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Message to Foundations: Step It Up

This letter is reprinted from the Nonprofit Quarterly Bulletin:

Like many, the editors of Nonprofit Quarterly were disappointed in the Council on Foundations' open letter to its members about what they and other foundations should do during this time of national and global economic distress.

Below is the letter we here at the Nonprofit Quarterly wish the Council had sent. You will find the original letter from Ralph Smith and Steve Gunderson of the Council on Foundations here. Please leave your feedback here.

Dear Colleagues:
National and global economic turmoil make these extraordinarily difficult times for people in need in the communities served by U.S. foundations. Foundations have to think and act differently at this pivotal moment. As the leadership organization representing the foundation sector, the Council on Foundations encourages its members to step up in these circumstances. We need to be expansive, generous, and bold, not fearful and self-protective. We recommend the following:

1. Increase grantmaking: As some courageous foundations demonstrated in the wake of the post 9/11 recession, downturns in the economy are the time for foundations to increase their grantmaking, not cut back. While foundation funding is only a small part of overall nonprofit revenues, it is a crucial and distinctive component, enabling nonprofit recipients to undertake programs and actions that the turmoil in the economy demand. As so often stated, our funding is the risk capital for social change. This is the time when we have to live up to that credo and put our money on the table to help nonprofits address the recession or depression in all of its forms.

2. Increase the flexibility of grants: There are many arguments pro and con on flexible core support grantmaking versus program -- or project-specific grantmaking. At this moment, however, many organizations do not have the luxury of taking or completing program-specific grants while experiencing losses in individual donations and government grants. We strongly suggest that foundations make many more core operating grants and, further, make every effort to convert program-specific grants to flexible, core operating grants to help grantees survive these economically perilous times.

3. Increase program-related and mission-related investments: At the crux of the economic downturn were problems in the financial sector, reflected in widespread mortgage foreclosures and related bank failures. Commercial banks have closed down much of their lending and a retrenching Wall Street is tight on investment capital. As mission-driven institutions, foundations should be devoting increasing proportions of their investment capital to mission-related projects and programs sponsored and implemented by our nonprofit partners.

4. Increase support for advocacy: The pace of change in these times has been unlike anything our society has seen in many years. Government initiatives to rectify problems in the economy such as the bailout legislation are devised and altered by the day. There is an enormous window for advocacy on social spending and tax policy among many other things. Foundation support for nonprofit public policy advocacy and organizing is essential if nonprofits are to be able to carry out this function.

5. Increase our commitment to the nonprofit sector: There is hardly a nonprofit in the nation that is not preparing for cutbacks, laying off staff, reducing program services, contemplating deficit budgets, and thinking about creative ways of surviving what could be a prolonged economic slump. This is a time for the foundation sector to remember that we have to invest in strengthening rather than abandoning the nonprofit sector. It is not "myopic," as one national foundation leader insinuated, for philanthropy to recommit to a primary focus on the nonprofit sector. Rather, at this moment, it is nothing short of essential to the fabric of American democracy.

We know you are all concerned about raising unrealistic expectations given that foundations across the board are being hit with declining endowments and increasing needs from your nonprofit partners. We encourage you to explain to your nonprofit partners what the economy is doing to foundation assets, but also to meet with and listen to your partners on what the financial meltdown is doing to the core nonprofit infrastructure that undergirds not only social programs, but our democratic local and national polity. We are confident that together foundations and nonprofits will be able to craft appropriate solutions that don't just help all of us get through this economic crisis, but also take advantage of the moment of instability to reassert democratic values into public dialogue. But this must start with our sector's willingness to own up to and deliver on the value of our grantmaking and investment assets.

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