Providing long-term general operating support along with capacity-building grants may be a "gold standard" funding practice that drives positive outcomes achieved at the community level, a report commissioned by the Citi Foundation and produced by Synergos finds.
Drawn from secondary research and interviews with more than fifty funders and nonprofits, the report, Funding From a Place of Trust: Exploring the Value of General Operating Support and Capacity Building Grants (41 pages, PDF), found that coupling multiyear general operating support with funding for capacity building allows nonprofits to avoid the tradeoff between investing in capacity and programmatic growth on the one hand and sustaining that newly acquired capacity on the other. Given that the benefits of general operating support and capacity building play out over time, the report argues that funders should invest early and for the long haul — with grant terms of five to seven years. One essential factor in the effectiveness of general operating and capacity building support, the study found, is the willingness of a grantee to make the changes necessary to move from a project mindset to a broader impact-oriented mindset.
According to the report, general operating support is a form of "trust capital" that, when coupled with capacity building or programmatic funding, establishes a trust-based relationship and helps re-balance the power differential between funder and grantee. Leveling the playing field also helps foster honest two-way communication and, in turn, learning and capacity building for both parties.
"Donors should acknowledge the limitations of short-term cycles of one to three years which tend to be the norm in the funding landscape," the report's authors conclude. "[General operating support] combined with targeted [capacity building] funding can give organizations the time, space, and confidence to rethink and strengthen their engagement with the communities."