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Cliffs, Cuts and Change: Facing Austerity and Crises, Will Philanthropy Adapt or Delay?

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While Congress and the White House managed to avoid the ominous "fiscal cliff" earlier this month, the fact remains that perilous "cliffs" are an everyday reality for many individuals across the U.S. struggling with the effects of poverty. Thanks to the work of grantmakers and nonprofits across the country, many of these individuals have avoided these fateful ledges, but if the philanthropic community is to continue to address critical needs of the communities it serves in the face of future crises, it needs to learn to act in bold new ways.

This is the time for philanthropy and the wider nonprofit community to talk about what we have learned from the recession as a starting point for confronting continued uncertainty and this next set of challenges.

The threat of the fiscal cliff and still-pending sequestration cuts highlight how critical it is for philanthropy to continually push to understand how to use precious resources for a maximum impact. According to the National Center on Nonprofits the still-pending "across-the-board cuts of $54.6 billion from domestic spending programs... will touch virtually every person and every community in America" and will essentially "reduce funding without reducing the underlying human needs." As a result, grantmakers have to contemplate how they can help their grantees not only sustain their programs and operations but also continue to expand their impact to serve more communities and people in need.

In 2009, Grantmakers for Effective Organizations responded to the demands of the economic recession by publishing a briefing with recommendations on how funders could help nonprofits weather rapidly changing financial conditions. These recommendations included:

  • Hold grantmaking steady by increasing or maintaining your support at a time when nonprofits need it most.
  • Consider releasing restrictions on current grants and waiving or limiting reporting requirements for long-time grantees.
  • Engage your key stakeholders in authentic conversations to get a clear picture of what they are experiencing and what else you can do to help.
  • Consider providing more unrestricted supports or access to credit to give nonprofits the flexibility they need to adapt to changing circumstances.

In addition to these recommendations, which remain important in the current context, I'd like to suggest that grantmakers also consider a powerful, yet-untapped opportunity to facilitate and model collaboration. By this, I don't mean giving blanket advice to nonprofits to "collaborate more" or even to advise two specific nonprofits to work together. Instead, grantmakers can use their convening power to create spaces where relationships are built and collaboration can thrive. Many nonprofit leaders are feeling isolated and could certainly benefit from connecting with their peers. At the same time, grantmakers must themselves be more willing to adapt in the ways that collaboration requires. This might mean making grants outside of your grant cycle or accepting applications and reports constructed for someone else.

Many members of the GEO community have been tackling the challenge of increased need and constricting resources. The John Rex Endowment, in Wake County, N.C., began offering bridge grants two years ago to help nonprofits deal with transitions. After the recent economic decline, Kate B. Reynolds Charitable Trust made exceptions to a policy that restricted the use of their bridge grants from filling government funding holes in order to support nonprofits that were vital to their mission of meeting the healthcare needs of the financially needy of North Carolina. Others like The Patterson Foundation are using a combination of strategies -- including capacity-building support and offering financial and business planning training -- to accommodate the diverse needs of their nonprofit partners.

We welcome other funders and nonprofits to share how they are adapting in the face of dwindling government resources. You can share your story as a comment below or email it to us, and GEO will collect these stories for our efforts to help grantmakers improve their practices for better results.