A Need for Community Foundations: A Better Approach to Grant-Making

Nonprofits are tired of hearing of the toll that the current recession is taking on their industry. They are tired of the stress associated with developing new strategies for nonprofit fundraising in the midst of a financial firestorm. So they are turning to community and private foundations for answers in surviving this recession and those in the future.

Donors, as well, are expressing frustration with nonprofit organizations that are reeling from a tremendous increase in services needed by the community. Lack of funding has resulted from a market that has reduced current income below budgeted levels- creating a flash point of failure among our most needed community sector.

New ideas are needed to bring both ends of the nonprofit sector together to accomplish both of their missions. If our communities are to continue thriving, then sustainable nonprofit funding needs to be developed by both community and private foundations.

The Strategy for Sustainable Nonprofit Funding

A growing number of foundations are realizing their shortcomings in funding specific projects and programs, which creates a solution for a set period of years. In order to make those programs and projects sustainable in the long run, they are re-thinking their grant-making objectives.

The best strategy for sustainable nonprofit funding has centered on enticing more operating support as a means of strengthening nonprofits and enabling them to do their job in the community for a longer period. "Unfortunately," says Michael Seltzer in a post on The PhilanTopic Blog, "unrestricted grants comprise less than twenty percent of all grant-making dollars, compared to the more than fifty percent of grant-making dollars awarded for specific programs or projects or campaigns (Foundation Giving Trends, 2009 edition, Foundation Center)."

It's not just funding that is missing. An overall approach to investing in nonprofits is missing a crucial element- education.

Educating the Nonprofit Builds a Stronger Nonprofit

The method of overcoming the general operating support hurdle of inadequate unrestricted grants to fund the overall capacity of the nonprofit is through education. Educating the nonprofit starts with the donors.

Lauren Norton Welsh, the Vice President of Marketing and Communication with The Community Foundation of Greater Atlanta, had this to say about general operating support as a grant-making objective, "Right now the foundation is very focused on what different investment approaches are proper for nonprofits. Donors look at programs, but the foundation is educating them to look at general operating support as a means of carrying out programs for the longer term."

Foundations are looking very intensely at board governance, volunteer management, financial backgrounds, marketing abilities and other administrative areas of nonprofits. This will help them to judge the capacity of the nonprofit to carry out their mission for many years, thus having a bigger impact on the community as a whole.

The Nonprofits Management Capacity

Sometimes, in viewing the nonprofits' management capacity to carry out their duties, it's discovered that they are weak in a given area, limiting their ability to sustain a long-term commitment. This hurts the community in the long run because at some point the gap in service will re-appear, causing hardships on residents of that community.

"We are talking to donors about nonprofit effectiveness." stated Lauren Norton Welsh. "Sometimes a nonprofit may not be as strong as we would like them to be in a certain area to earn general operating support. We can usually offer them an effectiveness grant through the Georgia Center for Nonprofits, to pay for a consultant to work with them on a given area."

Welsh continues by saying, "It's not only about the financial plan, but how we create a strong nonprofit - how we as a foundation sustain a nonprofit that can continue to give back to the community. This is what we are teaching our donors- that giving to projects and programs is not always the best investment for the best results."

Donors giving general operating support funding through a foundation is an excellent example of a sustainable nonprofit funding strategy. When coupled with a foundation that encourages and directs nonprofits as a means of strengthening their capacity you have sustainability at its best and communities that are thriving.

The industry needs to continue to strive, as The Community Foundation of Greater Atlanta has, to find new and exciting ways of capacity building that when linked to funding produces sustainability. This will enable the local nonprofits to obtain long-term results not realized in the past.

For more on The Community Foundation of Greater Atlanta see Community Foundations and Donor Advised Funds

Cite: The PhilaTopic Blog, Michael Seltzer, June 11, 2009, Strategies for Hard Times: The Case for Sustainable Funding