Funders Address How to Build a Robust Non-profit Sector

March 15, 2007
Esther Handy

Although significant funding flows into the nonprofit sector, the funds are rarely structured to meet the true capital, financial and organizational needs of nonprofit organizations over time. Little is understood about how funders, as an industry, can work together to address the undercapitalization, resource and sustainability dilemmas faced by the nonprofit sector.
Catalyzing discussion on this increasingly important issue, grant-makers and thought leaders from across the country gathered March 15th at the Charles Hotel in Cambridge for a symposium co-presented by The Kennedy School’s Hauser Center for Nonprofit Organizations and the Nonprofit Finance Fund titled “Capital Ideas: Moving From Short Term Engagement to Long Term Sustainability.”
Elizabeth Keating, senior research fellow at the Hauser Center, described the current trap in which many nonprofits now find themselves.
“The perpetuated myth that providing more services now should be the top priority of every nonprofit organization prevents nonprofits from using capital reserves or retained earnings to invest in their own organization’s long-term fortification,” she said.
Hauser Center research fellow Kathy Buechel introduced draft guiding principles for funders designed to help nonprofits escape from this trap. Principles such as “Fund to Sustain the Core Business” and “Know Yourself as a Funder and Invest Consistently” were discussed by participants throughout the symposium.
Clara Miller of Nonprofit Finance Fund noted that “for many decades our sector has operated under a set of well-intentioned financial rules of thumb and assumptions that we can now see in fact inadvertently undermine our capacity and effectiveness in many ways. It’s time to redefine ‘financial best practices’ to reflect both current economic reality and the growing level of management sophistication in the field. We propose a new framework for building those practices based on the needs of the entire enterprise, rather than individual projects or programs. Best financial practice must recognize the need for the mission to be supported within a healthy enterprise, and focus on the main thing: achieving social goals.”
Panelists ranging from Andrea Levere, President of CFED, Fred Bollerer of Venture Philanthropy Partners, and Lew Feldstein of the New Hampshire Foundation shared their own promising practices. Marc Cherna of Allegheny County Health and Human Services offered his experience creating partnerships between foundations and Government. The group was reminded that Foundation giving represents only a small portion of total non-profit revenues, and engaging government-funders and policy-makers will be critical to moving forward.
Kathy Buechel called the symposium “a terrific first step toward engaging some of the most thoughtful and creative leaders in the field, to collect and then reflect on promising practices and pro-sustainability funding principles.” Symposium participants included representatives from several larger foundations such as Gates, MacArthur, Annie E. Casey and Shell, and from socially innovative philanthropists like Social Venture Partners, New Profit Inc., REDF, Heron, Synergos, Dorot Foundation. Other participants represented The Boston Foundation, Meyer, Grable, Heinz, New England Foundation for the Arts, Bridgespan, Minnesota Council on Foundations, Illinois Facilities Fund, Independent Sector and the Aspen Institute.
For further information on this event and project, consult the Capital Ideas website at: http://isites.harvard.edu/icb/icb.do?keyword=k14620


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