In early April 2020, the Montana Conservation Corps was seven weeks away from bankruptcy. The pandemic was shutting down much of its government-backed work to protect wild areas, and its operating reserves were pitiably low.
Three years later, MCC, as the group is known, has $600,000 in reserves. That’s a small safety net for an organization with an $11 million budget, but the group is setting aside money each year to push that figure to $1 million over time. After years of operating at the anxiety-ridden limits of cash flow, financial staff approach the budget year’s end with relative calm. MCC’s line of credit has been untouched for a couple of years, saving the group thousands of dollars in interest payments.
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In early April 2020, the Montana Conservation Corps was seven weeks away from bankruptcy. The pandemic was shutting down much of its government-backed work to protect wild areas, and its operating reserves were pitiably low.
Three years later, MCC, as the group is known, has $600,000 in reserves. That’s a small safety net for an organization with an $11 million budget, but the group is setting aside money each year to push that figure to $1 million over time. After years of operating at the anxiety-ridden limits of cash flow, financial staff approach the budget year’s end with relative calm. MCC’s line of credit has been untouched for a couple of years, saving the group thousands of dollars in interest payments.
What happened?
A big part of the answer lies in innovative funding from the Kendeda Fund, the grant maker of philanthropist Diana Blank. Since 2020, Kendeda has awarded $8 million to 37 organizations in matching grants to start or bolster operating reserves.
Groups report that the new cash cushions have headed off small crises triggered by, say, a shortfall when a government grant payment is delayed. The buffer can also be a safety net in bigger emergencies — when a grant maker unexpectedly fails to renew a grant, for instance.
Interestingly, MCC and other organizations say that the cash emboldens them to expand projects or seize new opportunities. The Trace, a nonprofit news venture covering guns and gun violence, assigned a staff writer to report and host a podcast with WBUR, a public-media outlet in Boston. The partnership, which developed informally, wasn’t planned when this year’s budget was set. The Trace must raise money to pay freelancers to fill in for the writer, but it pursued the arrangement knowing it could use the reserves to bridge that temporary shortfall.
Some benefits of more cash on hand are psychological, explains editorial director James Burnett. “As a nonprofit organization gets bigger, and older, it can become risk-averse to a fault,” Burnett said in an email. “I think the reserve fund helps keep our confidence up.”
An Extra Gift
Kendeda’s reserves program was born of what the fund calls its “spend out.” Blank decided in 2013 to close operations in a decade, and the foundation will distribute all its assets by the end of this year. By 2018, however, a booming stock market had left the foundation with $100 million more to give away than expected.
Rather than plow these funds into established priority areas, Kendeda made a round of grants it calls lagniappes — a term said to originate in South America and used by New Orleans shopkeepers who give customers something extra with their purchase. (Years ago, stores used to offer a string of licorice.) Kendeda directed much of this newfound money where Blank had not previously invested heavily, including to work to create employee-owned businesses.
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Another notable grant: $10 million to the National Native American Boarding School Healing Coalition to help address the trauma caused when U.S. policy in the 19th and 20th centuries separated Indigenous children from their families and sent them to residential boarding schools.
The operating-reserves grants, another lagniappe, focused on a common theme of Blank’s giving: strengthening nonprofits. Financial experts typically recommend groups keep enough cash on hand to operate for at least three to six months, but nearly a quarter have less than that, according to the latest survey from the Nonprofit Finance Fund.
Courtesy of The Kendeda Fund
Diana Blank’s Kendeda Fund awarded $8 million in matching grants to 37 organizations to start or strengthen their operating reserves.
Beginning in 2020, Kendeda offered as much as $30,000 in planning grants to grantees recommended by the fund’s advisers in each of its seven priority areas. Organizations used the cash to prepare to raise the money that would trigger the grant maker’s pledge. Some bought software; others hired consultants or brought in administrative staff to give leaders time to connect with donors.
The Trace raised $420,000 to match its Kendeda funding. The grant gave the organization a new fundraising vantage point. The reserves, according to Burnett, “facilitated a natural entry point for longer-range conversations with our existing funders” more focused on the organization’s general health than is typical.
With Kendeda support, Common Future, which funds community-driven efforts to advance racial and economic equity, hired an adviser to help evaluate its revenue drivers and reimagine its business model. Leaders considered how they might accelerate impact if the group could build and own community wealth-building institutions and social enterprises — efforts that would also generate income for Common Future apart from philanthropy.
The organization last year made two key moves: a merger with Uncharted, an accelerator for nonprofit and for-profit community-led ventures dedicated to economic justice; and the acquisition of Community Credit Lab, which eschews traditional lending practices to make capital and credit more available to people of color. The Kendeda Fund “gave us the space to imagine,” says revenue director Rakiba Kibria. “Nonprofits — particularly Black-led nonprofits and those led by people of color — are never given a chance to imagine.”
At MCC, the 2020 crisis forced the organization to recognize that it couldn’t innovate and adapt to changing conditions when it’s always walking a fiscal tightrope. Launched in 1990 and modeled on the Great Depression-era Civilian Conservation Corps, the organization recruits teenagers and young adults for hands-on conservation work like wildfire rehabilitation and watershed restoration. In recent years, as Montana’s home prices have soared, it has sought ways to provide housing for corps members. It’s also doing more outreach to Indigenous communities.
The operating reserves will backstop the group in emergencies, but the board has designated it as an “opportunity fund” — money that can be tapped when an unforeseen mission-aligned opportunity emerges. “It’s an investment resource,” says executive director Jono McKinney says. The board makes spending decisions with that in mind, building into the budget money earmarked for the fund.
The program offers lessons for grant makers as well, according to Kendeda. “The spirit of this is: You don’t need to starve your grantees,” says Christine Hunt, senior director of special projects and operations. “They shouldn’t have to be going hat in hand to philanthropy all the time, like, ’Save me again.’”
