Publication Date:
Mon, 12/05/2011 - 10:22am
Today, with the help of a
particular kind of money--Change Capital--Alvin
Ailey American Dance Foundation is attracting new revenue by building a
technology platform and internal capabilities that maximize opportunities for patron
and audience engagement. Merce
Cunningham Dance Foundation is raising money upfront to wind down its
operations in a graceful way and leave a meaningful legacy.
These are success stories. But, when grantmakers and grantseekers fail
to make the distinction between different kinds of revenue and capital, the consequences
can be dire: desired outcomes aren’t met, organizational infrastructure is
hollowed out, and communities go underserved. Given these risks, the
nonprofit field and funder community need greater clarity about the role of
each type of money and what they can separately and collectively achieve.
First, some definitions:
General Operating Support
GOS is unrestricted revenue, meaning it can be spent at the
organization’s discretion – on anything. It might be used to fund programming,
to offset administrative salaries or to pay the rent. In a universe where
many grants are tied exclusively to specific programs or projects—often without
paying for an appropriate share of the infrastructure required to deliver
them—GOS is a rare form of flexible revenue that can pay for mission-critical
expenses that few (sadly) are yet willing to support. As such, annual GOS is an
essential element of a healthy revenue mix for any organization. It is
typically raised from select foundations as well as individuals and
corporations, often through special events.
Capacity Building Revenue
Grants for capacity building,
whether formally restricted or not, are revenue
typically earmarked for building new organizational knowledge, staff and
infrastructure. Board development, expansion of the marketing department and
the purchase of new technology would all qualify as capacity building
expenses. GOS is often but not always used to pay for capacity-building
activities. In that sense, the two can overlap. The difference is that capacity
building dollars usually have a specific non-programmatic intention. They
are typically raised from foundations.
Change Capital
Change
capital is a
concept we developed at NFF to describe a flexible form of capital, distinct from revenue.
