Funding Collaboratives

Across the country, funding collaboratives have been forming and pooling funds to foster the formation and expansion of workforce partnerships, and to advocate for policies that will sustain them. The power of these collaboratives comes not only from the funds they bring to programs but also, even more crucially, from the alignment of civic leadership around a common vision for the community.

Funding collaboratives affiliated with the National Fund for Workforce Solutions are supporting local initiatives to strengthen and expand workforce partnerships. There is no single model for funding collaboratives. They range from loosely aligned groups that agree to support a common set of projects, to highly structured groups that pool their resources.

Governance

The funding collaboratives in NFWS range from highly structured agreements among co-investors to loosely structured alignments for co-investment. In several cities, private funders, public-sector leaders, research organizations, workforce boards, employers, advocacy groups, service providers, and other key stakeholders have joined together in steering committees to provide support for existing and new workforce intermediaries. Sometimes the steering committee consists exclusively of funders who collaborate in a variety of ways, from coordinating grantmaking based on agreed-upon principles, priorities, and strategies, up to and including blending their funding for targeted investments.

None of the funding collaboratives in the national initiative are incorporated as 501(c)(3) organizations, nor do any have by-laws at this time. They see their roles as temporary alliances that have come together to address a particular problem, rather than as permanent institutions that require a separate administrative structure.

Staffing

A funding collaborative is a good way for individual funders to outsource the administrative costs of operating a workforce partnership initiative. Many funding collaboratives hire an independent staff person to manage the local initiative and national consulting firms in workforce development to provide advice and strategic guidance to their initiatives.

Financial Management

According to Grantmakers for Effective Organizations, only about one-third of funder networks coordinate their funds or manage a pooled grantmaking fund, and fewer than one-fifth conduct joint fundraising. In the workforce partnership initiatives, these financial activities are core funding collaborative functions. To varying degrees, the collaboratives have aligned their investments through structures ranging from the blended funding of public and private funds in Boston and New York City, to the alignment of individual grantmaking decisions in Baltimore and Rhode Island.

Blended Funding

In the ideal vision of a blended funding model, each funder makes a pledge to the overall initiative, to be allocated as needed to grants, research, management, evaluation, or other activities. In reality, however, many contributors to a funders group have restrictions on where their funds can be spent or on the activities that they can support. The funders group assumes the responsibility of keeping track of these restrictions, rather than passing them on to the grant recipients.

For example, the SkillWorks Funders Group blends investments from 14 foundations and public sources of workforce development funding into single public/private grants to service providers, providing a model for simplified, coordinated program support. Their financial contributions are managed following a “mutual fund” model.

In the Bay Area, the California Employment Development Department collaborates with several foundations on the design of a request for proposals that both public and private funders use to solicit, review, and prioritize the grant requests. In addition, a number of private funders do not invest in the mutual fund but make aligned grants to support selected projects. California EDD does not put funds directly into the philanthropic funding pool; rather, it makes separate grants to programs selected through the aligned solicitation.

In New York City, individual foundations award grants to a 501 (c)(3) created by the New York City Small Business Development Services Department to receive funds from both public and private sources and then makes grants. The New York Workforce Innovation Fund consists entirely of unrestricted philanthropic awards to the Workforce Development Corporation. The Small Business Development Services Department awards Workforce Investment Act funds as well as special city grants to the Workforce Development Corporation, and also provides staff to manage the grant award process for the funding collaborative.

Aligned Funding

Some funding collaboratives are more loosely aligned, with no multi-year goal for budget and fundraising, or joint grantmaking. Instead, funders drawn from philanthropy and the public sector meet as an informal steering committee to discuss the community’s workforce development needs and how each member can contribute to achieving their shared vision. In turn, each funder follows its own grantmaking process to solicit proposals for workforce intermediaries and support the actual training and support services of the workforce intermediaries.

This approach may lose some of the potential resources and influence of a more deliberate effort to organize key stakeholders to systematically identify priority areas for system improvement and coordinated investment. It is harder to “tell the story” of a loosely aligned project, because it has not announced its intentions with a formal goal statement or the release of an RFP. Nor has it substantially raised the visibility of the issues the funders care about within either the workforce development network or the community-at-large.

Nevertheless, aligning funding is an effective way to bring together investors who may have limited experience with collaboration or whose boards are hesitant to relinquish the autonomy required for blended funding collaborations. In areas with limited experience of funder collaboration, an aligned funding strategy may be easier to accomplish than blended funding.

Public/Private Co-investment

Public/Private funding collaboratives may be managed by philanthropy, aligned, or managed by the public sector, or they may choose a third party to manage both sources of funds.

In Boston, both the city and the state WIA administration transfer funds to the “mutual fund” managed by a community foundation by using fixed unit price contracts with deliverables based on the implementation of the initiative design. With this approach, once the contract payment terms or deliverables are met, the fiscal agent is able to simplify the financial tracking and reporting responsibilities associated with managing public funds. This process is more like the grant-making process of foundations than the usual cost reimbursement contract would be. The value to the public funders is that they only make payments for success.

Many foundations are restricted from managing public-sector funds. In this situation the philanthropic collaborative can work with the state to align their grantmaking. Each sector awards its own contracts to projects, using a collaborative review process that reduces the likelihood of duplication of effort and increases the support for more holistic program approaches. Another approach is for both sectors to award grants to a third party, such as a non-profit organization, which manages the funds and re-grants them in accordance with the guidelines developed by the funder collaborative, using funds from both philanthropic and public sector sources. Finally, philanthropic members of the collaborative may make grants to a public entity such as a Workforce Investment Board to expand the reach and flexibility of public-sector grants.

Accountability

Managing the investments of multiple funders is complicated. In some collaboratives a large community foundation (e.g., the Boston Foundation, New York City Community Trust, or The San Francisco Foundation) serves both as chair of the funding collaborative and as fiscal agent for the initiative's funds. Their legal status as 501(c)(3) nonprofit organizations makes them eligible to receive grants from both private foundations and from public agencies. As fiscal agents, the foundations are, in effect, the recipients of grants from the other investors.

The fiscal agent writes proposals to other funders to trigger their grants to the collaborative. Each funder receives written reports on the progress of an initiative, in accordance with that funder’s reporting expectations as stipulated in its grant award letter. Funders also receive regular updates at funders meetings from the staff or consultants responsible for managing activities, and they receive written progress reports from the grantees.

Restricted grants from each of the funders are tracked by the fiscal agent, which provides financial reports to the funders on a regular basis.

For More Information

Funder Collaboratives: A Philanthropic Strategy for Supporting Workforce Intermediaries