Navigating
a Changing Economy
The Maine Philanthropy Center is compiling
resources, tools, opinions and ideas to help Maine's philanthropy community
respond to the economic crisis.
Suggestions for Grantmakers
Source:Grantmakers
for Effective Organizations
Hold
steady. No one knows where the current crisis will lead, so
consider holding your grants
budget steady for 2009 at 2008 rates. Nonprofits, unlike foundations,
have no financial cushion to ride out times like these. A decision to
hold steady will provide a small degree of breathing room as nonprofits
themselves adjust. This may mean that you pay out more than five percent,
but such a decision displays a real commitment to the nonprofits on
the front lines.
Consider
the no-cost changes you can make that will give your grantees
added latitude to weather the storm. For instance, think about releasing
restrictions on current grants so that grantees can better react to
a changing environment. Several grantmakers quickly made this adjustment
after September 11 and Hurricane Katrina. Not only did it enable nonprofits
to react to the changed circumstances, it also generated a great deal
of goodwill.
Consider
providing more flexible dollars or access to credit. For grants
in 2009 and beyond,
operating support may make a great deal of sense given how rapidly the
landscape is changing. The projects or programs that nonprofits might
propose could quickly become outmoded or obsolete by policies of the
new White House or changes in the economic climate. Additionally, stop-gap
measures like cash flow loans and access to credit may be just what
a particular group needs to continue its important work.
Stick to what works. The kinds of investments that
the GEO community values and supports may
be vulnerable in the coming weeks and months—higher dollar commitments
that are made for
multiple years; support for leadership; efforts to focus on learning
and improved performance. Y
these are the exact kinds of investments that matter most now. Nonprofit
leaders will assume a great burden to respond creatively to the financial
crisis. Your investments can help sustain them in this challenging time.
Engage your key stakeholders to get a clear picture
of what they are experiencing. And, ask them what else you can do to
help.
Suggestions
for Nonprofits
Source: Nonprofit
Finance Fund
1.
Nonprofits heading into recession need to avoid "strong,
silent behavior" and sustained spending, which has been
a hallmark of the industry for more than a decade, and continues to
make nonprofits weaker, not stronger. Miller explained: "We are
entering a period of financial crisis, and we can't afford to 'fake
it until we make it.' This heroic type of behavior does no one any good
in the long run. Nonprofits need to share worries with boards and funders,
and enlist their support in getting ready for a possible recession.
Organizations need to try to get by on decreased revenue and programmatic
spending for a year or two in light of new financial indicators, before
moving forward with challenging expenses."
2.
Nonprofits should engage with board members and funders in contingency
planning on what is likely to happen to clients and funders
during a recession. Clara Miller said: "The end clients are especially
important, and face the greatest risk: many of the populations served
by nonprofits are fragile, needy people, whose need increases in times
of financial stress. The goal of surviving a recession or economic recession
is not to stay afloat for the sake of staying in business, but rather
to make sure you're around to keep serving the public, particularly
in times of increased demand for services. It's important to get board
members and funders to go public with that message -- that the organization's
survival is important because of the clients it serves" (WAB NOTE:
and the value it provides to its community).
3.
Nonprofits should avoid large investments in fixed assets and
infrastructure (i.e., a building purchase, new hires or expansion
of services), and if change (growth or retrenchment) is likely, then
nonprofits need to work with funders and board to build a cushion to
allow flexibility and course corrections. Miller explained: "As
economist Peter Bernstein put it, 'Risk means not having cash when you
need it.' And that is particularly true for nonprofits, which often
have liquidity problems in the best of times. Liquidity becomes even
more of an issue during a downturn, when there is a temptation to maintain
or increase services, and hence expenses, even if revenue is declining."
4.
Nonprofits need to get a firm handle now on their revenue patterns.
Clara Miller said: "Organizations can examine revenue cycles to
see if they're contra-economy or not. In some cases, the revenues of
nonprofits actually rise during a recession. If that's true, nonprofits
can build growth funding to allow rapid expansion to meet needs. If
the opposite is true, nonprofits can take actions in step with cushion-developing
approaches."
5.
If they offer services (e.g., job retraining, food kitchens and housing
services) that will lessen the negative impact of an economic downturn,
nonprofits should approach government funders more
aggressively.
