How Foundations Are Using AI to Vet Grantees

Program officers at nearly 200 grant makers are using a new artificial intelligence tool to assess the financial health of prospective grantee organizations.

The Patrick J. McGovern Foundation, a $1.5 billion philanthropy, developed Grant Guardian in-house and released it publicly earlier this year. It gives the technology for free to other foundations as part of its mission to use data and AI to accelerate social good. To date, 189 philanthropies have taken the McGovern Foundation up on its offer; early adopters include the GitLab Foundation and the United Way.

“Foundations often have limited time and resources to thoroughly assess financial stability,” says Vilas Dhar, president of the McGovern Foundation, who explains that the tool generates instant financial reports that would take program officers weeks to compile by hand. “We’re trying to take [on] the menial tasks of doing financial diligence and allow program officers to have that strategic, high-level viewpoint so they can streamline the entire process.”

Future versions could potentially be used for other types of evaluations, Dhar says, though currently the platform is limited to financial analysis.

While the foundation is still in the early days of disseminating Grant Guardian, Dhar says he expects more grant makers will hear about the technology’s value from their peers in the months to come. “I think we will see a massive surge in adoption,” he predicts, as program officers dig into the platform and discover how it optimizes the grant-making process.

How It Works

Powered by Anthropic’s large language model Claude 3.5, Grant Guardian extracts a charity’s financial data from submitted records, like a Form 990 or audited financial statements. The tool then analyzes the charity’s financial history and generates a scorecard along with a summary of its findings based on the criteria the foundation has defined as most important to a nonprofit’s financial health.

The program is customizable by the user, so certain financial metrics can be given extra weight if desired. For example, if a program officer wants to know whether a charity recorded annual losses in consecutive years, Grant Guardian will designate that as a high-priority indicator and flag it in its assessment.

The foundation tested the tool with users at a few grant makers for several months before its public release in January. One of those beta testers was Jessica Van Grouw, grants manager at the GitLab Foundation, which made 78 grants totaling $21 million last year, to bolster the earning power of individuals, families, and communities.

Van Grouw says she finds the technology simple to use, even though she does not have a background in finance.

The user’s ability to customize the tool to specify which metrics are most important is a key feature, Van Grouw says. When compiling financial analyses previously, she “would often run questions up the ladder” at her organization and wait days for a reply before she could hand off a report to the foundation’s three program officers. Now she can finish five or six reports in a day: “For me and my workflow, it makes a huge difference.”

Time Savings

Sabra Williams, manager of IT systems at the United Way of Greater Philadelphia and Southern New Jersey, saw a post on LinkedIn about Grant Guardian in February and reached out to the McGovern Foundation right away. Her organization was gearing up to conduct a financial review of 100 existing recipients of two-year grants before renewing their funding for a third year.

Previously, her organization’s financial analysts would spend hours searching for and copying relevant financial information from spreadsheets. She estimates that it now it takes her two or three minutes to upload a grantee’s Form 990 or audit and generate a detailed report for the finance team’s review.

“It’s not a requirement that you need to be a finance expert to use this system or to read or generate these reports,” she says. “These are things you could share with your board or your donors or other stakeholders.”

Besides appreciating the fact that it’s user-friendly, she likes that it makes the grant-making process consistent and transparent because all prospective grantees are subject to the same criteria. “There’s not any mystery or surprises or potential questions about the accuracy or integrity of the process,” she says.

Human Monitoring Is Critical

AI has broad potential in philanthropy, Dhar says, and organizations should be aware of the ethical applications of these new tools. He says it’s important for foundations to understand that Grant Guardian is designed to enhance staff workflows, not replace their expertise: “This tool doesn’t make a decision. Its entire role is to provide a human program officer with the information to let them make better and faster decisions.”

Foundations should not adopt the platform as a way to cut costs or jobs, he warns, but instead should use it to advance impact. “Cost-saving is a consequence and an outcome, but it shouldn’t be a driver for using these tools. AI use and operations increase the capacity of your existing staff to do more and better, and that should be our North Star.”

Nonprofits commonly cite data security as a top reason they hesitate to use AI — not without cause, Dhar says. His product-development team listened to those concerns and built the tool on Claude because it follows the industry standards for data privacy in AI to ensure both the applicant’s financial information and the foundation’s evaluation processes remain protected.

Williams says she gave the McGovern Foundation feedback on Grant Guardian’s privacy features that its developers incorporated in a subsequent version — like the ability to archive reports and delete data.

She notes the United Way of Greater Philadelphia and Southern New Jersey hasn’t yet published a policy that acknowledges its use of Grant Guardian to grantees but intends to do so during its next round of grant making because its test run of the technology was so successful. “We will definitely use this again for future funding applications,” Williams says.

The GitLab Foundation publicly discloses its use of Grant Guardian in its handbook for grant seekers. Van Grouw says a negative finding on the generated report would not rule out an application but that she would share the flagged information with her program officers, who then might ask the applicant for additional context. “It gives us a more holistic understanding of the organization,” she says. “We utilize Grant Guardian to help us form that holistic picture.”