsive to the trends that emerged from the portfolio analysis based on budget size and racial identity, the foundation decided against a one-size-fits-all indirect cost rate policy as it would perpetuate or even worsen inequities by disproportionally underserving smaller grantees and organizations of color. The new policy utilizes a three-tiered approach:
Budgets under $5 million qualify for a 25 percent indirect cost rate.
Budgets between $5 million and $100 million qualify for a 20 percent indirect cost rate.
Budgets over $100 million qualify for a 15 percent indirect cost rate.
Principle #2: Simplicity
When applying for a grant, organizations are not burdened with the complex and often intimidating tasks of calculating, substantiating, and negotiating their indirect cost rate. On the foundation’s grant budget portal, there is a simple drop-down menu for organization size with three options that reflect the policy’s tiers. The indirect cost rate for each automatically populates the form. If the amount exceeds the organization’s indirect cost needs, they can use the funds as they see fit – essentially unrestricted funding.
Principle #3: Fairness
Casey absorbed the cost of implementing the new policy by increasing its annual grantmaking budget, as opposed to decreasing the number of grants allocated per year or reducing the programmatic scope (i.e., direct costs) of individual grants to offset increased indirect cost coverage. As a result, the foundation is able to pay its ‘fair share’ of grantees’ indirect costs and equitably support them without sacrificing the scale of its operations.
Community Connections for Youth: The Transformative Impact of Grassroots Collaboratives
No Kids in Cages
The Annie E. Casey Foundation supports like-minded- and like-hearted nonprofits organizations that can catalyze, advance, and sustain efforts to meet their shared mission. Community Connections for Youth (CCFY) exemplifies the importance of investing in community-based organizations to create enabling environments for youth to thrive. In 2009, Reverend Rubén Austria founded CCFY in the South Bronx to accelerate progress toward a vision of the world with “no kids in cages” by empowering and building the capacity of grassroots faith and neighborhood organizations to develop effective, community driven alternatives to youth incarceration.
He was inspired to create the organization during his work as a 2007 Soros Justice Fellow. He successfully advocated for the closure of numerous youth prisons in New York state; however, reducing overreliance on the juvenile justice system is not simply a matter of downsizing infrastructure. Rubén believed that effective reform requires the mobilization of strong community networks that have the knowledge, resources, and technical expertise to care for and meet young people's needs before, during, and after they get into trouble.
Where is the Funding for Juvenile Justice Reform?
When prisons close, the millions of dollars saved by the state are mostly recycled within the system and, to a lesser extent, allocated to large social service nonprofits. When the public sector does signal real interest in justice reinvestment – i.e., reinvesting resources spent on prisons in communities – the grassroots groups engaged in transformative work anchored in community engagement typically lack the capacity to qualify for or navigate the rigors of public funding processes.
Philanthropic dollars for community-based organizations are far fewer and more restricted than those available to policy advocacy groups and large nonprofits not directly connected to people impacted by the justice system. Grassroots organizing and provision of direct services are misperceived by many funders as small-scale and low return on investment. For years, CCFY was one among many organizations completely overlooked or considered ineligible for unrestricted support. As a result, it became dependent upon short-term project grants which largely have insufficient indirect cost coverage, as well as restrictions on specific indirect costs, such as ‘executive salaries,’ that reflect fundamental misunderstandings of many grassroots groups’ non-hierarchical structures and horizontal operations.
“There are public dollars increasingly being made available for justice reinvestment, but still the grassroots groups that are the most likely to be closest to young people – led by people who are directly impacted by the justice system, led by formerly incarcerated, led by credible messengers, and led by Black and Brown people – are usually the last in line for funding.”
Rubén Austria, Founder & CEO, CCFY
The Changing Landscape – and Face – of Philanthropy
Since 2009, CCFY has grown from subsisting on a $35,000 shoestring budget to being a $3 million pillar of the community. It was able to pull itself out of the nonprofit starvation cycle in part due to shifts in the philanthropy landscape that created an enabling environment for grantees to advocate more effectively for funding responsive to their financial realities and supportive of their growth potential. Over the years, the face of philanthropy has changed.
“That really gave us the confidence to have some of those conversations and then to realize they could be had in other spaces. It came from some of the turnover in leadership in some of these foundations where the face looked more recognizable, somebody who we trusted who came from where we came from... the importance of representation.”
Rubén Austria, Founder & CEO, CCFY
In CCFY’s experience, greater diversity among program officers in private foundations has resulted in decision-making led by individuals more familiar with its grassroots context and committed to improving funder-grantee dynamics.
Changes in foundation leadership have proven especially impactful with radical shifts in tone and institutional reforms that have opened doors for grantees to have more trust-based relationships with funders.
Additionally, sector-wide efforts to increase indirect cost coverage in project grants, alongside greater willingness to provide unrestricted support, have enabled CCFY to overcome persistent deficits and grow.
Similarly, during the height of the COVID-19 pandemic, many funders demonstrated unprecedented flexibility and converted restricted funds to general operating support that enabled CCFY to not only maintain financial security but also have dedicated resources for strategic planning.
Building Grassroots Collaboratives
More stable and stronger than ever before, CCFY is committed to ensuring funders truly invest in the community and support the growth of grassroots collaboratives. For example, when a funder is not willing to disburse funds directly to groups that lack robust organizational infrastructure, CCFY will accept a grant on behalf of a collaborative and distribute the funds through sub-grants. Rubén and his colleagues ensure that CCFY is not simply used as a passthrough entity by encouraging funders to work with the other groups in the collaborative as if they were direct grantees. This is done with the understanding that as funders increase their interactions with people who are socially, racially, and culturally different from them and become more familiar with their important work, they are more likely to support them in the future.
The Youth Justice Capacity Challenge (YJCC) embodies another strategy CCFY employs to channel resources to nascent and small grassroots groups. Selected organizations receive grants up to $20,000 to work collaboratively with CCFY, as well as training, technical assistance, joint planning with juvenile justice system stakeholders, and connections to local philanthropies. CCFY also fiscally sponsors smaller, less developed organizations. Indirect cost coverage plays a critical role in fiscal sponsorship as it necessitates advanced bookkeeping, increased time and human resources, and non-financial support to sponsored organizations. When funders are willing to cover the ‘true costs,’ CCFY can provide support without jeopardizing its own financial stability.
The Power of Data
In its early days, CCFY struggled to survive as the recipient of traditional project grants and restricted funding that failed to meet its needs and limited its growth and impact. Now, operating with flexible funding and sufficient overhead coverage, CCFY has strengthened its capacity for data collection with tremendously positive results that have not only benefited the South Bronx community but also provided a roadmap for innovative programming across the country.
CCFY piloted the South Bronx Community Connections model – the first independently evaluated juvenile justice intervention built entirely on the strengths of local grassroots faith and neighborhood organization. Youth were 33% less likely to get rearrested in the year following the program.
Strengthening capacity for data collection and having the flexibility to design and implement monitoring and evaluation (M&E) strategies specific to their needs – as opposed to those prescribed by funders – have multiplier effects on the sustainability of organizations. The rationale for improving data collection is not simply about equipping organizations to do more.
CCFY has also championed participatory action research on the experiences of girls and female-identifying and gender non-conforming youth in the juvenile justice system, demonstrating innovation and forward-thinking leadership in a neglected issue within youth justice.
In actuality, many grassroots groups are accomplishing far more than they are able to measure and report upon.
With funds for organizational development, CCFY has developed a nuanced approach to M&E that ensures work being done ‘under the radar’ is accounted for. Informal or impromptu outreach efforts and points of connection with young people – such as phone calls, texts, crisis interventions, time spent accompanying them to appointments and school, and handwritten notes – represent vast and numerous data points that were previously uncaptured.
CCFY exemplifies how investments in capacity development and data collection can improve programs and strategic planning, as well as enable groups to be recognized for their accomplishments. This can in turn raise their visibility and be leveraged to secure more and better funding.
Written By Alexandra Solomon
