Grants Accelerator is a regular blog series about leveraging your grants strategy to enhance organizational sustainability.
As we roll over the calendar year, everyone is thinking about their fresh start. Some people welcome the New Year by beating pots and pans, jumping into ice cold water, or burning photographs from the past twelve months.
At Ostara, we observe another distinct New Year tradition among nonprofits. It’s called “The Annual Grant Budget Freak Out.” This often involves hair pulling and frantic searches on Foundation Center.
I feel your pain. I have been that staff member staring at the new annual budget filled with general operating needs and trying to match it to my list of restricted funding prospects. I could get up on my soapbox right here and rant about why there isn’t more general operating funding. I’ll save that for another day.
Instead, I’ll sit alongside you as you dig into that annual budget and offer a few tidbits of advice for your 2019 grant strategy.
Strategy 1: Make Restricted Grants Work for You by Carving out Flexible Funding. Most organizations see grants in two categories: restricted and unrestricted. Ideally, a healthy grant portfolio has the full spectrum of funding categories:
____________________________________________________________________________________________Unrestricted Lightly Restricted Moderately Restricted Highly Restricted
Unrestricted (General Operating Grants): These are completely unrestricted and may be used for any expense purpose.
Lightly Restricted Grants: These are restricted to a broad purpose that may include a program or set of programs, but they likely do not have a specific budget, list of eligible expenses, or metrics to be achieved.
Moderately Restricted Grants: These are restricted to a program or project. The program budget may group together all program expenses and program revenue, including grants from multiple funders, giving the organization freedom to use the funds in whatever way they see fit to achieve the project or program goals.
Highly Restricted Grants: These are awarded for programs or projects, require budgets with specific line-by-line descriptions of where each of the funder’s dollars will go, and require a complete financial report at the end of the grant period itemizing expenditures.
Your sweet spot is in the middle where you can carve out flexible funding from lightly or moderately restricted grants. You can tuck indirect (operating) expenses into the budget by being more purposeful about what you include and how you label it.
For example, instead of removing rent from your program budget, think about how that operating expense is critical to a program. You could then relabel it “meeting space for program classes” or whatever makes sense for your particular organization. The share of an Executive Director’s salary for leading a program could become “strategic program oversight.” Be creative and purposeful in your budget development, while also being transparent.
Strategy 2: Group your programs under a broader brand. Instead of always developing bright, shiny new programs to attract funding (often restricted), think about how you could put a fresh face on your core programs. Ostara is currently partnering with Vine Maple Place, an organization serving homeless families. They decided to group their housing, financial skills education, employment services, life skills, counseling, and youth programs under one brand called the Stable Families program. This allowed them to attract more sustainable funding for their core programs through general project budgets. While the funding was “program-restricted,” it is restricted to all their programs. This keeps those funds more flexible over the course of the year.
Strategy 3: Don’t Itemize Unless It’s Required. Unless a funder specifically asks you to itemize how their dollars will be used, you can usually present a program budget that groups together all expenses and funding sources. Whether funders need to see their dollars tied to specific expenses is a good clarifying question to ask before you submit.
It may not be as cathartic as beating pots or jumping into Puget Sound, but liberating yourself from the black and white world of restricted vs. unrestricted funding will open a fuller spectrum of opportunities in 2019 and beyond.