Giving Compass’ Take:
• Kate Ingersoll explains that funders should always be working to prepare their grantees for market downturns by helping them build up their reserves for hard times.
• Are your grantees ready for financial fluctuations? Beyond financial support, how can you help them prepare?
• Learn about giving during challenging times.
As I think about a likely downturn in the market—you can only go up for so long before a correction, I am thinking about how our foundation needs to prepare to continue to support the advocacy and service providers that are essential to advancing our mission when we will be earning less interest on our corpus.
I reached out to Carol Cantwell of Fun with Financials, a consulting firm that provides financial tools and training to nonprofits and foundations, who offered some helpful perspective.
Carol noted that, “The very best way to prepare grantees for a market downturn was actually three years ago by giving general support grants that allow grantees to build their own reserves. It needs to start way before the downturn.” I liken this to the adage: The best time to plant a tree is twenty years ago.
Carol also offered some important insight into the ways funders often think about financials and how it impacts our grantees’ ability to respond to market changes. She stressed that funders need to get comfortable with grantees smoothing out inevitable ups and downs with reserves. Often times, funders expect a balanced budget model from grantees that doesn’t allow an organization to build reserves for the inevitable downturns and funding shrinkage. She stressed that funders shouldn’t be afraid of seeing deficits in grantee budgets, especially during downturns, because they are not always bad.
Read the full article about helping your grantees prepare for market downturns by Kate Ingersoll at Exponent Philanthropy.
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