- Karen Eber Davis Consulting - https://www.kedconsult.com -

Reason for Hope? Government Funding

What Your Board Needs to Know About Government Funding

If the seven nonprofit incomes sources[1] [1] entered a popularity contest this year, the biggest loser would be government funding. As state legislators across the United States come to a close, sessions that caused widespread anxiety, it is clear that government funding has become unpopular. However, dismissing it entirely is a mistake. Even with current cutbacks, nonprofits will continue to receive significant government money. Grants.gov, the official website for US Federal Grants, lists 26 agencies that offer 1,000 funding opportunities. States, provinces, municipalities and others will continue to provide income. This article provides a board primer on government funding to help your leaders maintain a realistic perspective on this source.

1. Why do governments pay funds to nonprofit organizations?

2. What are some examples of how government support has helped nonprofits?

3. What types of support do government entities offer?

Typically three kinds:

a. Grants. Through a competitive application process, nonprofits apply for one-time funding. The application and subsequent contract outlines what the nonprofit will achieve with the funds. Often payment is divided into segments.

b. Contracts. While the labels of “grants” and “contracts” are often used interchangeably, they represent two different arrangements. With contracts, again through an application process, nonprofits obtain funds to provide services. If the service is not performed, or less units of it take place than the contract allows, the nonprofit receives a reduced proportion of the award.

c. Earmarks. Wikipedia defines an earmark as “a legislative provision that directs approved funds to be spent on specific projects, or that directs specific exemptions from taxes or mandated fees . . .” Generally, your legislator inserts an earmark into a budget or legislation that directs resources to your organization.

4. Is this a common source of nonprofit income?

Yes, it is the second or third largest source depending on the reference. In size, government funding ranks after earned income and either before or after individual donations. Historically, governments represent 21 percent or more of all nonprofit income.

5. What are the benefits of government support?

6. What are the risks?

7. What is your organization’s experience with government support?

As a board member it is wise to learn about the different types of government support your agency receives or might receive. Consider asking questions like: What government agencies might fund the nonprofit? What is the process? What percentage of the budget does government funding represent? If significant in size, what plans exist to replace these funds if they are reduced or eliminated for a year—or forever? What actions should we take to ensure these funds remain available to us? Do we have the infrastructure in place to do a stellar job with these funds?

8. What is the role of the board?

9. How can we prepare for what is ahead?

Pursue. Don’t let the headlines confuse you. Government funding is here to stay. Identify the sources you need. Seek them. Be aware of trends. Don’t let them keep you from the money you need for mission and a partnership with a government entity.

Be Proactive. Your government income may be immune to cuts, but recognize that for many nonprofits the unthinkable in this arena has happened. Regardless of your certainty, find a spare income vehicle that works and run it around the neighborhood regularly.

10. What is the general process of developing government support?

Best Practices.

For earmarks: Contact your legislators.

For grants and contracts, 1. Identify government entities that share goals with your organization. Review their websites. 2. Talk to their staff. Learn about any existing or pending programs. Ask for copies of successful applications. 3. Develop a proposal concept. Check with staff about it suitability. 4. Draft your proposal in time for a pre-submittal staff review. Adjust the proposal according to any suggestions. Thank staff for their help. 5. Submit the proposal. 6. Prepare for the site visit or panel review meetings. 7. Obtain the results. Celebrate or determine if this source is a realistic opportunity for your organization. Incorporate what you learned. Apply again as appropriate.

The End of Government Funding?

Government funding will remain an important funding source for nonprofits. In all likelihood, threats of cuts and actual cuts will be part of the experience. If your mission and the government’s intersect, uncover the opportunities you have and decide how your organization will take advantage of this resource to forward your mission.

Resources

Government funding is only one of seven sources. To learn about the other six, see Can Your Organization Obtain More Income? The 7 Sources [2]. This article on government funding is number three in a series about each of the seven sources. For the earlier issues, see https://www.kedconsult.com/newsletter-archive/

For more on nonprofits and funding opportunities listen to our collection of audio downloads, especially Money-tastic #2: Nonprofit Income Opportunities and Money-tastic #3 Creative Revenue Streams for Your Nonprofit


[1] [3] Mission earned income, individual gifts, government, corporate, foundation and other groups, other income and in-kind.