Grants alone do not a sustainable funding model make! Jo Garner from Strategic Grants talks about the role of Trusts and Foundations and the true purpose of grants.
The 2016 NFP Governance and Performance Study revealed a worrying statistic:
40% of Nonprofit directors relied on donations and grants to replace assets.
Many directors interviewed for the study “believed struggling was normal and to be expected. Some did not set an annual profit target, but instead assumed that their only goal is to break even. These organisations expect and rely on grants and donations to keep their NFP alive. Because of their ‘hand-to-mouth’ existence, planning is often short-term and risk averse…” (2016 NFP Governance and Performance Study, p15).
There’s a theorem by W.I Thomas and D.S. Thomas that runs “If men define situations as real, they are real in their consequences.”
Meaning, if nonprofit directors believe their only goal is to break even, their actions will be limited to facilitating that end, rather than the higher goal of long-term sustainability.
So it’s important that we set our sights on that higher goal in the first instance and start planning to fund our organisational missions far into the future.
Like any form of fundraising, grant-seeking needs to be done well and with a clear understanding of where it fits into a broader strategy.
So, what role do grants play in a sustainable fundraising mix? And what can we be doing better to ensure that the proportion of nonprofit funds that do come from Trusts and Foundations is as healthy and reliable as it can be?
Some nonprofit organisations still see grants as a solution to all their problems.
We are often asked: “What I really need is money to run our core operations – the things we do day in, day out. Will a funder support that?”
Grants, in general, are awarded for time-limited projects or activities.
They are not a suitable source of funding for the day-to-day running of your organisation.
What's more, funders seek to invest in those organisations who have the proven capacity, and financial stability, to deliver the best possible social outcomes.
How do we get to that place of financial stability?
Our advice is generally that non-profits should always seek a diversified income stream to ensure the sustainability of their programs year-on-year.
In other words, putting all your eggs, or too many eggs, in one particular income stream is far too risky.
Apart from grants from Trusts and Foundations, a diversified funding stream could include:
• income from fees-for-service
• donations and major gift
• government funding
• workplace giving
• community/event fundraising
• bequests and/or
• corporate partnerships.
The optimal revenue mix will depend on the types of services you provide and the relationships you have developed with your supporters.
Some trusts do fund existing programs but multi-year commitments are rare beasts, and it’s even rarer to receive the level of funding needed to run a whole program.
Even if such funding is secured, your organisation will still need to plan how the program will continue should funding from this source cease.
Organisations reliant on a corporate partnership or government funding will face the same challenge.
Rather than fund an entire ongoing program, Trusts and Foundations will more often support a pilot program in a particular geographic area and/or with a target group that fits with their funding areas and criteria.
For example: ABC Charity’s core business is providing shelters and counselling for homeless men in Littletown, but ABC is keen to expand this service to families. To do this, ABC needs to develop a pilot program to work through the unique issues faced by homeless families and to properly address their needs. Staff may also need further training to participate in the pilot.
When seeking a grant, this project would be distinct from the ongoing program and the application would need to present evidence for the program’s need in a new area and/or with people from a new target group.
Many funders will also want to know that the program can be sustained in the long-term, once the pilot is complete – so again, it comes back to having diversity in your fundraising mix.
It’s all about evaluation, communication and engaged relationships.
Grants are a partnership to achieve a specific outcome.
And any good partnership requires excellent communication.
This means the appropriate person within your organisation must communicate with your funder about any changes to the program they’ve funded, or any road blocks (they may be able to help you find solutions), and keeping them up to date on the project’s progress and successes.
Deeper engagement requires inviting your funders to come and see for themselves the work you are doing, asking for advice on how you could do it better and, if it is appropriate, asking them to be involved as a volunteer or on the organisation’s board.
We also need to be able to communicate the impact of the funder’s dollars.
To do this in a meaningful way, we must ensure that evaluation of the program or project is built in from the very beginning; that data on outputs, outcomes and impact is being collected by the right people at the right time, and that it is presented in meaningful ways.
“Think in numbers, but present in visuals” is the advice of The Ian Potter Foundation’s Research and Evaluation Manager, Dr. Squirrel Main.
And of course, having the evidence from your program evaluations about the impact of your work is brilliant news for future funding requests to existing or new grant-makers!
We hope you’ve enjoyed this guest post by Strategic Grants (thanks CSIA for having us!). We’ll be popping back in March with a more about measuring impact and building evaluations into your projects, so watch this space!
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