Too Much Grant Funding Can Prove Disastrous
I realize that the statement in this blog's title might seem a bit preposterous to those who work hard to meet charitable needs. But hear me out. When I am approached by nonprofit managers to help procure grant funds, I immediately ask what percentage of their annual operating budget includes grant funds. If they even know, that number is typically well over 60%. I then advise them to re-think their fund development strategy and work to find other avenues of funding. This is when I get the question- Do you not want to work with us?
The Speech
My Fund Development Planning speech inevitably follows this question. In order to simplify the speech as much as possible, I have summarized it in the bullets below:
1. Before seeking any sources of funding, you must develop a comprehensive fund development plan that outlines the amount and sources of revenues needed to meet the organization's operating costs.
2. The first step in this process is the creation of a realistic list of anticipated expenses for a given annual operating period. This list should include not only those expenses expected for running your programs, but also those administrative overhead expenses necessary to run the business side of the organization, e.g. administrative costs.
3. Once you have a clear picture of both your programmatic and administrative costs, you are better equipped to determine just how much you should seek in grant funds in a given year.
Consider This
Let's say for example that your total operating costs for the year are $100,000. Of this amount, your administrative costs (rent, telephone, office supplies, postage, travel, grant writer, conferences, accounting, legal, and administrative staff) will cost you $45,000. If you go after as many grants as you can without a fund development plan that is tied to the types of costs you expect to incur, you will fall short of your revenue needs.
Yes, you can get $100,000 in grant funds and still struggle to meet your budget needs – even though you have a $100,000 budget! How can this be? This is because it is more likely than not that ALL of the $100,000 in grant funds is RESTRICTED only for program related costs.
Doing The Math
If we do the math, you will have a shortfall of $45,000 that you need to cover critical costs to keep your organization's doors open – the costs of doing business!
Fund Development Planning is critical to an organization's success and sustainability. An effective fund development strategy will help you determine how much restricted (grant) funds you should go after AND what other sources of revenue you need to seek to insure that you also cover the costs of doing business – your administrative costs.
If you have faced the challenge of covering your business related costs as an NPO manager…or, if you are only operating at the “programmatic" level and are not sure how to plan or operate at the “organizational" level, give me a call. I'd love to sit down with you and discuss how we might be able to help. Our initial consultation is free of charge.
I hope that this blog post has given you some insight on how to go after the funds you need to run an effective nonprofit organization.
Please check in on my blog periodically for helpful business related tidbits. In the meantime, be well and prosper!
Angeline
Client Portal