Lean Funders Can Help Nonprofits Tackle Inflation Costs

Families across the country continue to struggle with the rising cost of food, gas, housing, and more. Even Halloween candy prices were up 13% this year! Even more scary: nonprofits are facing the same inflation pressures—and many of them came into 2022 already facing declines in donations, a cliff in pandemic relief support, workforce shortages, and increased demand for their services.

To meet rising costs, nonprofits face difficult choices. While they can work to raise more money, it takes time away from important programmatic priorities. Nonprofit leaders can try to cut costs, including eliminating staff cost-of-living adjustments. However, then they run the risk of not being able to carry out their critical missions. Some organizations could run a deficit and tap into reserves, but most nonprofits do not have that option.

How You Can Help Nonprofits Tackle Inflation Costs

As a lean funder, you have an opportunity to show you understand these difficulties by helping your nonprofit partners address rising inflation costs. And you can do so quickly by adding 10% to each of your active grants. Sending an extra $3,000 to a grantee that received a $30,000 grant may not sound like a lot. But it can make a big difference in helping with challenges today.

Earlier this year, we told our active Fidelity Charitable Trustees’ Initiative multi-year grantees that we were adding more money to their grants to account for inflation and the rising costs they’ve experienced during the last year. As a nonprofit- and sector-strengthening funder, we thought it was imperative to get creative and make sure we were looking out for the very organizations that we ask to bolster other nonprofits.

How a Lean Funder Made This Happen

We wanted to ensure that our multi-year grantees who applied for funding before the inflation surge would not get penalized for having a multi-year grant. This practice supports nonprofit sustainability and reduces administrative costs. Thus, our trustees approved proactively adding roughly 9.1% (the inflation rate as of 6/30/22, a 40-year high) to their next grant payment. For example, if someone’s next payment was $100,000, we’re making it $109,000. If they had already received their payment during the last few months, we sent extra funds.

This wasn’t a major financial or administrative burden, and the response was unlike anything I’ve seen before. The CEOs really appreciated our proactively recognizing that their financial situations had changed this year due to forces beyond their control.

This was possible largely because the Trustees’ Initiative is a lean funder. There wasn’t a lot of red tape to go through. To illustrate, I went directly to our board members to calculate the cost, make the case, show them two funders who had made similar decisions (thank you, Aviv Foundation and Woodcock Foundation), get approval, amend our grants, and notify the grantees.

Start with Grantees Who Have the Smallest Budget Sizes

You can do this too. Alternatively, if you feel that your own internal budget might constrain doing this for all grantees, start with those who have the smallest budget sizes, or otherwise already have less access to resources.

We’d love to hear what you’re doing to help nonprofits manage rising costs. Add in the comments below what practices you’ve adopted.

About the Author

Tony Bowen is Vice President of the Trustees’ Philanthropy Fund at Fidelity Charitable. The Fidelity Charitable Trustees’ Initiative is a grantmaking program within Fidelity Charitable^® that ensures nonprofits have the resources they need to reach their full potential. We fund organizations that strengthen nonprofits, improve donor effectiveness, and advocate for financial resources for the nonprofit sector.

The views and opinions of third-party content providers are solely those of the author and not Fidelity/Fidelity Charitable. Fidelity/Fidelity Charitable does not guarantee the accuracy of the information provided by such third parties.