In the supply/demand equation, organizational structures matter

The subject of whether there is a supply/demand problem in the nonprofit cultural sector is resonating with a lot of people, and for me it’s caused reflection on what’s changed that’s brought us to this discussion.   And one thing that has changed is funders’ expectations for what constitutes an appropriate grantee.

In the 1970’s and 1980’s there existed a number of intermediary cultural organizations that no longer exist (or exist with a changed mission), some national and some local, whose purpose in part was to provide the organizational structure and legal framework for associations of artists and individual artist’s creative projects to qualify for support from the philanthropic sector – government, foundations, and individuals.   In practice these organizations sought out, approved and then sponsored independent projects so that the artists involved could receive contributed support, and they allowed philanthropists to deduct their gifts by providing a bona fide tax exempt organization as the gift recipient.

I ran one such organization, at the time called Alameda County Neighborhood Arts Program (ACNAP) and then re-named Pro Arts, that provided project management and fiscal agent services for a few dozen small arts organizations and individual artist’s projects in the San Francisco Bay Area. We helped donors and artists, allowing each to take advantage of the management systems and processes that a tax exempt organization requires, but allowing the artists to remain unencumbered by the mini-bureaucracy that is required of a tax-exempt enterprise.

Over time, grantmakers decided that giving through “fiscal agents” (sometimes called “sub-granting”) did not provide adequate management, legal, or fiscal oversight of individual projects, and their guidelines became explicit that such applicants were not eligible for grants.  Another policy that undermined these more-flexible structures is that grantmakers developed rules about giving only one grant per recipient.  So, if you were an organization sponsoring dozens of projects, you would allow only one of them to apply to any given grantmaker.

In essence these guidelines against structural flexibility were public policy decisions made by grantmakers, resulting in each applicant becoming a federally approved tax exempt organization.  These policies also resulted in the expansion in the number of organizations because uniqueness, not collaboration, was rewarded.  Without your own board of directors, management structure, and tax exempt status, you could not be eligible for funding from most grantmakers.

It is exciting to see the way artists and new organizations are now evolving new structures that allow the public and private sector to support culture without creating more cultural institutions.  Innovators like USA Artists, Kickstarter, and Fractured Atlas provide flexible mechanisms for individuals, corporations, foundations, and government to provide support for artists’ projects without requiring that each artist or small organization become a 501(c)(3).  

I suspect that the the majority of vibrant tax exempt cultural organizations today have the capacity to create alliances, mergers, or other associations that would result in new creative bonds and less money spent on management and administration.  What’s needed to encourage this is a broad dialogue about the best structures for creativity, and a willingness on the part of the philanthropic sector to consider how to reward new ways to work.

In a future post I’ll lay out some ideas for how we might reshape our organizational structures and funding relationships based on today’s circumstances.  Please help me by sharing your ideas for how this can be accomplished, or point to successful new models that are already working.