Is Nonprofit Finance An Oxymoron? (Part 1)

A white paper providing a series of extremely well reasoned explanations for why there needs to be “a fundamental shift in the way funders support the nonprofit sector” is now available as a resource for the sector.

Capital Ideas: Moving from Short-Term Engagement to Long-Term Sustainability, produced by Liz Keating from the Hauser Center for Nonprofit Organizations at Harvard University, Clara Miller from the Nonprofit Finance Fund, and Kathy Buechel, former head of the Alcoa Foundation, expertly captures the fundamental barriers to bringing more and more strategic foundation capital to better performing nonprofits.

Keating and Miller provide a number of prescriptive ideas about the need to broaden general operating support that will allow nonprofits to build the infrastructure to scale, increase the use of sector-wide metrics and streamline grant processing requirements and procedures.

While I hope funders that are using precious social capital resources to support this research will agree these are definitive prescriptions for the future but, I'm afraid they aren't going to be implemented for a number of reasons:

As the president of one of the nation’s largest and most thoughtful private foundations recently and perhaps not unwittingly delivered the death blow to these ideas, “Operating grants are boring.”
Non-engaging giving has no more future in the foundation market than it does in the donor market. Fun, interesting, challenging, new, strategic, hands-on - if you cannot offer some or all of this, you are not going to get funding from foundation.

The conditions for a market are still not present in the sector and will not be until we tackle a series of problems that we have written about before. (See prior posts on the social capital marketplace Part II and Part III.)

Funders are making decisions to “support” nonprofits, not "finance" by any definition of that word. Until there is a desire and and an incentive to finance nonprofits, not just support them, Keating, Miller and a number of the rest of us are barking up the wrong tree.

Carla E. Dearing