Capitalization
Grantmakers in the Arts defines capitalization as “the accumulation of the resources an organization needs to fulfill its mission over time,” specifically regarding financial health. Capital is money saved in order to respond to challenges and opportunities. Capital is different from revenue (which is immediately spent), and from assets like endowments or facilities (which are not available as liquid cash that can pay expenses). It has been the norm for the nonprofit arts sector to be poorly capitalized, an issue which disproportionately affects organizations of color. In response, GIA embarked on the National Capitalization Project (NCP) in 2010. Since its launch, GIA has provided resources, conferences sessions, publications, and workshops on nonprofit capitalization. GIA’s Capitalization and Nonprofit Financial Health Workshops are specialized workshops, held separately for funders and nonprofit grantees, focusing on what each group can do to support the financial health of nonprofit arts and culture organizations. GIA has also updated the workshop to reflect the financial impacts of the pandemic and to reflect a racial equity lens. These workshops are available either in-person or online by contacting workshops@giarts.org.
February 2012, 31 pages. The Paul G. Allen Family Foundation, 505 5th Avenue South, Suite 900, Seattle, WA 98104, www.pgafoundations.com.
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Read More...In June 2011, Nonprofit Finance Fund published a new series on the need for and uses of capital in the arts.
Read More...The presentation of the National Capitalization Project (NCP) engendered a robust discussion at the October 2010 GIA conference in Chicago. GIA heard a range of responses from attendees. While some were very positive — agreeing that capitalization principles are a critical consideration in grantmaking — others felt differently. They wondered whether a discussion of capitalization was only relevant to large foundations or to large arts institutions.
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The Performing Arts in Lean Times: Opportunities for Reinvention (832Kb)
Capitalization is the accumulation and application of resources in support of the achievement of an organization's mission and goals over time. A well capitalized organization has the ability to access the cash necessary to cover its short- and long- term obligations, to weather downturns in the external operating environment, and to take advantage of opportunities to innovate. All capitalization is represented on the organization's balance sheet, primarily in the Net Assets section.
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