New ‘Quick Start’ Guide Helps Grant Makers Establish Emergency Funding Programs

As the Covid-19 crisis enters its sixth month, the U.S. economic outlook has darkened: Giving to charities has slowed, and some groups are experiencing existential crises.

The sheer scale of the crisis has put grant makers in triage mode, trying to determine which urgent needs most warrant support. Foundations must make hard choices quickly, which adds more pressure.

To help foundation leaders, program officers, and other decision makers, the Open Road Alliance has created a new resource entitled Emergency Funding: a Quick Start Guide. The Open Road Alliance specializes in making grants and low-interest loans to nonprofits that encounter unexpected roadblocks that jeopardize projects, programs, or goals. The organization also works to to help nonprofits better plan for and manage risk.

Drawing on its recent experience as well of years of providing emergency grants to nonprofits, leaders at Open Road share advice they hope will help others set priorities as they make sometimes wrenching decisions. “The folks you decide not to help may go out of business,” says Open Road CEO Maya Winkelstein. Grant making right now, she says, “it really is like an emergency room. Assume, especially in this Covid moment, that demand is going to exceed supply.”

Here are some key recommendations from the report on how foundations can better manage emergency grant making:

Develop a Triage System. Create a special process for speeding up emergency funding requests. The changes might entail creating a new board committee with the authority to approve grants or expanding the grant-making authority of senior staff. Open Road aims to shorten the decision-making timeline for emergency requests to three weeks, from initial inquiry to final decision. Some steps to help make that possible:

• Vet requests through an initial phone call before asking for a full application.
• Prioritize groups experiencing a cash squeeze. (See more about that cash flow below.) For example, if one organization has six months’ worth of cash on hand and another has only two months’s worth, consider processing the latter application first.
• For committees that make funding decisions, hold conference calls frequently, perhaps daily.

Create new funding criteria. The calculus for what to fund can be far different in emergency funding scenarios than what you’ve historically supported. It’s important to define the circumstances in which you will activate emergency grant making and, in terms of impact, which kinds of results you can live without, the guide advises.

Nonprofits that can have a big impact on the crisis— for example, those that slow the spread of the virus or help for those on the front lines — are obvious funding choices. Beyond that, the choices get more difficult. Even nonprofits that aren’t directly responding to the virus deserve consideration, especially if their failure would have damaging long-term consequences, Winkelstein says. Which groups are most likely to lose out? Nonprofits with limited immediate or long-term impact that probably won’t survive.

Be transparent. Make your emergency grant-making criteria public. Identify the type of results you hope to achieve and what may no longer be supported. Such openness saves everyone time, including grant applicants. “Fear and mistrust are the enemies of impact during a crisis,” the report states. “Funders can afford to take some calculated reputational risk for the sake of transparency and open communication with grantees.”

Focus on real-time cash flow rather than audited financial statements, which are almost certainly outdated in the current environment. Cash-flow information is critical for prioritizing which organizations are most in need and where emergency funding can help the most. Questions you should ask about cash flow include:

• Is the nonprofit suffering a temporary gap in revenue? Is revenue delayed or deferred? Or is the problem more lasting?
• What else beyond the current grant request might be needed to help a grantee survive?
• Will your funding provide “a bridge to somewhere,” or will it simply delay an inevitable failure?

Use these lessons to build a permanent emergency-response system. The risk of the unexpected always exists; it isn’t unique to the pandemic. When the current crises subside, consider formalizing the emergency protocols for use whenever needed.

To learn more, download the full guide.