The Center for Effective Philanthropy’s State of Nonprofits report is timely and insightful, and many of its findings are an important reality check. We are in a time of great challenges on many fronts. It is fitting to refer to this period as a crisis in the nonprofit sector and address the challenges of navigating philanthropy in a time of uncertainty.

The manmade crisis is marked by funding cuts from government sources, threats to long-standing programs and commitments, a deep chilling effect on our freedoms, and profound uncertainty about the state of the economy and the funding landscape. These factors are well-described in the CEP report.

It was hard enough to lead a nonprofit before. It didn’t need to get harder. And yet, as this report documents, it has.

As a funder, I can say that we hear you, and we see this dynamic. That’s a big part of why MacArthur has promised to increase our giving by 20 percent or more in the coming two years (we are shifting the floor, not the ceiling), and providing every ounce of flexibility in our funding as we can.

In that spirit, I want to respond directly and in more detail to a few of the quotes in the report that caught my attention.

Flexible Funding: Philanthropy in a Time of Uncertainty

One suggestion to funders was: “Flexible funding allows organizations to sustain critical programs, respond to policy changes, and invest in infrastructure without constant financial uncertainty.”

At the MacArthur Foundation, we hear this, and we agree. Nonprofits should have flexibility in how they allocate their budgets, and funders should support grantee health. In large measure, MacArthur uses flexible funding in most of our programs.

There are two considerations I would like to add that may be helpful insights for our nonprofit colleagues.

The first consideration is that when we fund long-term general operating support, we unfortunately cannot welcome as many new grantees, as we would if we made smaller, shorter, project-based grants. That can be frustrating to new grantseekers and can slow change in philanthropic practice. The hard truth for MacArthur is that we hear from many more organizations than we have capacity to fund with flexible funding. This is not a symptom of a “scarcity mindset,” as I have been told, but it is basic arithmetic that requires a trade-off.

Read the full article about the state of the nonprofit sector by John Palfrey at The Center for Effective Philanthropy.