This should be obvious, but it’s key for our sector: To deliver on their mission and sustain their good work over time, nonprofit organizations require the right mix of financial resources. Resources to pay the right people to get the job done well. Resources to have cash on hand for unexpected events. Resources to allow for innovation and improvement.
Of course getting to the right mix of resources is challenging for all kinds of reasons. Our culture assumes that operating on a shoestring is somehow good. Funders can put unnecessary and harmful restrictions on funding – sometimes without even realizing it. And sometimes nonprofits don’t know what they need to operate from a position of strength and accept funding that squeezes their bottom line. To make it more complicated, foundation and nonprofit staff have widely varying degrees of comfort in engaging with issues related to nonprofit financial health. Very few people go into nonprofit work (or philanthropy) because they love nonprofit finance, though I personally know some amazing exceptions to this rule. Fortunately, there is a growing awareness of this challenge, and resources for addressing it are emerging for nonprofits and funders.
One such example is The Full Cost Project, led by Philanthropy California with the Nonprofit Finance Fund. The project focuses on ensuring that foundations and nonprofits have a good understandings of, and authentic conversations about, the full costs of operating a successful nonprofit enterprise. Conversations across California in the first phase of the project revealed that most funders do not have specific policies about how grants are structured, and that most program officers have a fair amount of discretion. However, they may not have the tools to discuss financial matters with nonprofits – and nonprofits may be in the same boat. After a period of exploration with funders and nonprofits across California, the Full Cost Project is now offering trainings for both funders and nonprofits on this key topic.
It is exciting to see this work unfold, and we are delighted to be supporting the Full Cost Project as it encourages these conversations in our state. As the Full Cost Project website says, “many of us recognize that nonprofits are built with remarkable resourcefulness — but what is less commonly understood is how funding constraints often threaten their delivery of social good.” The Full Cost Project represents an opportunity in California to improve the practices of both funders and nonprofits and to bring those practices into the mainstream.
How are you ensuring that nonprofits have the right resources to achieve maximum impact? Let us know in the comments!
A very good discussion on the grey if not dirty area of funding structure for npos. Working in a for profit with a social agenda, financial inclusion, we suffered from sever corporate schizophrenia, so to speak, and ultimately set up a foundation where we could migrate the really sticky issues for what we think will be better focus. When everything was under one mandate, we suffered from inconsistency in objectives, actions, results and measurement. Relationships with funding and implementing partners were typically strained. It is generally believed that causes are championed by those who themselves suffer from one exclusion or another and must therefore be grateful for any and all funding they may attract. Often this is the case. Successful programmes, as with most things in life, are those for which the resources are appropriately and deliberately tailored.
Very important topic here. Conversations on NFP fiscal sustainability (defined as long-term viability and relevance) have been around for a while, but seem to be moving slowly front and center. In addition to delivering programs, NFP must work with funders to ensure that the organization can make long term investments, can address changes in its environment and be around to provide service in the future. Full cost is one very important facet of fiscal sustainability. NFP must understand the actual resources required to deliver programs not just today but for as long as they are needed. Thank you for sharing your expertise! –mike