09/27/2010 08:14 am ET | Updated May 25, 2011

Responsible Philanthropy

A great deal has been written in recent weeks about the new English government's plan to slash government funding for the arts. Understandably, the arts organizations in England are deeply concerned. They have relied on government funding for large portions of their budgets and do not feel equipped to fill the budget gap that will result from this sudden reduction in income. This is not a unique situation. Governments and other major institutional funders across the globe are cutting arts funding as other social needs take precedence.

This situation inevitably leads to a discussion of the responsibility large donors bear when they wish to cut their grants substantially. Do they have an obligation to prepare their grantees for the bad news? Do they bear responsibility for the health of their grantees after the grants are reduced?

If a funder truly cares about the arts (or any sector of the not-for-profit sector it funds, for that matter) it should do three things:

1. Reduce the size of grants over a period of time. A one-time cut does not give the affected organizations the time they need to find alternative sources of funding. If a donor can announce its reduction plan in advance and spread the cuts over a number of years, the grantees have time to reduce budgets, at worst, or find alternative sources, at best.

2. Give challenge grants that force the organizations to develop new sources of revenue. A challenge grant is a grant that must be matched by other donors. If receiving a grant is dependent on raising matching funds from new donors, or increased grants from existing donors, the organization will be in better position to survive the cuts. This is especially important for smaller organizations which might not have the experience or capacity to raise money from private donors. A challenge grant is true, positive motivation to build this expertise.

3. Give arts organizations training in marketing and fundraising so they are better prepared to find new revenue. In many countries where fundraising is still a new concept, most arts organizations have no experience raising private contributions. Simply telling these organizations to find new sources of support is equivalent to telling me to perform an appendectomy. I would not know how to begin. Training is available to help organizations begin the process of building private contributions.

Donors, especially governments, have an obligation to behave responsibly. Sometimes donors are forced to reduce their grants but this must be accomplished while giving grantees the best chance of surviving and thriving despite these cuts.

But arts organizations, themselves, are responsible for their long-term fiscal health. No arts organization should be so heavily dependent on one donor that a cut from that donor threatens the organization's existence. Arts organizations in every country, no matter how much the government gives, should diversify their funding sources as insurance against sudden cuts from any source. Just ask the leaders of any arts organization in England if they wish they had spent more time over the last decade building a larger cadre of private funders.