Is now the time to give up government grants?

At a time when our national government seems bent on converting as many people as possible into government wards through free money and programs, many nonprofits are discussing ways they can reduce their dependency on government grants. 

Historically, the motivation to fund nonprofit ventures by the government has been highly politicized, i.e. the funding mirrored a current administration's own interests and/or motives. Whether that is good or bad is a matter of personal judgment, but it is a fact. 

Savvy nonprofit funding managers watch the trends and new nonprofits spring up like weeds in an abandoned field whenever the focus changes, waiting to access the "new money". 

The problem with that mindset is that when an administration goes out of power, the funding for their priorities usually goes with them. For example, a quick look at the grants.gov website shows many new grant openings related to setting up the health exchanges required by the Affordable Care Act. This legislation is still highly politicized, and remains a target for reform or repeal. If there is a significant change in Washington in the next two to four years, the funding for health exchanges will change as well. The general economic condition of the country is also a defining factor. When times are good, the government tends to commit more funds to grants. When they are bad, the funding goes away.  

The problem facing far too many nonprofits is that their whole existence depends on some level of government funding.  Efforts to reduce their dependency on government funding generally fall far short of replacing the federal dollars, and so the system perpetuates itself.  

At present, the prevailing attitudes in Washington seem to be favoring maximizing the amount of personal and business wealth that can be removed from the private sector and transferred to the federal coffers. With the historical trends in mind, that would seem to indicate now is the time to step up your efforts to apply to any and all Federal offering that you can even remotely write a program to access. 

The problem is, we do seem to have a bit of a problem with paying the government's bills. Grant funding is discretionary spending, and that is currently the most probable avenue for shifting money to pay those bills. The backlash against the current administration's penchant for awarding funding to its favored causes instead of paying down existing debt is growing. As a matter of practical economics, even if the current party stays in power in 2014 and 2016, there may simply not be enough inflow to continue to keep the floodgates of public funding fully open. 

Now is not the best time to change your funding strategies, but now may be the only time you have to diversify your funding sources.  Accessing more foundation and corporate funding and cultivating major gifts could lessen the shock when the Federal funding slows to a trickle. 

Low or no-cost nonprofit advertising

New and small nonprofits need money to survive, yet far too many think of formal public relations and marketing as something only for-profits or huge nonprofits do.  Some are actually almost antagonistic about the concept, seeing it as a waste of time and money.

If you are very new, local donations may be your only source of income for quite a while. When I am approached to work with a nonprofit, one thing I do is look for local publicity on the organization.If I stood on a street corner in your town and asked 100 people if they had ever heard of your organization, how many affirmative responses do you think I would get?

You can have the noblest mission in the world, but if no one knows about it, it won't attract donors. Donors in the nonprofit world are the equivalent of investors in the for-profit sector.  People invest in for-profits because they see a chance for a good return on their dollars.  Private donors, including foundations and corporations, support nonprofits because they see a good return on their emotional attachment to a cause.

Social media and a web presence are fine and an integral part of marketing for many nonprofits, but it isn't the only option for publicity.

The trouble with social media is that people have to have a connection with you before they will go to your page or read your tweets.  Very few people enter "nonprofits supporting X in my community" in search engines on social media sites.

PR campaigns seem unbelievably expensive when you don't have much money to invest in it. The good news here is that there a lot of free or nearly free ways to get your name out locally.

Broadcast media often have a budget for free advertising, because they are required to provide public service announcements.  Local stations and newspapers usually have a weekly "what's happening" page and it's nearly always free to list an event on that page.  Call the station or paper for information, and mention that you are a nonprofit.  Be prepared to tell them what you support and how in as few words as possible.

Do you have a particularly compelling mission, or are you connected with a high profile cause, such as cancer or heart disease? Ask the radio and TV stations if they will do an interview on an event you are hosting or participating in.  If you are just opening, send out professional looking press releases to the local media.  Often, stations are looking for filler between the headline stories they are covering and will mention you or even offer to interview you, if it's a particularly slow news cycle.

 

Other strategies are less direct.Go to local business meetings.If you will have any paid positions, attend a job fair.  Join any nonprofit organizations in your area or state.  Is the local art council having an open exhibit?  Go there and mingle with the crowd, and introduce yourself to anyone that even makes eye contact. Your introduction should be short but informative. "Hi, I'm Mary Doe, the executive director of the XXX organization."  If they show any interest, hand them a business card which should include your website URL.  Most people will at least look at the card and that cements your name in their consciousness better than a simple introduction, even if they toss the card later.

None of this will break your budget, and it may lead to contacts that you can develop.  At the very least more people will know who you are, which leads to increased credibility when you do ask for money.  

It isn't your money

Grant funding, by definition, is to be used "for the public good".  That is the definition of a nonprofit.  If the money were yours to use when and where you wish, you would be a for-profit.

You may feel that any money you receive will ultimately go toward accomplishing your mission, but there are normally very specific expectations for how the funds are used. 

Struggling nonprofits sometimes fall into a habit that at the very least will assure they lose support in the future.  They receive a restricted grant, but spend the money for things other than what they outlined in their grant application.

 

If you need operating funds, that is what your grant application should request.  If you applied for funding to purchase specific items, or provide specific services, you absolutely can't use it to pay your other bills without the grantor's permission. 

Even some supposedly "unrestricted" grant funding should usually be related to mission-specific spending.  If you suddenly find that you don't need all of the money for the specific purpose for which it was requested, you can either return the excess to the grantor, or apply to them to shift it to another program.  If you have any doubts about what the grantor or donor meant by "unrestricted" you should be sure that you clarify the meaning.

Aside from losing the trust of your grantor, you may also be criminally liable, if the grantor can prove you "knowingly and deliberately" received funds that you knew you were going to spend on something else.  Most courts view that as fraud. 

Tracking the uses of grant funding is a necessity.  Be sure you can prove that you spent it on the right things. 

Can You Fund Raise Without Being a 501(c)(3)?

The short answer to this question is "yes".  Please note that there is a difference between "raising funds" and applying for grants from a foundation or government entity.  The latter does require the 501(c)(3) status almost without exception. 

Many very new or small nonprofits have community fundraisers, or solicit small donations from the general public, and do not have the Internal Revenue Service (IRS) determination letter. Many smaller charities raise funds online without the formal IRS determination letter.   I always suggest to prospective clients that they develop a complete fundraising strategy, and this is where most of them start, or have started previously.  It's the "baby-steps" part of being a successful nonprofit. 

You WILL need to register as a nonprofit corporation with your state, or apply to an approved 501(c)(3) for a "fiscal sponsorship".  As an non-sponsored, state-registered-only nonprofit you are not allowed to state that donations are tax-deductible, which may affect your ability to accept large donations.  

Since each state may have different regulations regarding fundraising and nonprofit registration, you should consult your state attorney general's office or a knowledgeable attorney concerning the requirements for your specific state. 

Fiscal sponsorship allows you to solicit funds, including grant funds from some donors, by utilizing the larger nonprofit's 501(c)(3)status.  In general, you apply for affiliate status with the charity. Some of them will list the requirements on their website, while you may have to approach others with a letter of inquiry, and many do not accept affiliates at all. 

The larger NPO will have basic requirements that may include furnishing them with documentation related to your activities, including program descriptions and budgets, governance, organizational and fiscal history, board member list and proof of state registration. In addition, they may require you to relinquish some control of the program(s) to them, or at least allow them to inspect or review your procedures and provide them with proof of success or impact.  

Again, do your due diligence. There are very specific requirements from both a tax and legal standpoint that you should investigate thoroughly, as well as investigating the fiscal sponsor  to be sure they are reputable, well-run, and representative of your goals.  If possible, try to meet personally with them, since you will be working very closely with their staff. As in any relationship, the chemistry has to work for both sides. 

What is your grant request missing?

There are many more nonprofits seeking grant funds than there are foundation or corporate grantors with money available. Some categories, such as human service-based nonprofits, are numerous enough to resemble the competitive atmosphere found in the for-profit retail world. Others are so niche-specific that they don’t have many funding sources. You have to stand out from your competition to compete successfully for the finite amount of funding available. One of the ways you do that is with evidence-based reporting.

I was recently contacted by a smaller (less than 30K annual income, 4 staff members, 22 volunteers) nonprofit that works with teens and young adults aged 14 to 24 to provide career and educational assistance. Their mission statement was clear, concise and very compelling. They had a five-year organizational history, well-documented financials, an adequate website, and a few locally well-known supporters. They are far more credible as funding targets than many smaller nonprofits.

The problem?  They were constantly being passed over for grants. They did have some events that supported their basic needs, but they just couldn’t attract money for program support, much less capacity building. They were slowly losing the excellent volunteer base they had, as people became disillusioned with the rate of progress. They had submitted nine applications, and all had been denied (or ignored).

Upon closer inspection, there were two things wrong with their funding appeals. They had only one program narrative. They had crafted a basic boilerplate narrative to describe their entire mission (as opposed to program), and it went out to everyone, even when it didn’t appear to quite match the grantor’s own mission statement.

But more importantly, they couldn’t prove their claims of success. Yes, they had anecdotal statements from current and former program participants, and even a nice letter of support from a business, but there was no hard evidence. There was no evidence-based reporting or documentation of the results, and no ongoing performance reviews for the program.

Initially, I met with considerable resistance to my suggestion that they set up a data collection and reporting system that would provide such commonly requested information as demographics, completion rates for the program (which actually turned out to be two programs and are being re-stated to reflect that), and measurements such as before and after income or before and after hiring-to-application ratios for the older group. For the younger group, I suggested that they use measurements like truant day improvement, grade point increases, or disciplinary problem reductions.

It is a lot of paperwork. The initial resistance was in the form of “If we spend all that time on paperwork, we won’t have time to help the kids.”  My response was “How many kids can you help if you don’t exist anymore?”

There is software available that nonprofits can use to record all types of input, but it is not absolutely necessary at first. Look at the requirements of the grants you are applying for, and set up a basic spreadsheet to capture information. Design some simple survey forms for participants, family members, school and employers to capture the raw data. Set your program up with specific goals, and capture the results as measured against the goals. For instance, let’s say that your goal is to place 20 young adults in full-time jobs every 6 months. Show how many people you have in the program, how many completed the whole program, how many interviews they went on before entering the program, the number of times they were hired, their average earnings from each jobs pre-program. Contrast that with the interview-to-hire ratio post-program and the earning increases.

They are in the process of compiling this information, and dividing their programs so that the data will more accurately portray their results. When the data is complete, they should be able to show prospective grantors that they used $5000 to create X full-time employees, earning X income, which was an increase of Y percent in each category pre-program. They will even be able to say that the increased employment, coupled with less public assistance dollars spent per participant has had a positive impact of Z dollars in the community. They will be able to document grade-point improvement, graduation rates and behavior improvements in the younger group. That’s going to present a cost-benefit ratio that will be hard for any grantor to ignore. 

Grant Alert for Animal Rescues

Attribution:  Philanthropy News Digest

The American Humane Association provides financial assistance to animal welfare organizations and breed-specific rescue groups responsible for the temporary care of animals before they are put for adoption into permanent homes.

Due to the overwhelming number of abuse cases nationwide, Second Chance Fund grants are offered only in select cases of animal abuse or neglect. Funding may be used only to cover medical procedures for animals that have been victims of abuse or neglect and require medical treatment before being placed for adoption.

Funding to any one agency is limited to $2,000 per year. Applications are accepted year-round but must be received no later than six months following the date of intake. Individuals, businesses, and corporations are not eligible to apply.

More information about Second Chance Fund grants, including stories of animals who have benefited from getting a second chance, can be found at the American Humane Association Web site.

Unintended Consequences

Structure without stricture - A winning strategy for nonprofits

My clients and my blog (http://cloudlancerwriting.blogspot.com) readers know that I am a proponent of nonprofits becoming more “business-oriented”.  Cloudlancer Writing Services exists because there are too many small or newer nonprofits on the edge of failure.  I firmly believe that to both survive and succeed in your mission, your organization needs to have some elements of the business (for-profit) world within your organization.  You need simple things like having a plan to move forward, defined programs that you can easily articulate to supporters and budgets so that you can assess how much impact the program will have on your mission.  You need boring documents like contracts and personnel manuals to keep your organization legal and good financial records to keep the IRS and your donors happy.  You need a board that will help your organization succeed, not just take up space in the board room.

Those things are structural.  It’s sort of like building your dream house.  The framework and the foundation keep the house upright, and allows for intelligent expansion. Still, a house with just the concrete and 2x4’s in place looks pretty much like every other house.  What will make the house your home are the things you add to give it personality.  When you add color, lovely finishes, a yard and friends and family, you have a home.

When I tell clients that they need better organizational structure, some of them feel that approach will mute the message about the mission.  They feel that focusing on “the bottom line” will prevent them from moving forward.   My view of the business side of their nonprofit feels confining.  They feel strangled by the “rules”. In reality, the structure will support and advance your mission.  It’s a lot easier to go out and give a passionate speech about your cause, if you are sure the lights will still be on next month.

 

On the other hand, if you are so focused on the structural portion of your dream house that you never get the yard planted, or the walls painted, you will never live in your dream house.

Get the framework in place, and like the 2 x 4’s in your walls, you won’t have to think about it much in the future.  Yes, you may have to watch for dry rot(complacency) or make sure you don’t have termites (outside threats),  but mostly, you are then free to advocate confidently for your cause.

 

Confidence is attractive.  If you feel good about your organization it will be evident to donors.  Desperation is seldom a good public relations tactic.  If you find yourself constantly asking for money just to survive, people will be fearful about investing in your cause.  On the other hand, if you can make your appeals all about achieving your mission, you will allow your donors and grantors to share in that passion and vision with enthusiasm and commitment.

Structure without strangulation is a winning strategy for nonprofits.  There is a point at which you can deviate from a strict business model, and you should.  Once the structure is supporting your organization, you can focus on your real goal of achieving your mission.