Of Fables and Financial Management

Among the final sessions at this year’s Grantmakers in the Arts conference was a panel that included speakers from the Nonprofit Finance Fund, National Arts Strategies, and the Mellon, Boston and Doris Duke Foundations.  The uncertainly titled “One Step Back, 2 Steps Forward?” session took a pragmatic look at what new strategies funders are employing in response changing needs in the arts and how these new approaches will likely affect grantmaking in the future.

First, there was an overview of the current arts environment and what organizations were doing themselves.  In short, the arts are less healthy than other sectors and money for the arts disappeared first and faster than for human service nonprofits, with support from individuals being the first to go.

More specifically, the national overview aligned pretty well with what we see here.

  • While 30% of organizations operated at 8% above break even during 2008-09, 56% of them expect a long term negative impact.
  • 70% of organizations have prepared ‘worst case’ budgets for the future.
  • 50% are asking funders to re-purpose grants already made for more flexibility.
  • 50% have reduced staff
  • Debt service is taking precedent over program support
  • Reducing and/or shifting program focus has also created challenges
  • Super-small groups are the least endangered as they have the greatest flexibility.
  • Mid-sized organizations are at greatest risk.  Many cannot sustain the increased infrastructure they have built in recent years.
  • Some of the largest organizations are in serious trouble due to heavy reliance on endowments which have been decimated.

None of this information was surprising or unexpected at this point in this “stressful economic retraction” as one panelist named it. 

(I’m going to get to the Fable part in a minute.  I promise.)

While there were some interesting new strategies being employed by funders, most of these emerged from intensive evaluations and a lengthy process of re-positioning.  These were not things that many foundations can immediately employ without their own study and planning processes.  

But during the conversation, Russell Willis Taylor, the witty and (as she might admit) acerbic head of National Arts Strategies referenced a “provocation” paper she had written for the Doris Duke Charitable Trust: The Grasshopper or the Ant.  The paper both
reinforced and challenged some sacred cow notions about the value of endowment gifts.  I commend it to any organization contemplating an endowment campaign.

Also on the NAS website is a terrific paper by National Arts Strategies Vice President Jim Rosenberg, about effective financial practices for arts organizations (with applicable information for other nonprofits as well). This paper also contains a terrific self-assessment framework for arts organizations.  NAS is happy to have this paper widely circulated and I hope you check it out.

Toil away, all you ants – and grasshoppers. �