June, 2008A while back, we had the privelege of talking with a couple of staff member of large foundations. They honestly shared some interesting thoughts. Thank you to you – only you know who you are. Here you go….
1) The issue – overestimating a budget - a foundation gave a gift to support a worthy project. When the project was complete and came in under the approved budget, the nonprofit asked if they could keep the large amount of money to buy a piece of equipment they needed for a completely unrelated purpose. In the case of this foundation, the amount was so great that it crossed their minds that the “overage” was all part of the plan. Especially if there are large amount of dollars involved.
- What to do when you overestimate the budget – mind you a small amount isn’t really so significant, but a large amount does not look good. The perception could be that you did not work hard at putting together your proposal using only a bull’s eye approach. Get several good faith estimates of cost and use the average. If by some miracle even after good due dilligence you do come in way under budget for one reason or another, offer the dollars back to the foundation. They can choose to tell the nonprofit keep it with their best wishes to buy that extra piece of equipment they have eyed. Alternatively, they can choose to ask for it back to use in another way.
2) The issue – foundations that don’t give dollars for operating costs – many foundations decided a long time ago that that they liked to fund great projects, but did not want to fund the operating costs needed to get the project done. This left a huge problem of how to get from here to there….how to get a project done when there is money for the structural part of the project, but no money for salaries, pens, pencils, telephone charges, etc.
- What nonprofits are doing to combat this issue – to beat this, nonprofits started designing their proposals to include funding the project, and all the costs involved form plant and equipment, to postage, to staff. This certainly looked legitimate. Many foundations do not agree with this method either.
- What is happening today – there is a movement among foundations to encourage nonprofits to have for profit sides that are sometimes unrelated to their mission, to raise funds to support a staff to manage and run the nonprofit. Others think this takes the nonprofit eye off their mission and goals.
Some foundations think that nonprofit salaries are too high anyway, and that the staff is self-serving with only dollars to cover their salary in mind. At the same time, these founders, many of whom are successful entrepreneurs in the buisness world would usually jump at the chance to pay a high salary to capture a true business hero for their staff.
- Jobs in the nonprofit sector today – all of this causes a major problem in the job market in the nonprofit sector. We see nonprofit employees are looking all the time for their next position. Take from us at TXNP – we have conversations with staff at nonprofits one day and their emails bounce the next. The turnover is huge, and a big reason is the low salaries and lack of benefits consistent with this sector.
- What nonprofits should do – this is a thought. Once a nonprofit comes to an agreement with a foundation in concept, ask them for input into the execution of the project. Let them come to the conclusion that they should help with operating expenses. A what if they suggest you go to another foundation to ask for operating expenses. If this happens, ask them to give you an introduction to a potential collaborating foundation and to ask for them to join you in the ask. Help them understand a successful project is their success as well as yours.
- What foundations should do – look at the whole plan – join forces and become a business partner and advisor to the nonprofit you choose to fund. Make sure you don’t just give the money and then walk away. Help them overcome obstacles so that together you can build a win-win project. And please, do not push the nonprofits into the for profit world. We need them to solve the ills of society – not compete with huge conglomerates.
3) The issue – lack of long range planning – A foundation gave big dollars to a homeless shelter for a new commercial kitchen. Within six months after the state of the art kitchen is completed with the huge grant, a person comes along and offers the homeless shelter a new and better location nearby. The board votes to accept the new facility and vacate the old building with the great six month old kitchen.
How do you think the first funder feels? Sad…. that’s how.
- What it looks like – did the nonprofit have a strategic plan? Did they have any idea where their captains were sailing? A strategic plan is imperitive and should be available to the public. In the short term, they need someone who can calm the feathers of the foundation that awarded the money in the first place.
- The long range fallout – Woah – other foundations will hear about this and possibly be hesitant to ever consider a serious gift to the nonprofit that operates so helter skelter.
4) The issue – lack of attention/too much attention from the board members – we have dealt with this and dealt with this over and over. Get rid of dead wood on your board. You must have an active progressive board who is willing to work for your nonprofit. It is their duty. Tie the mission and the action of the board together and quit falling asleep at the wheel. On the other hand – some board members are way too powerful and way to controlling. So get on an even keel and get going… stop wasting time.
5) The issue – looking for funding but not willing to collaborate with other like organizations – dollars are so precious that some nonprofits become secretive and do not want to share their ideas. Foundations could perceive their secretiveness as an attempt to get all the funds for themselves.
- What to do - Instead of looking at other groups as competition, invite other like organizations to collaborate and unite to work on big issues. Find a project, find 3 other organizations to divide the project up with, put together your proposal and go get the community to buy into the grand scheme.