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Understanding the Arts and Culture Program’s Facility Investments and Building Reserves Grant Opportunity . Agenda. About The Kresge Foundation Institutional Capitalization Goals Capitalization Preliminary Application. 2. The Kresge Foundation.

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Understanding the Arts and Culture Program’s

Facility Investments and Building Reserves Grant Opportunity

  • About The Kresge Foundation
  • Institutional Capitalization Goals
  • Capitalization
  • Preliminary Application


the kresge foundation
The Kresge Foundation
  • The Kresge Foundation is a $3.1 billion private, national foundation that seeks to influence the quality of life for future generations through its support of nonprofit organizations
  • The Foundation works in seven program areas:
    • Arts and Culture
    • Community Development
    • Detroit
    • Education
    • Environment
    • Health
    • Human Services


the arts and culture program
The Arts and Culture Program
  • The Kresge Foundation’s Arts and Culture Program seeks to build vibrant communities enlivened by the presence of healthy arts and cultural organizations, creative and well-supported artists, and well-integrated arts and community-building efforts
  • The Arts and Culture Program is focused in three areas:
    • Institutional Capitalization
    • Artists’ Support Services
    • Arts and Community Building
  • This slide presentation addresses the Facility Investments and Building Reserves grant opportunity within the Institutional Capitalization Focus Area


about institutional capitalization
About Institutional Capitalization
  • Through the Institutional Capitalization focus area, Kresge expects to see:
    • A shared understanding of basic definitions, principles and practices of capitalization
    • The adoption of capitalization best practices among organizations
    • 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
  • This focus area provides support in four areas:
    • Field-wide efforts to promote and adopt capitalization principles
    • Facility Investments and Building Reserves
    • Sector Leaders
    • Strengthening Arts Facilities Effectively (SAFE)


about facility investments and building reserves
About Facility Investments and Building Reserves
  • Why facility investments and building reserves?
    • The Arts and Culture Team’s Institutional Capitalization focus area uses facilities and building reserves as an entree to help organizations examine their level of comprehensive capitalization
    • While this grant opportunity places an emphasis on facility investments and building reserves, it is truly about comprehensive organizational capitalization


what is capitalization
What is Capitalization?
  • Capitalization is the accumulation and application of resources (operating and working capital, operating reserve, risk capital, endowment and building reserve) to support achievement of an organization’s mission over time.

Elements Needed by All

Needed by Some


Building Reserve

Risk Capital

Operating and Working Capital

Operating Reserve

Ensure appropriate longevity of programs

Steward necessary fixed assets and collections

Design, test, and refine effective programs

Deliver high quality and effective programs

Maintain adequate supportive infrastructure

Source: TDC


why does capitalization matter
Why Does Capitalization Matter?
  • Without adequate capitalization, your mission is at risk.

Capital Fund


Risk Capital

Inadequate Operating and Working Capital

Inadequate Operating Reserve

Inadequate Endowment

Inadequate Building Reserve

Warning Signs

Passing up new program ideas.

Inadequate cash flow to handle expansion.

Borrowing from advance ticket sales.

Permanently drained lines of credit.

Making payroll is an adventure.

Collections calls.

Chronic deficits are covered by endowment and reserve draws with no way to replenish.

Roof has been leaking for past 18 months.

Collections are crumbling.



Inability to innovate or realize benefits from innovation.

Inability to spend adequate resources to create quality programs.

Inability to attract talent or maintain quality partners and vendors.

Inability to weather risks, and/or inability to deliver quality product over time.

Inability to steward fixed assets or collections.

Source: TDC


how well are you capitalized now
How Well Are You Capitalized Now?
  • Capitalization is embodied in the balance sheet
  • The balance sheet records an organization’s accumulated financial performance over time
    • The Income Statement (the Statement of Activities) shows only one year’s revenue and expenses
  • The balance sheet also demonstrates the strength and availability of an organization’s asset base to support its future
  • Finally, the balance sheet shows an organization’s degree of liquidity

Source: TDC


unpacking the balance sheet
Unpacking the Balance Sheet
  • What are we looking for in your balance sheet?

Income Statement



Net Income

Balance Sheet



Fixed Assets

Total Assets





Net Assets

Total Liabilities and Net Assets

Elements of Capitalization

Requires Liquidity

Operating and Working Capital

Operating Reserve

Building Reserve

Risk Capital


Source: TDC


what are we looking for in a capitalization strategy
What Are We Looking For in a Capitalization Strategy?
  • There are no cookie cutter answers
  • A capitalization strategy looks at four distinct pieces:
    • Mission and vision
    • Business model drivers
    • Time horizon
    • Marketplace
  • With this in mind, the strategy determines the types of funds required
  • It then articulates the necessary size of the funds, the timing of the need, and the method for obtaining the required resources

Source: TDC



What Are Your Business Model Drivers?


Audience + facility

Audience + high fixed costs

Audience + facility + high fixed costs

Fixed costs

Fixed costs

High flexibility

Low capital intensity

Low flexibility

High capital intensity

Source: TDC



What is Your Time Horizon?

Medium Term (Organizational View)

Long Term

(Institutional View)


(Individual View)

Artistic expression fulfills established brand identity

Obligation to persist as civic anchor or long-term stewardship of collection or art form

Highly specific artistic expression – often focused on a particular artist

Fixed costs

Fixed costs

Fixed costs

Rented or borrowed facilities

Fixed costs must be tightly controlled

Highly flexible with limited fixed costs

Fixed costs extensive and multi-faceted

Facility ownership often necessary

Facility ownership may or may not be supportable

  • Higher risk tolerance may be appropriate
  • Requires coverage of basic needs – working capital, risk capital, and operating reserves.
  • Level of obligations call for low risk tolerance
  • Requires larger scale of basics and, often, plant reserves and endowment to meet all obligations.

Source: TDC


importance of the marketplace
Importance of the Marketplace
  • A thorough understanding of the marketplace tests the mission and vision and predicts the resources available by asking:
    • Who is the anticipated audience? Is the product or service needed or wanted in the community? What level of support will they provide?
    • With whom might the organization be competing locally for audience and support?
  • These questions can only be answered in the context of the local community and are particularly important during projected program or facility expansions

Source: TDC


  • Analyzing the marketplace also helps determine necessary operating resources for the environment
    • With whom is the organization competing for talent and key resources? How does that impact fixed costs?
    • What investments are necessary in marketing and development?
  • Organizations with facilities must also define long- term systems replacement needs
    • These organizations often operate with a systems replacement plan (SRP), which articulates anticipated need, but does not address the funding of those needs.

Source: TDC


what are we looking for in a strategy
What Are We Looking For in a Strategy?

Time Horizon and Business Model Drivers

  • Mission/Vision
  • Artistic/cultural production
  • Theory of change for impact on audiences and other beneficiaries
  • Market
  • Customers
  • Donors
  • Competition
  • Resources
  • Ongoing resources to sustain operations and a facility if appropriate
  • Human resources
  • Key investments

Planning process informed by Mission/Vision, Market, and Resources engages board, staff, partners, and supporters, and encourages a holistic understanding of the organization.

Integrated Strategy

Programmaticstrategymaximizes artistic quality and impact

Organizationalstrategyincludes adequate human and other resources for marketing, development and space

Capitalization strategy articulates size and shape of capital needs grounded in organization’s inherent business model drivers and strategic goals

Source: TDC


what does this look like over time
What Does This Look Like Over Time?
  • Once need is defined – prioritize!
  • The capitalization strategy identifies the needs and sources, and prioritizes among them
  • Generating reserves often implies surpluses. Break-even budgets do not allow organizations to implement a real capitalization strategy
  • Preserving the more capital-intensive funds is difficult without adequate operating funds

Elements of Capitalization

Operating surplus

Operating and Working Capital

Operating Reserve

Surplus or non-operating fundraising

Building Reserve

Risk Capital

Net Assets


Non-operating fundraising

Source: TDC



Preliminary Application

Facility Investments and Building Reserves


getting started
Getting Started
  • Read the supporting documents on the Kresge Web site:
    • Capitalization Philosophy and Terms
    • Guide to Strategic Planning
    • Guide to Building Reserves
    • Search the Kresge Foundation online library for additional reference materials.
  • Capitalization is a new topic for many, and we believe that reviewing these materials in their entirety before applying will help applicants


  • Who is eligible?
    • Organizations with arts and culture as the primary purpose of their mission
    • US-based organizations
    • 501(c)3 organizations not classified as a private foundation
    • Organizations with facilities that are government-owned, but operated by separate 501(c)3 organizations
    • Organizations with audited financial statements
  • Who is not eligible?
    • Organizations with an active grant from Kresge
    • Art-focused subsidiaries of larger parent organizations such as universities or human services agencies
    • Start-up organizations (less than two years of operational history)
    • Government-owned and operated entities
    • Organizations with compilations or reviews, or financial statements prepared on a cash or modified cash basis


what we support
What We Support
  • Organizations may apply for two types of grants:
    • Facility Investments and Building Reserves
    • Building Reserves
  • If seeking a facility investment, renovation and repair projects will be prioritized over new construction.
  • We do not fund reserves solely for equipment.
  • Grant amount will be dependent on the type of project and the size, scope and business model of the organization. However, grants will not exceed $1 million and/or a period of three years.
  • Some grants may be awarded on a matching or challenge basis.


a highly competitive process
A Highly Competitive Process
  • Spring 2010: 141 preliminary applications; 21 invited full proposals; nine Facility Investments and Building Reserves grants
  • Fall 2010: 134 preliminary applications; 10 invited full proposals; five Facility Investments and Building Reserves grants
  • Spring 2011: 152 preliminary applications; 22 invited full proposals; nine Facility Investments and Building Reserves grants


criteria and review process
Criteria and Review Process
  • Step 1: Competitive assessment of preliminary applications
  • for alignment with the Arts and Culture Program’s values:
    • Create opportunity and enhance access to arts and culture through authentic and relevant programs that exemplify excellence in the field; that involve people of all social and economic backgrounds; and increase participation of new and non-traditional audiences.
    • Exhibit a high level of community impact through work that contributes to a vibrant arts and cultural ecosystem and exemplifies excellence in the field; benefits the broad local community and reflects the diversity of the community population; advances community building efforts; and embodies key principles of community planning to enhance quality of life.


criteria and review process1
Criteria and Review Process
  • Values continued:
    • Stimulate innovation through work that furthers best practices in the field; uses new and possibly untested approaches; and brings multi-party, interdisciplinary approaches to problems that defy solution by a single sector.
    • Support institutional transformation and the capacity to profoundly influence the overall organization and its operations; or create new business models to strengthen financial stability.


criteria and review process2
Criteria and Review Process
  • Step 2: Competitive assessment of the overall quality of the preliminary application and the strength of the comprehensive capitalization strategy including:
    • Evidence of planning, including but not limited to external market research and analysis for earned and contributed revenue, benchmarking research, system replacement strategy
    • Evidence that the proposed project fits within the larger capitalization strategy and that it is the next appropriate step in that strategy, and that the organization understands how the proposed project will impact the future operating budgets and balance sheet
    • Evidence of a realistic fundraising plan, if appropriate to the request
    • Assessment of the liquid unrestricted net assets available for operations
  • The determination as to whether to request a full application is assessed on the competitiveness of the overall preliminary application.


competitive elements
Competitive elements
  • Competitive preliminary applications demonstrate the following:
    • Values that are addressed in a detailed way and which align with those of the Arts and Culture Program
    • A capitalization strategy that aligns with the organization’s mission and strategic plan, and which:
      • Accurately diagnoses business model drivers
      • Defines the needs and plans for each type of fund, and prioritizes among them
      • Includes a strategy to build surpluses and reserves over time
    • Building reserves strategies based on a realistic plan, accurate data, and policies which address use, withdrawal and replenishment
    • Realistic fundraising plans, when appropriate to the request
    • Evident collaboration among the CEO, CFO and Development staff in completing the application
    • Unrestricted Net Asset Tool correctly completed


how to apply
How to Apply
  • All Facility Investments and Building Reserves grant applications must be submitted through our online application system.
  • Visit the Facility Investments and Building Reserves page on the Kresge website and click on “Apply Online” in the Quick Links section. This will take you to an instruction page and provide access to the online application.


current preliminary application deadline
Current Preliminary Application Deadline
  • Deadline for the Fall 2011 call for applications is Thursday, March 1, 2012, at 5p.m. Eastern Standard Time.
    • This is the final call for applications for this grant opportunity.
    • Within 10 weeks of the part-one submission deadline, we will contact all applicants. At that time, we will invite those with promising requests to complete the second part of the application process.
  • Final grant-amount decisions will be made after review of the two-part application and conversations with the potential grantee. In most cases, awards do not exceed $1 million and cover a period of up to three years.



The Kresge Foundation

3215 W. Big Beaver Road

Troy, Michigan 48084