Responding to Crisis/Opportunity: The F.B. Heron Foundation’s Opportunity Fund

Thursday, April 29, 2010

By John Weiler
Senior Program Officer, F.B. Heron Foundation

Like many of its colleague funders, the F.B. Heron Foundation experienced a sharp decline in its charitable assets in 2008 and early 2009. At the same time, Heron recognized that many of our “customers” (i.e., grantees and investees) had opportunities to support low-income families through the economic downturn and to inform government policies as they were developed. In response to this crisis/opportunity, in December 2008 Heron’s Board approved an “Opportunity Fund” in addition to our ordinary grant budget to support grantees as they worked to create and preserve wealth for low-income families. Through the end of 2009, this fund has disbursed approximately $1 million in addition to Heron’s ordinary grant budget.

Heron’s historic approach has been to build a portfolio of high performers across our wealth creation and preservation programs, supporting organizations over time with core support and, where appropriate, program-related investments (PRIs). In order to smooth out charitable distributions projections, in 2004 our Board approved an allocation methodology based on a five-year rolling average of the net value of non-charitable use assets for annual charitable distributions (grants and PRIs).

When the markets headed south in 2008, we reviewed conditions with our Board at a special October meting and adopted a contingency plan based on three scenarios (bad, worse, extreme). For our grantmaking program, the scenario that we implemented meant “hanging in there” with the customers currently in the portfolio, but with no increases and no new relationships.

Our staff was in especially close contact with our customers throughout the fall of 2008. We heard how the worsening economic climate and the paralysis in the financial sector were affecting them. At the same time, a number of our customers were engaged with people close to the incoming Administration, and were excited—but realistic—about the impending changes and the opportunities to build and preserve wealth in lower-income communities.

Heron staff shared our early findings with our Board and, in December 2008, the Board approved a $2 million Opportunity Fund to be deployed over 18-24 months. The Board directed that Opportunity Fund grants should be aligned with our mission and programs and should:

  • Be deployed to support efforts designed to leverage scale (likely to translate into policy engagement);
  • Support activities within our geographic concentration areas in addition to regional and national efforts; and
  • Support high-performing organizations with demonstrated track records/leadership to accelerate their efforts.

The Board delegated review and approval of grants to the President in order to enable the Foundation to act nimbly and provide “rapid response” to grantees; the staff agreed to report regularly to the Board on the progress of grantmaking through the fund.

Initial Opportunity Fund Activities in 2009
The Opportunity Fund was an important supplement to Heron’s “ordinary” grant budget in 2009. In addition to just over $10 million in regular grants to about 140 customers, Heron also made a dozen grants totaling nearly $1 million through the Opportunity Fund.

The uses of the Opportunity Fund were in alignment with those that were anticipated when the fund was approved last year. Examples of grants included:

  • Scale—an early unrestricted grant to the National Community Stabilization Trust. The Trust is now operating in 160 cities and counties and expects to transfer about 7500 foreclosed properties in 2010 from financial institutions to buyers for the purpose of stabilizing low-income communities;
  • Policy—a grant to Demos enabled them to communicate more effectively on credit card reform (which was successfully passed) and the creation of a Consumer Financial Protection Agency (still under consideration), as well as other financial regulatory matters;
  • Support for high performers—a grant to the Low Income Investment Fund to bolster their loss reserves against homeownership loans; and
  • Support for geographic concentration areas—grants in New York City and Texas to preserve wealth by preserving homeownership for lower-income families.

Finally, the “rapid response” system approved by the Board enabled the Foundation to act nimbly. The Foundation was able to provide grantees with approval and sometimes funding within days or weeks, which allowed them to proceed with confidence in a rapidly evolving landscape for policy and practice. In one case, a modest Heron grant ($5000) enabled a thinly capitalized grantee to fly community leaders to Washington on short notice for a high-level meeting with administration officials who were contemplating regulation revisions.

Heron’s Opportunity Fund is very much a work-in-progress. We are eager to hear and learn from colleagues who have taken their own extraordinary measures to help high-performing nonprofits expand their impact in these challenging economic times.

John Weiler has been at the F.B. Heron Foundation since 1999 and is currently responsible for the foundation’s grantmaking and program-related investing in New York City. Before joining Heron, Mr. Weiler directed national employment programs for the Corporation for Supportive Housing. Prior to that, he was the Director of Economic Development for Common Ground Community, a New York City nonprofit. Mr. Weiler’s other nonprofit experience includes work at the Development Training Institute. He began his career in banking, with positions at Chase Manhattan Bank and Manufacturers Hanover Trust. Mr. Weiler serves on the board of the Neighborhood Funders Group and the Neighborhood Trust Federal Credit Union and on the advisory committee for the NYC Acquisition Fund and New York City’s Office of Financial Empowerment, and has served on Philanthropy New York’s program and City Connect committees.

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