Minnesota Council on Foundations Blog – Philanthropy Potluck

The ongoing debate about restricted program support vs. unrestricted operating support is front and center again.

In our post yesterday we asked about other ways that grantmakers can help nonprofits during this economic downturn (and today’s Star Tribune has an article on this topic, too). Some MCF members — and lots of nonprofits — are suggesting that grantmakers should loosen restrictions on grants so that nonprofits have more flexibility to use funds to support their core missions and, if necessary, to reorganize to survive. This message has been voiced at the first two of three economy roundtables that MCF is hosting with members this week and next.

To help nonprofits manage through the economic downturn, foundations could remove restrictions from grants already made, as well as offer more general operating support grants in the coming year. One MCF member offered one example of the perils of restrictions: A financially-strapped nonprofit dissolved a program that had received $300,000 of dedicated program support; in the end, only $20,000 was available to add back to the organization’s bottom line. In situations like these, the nonprofit needs to have a safe conversation with the funder about how grant monies might become unrestricted or redirected to another program.

The call for more funding flexibility is being heard nationally, too. During a webinar hosted by the Taproot Foundation on Wednesday — “When Hand-Wringing Isn’t Enough: Proactive Approaches Funders Can Use When the Economy is Upside-Down” — panel members encouraged more focus on capacity-building support and unrestricted funding. They also talked about safe conversations: grantees need to be transparent with funders about their situation, and funders need to be open and clear, too. Said one panelist: “Anxiety is driven by ambiguity.”

Taproot has a specific focus on pro bono services and corporate volunteerism. During the webinar discussion panelists noted that, to build a successful volunteer program, nonprofits also need funds to create the infrastructure to recruit and manage volunteers … yet another example of why nonprofits need flexible, unrestricted grants to build capacity and further their missions.

Join the conversation: How are you adapting to the economic crisis? Grantmakers, are you ready to announce changes in your grant guidelines and funding restrictions? Nonprofit leaders, what steps are you taking to boost your unrestricted support?

- Wendy Wehr, MCF V.P. of Communications and Information Services