NFF helps The Colorado Health Foundation implement more inclusive grantmaking practices.
For the last several years, NFF has worked with The Colorado Health Foundation (CHF) to rethink its financial due diligence process for grantmaking. The goal was to move past traditional financial risk models that favor well-resourced organizations toward a more inclusive grantmaking process that supports organizations that have less power, privilege, and income, and who have been impacted by systemic and historic barriers.
“We’re first and foremost a community-informed funder,” explains Kelli Rogers, Senior Grants Manager at CHF. “We were doing a lot of grantmaking to grassroots organizations that might appear less favorable with traditional financial ratios. We realized that what we were doing in practice wasn’t necessarily reflected in our guidance of how we do financial reviews.”
The collaboration with NFF’s Consulting practice yielded a financial review process that uses data not as a gate to determine eligibility but rather as a starting place to more holistically understand an organization’s operating reality.
“Us forming an opinion about an organization’s financial risk doesn’t necessarily tell us anything about how they show up in community, how they are working toward impacts on the social determinants of health that we seek to fund,” Rogers says. “This process better matches our and our partners’ intents.”
Rethinking Financial Indicators
The collaboration began with the recognition that health – CHF’s grantmaking focus – is a broad field, and nonprofits across that field have different operating realities and different needs. Health is not strictly a medical concern. An organization might support a person’s and community’s health by providing primary care, increasing food access and security, or building affordable housing. NFF helped CHF diagnose this challenge and create a financial review process that accommodated these differences as part of a larger due diligence effort.
At the beginning of the collaboration, CHF made decisions based on eight financial ratios from over 13 pieces of data.
NFF worked with CHF to narrow down measurements to three metrics that would give a strong sense of the organization’s financial context and point to further questions a program officer could pursue to understand what supports would be needed and what challenges and opportunities the organization anticipated moving forward. It wasn’t just a new tool; it was also a new way of working that strengthened the relationship between CHF and its partners.
“It allowed us to focus on the contextual complexities of an organization’s finances and the underlying tensions that they’re trying to hold in balance, rather than being just focused on good/bad, yes/no,” Rogers says.
The framework solidifies a crucial change in approach. The gatekeeping role the financial review might have previously held has evolved into an exploratory orientation to better understand challenges and opportunities, and to find ways to work together to address and prepare for them. The new process helps ensure that an organization’s financial status and the systemic barriers they’ve faced aren’t used to penalize or disadvantage them in grantmaking decisions.
“We refer to the organizations we support as grantee partners, because we truly are partners in this work,” explains Ryan Severts, Senior Director of Grantmaking Operations at CHF. “Even if we don’t end up funding certain projects because they might not be aligned, we’re still having those conversations and building those relationships from a financial perspective that will help them get the capacity supports they need to be stronger and ultimately help their communities to be stronger.”
The Three Metrics That Matter
The Colorado Health Foundation starts with these financial indicators to better understand a nonprofit’s financial health.
Operating Surplus/Deficit
Shows an organization’s ability to cover its consistent operating expenses with its reliable and recurring revenue. This metric reflects the strength of an organization’s business model.
Months of Cash
The number of months an organization could operate with current cash reserves if revenue were to suddenly cease. This metric represents an organization’s liquidity (i.e., access to cash) – its ability to manage its short-term obligations and weather the predictable ebbs and flows of cash throughout the year.
Months of Available Net Assets (Without Restrictions)
The number of months an organization could operate with current available reserves if revenue were to suddenly cease. This metric represents an organization’s safety-net without restrictions – its ability to adapt to pursue new opportunities and to manage planned and unplanned risks.
Over a Decade of Partnership
The move toward more trust-based financial reviews didn’t happen overnight. It grew out of NFF’s ongoing partnership with CHF, which began in 2014 and involved both work with CHF’s grantee partners on financial management as well as coaching and training for the foundation’s philanthropy team. This partnership has allowed NFF to center learning, incorporating lessons from each initiative into subsequent projects to better serve CHF and its clients.
“That long relationship has made this kind of change easier, because NFF has always been so good about raising up the themes that they’re hearing from the community,” Rogers says. “It gives us the data to inform any changes that we want to make internally.”
Both NFF and CHF have adapted over the years to meet the needs of nonprofits amid economic and political change – as well as a global pandemic. Ideas like trust-based philanthropy, community-centered design, and capacity building have become key pieces of the work. One of the greatest takeaways of the work has been the power of grantmaking combined with capacity building, explains Brian Kellaway, NFF Senior Director, Consulting:
“Capacity building will never replace the importance of grantmaking, particularly unrestricted grantmaking, directly to nonprofit organizations. However, funding combined with capacity building can multiply the impact of philanthropic grantmaking. When nonprofit leaders have access to the support that they need to navigate opportunities and challenges, they can focus more of their energy on the communities they serve.”
The work NFF and CHF are doing today is only possible because of the trust that’s been built over the years, Severts says: “One thing that I’ve really appreciated about working with NFF is the trust – not only between us and NFF, but the trust NFF has developed with our local Colorado communities in partnership with us. It is invaluable. That doesn’t happen overnight. It’s great to have a partner that’s aligned with our values and the direction we want to go.”
TCHF & NFF Partnership Journey
2014-15 | Landscape analysis of Federally Qualified Health Centers (FQHC) and community clinics under Medicaid expansion.
2016-17 | Five two-day financial leadership workshops for FQHCs and community clinics.
2016-Present | Coaching and training for CHF’s Community Investment & Impact team.
2017-20 | One-on-one consulting for FQHCs and community clinics to plan and implement a new strategy using $250,000 in flexible grant funding.
2018-19 | Colorado CAN!: Six two-day seminars for nonprofits that address the social drivers of health to build financial capacity and engage with peer organizations.
2020-24 | Advancing Team-based Care: One-on-one consulting and peer convenings for FQHCs and community clinics to increase nonprofit leaders’ financial acumen to support and sustain new approaches to team-based care.
2020-Present | On-call support to dozens of nonprofits for day-to-day financial planning, management, and strategic decision making.
2021 | Focus groups with nonprofit leaders in support of a community-informed design to improved capacity building initiatives.
2021-22 | Six-part webinar series, one-on-one coaching, and learning circles to build financial management knowledge of nonprofit leaders.
2022-25 | Community Builders: Co-designed, customized technical assistance to support adaptability for underserved nonprofits and to increase confidence in financial management.
Visit NFF’s consulting page to see how our loans help organizations like The Colorado Health Foundation achieve their goals.
