The Changing Role of Foundations

Thursday, June 11, at 12 noon, U.S. Eastern time

Clara Miller is president and chief executive officer of Nonprofit Finance Fund in New York. Ms. Miller and her consulting firm provide financial advice to nonprofit groups nationwide.

Ben Cameron is program director for the arts at the Doris Duke Charitable Foundation, in New York, where he leads the foundations arts grantmaking activities. Mr. Cameron was executive director of the Theatre Communications Group for eight years, and previously worked as a senior program officer at the Dayton Hudson Foundation and as manager of community relations at Target Stores in Minneapolis. From 1988 through 1992, Mr. Cameron worked for the National Endowment for the Arts.

Ralph Smith is executive vice president of the Annie E. Casey Foundation, in Baltimore. He also serves on the boards of directors for the Council on Foundations, the Foundation Center, Wachovia Regional Foundation, the Annenberg Institute for School Reform, and Venture Philanthropy Partners.

A transcript of the chat follows.

Maria Di Mento (Moderator):
    Hello and welcome to today's live discussion. Today we’re discussing the changing role of foundations, and how they can manage themselves through the financial crisis with an eye toward long-term health.

Maria Di Mento (Moderator):
    Our three guests today include Ben Cameron, who is program director for the arts at the Doris Duke Charitable Foundation, in New York, where he leads the foundation's arts grantmaking activities; Clara Miller, the president of the Nonprofit Finance Fund, in New York; and Ralph Smith, who is executive vice president of the Annie E. Casey Foundation, in Baltimore.

Maria Di Mento (Moderator):
    All three will be available for the next hour to take your questions.

Maria Di Mento (Moderator):
    For those who are new to this forum, please note that this is a text-based discussion. There is no audio. You can watch the discussion unfold on this page, which refreshes every minute with the latest questions and answers. To ask a question, simply click on the "ask a question" link on this page and type in your query. I'll direct your question to a member of our panel.

Maria Di Mento (Moderator):
    We will be offering a full transcript of this event after it is complete at http://philanthropy.com/live. You are welcome to refer to the transcript in the future -- and to pass it along to others who might find it interesting.

Maria Di Mento (Moderator):
    Without further ado, let’s get started.

Ralph Smith:
    Thanks for the opportunity to participate in this important conversation. As has been the case over the past several years, I find myself wearing two hats. My responsibilities as Executive Vice-President of the Annie E. Casey Foundation require attention to many of the same issues I encounter as a member and now as Chair of the Board of the Council on Foundations. I will attempt to identify which if either of those roles drive a particular comment or response. I know both organizations would be deeply appreciative if they are not asked to share the burden of anything impolitic I have to say.

Question from John Martin, The MacDowell Colony:
    We are trying to meet income goals that rely on securing new funding from foundations. Establishing new partnerships is proving especially difficult this year. Do you have any advice about strategies that might help in this effort? Thanks!

Ben Cameron:
    Two observations: New partnerships in this climate are only going to be harder for many groups. Many foundations, in the face of budget reductions, are suspending new partnerships for the current and/or coming year. This may require you to try to maximize or deepen current partnerships and/or to reprioritize income streams (if possible). Individual donations are the growth sector for the arts--not only because we currently are underperforming in that sector but because it's where the most funds are. In the post-9/11 downturn in giving for the arts, the most dramatic increases came from individuals and from board members.

Question from Jackie Van Anda, Mountains to Sound Greenway Trust:
    I have found that only the most progressive foundations involve grantees in either making decisions or setting foundation policy.

a) If foundations want to be more responsive and see funding as more of a partnership than a hand out, why don't more foundations have an advisory board of grantees? Ditto for the regional foundation associations?

b) Most grantees/nonprofits, and especially in hard times, struggle to cover "general operating costs." I realize this is a long, ongoing discussion, and mixed with the need to see measurable "outcomes." For the 30 years I have been on the staff of nonprofits, only a few funders have consistently understood the fundamental need for this general support. (If you don't have a strong root organization, you will not have good programs that last over time.) What can smaller, less "influential" nonprofits do to help set the agenda for foundation giving and get more general support funding?

(On the extreme side, I am seeing some sources refusing to fund staff salaries. Yikes, salaries are the highest cost for almost everyone!)

Ben Cameron:
    Great questions. 1) Clearly every foundation's procedures reflect values, priorities and motives. Our own priority has been to engage arts professionals--including grantees and nongrantees--to help us understand issues as we create responsive policies. We believe in the value of peer panels as another means of achieving this responsiveness. Relying solely on grantees, however, may inadvertently privilege a select circle and lead a foundation to miss new opportunities, new priorities, or new trends that the grantees themselves may not see. 2) I think there is a growing sense of the value of gen op. For too long, gen op has been heard as "undisciplined," "unstrategic," etc. I wonder whether "flexible working capital" might not be more persuasive to certain supporters.

Question from Frederick A. Winter, Ph.D.:
    The Getty Trust announced recently that it will begin determining draws from its endowment based on actual current value rather than the traditional multi-year rolling average. In the current financial climate, this will result, presumably, in a significant reduction in the amount of the draw.

Are other nonprofits and, especially grant-making foundations, shifting to this mode of endowment use? Clearly, in the current downturn, the practice could lead to a sharp decline in expendable income and accessible funding.

Clara Miller:
    There is a wide variety of approaches by foundations. Some have increased payout to try to maintain services to the public through grantees. Some have reduced grants and payouts intentionally. My observation is that thoughtful foundations are looking at their mission and the needs of the public as a guiding framework for these decisions. Where grantees serve people or communities deeply affected by the recession, for example, foundations are deploying more dollars--beyond typical payout in some cases; where the mission is focused on conservation of heritage they may reduce payout, rebalance portfolio, and wait for the asset value to improve. Some foundations have looked to deploy assets in other ways. Many are cutting their own expenses to make more room for grantees.

Question from Ian Wilhelm, Chronicle of Philanthropy:
    Ralph, during the Council on Foundations meeting in Atlanta, several Obama administration officials said they want to work with grant makers, especially in light of the recession.

During your closing remarks, you suggested that a closer relationship with government would require foundations to change. They would need to make grants faster, work together more, and be "more muscular" when it comes to public policy. Could you expand a little on what you mean by that? Thank you

Ralph Smith:
    Permit to treat that as two separate questions. The first invites us to consider how foundations will have to change to take full advantage of the window of opportunity opened by the Obama administration's invitation to participate in as a partner in promoting economic recovery. The second asks for a fuller elaboration on what I mean when I refer to "muscular philanthropy."

First. Foundations are built for deliberation, not for speed. While not the most artful of phrases. the term "shovel ready" succeeds in conveying a sense of the pace with which dollars must be allocated and spent. The normal cycle time of many grantmaking foundations is much too long and too complicated for this reality. Moreover, the scope and scale of what is required for recovery will exceed by orders of magnitude what any single foundation can do. That will make collaboration absolutely essential.

Second. "Muscular philanthropy" has three commitments. (1) A commitment to finding solutions and investing for results. (2) A commitment to making the hard decisions and having the tough conversation needed to drive resources toward what works and away from what does not. (3) A commitment to find ever more effective ways of listening to the voices and views of those who are most affected by the decisions and investments.

Maria Di Mento (Moderator):
    Here's a link to The Chronicle's coverage of the most recent Council on Foundations' conference held in Atlanta: http://philanthropy.com/free/articles/v21/i15/15002301.htm

Question from gabriela zadrazilova, student of Civil Society Studies, Prague:
    I am working on a thesis focused on the governance of foundations, and while interviewing the members of the board I came across an interesting finding. The individual members of the board evaluate and approve the individual grant proposals. Do you think this should be one of the roles of the board or should that be the staff's responsibility? Thank you.

Ben Cameron:
    Different foundations will answer this question differently. Some foundation boards are quite generous with their time, making site visits, become quite interested and involved in the effect of their grants, etc.--a wonderful situation that helps them be persuasive to colleagues and other potential supporters. Others prefer to hire program officers with specific field experience or expertise and have a more removed involvement with the fields the foundation funds. Each system has its own advantages and drawbacks, and having both systems in the funding ecosystem is (I think) a healthy thing.

Question from James A. Brodie:
    With the recent downturn in assets [and the various frauds] many foundations should explore the idea of a merger. How is the best way to go about this? What questions would the committee need to ask? How much will it cost and how much will it save? These questions are being asked by some and should be asked by many more.

Clara Miller:
    In large part, I agree--many foundations espouse mergers among grantees, but few have set an example! Warren Buffet's giving to and through the Gates Foundation is one recent one however. In our merger practice here at NFF, we believe there is a range of shared platform solutions, cooperation, collaboration, merger, acquisition etc., that can make a great deal of sense. On the other hand, mergers that look good from the outside may be problematic inside (as Tom McLaughlin says, "culture eats strategy for breakfast!" Simple, short/sharp feasibility advice from an experienced pro before plunging ahead is, in my mind, the best first step. To your second point, I don't think foundation mergers would do away with Madoff-style fraud: some very large and sophisticated players were duped by that, and the regulatory lapses supported the criminal behavior. But supporting the built cost structure on a vastly reduced corpus will require downsizing of some kind, and merging may be attractive.

Question from :
    Due to the economy,many foundations are only supporting organizations that they have previously supported. How do I get my non-profit organization to be noticed, as we are doing many good things in our community.

Ben Cameron:
    Clear and appropriate communications--and patience-- are key. Most program officers I know track many more organizations than they are able to fund: they track other organizations to track the progress of a field, and to shape mentally future initiatives and priorities. Just because they can't fund you today doesn't mean that they are not acutely aware of what you do and of your value. That said, it's not a good use of your time--or of a foundation's time--to communicate without doing your research first. We, for example, fund jazz, contemporary dance, theater and presenters of those forms--a mandate form Doris Duke's will. As much as I love opera companies (and I genuine do), I would just note that it isn't worth their time to communicate with us: they simply fall outside of the fields we can fund.

Question from stephen shubert, community health clinic:
    What program criteria are likely to be used to fund and can we expect smaller amounts of funding, therefore need to seek multiple funders to fund a project?

Ben Cameron:
    Every foundation is making clear decisions along these lines and should be able to communicate them to you. All of our grant programs have guidelines that we hope are clear--including a sense of the review criteria that will be used. If you don't see them, it is never inappropriate to ask!

In the context of reduced giving budgets, foundations are having to make a critical choice of "depth vs. breadth"--will we invest bigger amounts in fewer organizations, or smaller amounts in as many different organizations as we can reach? Different foundations will simply answer this differently, making your question impossible to answer in absolute terms. That said, multiple partners is NEVER a bad idea if you can arrange it--it provides a kind of buffer or protection that can serve you as funding priorities within a specific foundation shift and change.

Question from Clie Jolly, Delta Delta Delta Foundation:
    During this economic downturn, our foundation has received less unrestricted donations.

Donors are less willing to consider an unrestricted gift. Do you have suggestions for successful unrestricted gift solicitations?

Clara Miller:
    I think this is the time of times for unrestricted giving, and some leading foundations and thoughtful givers are actually releasing past restrictions to give operating flexibility.

I would try to make the case that now, with revenue from all sources becoming less reliable, and mounting (and less predictable) needs, front line organizations need maximum operating flexibility to maintain services. As Wall Street guru Peter Bernstein says, "risk means not having cash when you need it,"and on the social sector's front lines, today, this translates into risk to the most vulnerable people among us.

Question from Rebkha Atnafou, The After-School Institute, Baltimore:
    After-school program providers understand that partnerships are an excellent way to strengthen program offerings and leverage funding. Yet they also feel that partnerships are easier said than done, and believe that the foundation and funding community is in an ideal position to help programs think strategically about collaboration and partnership. How can foundations use their strategic planning capacity and skilled staff in finance and law to develop a plan for non-profit to share services such as accounting, human resources, insurance etc. and maximize the limited resources they have?

Ralph Smith:
    The added fiscal constraints imposed by today's economy expose what has been a long term issue for many organizations in the social sector. Too many of these organizations are spending precious time and resources on "back office" functions that are not part of their mission and not among their core competencies. Foundations could and should invest more to build a network of strong infrastructure support organizations that can handle the "back office" operations and when appropriate provide additional service such as communications.

Question from Jen Hopkins, NH Charitable Foundation:
    I am very interested in innovative grantmaking ideas that respond directly to the recession. How can grant programs adapt to be most useful in this time of urgency and change?

Ben Cameron:
    In the arts, we're already seeing new innovative adaptations. These include: 1) allowing significant portions or the entirety of project grants to be reallocated for general operating support; 2) "repurposing" of endowment funds (i.e. allowing nonprofits access to previously restricted endowment funds by reframing the purpose of those endowments, eliminating the "perpetuity" restrictions, or both; 3) new levels of disclosure around "best practice" and "lessons learned," including findings from evaluations and assessments--all things we have done in the arts program here at DDCF.

Again (am am I a broken record here?) it depends on a foundation's ability to be clear about--not how it gives money--but its values, its priorities and its strategies.

Question from Marie Beichert, Mandela MarketPlace:
    My nonprofit is a small business/micro-enterprise incubator for low-income residents of West Oakland, CA. We recently opened a grocery store/nutrition center to address food access issues here. a) What is the latest news on foundations emphasizing more publicly related investments (PRI's) as a way to maintain assets; and 2) If and how a social entrepreneur can effectively approach foundations for PRI consideration.

Clara Miller:
    The good news is that with stock portfolios plummeting, PRI portfolios at foundations are looking downright solid! Many foundations are looking at PRI's as a way to bolster their giving. Two cautions: 1) many foundations are new to the game, and are not accustomed to making loans and 2)debt is not a substitute for revenue...ever! A social entrepreneur can most effectively approach any lender (PRI, CDFI, bank) for a PRI if 1) there is a mission case, effectively made, that fits with the foundation or CDFI); 2) management can effectively make the business case, with projections and operating history, that would support an investment, including repayment/return and 3) that management can answer very tough questions about contingency (i.e., what would happen if sales projections are off by 40 percent, or a similar scenario) and thereby build trust with the investor.

Maria Di Mento (Moderator):
    As we approach the midway point in today's discussion, I'd like to offer a reminder that participants are encouraged to ask questions at any time. To submit your query, simply click on the "ask a question" link on this page and type in your question.

Question from Carol Kratz, Virginia G. Piper Charitable Trust:
    for Ben Cameron regarding endowment policy changes:

1. does Duke limit the amount of Duke granted endowment funds that an organization can re-purpose?

2. is there any requirement that the funds be repaid to the endowment within a specified period of time?

3. can an organization that has re-purposed its endowment funds return to Duke for another grant request? or is there a "time-out" period? Thanks so much for your assistance.

Ben Cameron:
    We are taking this on a case by case basis. Here are our six requirements: 1) the organization must demonstrate a deep understanding of its current financial situation and how it got there; 2) it must present a plan for the new use of the funds that impacts both the short and longer term; 3) the financial strategy must involve more than the repuruposing of the endowment (e.g. the new use of the endowment can't be the magic bullet that will save the organization by itself--the financial strategy has to be bigger); 4) the request must be supported by the nonprofits staff and boardl; 5) because our endowment grants were challenge grants, the nonprofit must secure the permission of the donors who met the challenge as well (we have agreed to repurpose contingent on securing that permission as well); and 6) the organization must demonstrate continuing significance for its field. To date we have agreed to three new purposes for endowment funds: 1) debt retirement; 2) working capital; 3) reclassification into a board designated endowment in order to meet bond requirements. (Two groups had secured large facilities with bond financing and now, given losses in their investment portfolios, faced noncompliance as their ratio of liquid assets to the bond debt balance fell below the mandatory ratio required by the bond insurers. Moving our funds from a permanently restricted, specific purposed endowment to a general board designated endowment helped them meet their bond requirements.) Different groups have different goals in restoring their endowments. One has plans to recreate it when their investments hit a certain level; another has recognized that an endowment may not be its optimal capital structure and has no plans to rebuild an endowment, preferring to focus on significant reserves that can be utilized and spent for strategic reasons when conditions warrant. our board has been receptive to both arguments. That said, we also know that once we remove our restrcitions, we genuinely relinquish control of those decisions.

All this said, because we recognized that (in the arts at least) urgent needs in the arts warranted significant investments of capital that could be deployed to innovate and make strategic advances, we terminated our endowment giving programs in 2007. DDCF no longer makes endowment grants to arts organizations. Finally, DDCF endowment grantees have always been eligible to apply for our other regranting prorgams (i.e. a theatre that received an endowment grant through DDCF has always been able to apply to the TCG New Generations Program--funded by DDCF in partnership with Mellon--for support there). Hope that helps!

Question from Kim Anderson, Children's Home Society of North Carolina:
    The phrase "flexible working capital" is new to me. Could you elaborate on this? How would grantees potentially frame this in a request for funding?

Ben Cameron:
    Most businesses recognize the need for ongoing working capital--it's the heart of funds that allow a business to make strategic decisions around launching a new program or line of business, investing in a new facility, etc. I have been in discussions with some business executives who have been adamantly opposed to general operating support for arts organizations--thinking it gives organizations free license to be unstrategic and undisciplined--but instantly supportive of flexible working capital. In essence, the purposes are the same--the difference is in how the two terms are heard.

All this said, "flexible working capital" is not (to my knowledge) an official accounting term. It's simply a different way of reframing for a new audience the need for what us dinosaurs in the arts always called "gen op."

Question from Polly Carr, Alaska Conservation Foundation:
    I am curious about measures of effectiveness for foundations in the changing economy. Are there existing resources or 'best practices' we can use to guide any changes in grant making/support?

Clara Miller:
    First, I think there are some efficiency measures that can help foundations focus on maximizing mission dollars. One is "net grants"--a version of something banks call "transaction cost." How much time (translated into dollars via an estimated hourly rate) does it take your grants officers and grantees to apply for, discuss, proces, report on, etc. a grant? Take that number and subtract it from the grant and it gives you "net grant." Remember that number is always negative if you say no to a grantee. Just the idea of this helps focus on what's really needed. A quick calculation of how many dollars it takes to put one dollar of grant on the street can be revealing, too.

Second, on effectiveness, look at how long you think it will take to fulfill the foundation's goals, pick some benchmarks (i.e., number of new bald eagle nests, or some big measure that you don't have control over) and look at it against the larger goal on a quarterly or annual basis. Incentivize program officers to set and work toward those goals and reward them on that basis.

Question from Kate Moore, Pottstown Area Health & Wellness Foundation:
    As a small foundation in SE PA, we have a small geographic area we fund and we focus on local preventative health programs. Like most Foundations, our assets are down and we are looking for ways to collaborate with other larger foundations on some initiatives. What is the best way to find out what opportunties are out there for collaborative funding? Kate Moore Program Officer Pottstown Area Health & Wellness Foundation

Ralph Smith:
    The Foundation Center (www.foundationcenter.org) is the best and most comprehensive resource available. Even so, your question invites a more systemic response. Regional associations and affinity groups can and should do more joint programming designed to provide ongoing support, information and peer exchanges that will illuminate and create the kind of opportunities to which you refer.

Question from Ruby Lockhart, Garth Fagan Dance:
    While individuals appear to be the most likely source of support at this time, what advice can you give us in applying to foundations at this time given the reality? Are there any new initiatives four arts orgs. that are threatened with closing our doors.

Ben Cameron:
    Ruby--Great to hear from you! In applying to foundations--especially if time is of the essence--do your research first and don't waste time/energy on funders whose guidelines are not a fit for you. (When you see exceptions to the guidelines in corporate giving, for example, it's because of a direct connection to the CEO or Board member. Guidelines can be interpreted as guidance and not absolutes--but going outside of them is VERY rare and tends to be dependent either or a deeper connection or a longer history of cooperation. If you don't have one or both of those, don't bother.) 2) Emphasize the intersection between the foundation's values/goals and your ability to meet and serve those values and goals. As someone once said to me about advocacy, "It's not about how good or bad, right or wrong you are--it's about the ability to speak to where your audience is listening from." I'd say the same is true of fundraising. 3) Be able to explain how you are part of the solution, not part of the need. EVERYONE is in need--and those who will succeed have a larger vision about the future in which they are helping a larger world or community move forward.

My sense is that any new initiatives to avoid foreclosure are likely to be few and far between, and primarily generated at the local, rather than national, level.

Question from Ruth Dinerman, Jacob's Pillow Dance Festival:
    Many not-for-profits worked very hard to build endowments that were meant to help us weather economic downturns. But for us and many others, the loss in assets over the past year means no income from those endowments. What is the new model for how a non-for-profit (who has diversified income streams, etc) can survive downturns?

Ben Cameron:
    Ruth, Best to everyone at the Pillow! Several observations: 1) some states now allow spending from an endowment even when it is "underwater." The DDCF endowment grants actually require spending in that circumstance--and other endowment funders may or may not have similar requirements. 2) I would urge you to consider the long-term value of endowments for your organization. Russell Willis Taylor's "The Grasshopper and the Ant"--a paper we commissioned here at DDCF (and which you can find on our website)--was written deliberately to investigate the downside of endowments for arts groups. Continuing to be wed to an endowment structure--which is HUGELY valuable for many--may well be a strategic decision rather than an assumption for the future. Russell's paper is likely to provoke some interesting discussion for you and your board! 3) Clearly the new emphasis is two fold: a) short term survival--which may mean downsizing, pulling back on scale of operations, deferring long term goals or projects that can be deferred, looking for new flexibility in operations, partnerships where appopriate and new emphasis on fundraising from individuals. b) transformation for the long term--having a longer term vision that you continue to work towards in new ways--a difficult balancing act as I'm sure you know!

We're all looking for the new model--and we could talk about this for days!!!--but in the short term I'd say that the future in the arts is less about consumption than about deeper engagement and participation for audiences; that all prior funding assumptions must be reexamined (including, for example, the value of demand pricing as opposed to fixed ticket prices); and that the old "NAS Pyramid"--the one that led us all to endowments--must be reexamined to emphasize flexible reserves of significant size that can be deployed for strategic advances or in times like these. Clara Miller--who is answering questions in this chat as well--is SOOOOO much smarter about this than I am (or than almost anyone else in western civilization...)

Maria Di Mento (Moderator):
    If you want to learn more about how endowments have fared, please see The Chronicle's recent study of endowments at http://philanthropy.com/free/articles/v21/i16/16000701.htm

Question from Kimberly Anderson, Children's Home Society of North Carolina:
    Two questions: 1) In the midst of the economic crisis, how can foundations strike a balance between funding basic needs, such as emergency housing and food pantries, while continuing their committments to programs that have more long-term (albeit delayed) impact on broad community issues (e.g., foster care)?

2)In addition to grant funding, how can foundations support community agenices in bridging service gaps that are worsening due to federal, state, and local government budget cuts? For instance, potentially collaborating with community service providers in advocacy initiatives to defeat proposed budget cuts to social and human service agencies. Thank you!

Clara Miller:
    Great question! First, communicate (listen and talk) closely with grantees. The funding situation, especially on the "safety net" front lines, is unpredictable these days. Some npos are reporting "our best fundraising year ever." A major youth services funder in NYC has told us that some of their strongest grantees have said, "skip me this year," so weaker organizations can hang in there, given a combination of stimulus money, individual contributions and similar. A front-line hunger, health or child welfare organization might want, as you suggest, to focus on prevention rather than treatment. I think this is a hugely important time to push on the policy end. We need to transform the system, and in some cases, transform whole communities (and that need existed long before the current meltdown). This is a huge opportunity to make that happen, and jumping sooner not later into the policy arena makes it more likely reform can work to the benefit of all. The direct needs can be filled (and must be filled) by other means; foundations may be the only source of support for policy, and it leverages those dollars.

Question from CFFPP:
    What role will foundations play in the funding of providing services to low-income men?

Ralph Smith:
    We've learned alot about helping programs that provide education, skills and training to men and women who are deemed "hard to employ" because they are poor, don't speak English proficiently, or who are coming home from prison. We all should advocate for the right mix of services and supports as a matter of good public policy. The challenge for philanthropy, however, is to reframe the issue from figuring out how to provide services and finding solutions to the root causes of persistent poverty and the disproportionate impact on young men of color. Investing to close the disparities in early care and education, school readiness, grade level reading, high school graduation rates all will help to reduce the number of low income men needing services and unable to care for and support the next generation.

Foundations have a decent even if not uniformly exemplary record in supporting the responsible fatherhood movement, the increased attention and support for non-custodial parents, and support for effective programs and organizations such as Strive, Youthbuild, National Fatherhood Initiative and the Center for Urban Families. The important work of Gordon Berlin and his colleagues at MDRC also is supported by foundations.

Question from Becky Glass, COWS, University of Wisconsin:
    I am working to develop an individual donor program for COWS (a "think and do" tank housed at the U of WI and run by Dr. Joel Rogers dedicated to developing and supporting inclusive, productive state and local strategies for a sustainable economy. Our organization has to date been almost entirely foundation supported. We know that the most promising area of income growth and stability is individuals. In the current environment, do you think Foundations are going to be increasingly open to supporting nonprofit efforts to build individual donor programs?

Ben Cameron:
    Becky, COWS sounds like a great idea and something worth following! As I have said in other answers, the idea of what "foundations" will do is a hard question to answer--we're a tribe that more closely resembles herded (or unherded) cats than herded cows! That said, I think in the arts at least, the question is not solely about increasing individual donations: I think the bigger question we would ask is "how do you think about engaging individuals in the arts in a more substantive and meaningful way--an interaction that will culminate in a donation?" As some have pointed out about our national economy, we've hit the reset button, and the future is less about economic recovery than about economic reinvention. For us at DDCF, our interest is in how you're thinking about that reinvention and what it means for the arts, more than it is in how to develop a more efficient donor drive. If you're able to articulate both, I think you're far ahead of many who are thinking only about this year's donations, without thinking about the longer term relationships and engagement they wish to have.

Question from Jen Hopkins, NH Charitable Foundation:
    The ARRA stimulus funds have some grants available for nonprofit capacity building. Are there strong ideas foundation's could use to help make the best use of those funds? For example, we convened nonprofit partners to discuss the new programs, we're considering offering matching funds to leverage the new dollars, and in some cases we provided technical assistance to help prepare strong applications. Are there other ideas out there?

Clara Miller:
    Those approaches are good ones. An added helpful framework is to look for opportnities to build capacity in to grantees for the long term (including capital investment), rather than . to buy only a marginal (albeit temporarily helpful) addition to skills, knowledge, etc. Matching (or additional) funds can play this role as wel.

Question from Richard Romeo, WNET.org:
    How important are board connections (my nonprofit board member serves on another board with a funders board member) when a foundations says it only gives to preselected organizations. I understand nonprofits have gotten at least an audience with a potential funder even though they say they don't accept applications. Thanks

Ben Cameron:
    Not necessarily important at all--as I noted in an earlier question, some boards are very involved in selection of grantees, while others are far more removed and rely on staff recommendations to determine a funding roster. Additionally, many boards--including ours--rigorously observe standards about conflicts of interest and recuse themselves from discussions where they feel either a direct conflict of interest or simply that they are too close to an organziation to render a useful and objective consideration of the grant recommendation.

"Preselected" can often mean "we have limited staff capacity and simply cannot consider every organization that wishes to apply to us." That does not mean "we choose favorites": indeed, preselection often follows months or years of quietly observing an organization from a distance or from more casual conversations. Communicating with a group and keeping them aware of your work may open doors in the long term: just be patient!

Question from Richard Romeo, WNET.org:
    The nonprofit sector is buzzing with news of mergers and/or collaboration due to the present economic downturn. Can we expect foundations to collaborate even more than in the past? Thanks

Clara Miller:
    We joke a little around the prevailing funder (beyond foundations) fantasy about "lining all the nonprofits up by height and marrying them off!" Then someone always says, "If merging is such a good idea, why don't they start it off? Maybe Ford and Rockefeller could merge!?"

All jokes aside, I have seen a higher ratio of action to talk by foundations on the collaboration front in the past year than ever before (it's perennially given lip service, but much more difficult to do than to talk about).

Not all small organizations are inefficient or ineffective, whether they be foundations or nonprofit service deliverers--and not all large ones are efficient and effecive. Today, however, shared platforms, infrmation technology and some promising emerging business models give every organization to truly transformational ways to get more mission execution done, involving partners and new business forms.

Question from David Davison, American Savings Foundation, independent private foundation:
    The federal government is stress-testing banks to see if they are viable for TARP funds. Should foundations try and stress-test key non-profits who are soliciting grants to determine if they are fiscally sound and viable long-term?

Ben Cameron:
    David, This is a great question and one I wrestle with. I think we as funders need to be clear about the value we place on long term viability and stability as a conscious priority. There are many who would contend that (at least before the economic collapse), we had a landscape of organizations that were relatively stable/viable but not particularly artistically distinctive or vibrant. (I can already sense the hate mail coming my way on this...) That said, were we reaping what we had sown? What would the arts field look like today if we had tried to support "amply resourced artistic vibrancy" rather than "stability"? Clearly, every funder has a responsibility to avoid support of fiscal irresponsibility, profligacy or projects sponsored by groups without the capacity to execute the projects. That said, there may be a different kind of value--especially as the world reconfigures itself in new communications modes, new business structures, etc.---in recognizing that there is value in organizations who do wonderful work short term but do NOT survive for the long term.

As a huge admirer of Jim Collins, I disagree with his criteria empahizing longevity in defining greatness. Three have been countless groups--arts groups, social action groups (ACT Up) for example--who accomplished enormous amounts of good work and chose to stop in a way that did not leave the community saddled with debt. If a group fulfills its mission, can we applaud it and make room for new groups?

Clearly I'm being a bit provocative here--but especially in these dramatic times, short term responsibility and capacity, strategic and specific planning, and vision/vibrancy may perhaps be more compelling and worth of our investment than "long term viability." And with that, let the debate rage!

Question from tess, small non-profit:
    what can a small non-profit do that is already struggling for funding?

Clara Miller:
    Like any nonprofit, your first duty is to the public: what is the best way to fulfill your mission? That clarity will guide you to "think outside the organization" and be able to focus on possible radical changes to the way you do business: becoming virtual, asking a larger organization to acquire you, adding more volunteers... Existing as an organization is not the only way to work towar a mission.

Question from small mid-west family foundation:
    I am looking for examples of ways foundations can be held accountable to the non-profit sector. Yes, our assets are shrinking, and we are pulling back but what response if any do non-profits have as to how we do this? Are there any examples of ways nonprofits are driving the changes that need to happen with in philanthorpy? Or is it all happening behind the foundation's closed doors?

Ralph Smith:
    "Accountability" is easier said than done. One - but by no means the only - major difficulty is figuring out how much and what type of accountability is owed and to whom. The decisions foundations make can affect many people and different constituencies. Some of those decisions might have the have greatest impact on folks are who not actually represented by any nonprofit organization or grantee. That said, I have become an increasingly vocal advocate for more transparency. What foundations do and how they do it is everyone's business. We should find ever more effective ways to keep the window open and sunlight pouring in.

Question from Brandon Lowe, A3 Creative Group (Education Communications Firm):
    How are organizations maintaining long term communications efforts while minding short term budget constraints? How important is it to continue to get the word out, even in hard financial times?

Clara Miller:
    In my opinion, it's more important than ever to communicate with our public, though being creative with approach and cost is obviously part of the "scope of work." If not now, when; and if not us, who? We need to make our case more vigorously than ever, not only to supporters but to the public and policy makers, and we need to make it more strongly than ever. This is a critical juncture if there ever was one.

Question from Gwen Samuel, State of Black CT Alliance:
    Are foundations focusing more on Results Based Accountability  written grants versus grants written by "wordsmiths" and not showing how they will measure outcomes?

Ralph Smith:
    Thanks for your question, Gwen. Here, it's hard to resist the temptation to repeat the old saw: "If you have seen one foundation, you have seen (pause) one foundation.

The field certainly talks more about "results" and results-based accountability. The jury is out regarding whether there is a trend behind the rhetoric. I know, first hand, just how challenging it is to turn the rhethoric and commitment into reality. Over the past five years, with the full support of our board, with great staff leadership and a dedicated budget that is quite ample, The Annie E. Casey Foundation has made slow but steady progress toward changing our practice and culture to become a more results-driven organization. The good news is we can celebrate progress. But we still have more to do and farther to go.

Question from Tony, philanthropic consultant:
    Why aren't more foundations looking at shared services (accounting, investment management, grant reviews) or even merger of operations?

Clara Miller:
    I'm a little puzzled by that myself...and can only come up with two ideas,that are powerful in any line of work: 1) force of habit, plain and simple and 2) no financial exigiency. On the latter, mainly conscience will inspire foundations to cut their costs.

Question from Jann Jackson Foundation:
    Can you talk about ways to encourage foundations to identify mission critical grantees and innovative ways foundations can help these organizations survive the recession?

Clara Miller:
    Foundations generally know who their mission critical grantees are...and most program officers, if pushed, would be able to name the top five or ten. The difficult part is deciding how to translate that knowledge into action. What do you do about that?

One way to look at those grantees is to simply ask them, "how do we help you fulill your mission?" Then sort out who--not only you, but the entire field of funders of that grantee--can work together as parts of the "supply" side of the undertaking. The grantees and funders alik (including government and individuals as well as foundations) should be looking at dynamic adaptation to the major economic shifts that were underway long befre this current financial meltdown. Very important: think outside your/the grant!

Question from Janelle Williams, The Center for Working Families, Inc., Atlanta :
    Like many other non profits, TCWFI has noted a significant increase in demand for our services particularly due to the current economic climate. However, we have also noted a change in the economic composition of the residents we serve. The most in need is becoming an ever fluid definition. Before the prevalent need factors were jobs, now they are being accompanied by housing assistance, childcare, and income enhancing benefits. Certainly, these services are inter-related and affect long term economic sustainability. More than ever, we need to strategically align ourselves with mission critical partners. How would the increased demand and expansion of services affect funding decisions?

Ralph Smith:
    In an open letter to leaders in the field of philanthropy, last October Steve Gunderson and I recognized that challenge implicit in your question. We also recognized the diversity in the field. With that in mind we offered up three broad recommendations:

1)Reaching out to the nonprofit sector in general, especially those organizations, leaders, and networks we currently support. Or nonprofit partners will bear the brunt of shrinking resources and growing need. Within parameters defined by our respective missions, resources and work, we should actively look for creative ways to assist the sector in weathering this storm and serving those most impacted

2) Playing an active and visible role in helping communities and regions figure out the scope and extent of the challenges they face, and in finding and crafting solutions that make sense. We know that some regional associations and community foundations already are using the convening role of philanthropy to build a "big tent" under which diverse stakeholders can gather to create shared understanding and search for common sense solutions

3)And paying special attention to those situations where the loss of philanthropic resources could be the intended consequence of mergers and consolidations that are the inevitable products of economic restructuring.

Question from Tammie Jones, student, University of Michigan:
    The more optimistic people cite the opportunity that exists within the current financial crisis... That it will help spur a much-needed consolidation of the sector, that it will inspire new creativty, etc. How do you think foundations will change as a result of this crisis? What do you all see "around the bend" for philanthropy?

Clara Miller:
    I realize that there is much heavy breathing and anticipation about the "needed consolidation" in the sector, but I think that closer examination would reveal that while doubtless some consolidation by certain kinds of organizations would be a good thing, economies of scale in our sector are subject to the laws of diminishing returns in many types of activities (and that's one of the commercial realities we take on, as William Bowen among others demonstrated in "The Charitable Nonprofits.) We are in an economy (all sectors) where disintermediation, decline in pull of place for location decisions and information technology are changing our fundamental economy radically. There are no exceptions! While foundations (and institutions with large endowments) have been somewhat buffered by their cash cocoons, the recent decline in asset value might be something of a reminder that the world is changing. I think the fundamental change in economic technics--of all commerce--wil drive changes in philanthropy and the delivery of nonprofit services (some good, some maybe not so good) as well.

Question from Jann Jackson, Foundation:
    Combined state budget gaps for the remainder of this fiscal year and state fiscal years 2010 and 2011 are estimated to total $350 billion to $370 billion. How can foundation work together to promote fair,simple, efficient,adequate and stable state revenue for essential public services?

Clara Miller:
    That indeed is the $370 billion question, and why our sector must "think outside the grant!" This is an "all society" political question that is being decided state by state, community by community up and down the country. Let's hope we all do the right thing.

Maria Di Mento (Moderator):
    It looks like our time is up. Thanks to everyone who joined us today. I hope you found the conversation informative. Thanks also to Ben Cameron, Clara Miller, and Ralph Smith for a lively discussion and some excellent advice.

Maria Di Mento (Moderator):
    Please join us on Tuesday at noon Eastern time when we will discuss grooming the next generation of nonprofit leaders. We hope to see you then.