|
Good morning and thank you for inviting me to discuss what I consider to be a critical…and somewhat sensitive…issue facing us as funders and grantmakers.
The principles of managing accountability and risk are central to our work, particularly for those of us who work to invest public funds. Those principles are not negotiable. And while the chartered accountant in me sincerely believes that financial accountability is a paramount objective, as the CEO of the Ontario Trillium Foundation, I am equally as certain that it should not be achieved at the expense of striving for the best possible program outcomes.
I’m also convinced that, as grantmakers, we may be tempted to worry about, and focus on, the wrong risks.
So today, I’d like to share with you what I believe to be the biggest risks – and potential lost opportunities – that we face as grantmakers, and how we might work to alleviate the risks, and maximize the opportunities.
The Ontario Trillium Foundation – or OTF – has been entrusted to invest public funds in building healthier and more vibrant communities across Ontario. Our role is to act as a catalyst that enables Ontarians to work together to enhance the quality of life in communities across this wonderful province of ours. To do that responsibly and effectively, our risk management framework is built on a careful balance between seeking clear accountability, while being a catalyst for creative and successful program outcomes.
That balance is maintained through three inter-related pillars:
1. our program design, which sets how we hope to inspire community groups to help us achieve our mission, and also encompasses our risk management framework;
2. our emphasis on relationship-building: and
3. our focus on creating a culture of trust and openness to change.
Put together, we believe that these elements enable us to achieve our goals and our dreams, while managing the risks inherent in our business.
For those of you who may not be familiar with the Ontario Trillium Foundation, I’d like to take a moment to provide a thumb-nail sketch. We’re fortunate to be one of Canada’s largest grantmaking foundations. We are an agency of the Government of Ontario, and we distribute $100 million annually through about 1,500 grants to not-for-profit and charitable organizations. Our grants seek to build the capacity of community organizations in the arts and culture, environment, human and social services, and sports and recreation sectors. As you can no doubt appreciate, our grants are in great demand.
Let me briefly explain our program design.
• We distribute funding through two granting streams: one is at the local community level, and the other is province-wide;
• We offer operating, project and capital grants;
• Grants can be for durations of up to five years;
• For a one-year project, our grantees receive their funding up front. For longer term projects, the grant is paid out over several annual or semi-annual installments.
An essential attribute that distinguishes us as a government agency is the degree of volunteer leadership and participation in the process: the Foundation is governed by a volunteer Board of Directors, appointed by the provincial government. And local volunteer committees in 16 regions of the province review applications and make recommendations for the Foundation’s grants. These volunteer committees immeasurably enhance the strength of the staff review, by bringing local knowledge to bear.
Financial accountability is a critical component of our program design. So our accountability framework includes the following requirements:
• a detailed work plan and project budget from the grant applicant;
• audited financial statements for applicants over a certain size;
• a clear list of expected grant outcomes;
• a list of references – and in addition to speaking with them, we will often select additional referees, such as other funders.
And our internal processes include the following:
• a grant approval process that has several layers;
• a signed Letter of Agreement, or contract, with an approved grantee;
• periodic financial and outcome reports from grantees, before grant installments can be released;
• an internal audit function; and
• we conduct a sample number of grantee audits.
And of course, our view of accountability does not begin and end with these mechanics. It includes our accountability to our values, to the expectations of our stakeholders, and to the communities we serve.
Now, one might ask, why is there such a strong focus on accountability in our business?
The answer, I believe, is that we want to minimize risk. So before we go any further, I suppose I should define ‘risk’. I believe it has several meanings:
• Risk is the potential for things to go wrong;
• Risk is also lost opportunity – for example, we were not as effective as we could have been;
• There is the risk of preventing a good thing from occurring – or of achieving adequate mediocrity, when great outcomes were possible;
• And…there’s always the risk of doing nothing.
I believe that risk actually increases if a grantmaker focuses exclusively on financial accountability as a means of mitigating risk. Why? Because I would argue that with many community and not-for-profit groups in particular, the risk of financial malfeasance in relatively low, while the risk of well-intentioned but inadequate program planning and implementation is much higher – in other words, the risk of everyone being satisfied with mediocrity.
And when you think about it, the financial and mechanical aspects of accountability are less challenging than the other parts – designing and managing a program that is creative, well researched, and designed to maximize the impact on communities. These aspects are much more difficult.
With that in mind, I’d like to move to a second critical component of our work – building and maintaining a strong relationship with our grantees. For example, at OTF the same program manager is responsible for both assessment and monitoring, allowing for the development of helpful knowledge of each funded project. And we believe that there’s room for flexibility, where appropriate.
As well, we have found that, if we focus exclusively on micro-managing every dollar, we may be missing the bigger picture. Even if we could track every expense, larger and equally as important issues could be overlooked: Did the program truly achieve its objectives? Did it do so in the best possible way? Are there any learnings that could be shared?
I find it interesting that we often associate the term risk management with prohibition…what we shouldn’t do…what we can’t do. An alternative approach is to think of risk management as an enabler. A good risk management process – indeed, a sound grant application process – allows and encourages the best things to happen.
So we have worked to develop a system that is enabling and transparent. Our grantees understand our timelines, deadlines and expectations…and they know precisely what the conditions are, when their funding is coming, and when it will end. A transparent process at OTF helps both our organization and those we support.
An integral part of that system is our application assessment process. The technical and quantitative elements are of course essential, but they are accompanied by subjective considerations. We believe that there’s more to a grantee than an application on paper. So we ask a lot of questions and engage the applicant in a conversation to understand the living and breathing dynamic of their project. As I mentioned earlier, we talk to their references, and also do our own research.
At this early stage, we start to build a meaningful relationship. Time and again, this relationship-building has reduced our risk exposure and helped grantees deliver better and more sustainable programs.
Building relationships with applicants and grantees is a primary focus, but not the only one.
Because OTF works across the province and across communities, and because grantees often obtain funds from us as well as others, we often bump into other funders, so to speak. If we’re not familiar with a particular grantee, we talk to other funders who are. If we’re unsure about an idea, we may get second and third opinions. So we find it valuable to cultivate relationships with other grantmaking organizations and we always learn from those contacts.
We also recognize that our volunteers and staff play a key role in risk management. We respect the ideas, knowledge and contributions of our human resources, and we’re fortunate to have a relatively low rate of staff turnover. This helps us build our organizational knowledge. The low staff turnover allows rich, long-term relationships to develop between OTF and our community partners. Because of these strong relationships, our grantees are comfortable coming to us if there’s a problem.
The Boston-based Center for Effective Philanthropy recently conducted a massive study of not-for-profit organizations in the United States, seeking to better understand their relationships with the foundations who support them. One of the most fascinating findings was that these organizations place a huge value on their relationship with staff at the foundations – who they can turn to for advice, for problem-solving, for updates. In many cases, this relationship was prized even more highly than the value of the foundation’s grant!
One of the results of this relationship-building is that when a problem arises, a grantee will come to us first, not last. Risk is often avoided, in that a small concern – a program delay or an unanticipated obstacle – can usually be dealt with appropriately, rather than allowing it to fester and grow into a major problem.
Of course, a healthy and positive relationship can only be nurtured in an atmosphere of trust.
So at OTF, that is our starting point. We believe that if you put good people together and encourage constructive conversations, eventually good things result. Perhaps not in an hour. Maybe not the next day. But over time, the positive outcomes become apparent.
An example – one with a local connection – comes to mind. The Ottawa Community Loan Fund applied for an OTF grant right after their organization had been created. As such, they had no financial history. And we had no way of knowing whether they could deliver on the expected results.
The first grant we approved was to offset their operational costs. Their goal was to develop their capacity to help poor, marginalized and other disadvantaged groups gain access to seed money to finance a start-up or existing business. As I said, at the time of the first grant, the organization had no track record.
This was clearly a risk and we managed it by requesting regular progress reports and maintaining a close working relationship. The result was a resounding success, and the grant outcomes exceeded expectations. This led to a second investment, which focused more on longer-term sustainability of this now highly successful organization.
In addition to a relationship of trust with grantees, we also trust that our volunteer Grant Review Teams and our staff make appropriate recommendations and decisions. A trust that stems in part from the longevity I spoke of a moment ago.
Say, for example, a grantee discovers that money earmarked for salaries would be better put toward purchasing a consultant’s services, or that a new computer would be more effective than the budgeted photocopier. Because the grant applicant – and the Foundation – can’t always forecast perfectly, our staff can authorize appropriate changes within an approved grantee’s budget, if there is evidence that the change will result in stronger program outcomes. In fact, our grant documentation encourages grantees to talk to us when such situations arise.
A flexible approach worked particularly well with a project called the Traditional Health and Healing program, the brainchild of the Mama-Wes-Wen North Shore Tribal Council.
The project sought a regional model of traditional healing. It took a mentoring approach to enable community members to regain traditional cultural practices as healers and helpers. This was an ambitious project: it covered a huge geographic territory and the Foundation’s investment was significant.
The risk for OTF was two-fold: one…supporting a project that depended on the cooperation of many groups that didn’t have a tradition of working together; and two…ensuring that cultural imperatives were respected. To balance accountability with effectiveness, we adjusted our reporting expectations, by agreeing to meet with them on a regular basis to allow them to verbally provide us with progress reports prior to submitting the written form.
This approach worked extremely well. The results of the program – including an active mentorship program, a new policy manual on traditional healing, and implementation in eight communities – speaks volumes about its success.
At OTF, we have found a process that works for us, based on the outcomes we are trying to achieve. Of course, the tools and techniques that are successful at OTF may not work for every grantmaker.
Our traditional approach, flowing from our mandate, has been to publicize our goals and our criteria, and then to work with those who come to us with a proposal. Assuming that it meets our criteria and priorities, we will provide advice and counseling to a prospective applicant.
I’m sometimes asked if this is an expensive model. My answer is that, while it does take resources to make meaningful grants that are going to have real impact, we do regularly benchmark ourselves with similar organizations, and our cost structure always compares very favourably.
Now, I mentioned that our approach has traditionally been to work with those who come to us with a proposal. More recently though, we have taken opportunities to be more proactive with potential applicants. To mitigate the risk of lost opportunity, for example, we are putting more emphasis on our role as a convenor and knowledge broker.
These efforts target low-capacity groups – those who may not be familiar or comfortable with a demanding application process. We are working to build the capacity and the confidence of these groups, so they are able to design, develop and present stronger proposals. Needless to say, these efforts not only help applicants, but they help us – we get a stronger pool of applications, and a better shot at achieving our mission – building healthy and vibrant communities.
I’m reminded of another story. It’s the story of the Good Day Workshop here in Ottawa. It came to life in 1996, with an idea of the Grey Sisters of the Immaculate Conception, to give unemployed street people a safe, compassionate place to work, learn woodworking skills and earn some money.
The Sisters, although well intentioned, had no experience operating a not-for-profit business. The initial risk we identified was funding an inexperienced grantee. We set out to mitigate that risk by suggesting a partnership with a more experienced organization – a suggestion that led to a partnership between the Sisters and the Sandy Hill Community Centre.
The first grant was to renovate space for the program. However, they soon discovered that they needed to recruit volunteer woodworkers to guide the delivery of the program. Subsequent grants supported some salary costs for a coordinator to enhance program delivery, volunteer recruitment and donors to support continuity.
After three successful grants, the Good Day Workshop has made a real difference for the homeless population in the Ottawa area. It provides people with a place to learn and be supported. And, the quality of the woodworking is such that this is fast becoming a rather successfully sustained enterprise.
Another question I’m sometimes asked is whether our questioning or suggesting an approach can be seen as intrusive. I acknowledge that that is a risk, but I think if you maintain a sense of respect for every applicant – by seeing them as a partner who can help us achieve our mission – then an opportunity for intrusion can be converted to a respectful conversation about possibilities.
In wrapping up, I’d like to summarize with five points:
1. For any grantmaker, and particularly for those of us working with public funds, financial accountability and risk management are critical.
2. Focusing primarily – or exclusively – on financial accountability sometimes leaves us focusing on the wrong risk.
3. Often, there’s a greater risk – the risk of lost opportunity when we allow ourselves to be satisfied with mediocrity, rather than striving for greatness.
4. A mutually respectful relationship with grantee organizations, and with other grantmakers, contributes hugely to managing the grantmaker’s risk – and also to obtaining stronger program outcomes.
5. An essential ingredient for building respectful relationships is the people factor – a staff team that is professional, knowledgeable and committed to the values of the organization. In our case, the people factor is strengthened enormously by knowledgeable and committed community volunteers, with everyone working to maintain a culture of trust.
As funders and grantmakers, we have an enormous responsibility – a responsibility to manage our funds wisely, to respect the need for accountability, and above all, to reach for every potential opportunity in building community health and vitality. Thank you. |