Strengthening Communities Through Flexible and Urgent Philanthropy

America has long been a philanthropic nation. Time and again, when crises arise—whether economic downturns, natural disasters, or unexpected social challenges—foundations have stepped up, demonstrating generosity, adaptability, and leadership. We are at such a moment now.

Across the country, nonprofits—the backbone of our communities—are facing unprecedented challenges. Government funding, historically a critical source of support for health, education, housing, and human services, is shrinking at both state and federal levels, leaving many organizations in financial limbo.

Meanwhile, inflation continues to drive costs, while demand for services continues to grow. Many organizations are struggling to keep their doors open, let alone expand to meet community needs. Now is the time for foundation leaders to have meaningful conversations with their boards and staff about how to best support the nonprofits in their communities while advancing their missions.

As stewards of philanthropic capital, we must ask ourselves: How can we rise to this challenge?

Three Key Areas for Foundations to Consider

1. Adjust Investment Policies to Maximize Impact

A foundation’s financial strategy plays a significant role in determining its impact. By making adjustments to investment policies, foundations can ensure their dollars work harder for the communities they serve.

• Increase Payout Percentages – The legal requirement for private foundations is a 5% minimum payout, but boards can consider going beyond that. Even a temporary increase to 6-7% can provide much-needed relief to nonprofits facing financial uncertainty.
• Explore Mission-Aligned and Impact Investing – Boards can explore using their endowments for mission-related investments (MRIs) and program-related investments (PRIs) rather than solely seeking financial returns in traditional investments. Investing in affordable housing, Community Development Financial Institutions (CDFIs), or other mission-driven initiatives can extend a foundation’s impact beyond grantmaking.

2. Adjust Grantmaking Policies to Enhance Nonprofit Resilience

The way grants are structured can make a major difference in a nonprofit’s ability to thrive. Foundations can take proactive steps to create more flexible and supportive funding opportunities.

• Consider Unrestricted and Multi-Year Funding – Unrestricted funding allows nonprofits to allocate resources where they are most needed, adapt to emerging challenges, and invest in their long-term sustainability. Foundations can opt for making more unrestricted/operating grants, allowing grantees to be nimble in responding to the emerging needs of the community. Boards may also consider loosening restrictions on current grants to give nonprofits added flexibility.
• Reduce Administrative Burdens – Complex application and reporting requirements can place an unnecessary strain on nonprofit leaders, especially during crises. Foundations can review their grantmaking processes and explore ways to simplify paperwork, accelerate grant timelines, and fund organizations based on trust and relationships rather than excessive compliance measures.
• Establish Emergency and Rapid Response Funds – Having a dedicated pool of funds for urgent, time-sensitive needs ensures nonprofits don’t have to wait through lengthy grant cycles to receive critical support. If a foundation does not already have such a fund, now is the perfect time to consider creating one.

3. Support Nonprofits Beyond Grant Dollars

While direct financial support is essential, it’s not the only way foundations can make a difference. Foundations have the influence and networks to drive systemic change and strengthen the nonprofit sector in meaningful ways.

• Leverage Influence for Policy Change – Many challenges nonprofits face are rooted in policy decisions. Foundations can advocate for policies that support nonprofits and the communities they serve by funding advocacy efforts, convening key stakeholders, or issuing public statements on pressing issues.
• Encourage Collaboration – Foundations can collaborate to pool resources and address systemic challenges more effectively. By fostering collaboration, philanthropy can have a more significant collective impact.
• Ask, Listen, and Act – One of the simplest yet most powerful steps a foundation can take is to engage directly with nonprofits. Reach out with a phone call, send a survey, or host a listening session to understand what organizations need most. Just keep in mind that nonprofit leaders are stretched thin, so be mindful of their time and ensure these conversations lead to meaningful action.

Leading with Courage and Commitment

Philanthropy has always had the power to step in where government falls short. By embracing flexible funding, streamlining processes, and supporting advocacy, we can help ensure that nonprofits continue to thrive despite the uncertainties they are facing.