I’m still processing Paul Light’s post yesterday about the Social Innovation Fund (SIF). The implications in his post are damning. If true – that a proposal ranked weak and nonresponsive (the lowest possible score)in a first-phase review – ended up being funded through a process full of questions about “fairness, conflicts of interest, and undue pressure”, then we’re looking at a possible failure of leadership and management within the Corporation for National and Community Service. And the only way to start resolving that would be for the agency to immediately address these allegations and to embrace full transparency on how the grant review was conducted and the proposals it received. Already, people on Twitter are speculating on the name of the intermediary left unnamed in the post. The Corporation needs to step ahead of the wave.

I’ve been asked why the SIF has generated so much attention and why we (practitioners in philanthropy; people like Sean Stannard-Stockton, Nathaniel Whittemore, and me; etc.) care so much about this program. The SIF’s aim to allocate $123M in combined public and private funds to nonprofit organizations slightly exceeds the $120M committed by the Edna McConnell Clark Foundation and its co-investors for the Growth Capital Aggregation Pilot (GCAP). And yet, the GCAP does not generate nearly the same level of attention.

As Sean explained in this post, the SIF offers the opportunity to provide growth capital to nonprofits and embrace a culture of knowledge sharing. I’ve written about the opportunity the SIF provides to significantly affect philanthropy by making it both more transparent and reshaping how it distributes funding, and creating secondary capital markets to support innovative but unfunded projects. Ultimately, the attention directed at the SIF also reflects the fact that we’re dealing with public dollars in this case instead of the private funds support the GCAP.

At this point, though, the public trust in the SIF is being seriously tested. If left unaddressed, the Corporation may not only lose credibility within the philanthropic sector, but it may jeopardize future funding for the SIF and delegitimize its importance.

While complete conjecture on my part, Mr. Light also raises the specter of a much larger issue, one that is probably more alarming than most understand. The implication of favoritism in the SIF review process will not sit well with key members of Congress. Mr. Light names Senator Grassley and Representative Issa, two key legislators who have kept a constant and critical eye on the Corporation (most recently around the circumstances of Gerald Walpin’s firing as the Corporation’s inspector general). Senator Grassley was an early and vocal critic of the agency and pushed through a series of reforms in 1998. If the concerns centered upon the SIF attract their attention, I suspect the program will not receive support for future funding.

It’s time to fix this mess before all the potential the SIF originally presented completely evaporates.

Tags: Social Innovation Fund, Philanthropy, Nonprofit, Foundations, Corporation for National and Community Service