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Strategic Framework: A shift from grant maker to strategic partner

Strategic Framework: Key Features of New Grantmaking Approach. A greater emphasis on unrestricted support for nonprofits with missions or projects closely aligned with TBF's principal strategiesLarger grants and multi-year commitmentsNo term limits, with grants generally awarded for up to five

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Strategic Framework: A shift from grant maker to strategic partner

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    1. Strategic Framework: A shift from grant maker to strategic partner Explain the slide. Note the newly added Value Statement We will marshal the full capacity of the organization behind each of these objectives, and the 9 supporting strategies which I will explain in a moment. Much of what we did before, we will continue to do. We will continue to engage in numerous initiative and funder collaboratives. But, some things will change – in areas where we are shifting our focus, we are doing so because we believe this change will allow us to have a greater impact. This is an effort to reconcile our need to be broadly available to the community, but at the same time to focus. We will hold ourselves accountable for the results. Ultimately, through these goals and objectives, we seek to have a profound impact on areas of community life that have emerged as central to the well-being of our people and the neighborhoods in which they live and work. These include: Making dramatic improvements across the education pipeline, especially for low-income youth of color Promoting health —by stemming the rising tide of chronic preventable disease that threatens the wellbeing of our region Building safe, vibrant neighborhoods Strengthening community through arts and culture And working to create a regional economy that enables everyone to participate and to thriveExplain the slide. Note the newly added Value Statement We will marshal the full capacity of the organization behind each of these objectives, and the 9 supporting strategies which I will explain in a moment. Much of what we did before, we will continue to do. We will continue to engage in numerous initiative and funder collaboratives. But, some things will change – in areas where we are shifting our focus, we are doing so because we believe this change will allow us to have a greater impact. This is an effort to reconcile our need to be broadly available to the community, but at the same time to focus. We will hold ourselves accountable for the results. Ultimately, through these goals and objectives, we seek to have a profound impact on areas of community life that have emerged as central to the well-being of our people and the neighborhoods in which they live and work. These include: Making dramatic improvements across the education pipeline, especially for low-income youth of color Promoting health —by stemming the rising tide of chronic preventable disease that threatens the wellbeing of our region Building safe, vibrant neighborhoods Strengthening community through arts and culture And working to create a regional economy that enables everyone to participate and to thrive

    2. Strategic Framework: Key Features of New Grantmaking Approach A greater emphasis on unrestricted support for nonprofits with missions or projects closely aligned with TBF’s principal strategies Larger grants and multi-year commitments No term limits, with grants generally awarded for up to five years A flexible process with rolling applications and quarterly decisions Mix of grant types to support innovation and wide range of organization size and type Greater engagement between foundation staff and grantee organizations, with deeper due diligence Acknowledging that Nonprofits are our key partners in creating community change…and recognizing that as funders we can sometimes contribute to the problem by they way we fund, the Foundation particularly focused on making amajor shift in its grantmaking approach… We shifted to….refere to slide Acknowledging that Nonprofits are our key partners in creating community change…and recognizing that as funders we can sometimes contribute to the problem by they way we fund, the Foundation particularly focused on making amajor shift in its grantmaking approach… We shifted to….refere to slide

    3. Massachusetts Nonprofit Sector: A Quick Background & 2007 Snapshot Vital civic, economic and social role of nonprofits $87 billion in revenues, $207 billion in assets 14% of state workforce Unprecedented growth in MA nonprofits 37,000 organizations Of which 65% or 24,000 are Public Charities Doubled in number in 18 years Occurring amidst: Slow growth in funding Weakening economic conditions Resulting in: Demand for services outpacing growth in funding Increasingly under-resourced organizations This shift from grantmaker to strategic impact partner also needed to take into account the state of the sector. We had already embarked on a major study of the Massachusdetts nonprofit sector and released a landmark report in June 2008 titles Passion & Purposse: Raising the Fiscal Fitness Bar for MA Nonprofits --- This is a powerful sector and a major contributor to the State’s economy – and it is important to understand it in greater depth to retain the powerful values that the sector represents...we therefore analysed it in the context of the key value propositions… This shift from grantmaker to strategic impact partner also needed to take into account the state of the sector. We had already embarked on a major study of the Massachusdetts nonprofit sector and released a landmark report in June 2008 titles Passion & Purposse: Raising the Fiscal Fitness Bar for MA Nonprofits --- This is a powerful sector and a major contributor to the State’s economy – and it is important to understand it in greater depth to retain the powerful values that the sector represents...we therefore analysed it in the context of the key value propositions…

    4. Exponential growth across the nation Adding to the perfect storm is the fact that the nation’s nonprofit sector has seen immense growth over the last decade … across all states… North Dakota grew the least at 3.7% -- and states such as the Carolina’s, Georgia (64%), Nebraska, Florida and Nevada grew at a rate greater than 50% in the total number of registered nonprofits However, public charities …which most of us deal with… grew 63% overall … and even in states where overall growth was low…they grew at the rate of between 30 to 50%Adding to the perfect storm is the fact that the nation’s nonprofit sector has seen immense growth over the last decade … across all states… North Dakota grew the least at 3.7% -- and states such as the Carolina’s, Georgia (64%), Nebraska, Florida and Nevada grew at a rate greater than 50% in the total number of registered nonprofits However, public charities …which most of us deal with… grew 63% overall … and even in states where overall growth was low…they grew at the rate of between 30 to 50%

    5. Massachusetts Nonprofit Sector, 2007: Three Value Propositions As you well know, the sector encompasses everything from a small food bank …all the way to our major hospitals and universities To make the breadth and complexity of the sector easier to grapple with, we took a leap and divided the sector into three primary categories that reflect both budget size and the dominant values of civic engagement, safety provision, and economic impact and competitiveness Walk through the value propositions….Grassroots; Safety Net; Economic Engine As you well know, the sector encompasses everything from a small food bank …all the way to our major hospitals and universities To make the breadth and complexity of the sector easier to grapple with, we took a leap and divided the sector into three primary categories that reflect both budget size and the dominant values of civic engagement, safety provision, and economic impact and competitiveness Walk through the value propositions….Grassroots; Safety Net; Economic Engine

    6. Recent Economic Downturns: The Changing Effect on Nonprofits Resources available to feed this growth have consistently been a victim of recessions …… this very interesting chart was pulled together by the Nonprofit Finance Fund. It highlights how nonprofits have fared in the different recessions and makes a number of key observations: The effects of economic downturns begin to show early on nonprofits and stretch beyond the recessionary period. Looking at “market dislocations” over the past 30 years, ….we see that changes in revenues, expenses and the shortfalls in the nonprofit sector have become significantly volatile …..with the last two dislocations showing greater volatility. Each market dislocation depicted on the chart exhibited was driven by a single event, i.e., a stock market crash, a cyclical recession or a credit crisis. 4. And although our current market dislocation is not represented on the graph, there are potentially important differences in this dislocation for the nonprofit sector. In this dislocation, all three of the factors that individually drove the past dislocations have occurred SIMULTANEOUSLY (stock market crash, cyclical recession and credit crisis). This would suggest that we will have a deeper and longer recession that the previous ones. We can expect that the stresses this downturn is imposing will require innovation, discipline, new management solutions and new organizational structures to ensure the survival of the sector…as well as its ability to seriously expand its impact at a time of growing need Resources available to feed this growth have consistently been a victim of recessions …… this very interesting chart was pulled together by the Nonprofit Finance Fund. It highlights how nonprofits have fared in the different recessions and makes a number of key observations: The effects of economic downturns begin to show early on nonprofits and stretch beyond the recessionary period. Looking at “market dislocations” over the past 30 years, ….we see that changes in revenues, expenses and the shortfalls in the nonprofit sector have become significantly volatile …..with the last two dislocations showing greater volatility. Each market dislocation depicted on the chart exhibited was driven by a single event, i.e., a stock market crash, a cyclical recession or a credit crisis. 4. And although our current market dislocation is not represented on the graph, there are potentially important differences in this dislocation for the nonprofit sector. In this dislocation, all three of the factors that individually drove the past dislocations have occurred SIMULTANEOUSLY (stock market crash, cyclical recession and credit crisis). This would suggest that we will have a deeper and longer recession that the previous ones. We can expect that the stresses this downturn is imposing will require innovation, discipline, new management solutions and new organizational structures to ensure the survival of the sector…as well as its ability to seriously expand its impact at a time of growing need

    7. Massachusetts Public Charities: Growth Rates by Industry Sector, 1989-2003 Lets take a look at the case of Massachusetts … In 2008 the Foundation released a report on the financial health of the state’s nonprofit sector called Passion & Purpose: raising the Fiscal Fitness Bar for Massachusetts Nonprofits…which highlighted the value and vulnerabilities of our social sector…. The three red circles highlight the key message of this slide: Between 1989 and 2003, public charities in MA increased at an annual rate of 6.3%. During this time, revenues increased at the rate of 1.3% while expenses grew 2.1% annually out-pacing revenue growth. In a single year, this trend may not seem troubling, but as an average over 14 years, it is highly problematic ….and not surprising therefore that we then found that most organizations had fragile financial structures…. Which have been further weakened as a result of this economic downturn Lets take a look at the case of Massachusetts … In 2008 the Foundation released a report on the financial health of the state’s nonprofit sector called Passion & Purpose: raising the Fiscal Fitness Bar for Massachusetts Nonprofits…which highlighted the value and vulnerabilities of our social sector…. The three red circles highlight the key message of this slide: Between 1989 and 2003, public charities in MA increased at an annual rate of 6.3%. During this time, revenues increased at the rate of 1.3% while expenses grew 2.1% annually out-pacing revenue growth. In a single year, this trend may not seem troubling, but as an average over 14 years, it is highly problematic ….and not surprising therefore that we then found that most organizations had fragile financial structures…. Which have been further weakened as a result of this economic downturn

    8. The Massachusetts Nonprofit Sector: Financial Impacts of the Recession Only 16% anticipate covering their operating expenses in 2009 and 2010. So what does all of this mean for nonprofits? in 2003 about 60% of the organizations were breaking even…. But according to the 2009 survey data from Nonprofit Finance Fund: Just 16% anticipate covering their operating expenses in 2009 and 2010; So what does all of this mean for nonprofits? in 2003 about 60% of the organizations were breaking even…. But according to the 2009 survey data from Nonprofit Finance Fund: Just 16% anticipate covering their operating expenses in 2009 and 2010;

    9. The Massachusetts Nonprofit sector: Financial Impacts of the Recession In 2009, 31% didn’t have enough operating cash in hand to cover more than one month of expenses In 2010, that number is down to 30% Liquidity for MA nonprofits remains low and is declining… In 2003 on average nonprofits had about two months of cash on hand….2009 survey data indicates that the liquidity numbers declining. 31% of the organizations don’t have enough cash to cover more than 1 month of expenses. Considering the fact that the economy has officially been in recession since Dec 2008, with funding down from several sources, despite streamlining and budget cutting, organizations are starting to run out of cash. Also, anecdotal data suggest that banks are cutting back lines of credit or removing un-used lines of credit. For the smaller organizations -- both grassroots and safety net under $1 million in budget that were heavily reliant on cash to pay their expenses the impact is more severe…as they do not have access to lines of credit or vendor credit. Organizations with budgets under $1 million are the most severely impacted however Larger organizations that depended on investment income to meet liquidity needs are also experiencing distress Liquidity for MA nonprofits remains low and is declining… In 2003 on average nonprofits had about two months of cash on hand….2009 survey data indicates that the liquidity numbers declining. 31% of the organizations don’t have enough cash to cover more than 1 month of expenses. Considering the fact that the economy has officially been in recession since Dec 2008, with funding down from several sources, despite streamlining and budget cutting, organizations are starting to run out of cash. Also, anecdotal data suggest that banks are cutting back lines of credit or removing un-used lines of credit. For the smaller organizations -- both grassroots and safety net under $1 million in budget that were heavily reliant on cash to pay their expenses the impact is more severe…as they do not have access to lines of credit or vendor credit. Organizations with budgets under $1 million are the most severely impacted however Larger organizations that depended on investment income to meet liquidity needs are also experiencing distress

    10. Long term solutions needed to help the sector: Restructure, Reposition, Reinvest

    11. One response: The Catalyst Fund for Nonprofits The Catalyst Fund for Nonprofits (CFN) - a funders’ collaborative A $3 to $5 million, 5-year fund under development to supply one-time financial resources as a catalyst to promising strategic collaborations among nonprofits. Two funding streams: a grants pool to support collaboration analysis, planning and restructuring and, where applicable and appropriate, implementation and a PRI loan pool dedicated to providing working capital loans to nonprofits to support implementation of collaborative business model restructurings. It will support a range of collaborations: Outsourcing of administrative and/or programmatic activities Administrative consolidations (resource sharing) Joint purchasing agreements Partnerships/Joint Ventures Mergers Dissolutions Funding will be used to improve the impact of nonprofit service providers by facilitating: Program innovation, growth and sustainability, Restructuring of business models to improve the financial capacity and durability of the resulting collaboration/organization, Enhanced governance and efficiencies in operational and financial management, Broadened access to sources of funding.

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