Wednesday, December 12, 2012

What funding changes will the future bring?

Faced with the probability that their funding streams may shrink over the next five, ten or more years, many grant makers are looking for ways to apply whatever future income they may have to models that will sustain their organizations. Even if the proposed limits on charitable deductions and increases in the tax rate on passive income don’t materialize, the conversation in many foundation boardrooms is addressing ways to achieve more effective use of their funds.

Thus, they may change their grant guidelines to fund collaborations that will make that change happen. They may even move their funding model to one of providing PRI (program-related investment), rather than outright grants. That model allows the investment to replenish the pool of foundation funds, rather than depending on what may be a shrinking pool of available donors and dividends for sustainable funding. Many are funding for a broader social impact, rather than an immediate basic need. While this may seem counter-intuitive to the concept of grants, this model often allows nonprofits to obtain capacity-building funding that funds projects year-over-year, rather than constantly chasing the same donor for continuing support each year. It also provides a higher level of certainty for the foundation, since they know the funds will sustain other giving in the future. 

Your nonprofit may have to adapt to a changing funding environment and become sensitive to, and capable of designing programs for, this new environment. Even relatively small (under $500K) nonprofits may have to adapt to achieve continued growth. You may have to furnish a much higher level of sophistication, detail and accountability in your programs to obtain funding than in the past.

What does this mean for your nonprofit?  Let’s look at a hypothetical example.

As an illustration, let’s say that a foundation has historically supported a local nonprofit that provides real-time support for battered women. The symptoms of the problem are the physical injuries to the women, and the need to remove them from the abusive situation. The foundation has been supporting the nonprofit’s program of paying for emergency housing and counseling for the women. That program helps women individually, but does nothing to stop the overall culture of abuse. In many cases, even though the women may get out of the situation, and even have a restraining order in place, they are later injured or killed by the abuser.

This year the funding foundation has decided that the only way to help the women is to fund a regional program to eliminate the causes and not just the symptoms of domestic violence.

A program that might address this focus could be one that will require changes in the law to mandate lengthy prison terms for first offenders, coupled with intensive counseling to obtain true behavior modification. The offender will get days off their sentence for each day they are in the program and early release if they are deemed safe to re-enter the outside world. If they are not successful, they will serve the full original sentence without the possibility of parole. This program will require large cash infusions and even collaboration with government agencies or for-profit businesses.

The social impact element the foundation is looking for is met by eliminating the opportunity for the abuser to be free to contact the woman at all, and force the offenders to accept changes in their basic behavior.

For you, the nonprofit in the middle, this means much greater emphasis on mission refinement, program design and development, targeted and measurable goals and outcomes, realistic and comprehensive financial planning, and constant monitoring of the timelines to meet grant maker expectations. If you don’t have, or discount the need for a strategic plan, you may very well miss substantial funding opportunities.

Cloudlancer Writing Services provides strategic and business planning assistance to both nonprofit and for-profit organizations. Let us know if we can help.

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