Are All Your Eggs in the Federal Funding Basket?

While working for a relatively small non-profit that was facing cuts in federal funding, I lamented to a family member about constantly being at the mercy of the government.  His response was smartly simple: “If your program is truly needed and truly worthwhile, it will be supported.”  His larger point was that the people in the community will support programs and agencies they value, regardless of what the government does with its funding.  Point taken.  So why do many non-profits rely so much on federal funding, and how does an agency build value (and thus financial support) within the community?

Many non-profits have fallen into a faulty habit of chasing after federal money.  If a government grant pops up that even loosely relates to our agency, we must apply for it, right?  Not necessarily.  It might be an appropriate avenue in order to maintain or enhance programming in the short term; however, it’s never a good idea to create a new program around the availability of specific funding.  New programming should always be created in response to community need.  First develop an effective program to address an identified need, and then seek the funding to sustain and grow it.

Many non-profits have also fallen into the dangerous habit of relying too heavily on federal funding once they have it.  The problem with that is threefold.  First, government grants are always at the mercy of funding decisions that are made largely without our input and without consideration of our particular agency’s worth.  Secondly, most federal grants require a “cash match.”  If all our eggs are in the federal basket, we may not have enough outside the basket to meet the cash match requirement.  Lastly, government grants come with strings attached for how the money can and cannot be used.  If that “can” or “cannot” directly conflicts with our agency’s mission and vision, then it might not be the best source of funding.

Building a diversified funding base is critical to the health of any non-profit, but it can’t be done simply by hosting 5-K walks, golf tournaments and bake sales.  It must start earlier and become a core component in the life of the agency.  Here are a few broad tips for increasing an agency’s value in the community:

  • A successful non-profit must always operate in response to a legitimate need in the community in a way that other agencies are not.  No matter how much time passes or how much growth occurs, remaining dedicated to the community’s needs is essential. 
  • The agency’s board of directors and executive leadership must be professional, engaged, and dedicated to the mission.  
  • Utilize (and document) to the fullest extent in-kind donations and volunteer service, which demonstrates a commitment from the community
  • Adhere to accountability and transparency in all things, particularly finances, which will show the community that the agency is legitimate and worth donating time, goods or money.

If your non-profit is reliant on government funding, do not despair.  Federal money can be (and often is) an important source of funding for many non-profits, however it cannot be the only source.  The strength, sustainability and growth of any non-profit is grounded in the depth and breadth of support from the community it serves.



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