Social Currency

Using data to support change. This is one of the goals of our annual State of the Nonprofit Sector Survey. As one of the largest nonprofit data gathering efforts in the sector, Nonprofit Finance Fund's (NFF) Annual Survey supports thousands of nonprofits each year by aggregating their stories into a collective data set that is used by nonprofits, advocates, funders, and reporters to understand the needs and challenges of the sector. And we couldn’t do it without the participation of the thousands of nonprofit leaders that have contributed every year. In this blog, we wanted to share with you the underlying mission driving our Survey activities, and why it matters to the sector.

NFF's Survey Mission

Overall, we have a 3-part mission with the survey. These three aspirations drive all of our activities, from the survey content, to outreach, to how and when we communicate our results. 

To provide stakeholders and the public with timely data on trends, challenges, opportunities, and actions in the whole nonprofit sector

NFF's survey is open at the same time every year, from mid January -mid/late February. Once the survey is closed, we work as fast as we can to get the results out to the community, to ensure that they have access to timely data. Our initial results are released no later than the first week of May every year, and often earlier.

To coalesce the nonprofit sector into a data-driven community organizing effort, creating a collective voice and spurring the use of data for change

Because of the nonprofit sector's diversity--in mission, size, business model, geography, and a multitude of other factors--it operates in a decentralized way. Yet we believe that coming together in a collective effort can help magnify what we DO have in common. That's why we work with hundreds of partners-- nonprofit associations, funders, advocates, umbrella organizations, and more-- to get the word out to as many pockets of nonprofit communities as we can. If your region or sector is under-represented in the survey results, please reach out to us for advice about how to spread the word. We have created an outreach kit to help communities share the survey with their own networks.

Data is only as good as how--and if-- it's used. That's why we don't simply release the results and return to business as usual. After release, our staff spends the next 7 months of the year integrating the findings into their daily practices, communicating the results through presentations, and sharing them as widely as possible. We also talk about the results with advocates, government officials, funders, nonprofits, and other practitioners in the field, diving deeper into ways that the data can be used in practice. Below are a few examples. Click here to see more.

  • Nonprofit leaders like Cynda Mack, Vice President of the Metropolitan Development Corporation, have used the data to assess whether organizational leadership were on the same page about the strategic direction of the organization. "While taking the survey, I wondered whether the leadership would agree with all of my answers. We are a very diverse group and have been working very hard the last two years on Strategy, Dashboards, Logic Models, Theory of Change, Mission, Vision, Focus, etc. Answering the survey brought many of those exercises together to show a progression of change that made sense. I am hoping that leadership will see their hard work in our agreement on the answers and that we are on the right track to success."
  • The National Council of Nonprofits used the data to inform government policy recommendations on the treatment of Indirect Costs.
  • Grantmakers can use this dataset to remain responsive to the needs of nonprofits in real time and refine their philanthropic investment strategies.

To provide accessible, data-driven insights that inform discussion and, ultimately, improvements in social sector practices

We work hard to make the data as accessible as we can. As requests for data increased over time, we looked for ways to make it even more accessible. That's why we created the NFF Survey Analyzer, an open tool that allows anyone to filter the data to see results that are most relevant to them. You can filter the whole data set look at state specific results, and much more. If you have any questions about the Analyzer, please contact us at!

Stories from 2014

Below, please check out stories from last year's respondents. We want to hear your story as well. We're proud of the impact our findings have had in past years, but we believe we can do better. Please help us continue our work on behalf of your organization and your peers across the country by contributing your knowledge and encouraging others to do so as well. Click here to take the survey today, and share the link with your peers and colleagues.  

"Nonprofits need to be visible in the communities they serve. Many nonprofits are only heard from when asking for support. The community needs to know that the nonprofit is a part of the community, the good it does, the care with which its leaders use the community's resources and the impact it makes in meeting the needs of the community. A community will support a nonprofit with time, talent and treasure IF the impact the nonprofit is making is known and appreciated as meeting a need in the community."
- Public, Societal Benefit Org, PA

"We are having to adapt programs to meet needs of a younger generation of veterans and one that includes significantly more women."
- Human Services Org, CA

"In the past 6 months... we have been able to secure new and expanded funding both for our core youth programs (restricted grants) and for general operating support from individual donors (major donors). We made the case by first refining our program offerings and getting very clear about our program strategy and what we are trying to do. This clarity has made asking for support, both from foundations and from individuals, much easier and more effective. As for major donors, we made the case by being very honest about our organizational challenges (both financial and programmatic), and sharing our vision of where we want to go. And then cultivating them earnestly - through mail, phone, and direct in-person meetings."
- Education Org, PA

"We initiated development campaigns targeted to specific audiences to support specific pieces of our work and also initiated "friendraisers" at board members' homes where we can talk about what we do and how we need their support."
- Workforce Development Org, MD

Kimberlee CornettAt NFF, we're fortunate to work with some of the most creative foundation   leaders who are wrestling with the challenges of connecting the resources they have to the social outcomes they seek. In this new interview series, NFF CEO Antony Bugg-Levine chats with some of these foundation partners about various aspects of philanthropy and financial strategy. We hope foundation and nonprofit leaders alike find sparks of inspiration and challenge in these explorations of how money can best support mission in the social sector. 

Our guest: Kimberlee Cornett is managing director of The Kresge Foundation’s Social Investment Practice. Kimberlee works closely with the foundation’s program teams  to make capital and financing available to organizations working on key, strategic priorities of the foundation. She identifies capital gaps and then structures loans, loan guarantees and alternative financing through banks, community development financial institutions and specialized lenders to meet specific project needs.  


Antony: The Kresge Foundation is a leader in social impact investing, going beyond grant-making to support nonprofits with other types of capital. What have you learned as you've built the social investment practice at Kresge over the last 4 years?

Kimberlee: There is a reciprocity between grants and investments. We knew this from an academic perspective, but are now developing muscle memory about it. I estimate that for every ten dollars we've invested, it has been supported by a dollar in grants. Some of these grant dollars have been used to better understand what types of capital are needed and to seed future investment. Serving as both grantmakers and investors gives us incredible leverage in terms of financial impact, influence, and knowledge, which makes us able to do our work better. The foundation is exercising a different way of making change around complex social problems using grants strategically as an onramp to other kinds of capital. Man cannot live on grants alone!

We're finding a similar dynamic with our clients' needs for advisory services and lending. One of the things organizations need most in today's environment is resources to enable them to adapt, but a loan is not the right starting point for adaptation in most cases. An organization needs a business plan before they need a loan. Can you speak more about the "knowledge leverage" you achieve by making both grants and investments?

Awhile ago, we did a sort of "speed dating" exercise with program and investment staff. We found that our program staff knew a lot that our investment staff did not; our investment staff knew a lot that our program staff did not. This approach is still in its embryonic stage, but it has helped inform the development of our comprehensive healthcare investment thesis, covering everything from grants to market-rate investments. We have now invested in two healthcare companies, with products that relate to safety net and vulnerable populations, and are looking at our third now. We call this our "better investor overall" project. If we really understand both sides of the equation, our hypothesis is that we may be a better investor with all of our capital resources.

That sounds unusual. For the grant and investment sides to come together, requires each side to change the way they think about how to optimize what they do. When Jed Emerson and I wrote Impact Investing, we couldn't find a single example of real collaboration between investments and grantmaking teams at foundations happening without the strong leadership of a foundation CEO or board. 

It is unusual. Our CIO happens to be someone who takes fiduciary responsibility very seriously, but also has an open door. He's open to strategic opportunities where the endowment can play a role.  

You and I agree that impact investing, while trendy right now, is not new. Community Development Financial Institutions (CDFIs) have been making impact-generating loans for decades, foundations have been using Program Related Investments (PRIs) since the '70s, and so on, but there is a lot of excitement around this latest wave. What new opportunities do you see?  

Things are changing. Right now we're seeing more product and platform development. We did exploratory work with a crowd funding site tied to real estate development, and looked at using it here in Detroit. We're an investor in Sustainable Insight Capital Management. There's the McKnight Foundation's commitment of $200 million in impact investments, the Pay for Success agreement that Bank of America Merrill Lynch introduced in New York[1], and other examples. So there is certainly new momentum.

What do you see as the unique highest and best use of a foundation PRI program in a world where others, including banks, are making impact investments? It does seem that compared with CDFIs and other banks, foundations could have unique risk appetite, and could use that ability to catalyze deals and help crowd in other flows of capital.

I believe our best tool is our guarantee, which is inherently risk capital, even though we are judicious in deploying it. That capacity seems to catapult deals forward, sometimes even more than loans. Right now, we're developing an investment channel/thematic approach that will take us deep into a space that relates to the overall objectives of the Foundation, uses multiple forms of capital (including market rate investments), requires sustained focus, cross sector solutions and policy reform. We are mid-stream in this work but expect to be making investments and grants in 2015.

In terms of the evolution of the role of PRI programs, there is a need for programmatically agnostic social investors who just want to see the market move faster. But that's not where we are today.

How do you measure the catalytic power of social investments?

One example is a current partnership where we're looking at how a “forward commitment” of a guarantee might expedite the raising of other capital so the financing can get into the market sooner. If the guarantee allows the fund manager to expedite the capital raising process then that is time and money saved for the Manager and new value at work in a community that much sooner.  A guarantee can also function as a stamp of approval for other investors. In the case of New York's Pay for Success contract, the Rockefeller Foundation's guarantee may have made the agreement easier to sell.  

What advice to you have for foundations that are considering impact investing? Start slow and find good partners? Or has enough been done that foundations can leap in?

I don't think it is necessary for foundations to slog their way through some of the early learning that we did! Engaging program staff at the onset can catapult an effort forward. There is also a case to be made for buying the investment capacity externally and not building it internally.

Well, social investment requires time and expertise and capacity that few foundations have. If everyone builds, it leads to fragmented efforts where few teams achieve the scale that fosters expertise. At NFF we’re excited to use our investment capabilities and expertise to support foundations looking to partner to achieve their impact investing goals rather than go it alone. But I do think it is important for foundations, even those just getting started, to have an internal champion to connect deals from a mission and human perspective to the foundation.  

Yes. A lot of times we have looked at what has helped us in terms of "skill and will" on program teams. Skill is an added asset but “will” is essential. We've recently interviewed a few candidates very carefully around “will”. Even if they weren't coming from a place where they had deep expertise with investment, we looked to see that they had an appetite and receptivity to using investment tools. Because we've hired people with “will”, we've seen a dramatic uptake in momentum.  Kresge is changing from the inside out because program staff are increasingly interested, motivated and seeking a wider range of opportunities.

Interesting. Even if program folks haven't done deals, making sure they’re open to learning and using different types of capital to reach goals is a great approach to strategic hiring. We find a lot of our work comes down to figuring out best ways to deploy various types of capital to support social impact, and there is an element of flexibility and creativity in every success story. Thank you for sharing your insight from your work as a leader and doer in impact investment. 


An abbreviated version of this blog post was also published in NFF's Money and Mission blog on The Chronicle of Philanthropy. Click here to view. 

NFF received more than 5,000 responses to our annual State of the Sector survey in early 2014. Of these responses, the arts and culture sector was represented by 919 organizations covering a broad cross section of artistic disciplines and budget sizes. In addition to questions on financial health and viability, we also asked cultural organizations about sector specific challenges and how they are working to address them.

High Level Findings

The story that emerged depicts a sector in flux: amid constant concerns about financial health, arts organizations continue to experiment with new programming and audience engagement tactics.

  • Perhaps not surprisingly, “achieving long-term sustainability” was cited by 47% of organizations as a challenge—the leading response to this question by far.
  • 71% of respondents are working to develop programs targeted to specific visitors and audiences, 59% are collecting data on audience preferences and behaviors, and 56% are implementing new marketing strategies.

Barriers to Success

Although these new investments and programs may promise positive results, a number of systemic challenges continue to exert an outsized influence on the viability of the arts sector.  Our 2014 survey responses point to the following barriers at play in the arts funding ecosystem.

1.       Mismatched funding

Financial reserves are a necessary part of doing business, whether for operations, facilities, artistic risk-taking, or to protect against the unexpected. Yet, organizations often struggle to obtain or even discuss a more balanced capital structure.

 2.       Missing dialog

While 53% of respondents could have an “open dialogue” with funders about program expansion, only 12% felt the same about operating reserves, and the numbers were even lower for facility reserves (9%) and growth or change capital (9%). A colleague at NFF recently drafted a separate blog on the specific obstacles preventing healthy dialogue and  transparent conversation.

 3.       Misaligned or outsized reporting requirements

Grantmakers often neglect to support the costs associated with managing their grant awards, like proposal writing, ongoing reporting requirements and impact measurement. (For example, a grant of $50,000 with reporting requirements that cost $10,000 is a “net grant” of $40,000).

 4.       Funding falls short of full costs

Planning for financial sustainability begins with an organization’s ability to truly cover the full costs of operations, for the short- and long-term. Tightly restricted program grants with unrealistic provisions for overhead will often sustain immediate programs, but stymie an organization’s chances for long-term mission success.

Breaking the Barriers

For now, the nonprofit creative sector continues living up to its name. Arts leaders have shown incredible creativity and resiliency, piecing together funding and developing innovative ways to support their mission amid financial uncertainty. But for many organizations, there is a real question about how long new programming and revenue strategies can be sustained if they don’t deliver positive financial results—and quickly.

You can download our new brochure to learn more about the full range of program and financial strategies that organizations are pursuing, the systemic barriers they face, and tips to help the sector overcome these challenges (for nonprofits and grantmakers alike).     

You can also slice and dice the data yourself using our online Survey Analyzer tool; it’s filtered here for arts organizations. We encourage arts leaders to select the data set—which is sortable by budget size and sub-sector—for their peer group and use this information in making the case for support to funders. Likewise, we encourage funders to filter the data to help understand benchmarks and dynamics affecting the organizations they fund.

Data like this can be an invaluable resource for our sector, but only if we pause to understand its implications and use it to inform our path forward.


As we plan for a new year of data in our 2015 State of the Sector Survey, we are reaching out to leaders in the Arts & Culture nonprofit sector to increase participation and strengthen our findings.

A higher volume in response rate yields more accurate and fine-grained data that is ultimately more useful to the diverse community of nonprofit supporters. Please sign up to take our survey in 2015, and share this link with your networks in the Arts & Culture nonprofit sector:

This post was orignally published on the White House Office of Social Innovation and Civic Participation Blog on December 4, 2014. It can be found here 

By Jonathan Greenblatt 

Two years ago, President Obama prioritized Pay for Success (PFS) as one of the key strategies in his second-term social innovation agenda. PFS is a rapidly expanding approach to funding social services that is making great progress around the country.

For those unfamiliar with PFS, it is a type of performance-based contracting for preventive social programs wherein government pays if desired set of specified outcomes are achieved. PFS often involves mission-driven investors who fund the preventive services with intent to be repaid from government savings generated when the services reduce demand for more costly safety net programs. If the services miss their targets or do not deliver, then investors absorb the loss. Thus, government only “pays for success.”

Today, the Administration can point to federal investments of almost $40 million that have helped to jumpstart the field and established the U.S. as the largest PFS market in the world. Just today we announced the nation’s sixth PFS transaction. This new initiative aims to reduce foster care costs in Cuyahoga County, Ohio by supporting mothers with children who have lost their homes.

As exemplified in Cuyahoga County, PFS will be driven outside D.C. at the local level. To improve the model, it’s valuable to analyze the early PFS deals and consider their lessons. Therefore, in collaboration with the Laura and John Arnold Foundation and the Nonprofit Finance Fund, we are proud to host a series of White House Summits on Pay for Success around the country to share best practices and spread the learnings with hope of driving down transactions costs and accelerating wider PFS adoption.

The first summit took place last month in Bridgeport, Connecticut. At that meeting, Governor Malloy and Mayor Finch kicked off a conversation with policymakers, business executives, and nonprofit leaders from across the east coast about PFS. They shared best practices and key insights based on PFS deals to date and new concepts in the pipeline.

We will host two more PFS Summits, including a session in Chicago that took place today and convened more than 100 stakeholders from across the Midwest and central U.S. We will host a third and final summit in Salt Lake City in January with elected officials and other interested parties from across the West and Southwest.

Yet, even as PFS rolls out across the country, Washington, D.C. does have a key role to play. With bipartisan legislative support, the President has provided grants through the Social Innovation Fund that will help communities identify and close PFS transactions that address a range of issue areas from mental illness and childhood asthma to foster care and homelessness. Recent bipartisan workforce legislation will permit states to use over $200 million in support of “pay for performance” reduce unemployment. We are also excited about new bipartisan legislation circulating in the House and Senate that will enable the federal government to pay for success in the form of rigorously verified outcomes that save federal government money.

PFS is not a silver bullet. The market is nascent and needs to mature. But we believe that PFS can serve as a powerful new social innovation to create better outcomes for communities, enabling them to invest in what works and conserve tax payer resources.

Jonathan Greenblatt is Special Assistant to the President and Director of the Office of Social Innovation and Civic Participation.

The first acknowledgment of the existence of “food deserts” was in a British study in the mid-1990s[1]. These are defined by the USDA as areas without access to fresh fruit, vegetables and other healthful whole foods, largely due to a lack of grocery stores, farmers’ markets and healthy food providers[2]. These vacuums of access to healthy food exist all over the United States, particular in low-income communities, which are already under the burden of a multitude of other social challenges[3].

NFF has worked with several food banks and healthy food organizations that are striving to change this social dynamic. One particular client whose story we wanted to share is that of Philabundance, the Delaware Valley’s largest hunger relief organization. Although they began as a simple food pantry, the organization has evolved over 30 years and grown to serve nearly 1 million people each year, motivated by the simple belief that no man, woman or child should go hungry[4]. In addition to wanting to impact the community on a greater scale, they also sought to develop a market-based approach that would invest in the community and generate value in a more sustainable way than a charitable food pantry. They embarked on a new challenge: to create the first nonprofit grocery store in the United States, located in one of the many food deserts in the Delaware Valley: Chester, Pennsylvania. Residents of Chester had experienced life in a “food desert” for years, having lived without a grocery store or food retail provision since 2001. Not only food insecurity, but unemployment and poverty were alarmingly high.

In the summer of 2012 Philabundance received a $4 million New Markets Tax Credit (NMTC) allocation from Nonprofit Finance Fund (NFF) and $3 million in allocation from The Reinvestment Fund (TRF) as well as bridge financing that included a $1 million loan from NFF to finance the rehab of a 22,000 ft2 vacant building and turn it into a working grocery store in the heart of the city. The NMTC program, administered by the CDFI Fund of the US Treasury Department, provides tax credits as an incentive to attract private investors to finance projects in low-income communities.









Called Fare & Square, Philabundance’s grocery store officially opened to the public in September 2013. The Fare & Square (F&S) team focused on providing access to fresh and affordable food, including nutritious produce, meats, dairy and deli, for a community plagued with food insecurity. However, F&S was far more than a simple grocery store serving a city. Whenever possible, F&S hires directly from the community, helping to make an impact on the high unemployment rate in the region. They are a community space for wellness, screening and nutrition classes.

Read More

Brendan Beier, Director for New Markets Tax Credits, and Will Lanier, Analyst in Financial Services, contributed a companion thought piece about NMTC in NFF's Money and Mission blog on The Chronicle of Philanthropy. Click here to view. 

Amidst the ongoing uncertainty about how Congress will handle expired tax credits, it seems like a good time to remember the many successes of the New Markets Tax Credit (NMTC) program and the very real impacts it has had on low-income communities and community revitalization efforts across the nation.

The NMTC program, administered by the CDFI Fund of the US Treasury, is a tax incentive intended to attract private investments to low-income communities. NMTC is one of several tax provisions that expired at the end of 2013 and, unlike in years past when tax credits frequently received temporary extensions, Congress is taking a fresh look at each provision as part of the overall tax reform climate.  Despite strong bipartisan support for the NMTC program, its future is unclear.

In just over a decade of existence, the NMTC program has brought enormous benefits to low-income communities.  And there is concrete evidence of this impact: NMTC was responsible for the creation of approximately 550,000 jobs between 2003 and 2012, with more than 72% of investments being made in communities exhibiting severe economic distress (see the New Markets Tax Credit Coalition website for more information).

Since 2007, NFF has been awarded $231 million in NMTC allocation, which we have put to use helping 26 nonprofit organizations –all serving low-income communities—expand and improve their programs and services. Our NMTC program has supported health centers, nonprofit theaters, social services providers, charter schools, and a statewide food bank, among others. In 2013 alone, NFF deployed over $40 million in NMTC investments to support five high-performing nonprofit organizations with their major new facilities projects: West Hawaii Community Health Center, Harlem RBI’s DREAM Charter School, Project H.O.M.E, Flint Health and Wellness District and the Joseph M. Smith Community Health Center. Without NMTC, none of these projects would have been possible.

Below are details of these projects. Because of them, along with 21 other active NMTC deals in our portfolio, people in communities that are underserved or under-resourced will have access to much needed services and facilities. Whether it’s creating a ‘first of’ or addressing ‘must haves’, NFF has witnessed the potential the NMTC program has for transforming much-needed investments into reality for organizations that are working to increase the health and vibrancy of their communities.

To learn more, visit our NMTC webpage, and if you are interested in getting involved, the New Markets Tax Credit Coalition has prepared an Advocacy Toolkit for direct action.


Impact in Action


West Hawaii Community Health Center (WHCHC)

$10mm NMTC allocation, closed December 2013 

West Hawaii Community Health Center

WHCHC provides integrated medical, dental and behavioral health services to primarily low income individuals and families in three clinic locations on the big island, with a part-time mobile dental clinic that serves homeless individuals. WHCHC will build a new 11,500 square foot medical center, the La'i'Opua Health Center, which will provide medical and dental care to 4,300 project patients in the first year of operation. Approximately 130 construction jobs will be created, along with 35 permanent positions upon completion.  


New York

Harlem RBI DREAM Charter School

$10 NMTC allocation, closed September 2013

Harlem RBI DREAM Charter SchoolHarlem RBI provides year-round education and community-building services   to more than 1,200 East Harlem children and young adults. Its high-performing DREAM K-5 charter school, co-located in a traditional public school, is on pace to reach its full enrollment of 450 students in 2016. In advance of that milestone, Harlem RBI has embarked on a mixed-use facility project that will include space for its school and youth development programs. NFF joined with several partners on a $27 million NMTC allocation to finance this transition to   a permanent home.



Project H.O.M.E.

$7 NMTC allocation, closed December 2013

Project H.O.M.E.Project H.O.M.E. (Housing, Opportunities, Medical Care, and Education) provides a range of services empowering individuals to break the cycle of poverty and homelessness. They are building a new Stephen Klein Wellness Center that will serve 1,200 patients annually and will include a fitness and physical therapy center, a pharmacy and dental care. This new 28,598 square foot health center will provide much-needed dedicated and state-of-the-art clinical space in a zip code that reports some of the most widespread and entrenched health problems in the city.



Flint Health and Wellness District

$5 NMTC allocation, closed December 2013

FlintThe Uptown Reinvestment Corporation (URC) was formed in 2000 with a mission to revitalize the downtown Flint business district by laying the groundwork for an emerging health education and wellness district. This district will be the new home of Michigan State University's School of Public Health and serve as the relocated site of the Flint Farmers Market, which will bring a vital fresh food option to downtown residents in a mass-transit-accessible location. The new wellness district will create over 100 permanent jobs, 60 of which will be high-quality research jobs at MSU.



Joseph M. Smith Community Health Center (JMSCHC)

$8 NMTC allocation, closed December 2013

JMSCHCBeginning as a small clinic in 1974, JMSCHC is building a new 48,000 square foot facility in the Allston-Brighton neighborhood, whose target population of 169,000 people is low income, uninsured or publicly insured, and culturally diverse. The new facility will allow JMSCHC to meet patient demand and increase the center's operational efficiency by centralizing managers, staff and patients. Once completed, the center will provide the area with 75 new jobs, including 48 clinical job opportunities and 27 support staff opportunities, as well as community classes and events.   

Earlier this month, Nonprofit Finance Fund (NFF) released a new analysis featuring the responses from the leaders of 919 arts and culture organizations who took our 2014 survey of nonprofit business health. The State of the Arts and Culture Sector report captures the challenges and triumphs of nonprofits grappling with financial pressures, changing demographics, new technologies, and opportunities to expand the reach of their programs. (The full data can be filtered by artistic discipline, geography and budget size through our online survey analyzer, available here).

NFF’s report identifies some of the systemic barriers that impede cultural organizations from building financial structures supportive of art-making and community engagement. One of these barriers is the missing dialogue between grantmakers and grantees: cultural organizations report significant discomfort engaging their funders in meaningful, candid conversations about their need for flexible capital to support liquidity, risk-taking and change.

Given this lack of open, honest dialogue, it’s unsurprising that our survey data also reveal a second systemic barrier within the arts funding system: an inability of cultural groups to secure the kinds of flexible capital resources that buttress their artistic ambitions. Only 11% of arts groups taking our survey reported receiving funding to help manage cash flow; just 8% raised flexible funds for growth and change; and a mere 5% secured money for reserves to invest in artistic risk taking.

Organizations such as NFF and Grantmakers in the Arts continue to educate funding communities around the country about how to make investments that pave the way for long-term artistic success. We know from experience that organizations cannot easily withstand economic pressures, respond to community needs, and create innovative programs if the funding system does not evolve in ways that broaden access to flexible capital.

While there have been modest improvements in the grantee/funder dialogue, we continue to ask: why isn’t the sector engaging in conversations about the full spectrum of capital needs? Why is funding so often misaligned with organizational needs?  

There are many institutional and cultural reasons. Not to blame, however, is a lack of knowledge on the part of arts executives. By and large, NFF’s work with these leaders confirms time and again that they understand the importance of flexible, long-term money and the relationship between stable finances and dynamic art. At a focus group that brought together ten cultural groups in Philadelphia to discuss the data, one museum executive told us: “You have to know what your business is…you can create great art, but if you're not operating like a business, then you're not going to make it.”

Here, we’ve identified some of the real reasons why open conversations about capitalization aren’t taking place – and why funding flows, therefore, don’t address true, full needs. We also offer some suggestions for actions cultural grantmakers and organization can take to address these issues.

Reason #1: A major hindrance to genuine two-way conversations about business health is fear. Cultural organizations worry that if they speak candidly about what they really need, rather than what they think funders want to hear, they risk being passed over for alternative, sexier investments. So instead, they put forward ideas that stretch their human and institutional capacity – ideas that frequently take them astray from their mission. (Consider how many cultural groups, for example, suddenly assert that they do ‘creative placemaking.’) One youth-serving cultural organization in a Boston-based convening told us: “Our current strategic plan doesn’t focus on growth. It focuses on getting better at what we do and going deeper into what we do. It’s hard to get funders excited about this message.”

  • Action: Given the power dynamic inherent in the grantor-grantee relationship, it is the role of the funder to penetrate the trust barrier by creating a space for honest dialogue about true business dynamics and needs.

Reason #2: Another obstacle to transparent conversations – and more rational funding flows – is a lack of integrated strategic and financial planning by nonprofits themselves. Grantmakers who have taken a leadership role in making capital grants often tell us that organizations frequently come to them with sizeable requests for support without having developed the rigorous, multi-year financial roadmaps that shows how the market for earned and contributed revenue will ultimately pay for their artistic ambitions. Encouragingly, funders are subsidizing comprehensive planning efforts more and more, giving them greater confidence that their investments will play out as intended. (A word of caution: unless these plans are backed by adequate infusions of capital, they will quickly gather dust -- or worse, lead to unfunded mandates for growth).

  • Action: Cultural organizations should be encouraged to integrate revenue and capitalization goals -- informed by an assessment of resources available from audiences and donors -- into their strategic plans. Then, grantmakers who can should be willing to put sufficient, multi-year infusions of capital into these plans.  

Reason #3: Ongoing confusion about what distinguishes flexible capital from flexible revenue also gets in the way of the effective flow of money to mission.  Both kinds of funding are essential to nonprofit health and program impact, but each has a different purpose. Revenue is money (from earned and contributed sources) to pay for what an organization already does. Capital is saved, spent and replenished as a source of short-term liquidity or longer term funds for adaptation. Unfortunately, many nonprofit supporters give revenue, cloaked in capital expectations. A classic example is the gift of general operating support (revenue) that arrives alongside a list of expected outcomes for organizational change or growth. Or, the innovation grant (again, revenue) that encourages organizational risk-taking but that is overly restrictive about use, late in coming, or sized inappropriately to the opportunity at hand. In such situations, one can easily see where the grantor-grantee dialogue goes awry: Funders believe they are having candid conversations about risk and change, whereas cultural groups perceive they are recipients to just another grant with oversized expectations.  

  • Action:  Funders can be clearer about whether they are a source of ongoing revenue (supporting current programs and business operations) or periodic capital (investing in structural change). They can play one or both of these necessary roles, but one kind of money cannot substitute for the other. Cultural nonprofits need to do a better job articulating what they need and are asking for, within the context of their artistic strategy and organizational goals.

Reason #4: Finally, we hear from cultural organizations and supporters alike that capitalization is simply too expensive -- the purview of national funders who make sizeable investments in large, anchor institutions. In fact, nothing could be farther than the truth. Even the smallest of organizations can be encouraged to save for a rainy day, and capitalizing community-based organizations needn’t break the bank. (For example, seeding a cash reserve at three months of expenses for a nonprofit with a budget of $150,000 costs just $37,500.) Some funders may find it a more cost effective strategy to meet the complete capital goals of a handful of small organizations, rather than to address a fraction of the capitalization needs of a few large groups.

  • Action: Cultural groups should be encouraged to set surplus and savings goals each year as part of the budgeting process. Grantmakers who aren’t able to make capital investments can still support healthy capitalization by paying for planning, collaborating with other funders, or simply employing funding practices that support long-term financial health (for example, by providing full cost project funding or recurring general operating revenue.) 

Overcoming these obstacles will not happen overnight. It will require cultural grantmakers and organizations alike to establish trust, embrace data-driven planning, educate themselves about the different roles money can play in advancing artistic goals, and accept that capitalization is not a fad, but a way of life – for every cultural organization. 

What else gets in the way of candid dialogue about true, full capital needs?  Please send us your feedback.


If you are interested in learning more about Arts, Culture & Humanities results from NFF’s 2014 State of the Sector Survey, join a free webinar this Thursday, September 25th at 3:00 pm EST. Click here to register.

Thursday, September 25th from 3:00-4:00 pm EST


Nonprofit Finance Fund (NFF) is pleased to share with you a special report that features the State of the Arts and Culture Sector. Over 5000 organizations completed NFF's 2014 State of the Sector Survey, and this new report focuses closely on what we found among the 919 arts and culture organizations that responded. At the highest level, results show that, while many organizations have developed new ways to engage audiences, visitors and supporters, those strategies have not necessarily led to greater financial resilience. 

We invite you to join our staff in a free webinar September 25th from 3:00-4:00 pm EDT as we discuss how this report can be used to create a case for support driven by data. Beyond exploring core findings, themes and trends from the data, the webinar will engage participants on the following topics:

  • What are the systemic barriers to success?
  • What are organizations doing to work around those barriers?
  • What can the field do collectively to break these barriers?
  • What targeted changes can arts supporters make to help the sector thrive?

By widely sharing these results and ideas for what nonprofits and funders can do in response, we can bolster important conversations about how to promote systemic change. We look forward to having a dialogue with you during the webinar, and would like to thank the Doris Duke Charitable Foundation for supporting our efforts to build a conversation with the cultural community around the survey's findings. 

NFF'S Fall Webinar Series: The Spectrum of Nonprofit Financing Options

Starting September 30th for six consecutive Tuesdays at 3:00 pm EST

Traditional financing tools, such as loans and lines of credit, are an integral part of doing business for many nonprofits across the country. Our State of the Sector Survey finds that organizations rely on debt to manage cash flow; advance IT capabilities; expand, renovate, and purchase facilities; and invest in programing. Increasingly, however, these traditional financing tools are not enough; while they remain a cornerstone of how many nonprofits operate, the sector is also progressively turning to innovative strategies as it adapts to a shifting landscape. These new opportunities—such as social impact bonds, impact investments, and New Markets Tax Credits—have captured the sector’s imagination. But how do we keep tabs on this ever-increasing gamut of financing options? And, once we understand the possibilities, how do we determine the best course of action for a particular nonprofit?

"Thank you for [the] timely topic. Our organization has been interested in taking this approach to strategic growth and this webinar provided the information to get us started" - Webinar Attendee

As both a nonprofit and a lender, NFF is keenly aware of these challenges, and we’re working to offer our expertise in the sector in the most accessible manner possible: online, hour-long trainings for those seeking to unpack details and definitions around nonprofit financing. We first offered our six-webinar series The Spectrum of Nonprofit Financing Options last fall, when nonprofit and philanthropic professionals across the country joined us for what became an incredible experience of learning and insight.For those who couldn’t join us last year, we’re now offering the series again, with six refreshed sessions that can be taken as a course or selected a la carte:

  • An Introduction to Debt and Financing for Nonprofits
  • The How and Why of PRIs: A Guide to Program- and Mission-Related Investments
"This webinar was fantastic! It opened up all kinds of ideas about how philanthropic equity could change the way that my org works with funders." - Webinar Attendee
  • Philanthropic Equity: Bringing Programs to Scale
  • Understanding New Markets Tax Credits
  • The Emergence of Pay for Success Funding
  • Impact Investing: From Conventional to Cutting Edge

You can find more information and register here. All registrations include on-demand access to the recorded webinar, as well as a downloadable pdf of the presentation itself. Hope to see you there!

We wanted to share with our readers a re-post the following blog, which originally appeared on Mixing It Up, a website by Sarah Murray dedicated to sharing 'thought-provoking views on business, society and the environment.'  


The past six months have seen corporate merger and acquisition activity reach its most feverish levels since 2007. Not so in the non-profit sector. Despite funding difficulties and the benefits of sharing knowledge and back-office expenses, the sector continues to grow, with US non-profits now outnumbering lawyers. So what’s holding back the marriages?

The arguments for consolidation are certainly compelling. First, there’s the opportunity to make cost savings, particularly in a sector where tight budgets remain a worry for many.

Some 56 per cent of organisations said they were unable to meet demand last year, according to the 2014 State of the Nonprofit Sector survey, the worst shortfall in the history of the survey, which is conducted by the New York-based Nonprofit Finance Fund.

The figure is even higher in some places. In a recent survey of more than 300 Southern California non-profits, 76 per cent said demand for their services continued to outpace their capacity. In the survey, conducted by the Center for Nonprofit Management almost half said limited funding made it difficult to attract the talent they needed to meet this demand.

Yet when two organisations come together, they can cut costs by sharing everything from IT, human resources and financial systems to donor records.

“It’s not that we have too many services in the non-profit sector but that there’s all this duplicated infrastructure,” says Peter Kramer, manager of national advisory services at the Nonprofit Finance Fund.

With fewer back office expenses, more philanthropic dollars could be spent on programmes helping communities and causes and advancing non-profit missions.

But cost savings are not the only reason for a non-profit merger or acquisition. Consolidation is a way of rapidly spreading know-how and experience. “This is really important,” says Katie Smith Milway, head of the knowledge unit at Bridgespan, a consulting group for non-profits.

She cites a hypothetical example – a large organisation with a 1,000-strong team of social workers helping at-risk youth. If it were to merge with or acquire a smaller non-profit working in early education, the smaller organisation could teach the social workers to identify early signs of trouble among the younger siblings of the teens.

“You can stop the next generation falling into the same pattern,” she says. “So the potential for knowledge transfer through a merger is tremendous.”

As well as increasing non-profit expertise, merging with or acquiring another organisation also helps groups expand geographically, add to their expertise and deepen their client base.

An acquisition strategy can also be an alternative to developing a new programme from scratch in-house. “There’s a lot of potential for some of these larger non-profits to buy versus make,” says Milway.

Yet, despite these benefits, there is no evidence of a rush to merge. In an analysis of legal mergers in several US states, Bridgespan found little rise in activity in recent years. And while in some places the number of mergers increased, it was offset by the rate at which new non-profits were being formed.

That’s because a number of barriers exist to consolidation in the sector. First, while ultimately costs may be saved, the price of consolidation is not trivial. “It’s a tremendous amount of change, needing additional dollars, time and expertise,” says Kramer.

Staff cuts may also be part of the equation, something that is more painful for non-profits than it is for corporations, which can usually afford to provide former employees with outplacement support.

And while two organisations may share a mission, their motives may be very different. “They each might have a different philosophical bent or sometimes religion is involved,” says Gene Tempel, founding dean of the School of Philanthropy at Indiana University. “So these things are not easy.”

Inevitably, joining forces with another organisation involves some loss of control over governance and decision-making. “That’s a difficult thing for any leader to think about, especially where there is emotion and passion tied into the mission,” says Kramer.

But although the internal hurdles are substantial, one of the biggest barriers is lack of support infrastructure. While the profit sector can turn to intermediaries such as banks to carry out due diligence and broker deals, non-profits lack the matchmakers that can help them identify potential partners.

This is starting to change. Donors are increasingly playing the middleman role between non-profits working on similar issues.

And a new fund – itself a joint venture between two organisations, The Lodestar Foundation and SeaChange Capital Partners – has emerged to support joint arrangements.

The Sea Change-Lodestar Fund for Nonprofit Collaboration offers exploratory grants allowing non-profits to evaluate potential collaborations as well as grants covering some of the costs needed to implement a collaborative venture.

As the fund’s name suggests, an acquisition or full merger of two non-profits is not the only option for organisations wanting to expand their reach and increase their efficiencies.

“You can have three or four organisations located in a single building,” says Tempel. “They might have a single accountant, copying centre or payroll processor and thereby operate more efficiently than if they were located separately.”

The challenge for non-profits is how to find the best match for the sharing of resources. Here, too, help is emerging. Nonprofit-share, a US, a start-up is using technology to help organisations connect, share resources, exchange knowledge and experience and form new relationships.

“Right now, we’re working on a new project focusing on matchmaking and building an algorithm that helps connect social entrepreneurs with the right people,” says Susmita De, co-founder and chief operating officer at nonprofit-share.

In fact, short of marriage, there are plenty of collaborative options for non-profits, from sharing spaces or procurement of services and supplies to joint ventures to work on specific programmes.

Milway sees great potential in these kinds of partnerships. “The merger rate should go up and I hope it will,” she says. “But I also think collaborations should go up even more.”


Sarah Murray writes about corporate responsibility, the environment and philanthropy. A long-time Financial Times contributor and former FT staff journalist, she also writes research reports and white papers for the Economist Group, as well as for universities, companies and foundations.