Two years after the U.S. Department of Education awarded $650 million in Investing in Innovation grants and set off a mad dash for grantees to raise more than $100 million in matching private funds in five weeks, some of the i3 winners are still facing financial uncertainty stemming from initial fundraising struggles.
A businessman who pledged $400,000 to an Oregon school district’s arts program did not make his most recent payment, potentially putting the program’s future in jeopardy. Other grantees have also encountered problems with matching funds coming through, and some nonprofit grantees have been forced to contribute their own money to match the initial amount.
For its part, the Education Department has lessened the matching-fund requirements, but is less clear on possible outcomes for the grantees that have run into financial problems.
Those developments have raised questions about the competition’s structure, including calls by some observers for the awards to be opened up to the for-profit sector.
“Part of the challenge for i3 is there was so much cheerleading on the front end, and there was a lack of attention to how you execute and implement,” said Frederick M. Hess, the director of education policy studies for the Washington-based American Enterprise Institute and the author of an opinion blog for Education Week. “We didn’t spend a lot of time thinking about the ‘what ifs.’ ”
In August 2010, the Education Department awarded 49 five-year grants to school districts, nonprofit organizations, and universities, ranging from $3 million to $50 million each. The grants were intended to help scale up education programs with proven outcomes or develop promising ones.
The terms of the competition, which was funded by the American Recovery and Reinvestment Act, required the winners to raise 20 percent of their awards in matching funds from the private sector, such as philanthropies or individual donors, and to do so in about five weeks.
The requirement set off a scramble—many grantees didn’t secure the 20 percent of their grants needed until the final days before the deadline. The Education Department had reached out to the philanthropic community about i3, and an online registry created by a group of major foundations and managed by the Bill & Melinda Gates Foundation aimed to match grantees and funders. (The Gates Foundation provides grant support for Education Week’s coverage of the education industry and K-12 innovation.)
On Different Tracks
Some grantees, such as Teach For America and the Denver public school system, used existing funders to cover substantial portions of the required match; others had been able to raise the matching amount during the application process.
Many winners, though, found their programs didn’t fall within foundations’ funding priorities or grant-writing schedules.
“This is not how foundations are prone to work,” said Robert Slavin, the executive director of Success for All, a Baltimore-based organization that had to raise $10 million to match a $50 million “scale-up” i3 grant. “They want a specific project for them, not to help out with someone else’s project.” (Mr. Slavin also writes an Education Week opinion blog.)
Success for All, which offers whole-school turnaround services, tried many options, including the i3 registry, but couldn’t raise the full $10 million before the deadline. Because the i3 grant only stipulates that matching funds must come from a private source, Success for All contributed $6.8 million of its own money for the $10 million match.
School districts awarded i3 grants weren’t afforded the same opportunity. The Beaverton, Ore., school district strained to raise $800,000 in matching funds for a $4 million “development” grant to fund Arts for Learning, a program that infuses arts education into the elementary school literacy curriculum in the 38,500-student district. Partnering with Young Audiences, a national, New York City-based arts organization that manages Arts for Learning in schools, it, too, came up empty on the i3 registry.
“I don’t remember a situation like this,” said Peter Gerber, the director for Arts for Learning and a veteran of the nonprofit sector. Other grants, he said, “all had longer arcs.”
About halfway through the fundraising process, John Wolosek, a businessman from Vancouver, Wash., who ran the Giving Stream, a new (and now-defunct) company that helps nonprofit organizations raise money, stepped forward with interest in donating money toward the grant.
He pledged $400,000—half the matching funds and more than $280,000 greater than any other donation to Beaverton, including those from the Intel Foundation and the Meyer Memorial Trust. He would raise the money by selling advertisements on the back of grocery-store receipts, he said.
“I actually anticipate over those five years, it will be closer to $5 million, but we put $400,000 because we knew if we all got hit by a bus, we could do that,” Mr. Wolosek told The Oregonian newspaper in a profile published in December 2010.
The deadline was fast approaching, and the i3 award was a public grant, Mr Gerber said, “so we took it at face value that if a person would come forward like this, they would not make a commitment they didn’t intend to keep.”
Mr. Wolosek made his first payment, of $25,000, but the grocery-store advertising never came to fruition. He told The Oregonian that future payments would come from his personal funds. He didn’t make the next one, of $50,000.
Mr. Wolosek did not respond to requests by Education Week for comment.
Beaverton is working with Mr. Wolosek on a new payment schedule to fulfill his commitment, said Jon Bridges, the district’s administrator of accountability. If he cannot make further payments, Beaverton will have to raise more, Mr. Bridges said.
Individual i3 grantees must perform their own due diligence on private funders.
“I don’t think it’s permissible or appropriate [for the Education Department] to be vetting each private donor,” said Nadya Dabby, the associate assistant deputy secretary for the department’s office of innovation and improvement.
Grantees are monitored extensively, through monthly phone calls with project managers, an annual report that includes a budget, and extensive proof-of-efficacy requirements, to make sure grants stay on target, Ms. Dabby said.
But “there’s always the possibility we can use the more dire options at our disposal,” she said.
“There is an option where we end the grant,” she added. “That’s not our interest or our intent. We want them to be successful.”
Beaverton’s situation may be worse than that of other i3 recipients, but interviews with several other grantees suggest there are other lingering effects from the initial matching-funds process.
Mr. Slavin, of Success for All, said one of its private funders, which he would not name, “is not sure if it can pay because of its own financial difficulties.”
After failing to find enough private donors, the Bay State Reading Institute, a nonprofit organization based in Massachusetts that focuses on elementary-level literacy, used $400,000 of its own money to match the $1 million needed for its $5 million “development” grant.
“We were unusual in that we had a reserve that could cover this,” said Britt Ruhe, the director of development and finance for Bay State, which has an annual budget of $1.2 million.
Despite the criticism, almost all the grantees interviewed said the i3 competition has had an overall positive impact.
“To us, the matching is a problem, but it doesn’t detract from the really important advancement that this represents,” said Mr. Slavin, whose organization applied for and won a development i3 grant in 2011.
But there are suggestions on how to improve the initiative.
For Mr. Hess of the American Enterprise Institute, there are structural problems with the competition itself. In the first round of i3 funding, the Education Department asked grantees to raise $130 million in funds from the private sector amid the effects of a deep recession, he pointed out.
It was also a “critical mistake,” he argued, that the law did not open i3 up to the for-profit sector, as federal grant programs for clean energy, the Department of Defense, and NASA do, even though he acknowledged the potential for “shady operators.”
And there’s the belief that, in general, the Investing in Innovation grants aren’t going toward particularly innovative programs, Mr. Hess said. The applicants are evaluated on simplistic factors, such as test scores and graduation rates, which aren’t attractive to national foundations involved in high-impact philanthropy, he said.
There are also pros and cons to i3’s approach to evaluation, which requires control studies, intensive data collection and reporting, and lofty outcome goals not seen in other federal grants, grantees said.
The Education Department stands by its evaluations. But in the 2011 round of i3, in which $150 million went to 23 grantees, matching-fund requirements were dropped to 5 percent, 10 percent, and 15 percent, for “scale-up,” “validation,” and “development” grants, respectively. Winners were announced in December to avoid awkward scheduling with philanthropies’ typical grant cycles.
The i3 registry is now being run by the Foundation Center, a New York City-based nonprofit organization that provides information and training for foundations. In the two years under Gates Foundation management, the registry funded $68 million of the roughly $150 million of matching funds required for the first two years of competition, said Lisa Philt, the center’s vice president for strategic philanthropy.
This year, 190 applicants are vying for $150 million in new i3 grants. To provide more preparation time for some applicants, the Education Department invited organizations to pre-apply for the smallest, $3 million grants. Awards for the latest round of grantees will be made by the end of the year.
A version of this article appeared in the October 31, 2012 edition of Education Week as ‘i3' Grantees Face Hurdles on Aid Match