I find it
interesting that I’ve read and heard quite a lot lately about foundation
leaders discussing the relative merits and challenges of moving some of their
grantmaking from program and project grants to general operating support. The
New York Times recently published a re-framing piece on this by Denise Caruso, "Can
Foundations Take the Long View Again?" The members of GEO (Grantmakers for Effective
Organizations) have been engaged in a long discussion and analysis on this
topic. They have published several thoughtful guides (free
registration is required to view them). What
I don’t think I’ve heard is a comparable discussion from nonprofit leaders
about how much impact and long-term value their clients and communities would
gain from more general operating support. If you are the director of a
nonprofit, you may think that is an obvious statement – but I don’t think that
connection is made very well. There are several issues involved, including
different terminology and understanding of budgets.
What is a
general operating grant? Is it a grant to pay for overhead expenses, or is it
funding to provide comprehensive support for the organization’s mission and
activities? Too frequently, the term is used as in this excerpt from an article,
“General operating money is certainly one of the more
difficult categories of funding to secure, mostly because it's a lot less
appealing to the funder. Let's face it, paying rent is not nearly as sexy as
helping people fulfill their potential as human beings.” STOP saying that.
This is the kind of thinking and woe-is-me mentality that can’t make the case
for general operating support. There is an implicit choice in this article: We have
$10,000. Should we spend it on rent, or should we spend it to help people
fulfill their potential as human beings? How
about this instead: Let’s
spend it on rent, salaries, benefits, supplies, and phones to operate our
effective, innovative programs that help people fulfill their potential.
Do
we need some new terminology to cut through this mess?
- General Operating Grant: Apparently, this is a grant
to pay for distracting, hard to justify, and uninteresting expenses (like rent and phones).
- Program Grant: A grant that is
restricted for a defined set of activities and outcomes that fit with the
organization’s mission. All expenses included in the program budget,
including salaries, rent, and supplies, are needed to carry out the
program’s goals.
- Core Mission Grant: A grant provided to an
effective organization to use as their leaders direct in order to support
and achieve their mission. Some of the funds may be spent on immediate
program and organizational needs and some on long-term investments, such as program
development, staff training, and technology.
According to Caruso's article, "The majority of foundation leaders polled in the studies acknowledged that unrestricted operating funds were better and more effective for grantees. But they continue to focus their grantmaking on project support, they said, because they prefer its clear-cut results." Flexibility is the key value of core, or operating, support. Think about how you can make the case that flexibility will enable your nonprofit to be more responsive to community, better prepared for the future, and more effective in all of your programs and activities - that's results.
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