Arts and Culture Program
Institutional Capitalization
The vitality of arts and cultural institutions and their capacity to serve the public are often threatened by weak finances. In assessing financial health, organizations and their supporters often look at a single budget year. In reality, it is the strength of an organization’s balance sheet that allows it to achieve its long-term goals. The need for a healthy balance sheet is even more acute given the presence of a facility.
By building their asset base through years of surplus operations, organizations develop the capacity to plan for the future, react quickly to new opportunities, and support missions that may require major fixed assets and a long-term view.
Our programmatic approach
We believe well-capitalized organizations will ultimately produce higher quality products and be more impactful, innovative, and relevant in and for their communities.
Thinking about capitalization is a relatively new effort in the nonprofit arts and culture sector and best practice is just emerging, but at the core capitalization is the accumulation of aggregate resources put to use to achieve an organization’s mission. Beyond this definition, our research reveals a strong need across the sector for a better understanding and implementation of the effective practices that will lead to this result.
Through this effort we expect to see:
- A shared understanding of basic definitions, principles and practices of capitalization among key players in the field such as nonprofit managers, trustees, private and public funders.
- The adoption of capitalization best practices among organizations reflecting the diverse disciplines within the arts and cultural sector.
- Better capitalized arts and cultural institutions that are stronger and whose business models are more sustainable, where appropriate.
- Arts and cultural institutions that are well positioned to produce high quality, impactful, innovative and relevant artistic product for their audiences and communities.
For more information, read the Philosophy and Terms, and FAQ – Frequently Asked Questions – linked from the gray bar at the top of this page. Located in the Resources box on this page is A Guide to Strategic Planning and A Guide to Building Reserves.
How we work
The Institutional Capitalization initiative provides support in four areas:
Facility Investments and Building Reserves
Strengthening Arts Facilities Effectively
Facility Investments and Building Reserves – Kresge has invested in developing the facilities of hundreds of arts and cultural organizations. Two critical issues have emerged from the foundation’s experience with these investments. First, we have found that the creation of appropriate building reserves to accompany the development of a new facility has not been universal. Indeed, this task is often put off for another day, for the second phase of a campaign or other future fundraising. Second, many organizations have not planned for the increased operating costs of a new or expanded facility, resulting in stressed operating budgets and significant deficits.
As such, organizations with facilities often struggle to create an effective capitalization strategy. The cost of both operating and maintaining cultural facilities over time presents difficult choices to nonprofit managers. Typically, these challenges are addressed after a building is constructed or renovated and outside of the realm of an organization’s overall capital structure and strategy.
Building upon this understanding, this new grant opportunity seeks to encourage arts and cultural organizations with facilities to do two things: fully integrate their ongoing capital expenses into their annual operating program and long-term strategic planning; and, when undergoing major capital improvements to both project realistic, ongoing operating costs and create ongoing building reserves that can be addressed through normal operations.
To this end, Kresge seeks to fund facilities projects that can address increases in operating expenses and the funding of building reserves through the operating budget. These projects should not compromise an organization’s other core capitalization needs. Kresge will also support an organization’s effort to establish an appropriate building reserve as part of its overall capitalization strategy.
Organizations may apply for two types of grants:
- Facility investments grants support both project costs and the creation of a building reserve. This new grant opportunity will prioritize renovation and repair projects. On occasion, we will entertain applications for new construction associated with exemplary sustainability practices or those that embody key principles of urban and community planning to enhance the quality of life in a place.
- Building reserves grants are designed to seed or enhance a fund to support the ongoing maintenance and replacement needs of an organization over time.
Institutional Capitalization invites preliminary applications for its Facility Investments and Building Reserves grants twice a year, in the spring and fall. We are currently accepting preliminary applications through the Kresge Foundation’s new online application system. The fall application period begins on Friday, July 30, 2010 through Wednesday, September 15, 2010, at midnight Eastern Time. In November 2010, we will post a program update on the Web site’s front page announcing the spring 2011 preliminary application period.
All Facility Investments and Building Reserves grant applications can be submitted through the new online application system by clicking “Apply Online” in the gray bar above.
To learn more about applying for a Facility Investments or Building Reserves grant please review A Guilde to Facility Investments and Building Reserves Grant Applications located in the Resources box.
The Arts and Culture Program will no longer consider traditional facilities-capital challenge grant applications. All requests for facilities funding must be made through Institutional Capitalization as outlined above.
Sector Leaders – We wish to support organizations that have demonstrated leadership within their particular discipline. We recognize that many of these organizations, while balancing their budgets still face critical capitalization issues that constrain their ability to fully achieve their mission. Appropriate levels of capitalization that allow an organization to grow or reinvent itself is standard in the for-profit sector, but has not routinely been considered best practice in the nonprofit sector.
The ability to generate or obtain capital to explore a shift in an organization’s business model or to develop innovative solutions for long-term sustainability has been highly limited among arts and cultural organizations. Kresge wishes to reverse this trend among leadership organizations to create exemplars for the field.
Invited organizations will be those that align with Kresge’s values criteria, specifically the four values that guide the Arts and Culture Program: create opportunity, community impact, innovation and institutional transformation. They must be willing to engage in the type of capitalization planning that Kresge is engaging. Grantees must also be willing to engage in Kresge sponsored evaluation efforts, as we wish to build upon and strengthen the sector’s knowledge of capitalization practices and outcomes.
Each spring and fall, we will invite a small number of leading cultural institutions, that are seeking capital to explore such shifts, to apply to this program. We expect to award one or two organizations in this initiative per year.
If you think that your organization is a candidate for this effort, please e-mail an introductory letter of up to 1,000 words to the Arts and Culture Team.
In the letter, please briefly describe your organization and the proposed shift in your business model or strategic innovation for long-term sustainability.
Unsolicited applications for Sector Leaders will not be accepted.
Place-based Cohorts – Beginning in 2011, in partnership with local and other national funders, Kresge will invite arts and cultural organizations with a budget of $1 million or more in select cities to apply for support to improve their overall capitalization. Support will include capitalization grants, technical assistance and advisory services.
Unsolicited applications for Place-based Cohorts will not be accepted.
Strengthening Arts Facilities Effectively – SAFE – In partnership with the Nonprofit Finance Fund (NFF), the Arts and Culture Program plans to work with approximately 20 children’s museums and community music schools on a six-year initiative to assist them in addressing their building maintenance and repair needs within the context of a better understanding of their overall capitalization. The 20 participating organizations will be selected primarily from previous Kresge grantees.
In this $4 million initiative, NFF will provide an in-depth review of an organization’s finances over a multi-year period to help the participants develop and manage cash assets such as capital reserves for replacing building systems. An independent engineering audit of each participant’s building will be the basis for a 20-year maintenance and repair plan and budget.
To incentivize the practice of matching deposits into a capital reserve account, Kresge will provide matching funds to each participant over six years. NFF and Kresge will proactively invite applications.
The Arts and Culture Program Team is currently identifying and developing the cohort groups and as such unsolicited applications for SAFE will not be accepted.
Funding guidelines
In general, all Institutional Capitalization grant opportunities begin the application process with a preliminary application. Grantseekers are asked to analyze their organization’s business model and strategies and define how either improving their facility, changing their business model, or improving their overall balance sheet strength will improve their long-term sustainability.
Institutional Capitalization invites preliminary applications for its facility investments and building reserves grants twice a year, in the spring and fall. We are currently accepting preliminary applications through the Kresge Foundation’s new online application system. The fall application period begins on Friday, July 30, 2010 through Wednesday, September 15, 2010, at midnight Eastern Time. In November 2010, we will post a program update on the Web site’s front page announcing the spring 2011 preliminary application period.
Organizations interested in applying for a Facility Investments or Building Reserves grant are strongly encouraged to read through our Guide to the Facilities Investments and Building Reserve Grant Application, located in the Resources box in the top right of this page. The guide provides more detailed information regarding the materials required to complete your preliminary application and instructions on using Kresge’s new online application system.
Organizations with competitive preliminary applications will be invited to submit full applications. For those organizations that submit promising preliminary applications but require additional support to complete their analysis, planning grants may be made available.
The size of the grant will be dependent on the type of project and the size, scope and business model of the organization. Some grants may be designed as matching or challenge grants. Additionally, full applications will be reviewed to see if other funding methods may be appropriate. In general, multi-year Institutional Capitalization grants will not exceed $1 million and/or a period of three years from the time of the grant award.
Unsolicited full applications are not accepted.
Eligibility
Institutional Capitalization applicants must be organizations based in the United States and, if government-owned, must be operated by a separate 501(c)(3) organization. Start-up organizations and those organizations that are government-owned and operated are not eligible to apply for facility investments or building reserves grants.
Institutional Capitalization applicants must submit an audit for their most recently completed fiscal year prepared by a certified public accountant in accordance with U.S. Generally Accepted Accounting principles or Government Accounting Standards. Compilations, reviews, or financial statements prepared on a cash or modified cash basis will not be accepted. If the timing does not allow you to submit an audit for the most recently completed fiscal year, submit the prior year’s audit.
Additionally, organizations applying for facility investments or building reserves grants must be able to demonstrate positive liquid unrestricted net assets. Please see the Unrestricted Net Assets Tool and the Instructions for Completing the Unrestricted Net Assets Tool located in the Resources box on the Arts and Culture Supplemental Attachments Checklist page.
For more information regarding eligibility and preliminary application requirements, please read our Frequently Asked Questions and the Guide to the Facilities Investments and Building Reserves Grant Application located in the Resources box.
If you have questions, e-mail the Grants Inquiry Coordinator or call 248-643-9630.