Collaborative funds, known to many as intermediaries or re-grantors, are among the most effective entities for advancing social change. By pooling philanthropic dollars, deepening learning and relationships, and mobilizing resources at the intersection of issues, these funds hold a unique and growing role in the philanthropic ecosystem.
But this critical work, of course, has a cost. And too often, intermediaries are forced to absorb much of that cost.
Collaborative funds are often incentivized to participate in a siloed race to provide services at lower cost. This bending to donor expectations perpetuates a nonprofit starvation cycle, pushing collaborative funds to not fully account for the breadth and depth of the work they provide — thereby blunting their potential to deliver critical work.
However, accounting and professional services firm BDO USA worked with Borealis Philanthropy to develop a new, accurate, and values-driven financial model. We invite others in the sector to join us in a wider conversation about aligning values, practices, and beliefs with the models and structures we use.
Building a Values-Driven Financial Model
Financial models express who an organization is, the values they hold, and the work they do.
In 2023, Borealis Philanthropy partnered with BDO to better understand what was, and wasn’t, being accounted for in its financial model, and to develop a model that is more powerful and values-aligned. To date, Borealis has received flexible, multi-year support that covered costs not fully funded by core donor contributions. With those general operating funds dissipating, a new financial model was necessary to ensure Borealis’ long-term viability.
Together, we sought to answer a central question: What does a healthy, well-resourced, collaborative fund’s financial framework look like? We built a cross-cutting design team, including Borealis staff members, the BDO team, and Borealis’ board treasurer, Jeanne Bell, to find a path forward. Critically, this six-month effort built upon true cost research and practice work among 12 large private funders that was facilitated by BDO.
Iterative and spirited conversations led to the co-creation of a flexible and holistic financial model – one rooted in a commitment to equitable and responsive grantmaking that reflects the full cost and breadth of sustaining grassroots movements for justice.
Key Lessons
Below are some of the lessons we are learning from this process.
1. Experimentation and Dreaming Required
Our design team knew a singular solution wouldn’t address and solve the complicated set of challenges facing equity-focused collaborative funds. As a result, we decided to pursue the power of experimentation. The nonprofit sector at large needs to transcend the limits of existing nonprofit models to dream new possibilities of organizing movements. Many working in the nonprofit ecosystem — especially BIPOC, femme, disabled, and queer leaders and organizers — have taken on traditional financial models. Now is a critical time to build new models rooted in vision and values.
2. Understanding and Accounting for the Whole
Baked into Borealis’ DNA is a commitment to providing wrap-around capacity-building support to grantees, including learning opportunities related to narrative power-building, healing justice, fundraising and finance, security, and more. To keep operations spending as low as possible, Borealis was providing core wrap-around services to its grantee partners, but without dedicated resources. “Borealis has always provided a critical set of core supports to its grantee partners,” shared Borealis board member and design team member Jeanne Bell. “It’s always been part of the approach and key to Borealis’ impact and success. It was just never specifically budgeted for and therefore not resourced.”
This led to the realization that Borealis was undercharging. A new category called “movement support services” was added to Borealis’ budget to account for this critical support and codify the full-spectrum model of support Borealis had already been providing.
3. Financial Models Can Be Living Frameworks
Going into this process, there were assumptions we didn’t know we had to “undo” —including that an impactful framework had to be static. We determined that Borealis needed a financial model that could bend and shift with evolving needs, the needs of partners, and the broader sociopolitical landscape. Remaining nimble and responsive is necessary when supporting movements.
That is why the new financial model we designed is a living framework.
In place of immutable percentages, we established ranges for each of three expense buckets (see graphic above). The annual allocation of donor contributions to each bucket will be finalized during Borealis’ budgeting process and will shift within the identified ranges as Borealis, movement needs, and the funding environment changes.
4. This Work can be Messy and Hard. And It’s Worth It.
Greater collaboration leads to greater impact — but it’s also more work (for now). While this financial model is better aligned with Borealis’ recently revised Theory of Change, it also requires more time and practice dedicated to priority setting and decision making.
While much of Borealis’ work was already deeply collaborative, the new model meant reimagining how staff members and departments work together across teams in ways that could not fully be anticipated. For example, program staff were accustomed to budgeting movement support services individually by fund. However, the new financial model requires deeper coordination and collaboration to allocate resources to top priorities.
Making This Change Together — With Funder Support
We are sharing this work in the hope that it sparks a dialogue to address a systemic issue that each collaborative fund has, until now, been left to navigate on their own.
Embarking on this change process, Borealis believed that funders would embrace this work, and they did. Many long-time Borealis funding partners shared similar concerns about the former financial model, acknowledged Borealis was not alone, and shared that they — like Borealis — didn’t have the answers. These funders encouraged Borealis to be unapologetic about how they allocate funding to all of their activities moving forward—including core operations and non-monetary support to partners, provided that the dollars are spent wisely and on meaningful efforts aligned with movement-identified priorities.
“Equity-focused collaboratives like Borealis have been a critical partner in our work and our ability to support progress,” shared Kathy Reich, who leads the Ford Foundations’ BUILD program. “We knew that their financial model did not fully express the true cost of the services they provide to movements. We hope this new model leads to a more sustained, powerful movement ecosystem, including a true accounting of what it takes to support and sustain this work.”
Join Us
Having a financial model that reflects shared visions benefits everyone. When collaborative funds like Borealis are fully supported, values-aligned, and include space for imagination and joy, they — and thus, the philanthropic sector at large — are better positioned to not only disrupt old systems, but also to build a new path toward a more just and equitable future.
As we move forward in this collective work, here are some guiding questions for funders and collaborative funds:
- Funders: Are you working with collaborative funds? How are you supporting them? What does their financial model look like? How are you resourcing them to be strong, effective partners? Have you considered providing them with general operating support?
- Collaborative funds: Is your financial model aligned with your vision and values? What models have you adopted and why? Are they serving you, supporting your work, and the work of the field?
We invite you to join us with Philanthropy Together on June 17 at 2pm Eastern time for a webinar where we will share more about how we moved through this iterative process, how the implementation of Borealis’ new financial model is going, and why reimagining financial models is critical to the pursuit of liberation.
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Rodney Christopher is a senior advisor on the Nonprofit & Grantmaker Advisory team at BDO USA. For three decades, he has worked with nonprofits and philanthropy across the U.S. as a consultant, impact investor, and funder. He currently focuses on helping funders engage with grantees about their financial and operating needs so nonprofits can deliver on their mission long term. He seeks to do this work systemically whenever possible.
Amoretta Morris is the President of Borealis Philanthropy. For the last 20 years, she has worked to build power, equity, and justice by supporting community-led change. Prior to Borealis, Morris led national community change work at the Annie E. Casey Foundation for nearly a decade, partnering with local communities to build change from the ground up.