The New York Times
By: Stephanie Strom
August 21, 2010
In late July, the Social Innovation Fund, a new $50 million federal program aimed at financing the replication of nonprofit programs that work, made its first grants.
But what was supposed to have been an emblem of the administration's commitment to nonprofit groups has become instead a messy controversy over potential conflicts of interest and the process used to select the grantees.
Several of the 48 independent reviewers who vetted the initial 54 applications for the grants were surprised by some of the winners because they had awarded them mediocre scores.
Critics noted that the executive director of the fund, Paul Carttar, had worked at New Profit Inc., a nonprofit group that helps promising social programs. New Profit Inc. received a $5 million grant from the fund.
Similarly, Patrick Corvington, the official who oversees the Corporation for National and Community Service, where the fund resides, previously worked for a foundation that financed a program operated by the Local Initiatives Support Corporation, better known as LISC. The foundation won a $4.2 million grant.
Marta Urquilla, senior adviser to the fund, said Mr. Carttar and Mr. Corvington played no role in selecting the winners. "We knew the things people are saying now would be said," Ms. Urquilla said, "and so we made sure each application got its fair chance and stood on its own merits."
But the fund has not disclosed who reviewed the grants -- or who applied for them or the ratings the applicants received, information that often is provided by many other government agencies that make grants.
In soliciting applications, the fund published a detailed set of criteria it would use to evaluate them, but the process by which they would be vetted was unclear. Last week, it disclosed more information about the procedures, including that the applications went through four stages, as well as the number of organizations culled after each.
"The bare minimum would be to release the names of the peer reviewers, the names of the applicants and the score they each received," said Dean Zerbe, a former tax counsel to Senator Charles E. Grassley, an Iowa Republican who has persistently scrutinized the Corporation for National and Community Service's grants and programs.
The fund was created with the passage of the SERVE America Act last year and quickly became one of the hottest topics for discussion in the nonprofit sector, which saw it as a means of getting government financing for young but promising programs at a time when the economy has crippled much fund-raising and hobbled many endowments.
The 11 winners effectively serve as conduits to channel the grant money to other nonprofit organizations that operate successful programs that can be expanded to serve more people in more areas. The winners must match the government's money, which also must be matched by the final recipients, potentially trebling the fund's financial effect.
The broader goal, Ms. Urquilla said, is to develop a network of intermediaries like the grant winners that can identify promising programs and connect them to donors and other sources of financing to allow them to expand.
The criticism has led the fund to decide to publish redacted versions of the winning applications in the coming weeks, together with the ratings they were given by various panels and how those compare with applications that did not win. "We fully embrace open government and the trend toward greater transparency," Ms. Urquilla said. "We just want to make sure we do it in a deliberative and responsive way."
The disclosures may not satisfy the critics, though.
Ruth McCambridge, editor of the Nonprofit Quarterly magazine, said that she may file a request for all the applications under the Freedom of Information Act. "This is supposed to be a learning process," Ms. McCambridge said. "That's the way the people at the fund have billed it, and applicants for the next round of funding, if there is one, might find it useful to see what didn't work the first time around."
She questioned why the fund would not release the names of the applicants or the peer reviewers and why it asked the reviewers to shred their work when it was finished.
Steven Goldberg, one of the reviewers, a consultant and author of "Billions of Drops in Millions of Buckets: Why Philanthropy Doesn't Advance Social Progress," said he had no problem with destroying the paperwork related to the review -- "as a lapsed lawyer, I can see that you don't want people to be looking too much at how the sausage gets made"-- but thought it would be a good idea to publish the names of the reviewers and applicants.
"My impression over all is that it was a very conscientiously designed and managed process, and they probably overcompensated to make sure it's all done scientifically," said Mr. Goldberg, who on Friday wrote a lengthy riposte to Nonprofit Quarterly's coverage of the issue.
Other reviewers, though, questioned the secrecy surrounding the selection process, particularly since it was being imposed by an administration that has pledged to greatly increase transparency.
"This is not a private, grant-making institution, it's the federal government," said Paul C. Light, a professor at New York University who has served as a reviewer for other federal grants and contracts.
Mr. Light, who aired his concerns on Thursday in his column on the Washington Post's Web site, said in an interview that his group of reviewers had rated one of the winning organizations as "weak and unresponsive," the lowest rating possible. He said the application contained typos and grammatical errors, lacked data needed to assess it and proposed using a substantial amount of money to build its own capacity to administer the grant it was seeking.
"I was very concerned about the potential impact of giving an applicant the bottom rating because I believed it would be a death knell," he said. "I got the message from our liaison with the fund that these ratings were a key input and potentially determinative."
Yet that organization won a grant.
Two reviewers who would speak only on the condition of anonymity -- the nonprofit world has its own code of silence that keeps insiders from expressing negative opinions -- said that organization was New Profit, a Boston-based organization that supports a number of high-profile programs like KickStart and iMentor. Mr. Carttar, the fund's executive director, worked for New Profit before joining the government. Ms. Urquilla said Mr. Carttar had "played no role whatsoever in the decision on any of the grantees."
For its part, New Profit said it was aware that its application may raise conflict-of-interest questions. "If any of us see Paul at a conference, we would wave from across the room, but we didn't speak to him," said Kim Symon, a managing director.
The fund owes its existence at least in part to New Profit, which in 2007 put together a coalition of nonprofit groups called America Forward to advocate for, among other things, the creation of a federal fund.
With New Profit acting as its agent, America Forward spent $67,000 in 2008 and 2009 lobbying for the creation of the fund and an additional $60,000 on lobbying in the first six months of this year, according to records provided by Nonprofit Quarterly.
Ms. Symon said New Profit's name appears on the lobbying reports because America Forward was not a legal entity, but that the two organizations were "functionally pretty separate."
"We don't feel we had an advantage and, if anything, thought we would have a disadvantage because we were so concerned about the perception of closeness," Ms. Symon said. "We felt like we had to be really competitive."
For that reason, she said, New Profit worked hard on its application. "We spent a lot of time and energy doing it in the first place, and there were times when that turned out not to have been enough," she said. "We were impressed by the level of rigor in the review process, which was very thorough and complete."
Ms. Urquilla did not discuss any applicant by name. She said that each application was reviewed by two peer review panels in the initial phase, and that three were given "excellent" ratings by one panel and "weak and unresponsive" ratings from the other.
Those applicants passed on to the second phase, together with the issues raised by the panel that had concerns about them.
"We were not going to assume that the opinion of one panel trumped the opinion of another," she said. "Eliminating those proposals in the first phase could have put the competition in the position of eliminating what might have been the most creative and innovative programs."