Saturday, May 4, 2013

Your nonprofit doesn't need more money

Weird title?  It seems that all nonprofits need money, all the time. Let me explain. I am often approached by nonprofits that just can't seem to come up with a credible reason for the ask. These are often either organizations receiving a major portion of their funding from government funding or major gifts. They are unable to present a program that is clearly an unfunded addition to their program lineup.

Take nonprofit A. They received a three-year Federal grant focused on after-school care that literally financed the whole program, as designed. It even paid for salaries and most of the overhead. They wanted to secure private funding to continue the program after the Federal funds were exhausted. They approached most of the major players in the early childhood development field, but were repeatedly passed over for funding.

On the surface, their plan for program continuation seems sound. They wanted to diversify their funding streams so that they wouldn't have to shut the program down when the government grant ran out. The problem was that they didn't have a need, in the eyes of prospective grantors. At an on-site  meeting with one of the foundations, they kept having to answer the question, "what is our money going to fund at this time?" Ultimately the grant was denied with a comment that basically stated the title of this post. Their statement of need (program continuation) was too far in the future to interest the foundation.

Nonprofit B received a major restricted bequest in the form of both cash and stocks to support an environmental program to purchase land for a wildlife habitat. After a period of time all the land available in the nearby area had been purchased, but the reclamation costs and maintenance were not covered by the bequest. When the NPO went back to the executors for permission to modify the terms to use the money for those needs, it was denied on the grounds that Granny wanted them to continue to purchase land, period. If they couldn't use it for that, the funding would revert back to the heirs. The NPO began to solicit funding to replace the bequest but again ran into the problem that on paper they had all the money they needed, and more. Not wanting to tick off the estate, they were not indicating that they would lose the funding if they failed to use it to purchase land. The upshot of that was, most prospective funders decided that they didn't need more money. This is a perfect example of poor planning when accepting major gifts but that's a story for another time.

The moral here is that you have to show an unmet need. Whether you are in the position of having good funding at the present or you are a struggling start-up, if you can't show a need, grantors are going to ignore you. Most funding supports a program. If that program is already fully funded, you will probably be faced with the unenviable task of creating either an adjunct program that is unfunded, or having to shut down the original program when the current funding runs out.

Many foundations operate on the principle that they want to help by spreading the wealth over a wide variety of nonprofits. Most foundations will not allow repeated grants to the same organization, and most do not even offer short-term multi-year funding. That philosophy is what keeps nonprofits in the never-ending cycle of chasing funds, and dooms many good programs to failure. While I certainly would like to see the whole giving philosophy change to provide long term sustainable funding to a few truly effective organizations instead of spreading the wealth to many partially effective ones (and I could write several thousand words on that subject, pro and con), the reality is that if you can't show need, you aren't going to get funded. Your ongoing programs must either identify a new area of concern, or expand into unfunded areas of your original proposal. 

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