8 Tips for Supporting Your Grantees After a Significant Award

The traditional one-year grant cycle has created a funding hamster wheel that often keeps grantees heads-down on applications to avoid a gap in revenue. That forces many nonprofit leaders to plan for a scarcity mindset with short-term, safe programs that they know will get funded, instead of long-term and innovative solutions that might include more risks.

The growth of trust-based philanthropy principles with multi-year, unrestricted funds is starting to shift organizations from that scarcity mindset to one of abundance.

But many nonprofits that earn organization-changing donations scramble to build the infrastructure to manage the funds effectively. Instead of using the lack of experience with significant gifts as a reason not to give them, grantmakers should work with grantees to fill knowledge gaps so the organization thrives.

During a conversation with Clare Golla, National Managing Director of Bernstein's Philanthropic Services, she shared how, with the right support and resources, multi-year, unrestricted gifts, can help your grantees move from a scarcity mindset to one of opportunity and excitement.

Here are eight tips for grantmakers looking to support grantees after an organization-changing award.

1. Provide-and Encourage Space-for Emotional Planning

Any significant and unexpected event-even if it's good-can paralyze an organization. Help your grantees understand that it's okay, and encouraged, to take a moment to breathe. Based on the work by Susan Bradley, CFP® and founder of the Sudden Wealth Institute, help your grantees create a decision-free period to research, learn, and get the building blocks in place for success.

2. Help Them Understand Their Fiduciary Framework

The nonprofits you support understand duty. They are dedicated to serving their community and their mission. With a significant gift of multi-year funds comes an increased focus on being good fiduciary stewards. Help your grantees put words to and processes around their fiduciary framework:

• Duty of Care: Educating themselves as nonprofit leaders and Board members, participating in leadership meetings, and approaching the situation as a learning opportunity
• Duty of Loyalty: Putting the Duty of Care into practice by keeping the best interests of the organization-and the community it supports-at the forefront of every decision
• Duty of Obedience: Knowing the applicable federal, state, and local laws and regulations that apply to the organization, as well as having the proper internal controls in place to comply with those laws and regulations

3. Encourage Your Grantees to Establish an Investment Committee

Your grantees likely have finance committees as part of their Boards, but with a sizeable gift that won't all be allocated immediately, they need to create an Investment Committee as well.

This can be a small group-three to five people-and they don't all need to be current members of the Board. In addition to crafting the Investment Policy Statement and Spending Policy, the Investment Committee should set a fiduciary calendar, so everyone knows when to expect updates on investments, reviews of operating reserves, and similar topics.

4. Provide Guidance on Board Responsibilities

Larger, more established grantees may have a regular cadence of education for their Board, but that might not be true for smaller or newer organizations. Provide guidance and recommendations for training on the Board's fiduciary responsibilities, such as how to read a form 990 and the financial audit. Give them the resources so their Boards can analyze the organization's finances thoughtfully and ask respectful, educated questions.

5. Show Them How to Create an Investment Policy Statement

Even if your grantees have an established Investment Policy Statement (IPS) or Spending Policy, it may be outdated or only cover a small portion of their investments, such as their operating reserve.

The IPS should cover the purpose, objectives, mission statement, time horizon, spending policy, target asset allocation, allowable investments, guidelines, and restrictions for each bucket of funds. For example, money they need for a research study slated to start in three months should be treated differently than funds used for a program that won't get underway for two years.

Provide templates to help them create an IPS and Spending Policy that encompasses the broad categories of funds they expect to have. Encourage them to update it on an annual basis based on the current market and the goals of the organization.

6. Give Your Grantees Resources on Choosing a Fiduciary Partner

Your grantees are experts in their impact area-which is why you funded them. They are likely not experts in investment management. Provide recommendations for people you know who work well with nonprofit organizations, or a checklist of questions your grantee's Investment Committee should ask when deciding on a fiduciary partner.

7. Help Your Grantees Establish Effective Reserves

A significant gift could mean that the organization can finally build out a true reserve fund that has a full six months of operating expenses. But that amount is different for each organization based on both internal and external factors. Help them determine their reserve risk, such as how concentrated their income sources are, and identify seasonality disconnects between income and spending that may affect how much the grantee should have in their reserve fund.

If your grantee is new to operating reserves or would like a refresher on thinking through the amount they should have, share our checklist for creating an operating reserve.

8. Meet Your Grantees Where They Are

You selected your grantee for funding because you were impressed with the work they do and the mission they stand for. Approach the conversation of financial sustainability with "maximum respect and minimal prescriptiveness," as Clare mentioned during the webinar. Avoid the assumption that your grantees don't have those networks and resources but provide channels for open conversation and easy access to support if they need them.

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