Flexibility and freedom of foundation funding can boost third sector during Coronavirus crisis

This article first appeared in Vita on 16 March. The English translation first appeared in Alliance on 17 March.

Let’s trust in the third sector to protect the most vulnerable.

Sometimes nightmares come true, and dystopian futures only seen in books and movies become a reality.

Today our attention is on the victims and the healthcare crisis. The courage, professionalism, and dedication shown by doctors and paramedics who are fighting the Coronavirus in Italy reassure us and make us proud.

The additional grants made by Italian philanthropic foundations to face the heath crisis are commendable.

However, we already know that this pandemic will have enormous consequences, still unpredictable, on all areas of life in our country, with profound economic, educational, cultural, and social impacts. We are facing a systemic crisis, and each of us, within the system, must do everything in his/her power to do the most to tackle it. We need to avoid that this viral epidemic becomes social butchery.

To do this, Italy needs increasingly widespread, capable, strong and resilient third sector organisations. Italian philanthropic foundations can and must take the initiative to contribute to this actively. First of all, by immediately changing the grantmaking and reporting modalities through which they support third Sector organisations.

The third Sector interests us all because it deals with the great causes that we care about, humanity, the planet, the most vulnerable people we love. The third sector interests each of us because it makes the difference for a better world because it is able to imagine the impossible and to bring together hundreds, thousands, millions of people for a cause. It takes care of the elderly as precious resources. It sees people with mental disabilities as people first and foremost. It fights racism. It educates us to protect the environment. It values the intercultural contribution of new citizens by teaching us that we live in an interconnected world.

The third Sector does not only substitute, at low cost, for what welfare fails to offer, it does not only cover the holes (or chasms) of the state welfare.

The organisations of the third sector are capable of transforming society, triggering processes that produce value not only in the achievements or outputs produced but also in the processes, sometimes long and bumpy, to get to them. The value of an open and inclusive society in which human rights and fundamental freedoms of all are at the centre: a lesson that we have all too often forgotten, and perhaps only this pandemic will succeed in making us learn.

Unfortunately, some myths, some ideological walls, that characterise not only the funding by public donors but also the funding by philanthropic foundations continue to prevent third Sector organisations from changing the world and keep them in a starvation cycle, in a situation of disempowerment and dependence.

I refer namely to: the necessity to reduce structural costs to the bone, the idea of doing a lot with the least possible, devolving everything to activities and beneficiaries and little or nothing to the structural strengthening of organisations (e.g.capacity building and digitization), and, perhaps above all, working only through projects cycles.

Now, in the face of this crisis, each of us wonders what we can do, individually and collectively.

My question is to philanthropic foundations – What is the difference that we want to make?

Philanthropic foundations’ uniqueness lies in the autonomy and creativity by which their private wealth can be made available for the common good. In the how, i.e. the quality of their contributions, more than in quantity.

Increasing funding for medical research and Coronavirus emergency response – which is an economic and educational and not only a health emergency – is fundamental, but it is only part of our country’s needs. Philanthropic foundations have, by nature, enormous strategic freedom and ample flexibility and agility of action.

Third sector organisations in a crisis like this, are at risk of collapsing. The projects-based funding as an almost exclusive model of financing keeps them permanently in the starvation cycle: most of them have cash liquidity that does not go beyond three months.

Now that all fundraising events are cancelled, many of the activities foreseen by projects suspended, the third sector is terribly at risk. Third sector organisations have been unable to endow, set aside reserves, save money.

It is precisely at a time of crisis like this that foundations can have the humility and the courage to use their freedom and flexibility.

First of all, by listening to their grantees and by trusting them. Indeed, grantees are the most authoritative in knowing what they need to face the crisis.

Unlike other donors, philanthropic foundations have the freedom and flexibility to modify funding and reporting modalities, which have a massive impact on the creativity, capacity, and resilience of third sector organisations. The crisis we are experiencing can be regenerative.

Philanthropic foundations can work with third sector organisations in a new and innovative way. For instance, they can offer them no-cost extensions, liquidate the entire grant in advance, they can eliminate or simplify the narrative and financial reporting burden.

But they can also be courageous and increase funding to missions and organisations (core support), provide flexible funding not earmarked to activities and outputs to cover current costs (salaries, rents, structural costs, etc.) and to support creativity and resilience. They can offer guarantee funds.

We know that most third sector organisations underestimate their operating costs by adapting to the demands of public and private donors who require third sector organisations to be cheap. It is time to debunk this false myth. Philanthropic foundations have the power to take this initiative.

I was re-reading, in these ‘suspended’ days, the compelling story of Ise Bosch, Giving with trust: transformative philanthropy.

Italy, as much as Europe, needs third sector organisations to devote all their best creative and innovative skills, their social, intellectual, and human capital, to vulnerable people, to make a difference for a better world, not to report.

Let’s trust in the third sector!

Carola Carazzone is secretary general of Assifero and advisory board member of Ariadne, DAFNE and ECFI