A series of Kresge Foundation grants designed to help arts-related nonprofits better understand their financial situation and improve their balance sheets resulted in positive changes within organizational practices, according to an analysis by Nonprofit Finance Fund released today.

The Kresge-commissioned analysis focused on 36 grants made through Kresge’s Arts & Culture Program’s Institutional Capitalization Program between 2010 and 2012. The awards helped grantees prioritize proper maintenance and funding of physical assets and shift business models to support stronger capitalization. Although Kresge’s Arts & Culture Program has since shifted its grantmaking focus toward creative placemaking, it continues to embed capitalization principles in its grantmaking.

The report provides valuable lessons and recommendations for funders, nonprofits and others seeking to build stronger capitalization practices at the staff and board levels. Arts organizations interested in building the strength of their balance sheets will find advice for making a capitalization plan, fundraising for different kinds of capital and implementing new capitalization practices. The analysis, “Funding the Extraordinary: An Evaluation of The Kresge Foundation Arts & Culture Program’s Institutional Capitalization Grantmaking,” found positive changes in organizational practices:

• Organizational leaders were better able to articulate capitalization principles and how they affect their organizations.
• Grantees were more likely to set policies and plan for a range of financial reserves to address long-term needs.
• Many organizations began to set surplus goals and incorporate system-replacement plans into their budgeting.
• Grantees reported the Kresge brand was a powerful catalyst for securing additional funding from donors and institutions.

The analysis concluded that in many cases, positive changes in capitalization planning did not translate to immediate gains in liquidity and other forms of flexible savings. Many of the program’s intended financial-health outcomes will take time to be fully realized.

A series of recommendations for capital grantmakers and for nonprofits is included in the analysis to help organizations and funders make informed decisions about capital investment in the arts.

“By scrutinizing the outcomes of these grants, we are able to provide some valuable lessons and guidelines for those looking to build their organization’s long-term financial health, to make grants that align with capital need or to learn more about capitalization in the arts,” said Alice Carle, program adviser with Kresge’s Arts & Culture Program.

The full report is available on The Kresge Foundation’s website.