Have you ever considered how exactly nonprofits stay in business? I mean, if the whole point is to *not* turn a profit, how exactly are they funded? And who’s job is that anyways?
This study takes a look at state grants, their requirements, and how they actually impact nonprofits on the daily. Many nonprofit leaders, especially at the local level, are not financial specialists, accountants, or even necessarily well-versed in spreadsheets. However, they are oftentimes the ones in charge of organizing, acquiring, and maintaining all funding sources for their organization. I conducted 5 interviews with nonprofit leaders in Monroe County, Indiana, in order to get a better understanding of how these nonprofit leaders feel about this system.
When asked about the kinds of accommodations they usually have to make for state grants, all five interviews varied greatly. One of the interview respondents works for a state agency and reported that the funding they receive through the state is directly targeted at providing the services and supporting the work that they do. Another respondent, who works for a national level nonprofit, said they are often able to use the work they are already doing, possibly with minor changes, to fit the requirements of the state grants. However, since this is a national level nonprofit, there are certain indivieuals within the organization, outside of the Director, who have the responsibility of researching, applying for, and maintaining state and federal funding. This phenomenon actually contributes to a later finding that the size and management structure of the organization plays a huge role in how certain funding sources are perceived.
Others reported that they struggle to keep up with the reporting requirements. Even though they already track a variety of measurements for their programs, grant administrators often ask for new or additional, unexpected data, and the organization must go back and further review that information.
The nature of the nonprofit’s mission or work can also lead to some administrative burden when it comes to state grants. Although it is possible in some cases for a nonprofit to take a different path from what the state wants, there is paperwork that comes with that and nonprofits must justify why they are not following the exact protocol. Another interviewee reported there was some burden with continued verification and eligibility.
When asked whether state grants directly help to fulfill the mission of the organization, almost all of the organizations reported that they find this funding directly helpful to pursuing their mission. One organization reported that state grants are helpful sometimes, but they do prefer other
funding sources over state grants. This organization only serves a specific population and, in the words of the respondent, “some get it, some don’t.” When discussing preferences for other types of funding, one respondent emphasized a need for a “healthy balance” between needing specific grant requirements to ensure the appropriate use of funds, while also allowing nonprofits to fully utilize the funding.
One of the important findings from the data analysis highlights the relationship and history an organization or an individual has with a grant provider. Local funding that is essentially guaranteed is always appreciated, but nonprofit leaders do prefer to combine their local grant funding with both state and federal grant funding. While one respondent noted that they prefer fundraising over almost any other method of funding, they acknowledged that without other large grants it can be difficult to grow and pursue your mission.
In general, the findings that the relationship an organization has with the origin of the funding and the size of the organization are at the forefront of nonprofit leaders’ minds can serve as a strong starting point in understanding how nonprofit leaders perceive grant funding. While the working theory – that the more conflict nonprofit leaders perceive comes with government funding, the less likely they are to pursue this funding – is neither fully supported or contradicted throughout this study, it serves as an interesting development and lays a foundation to build upon in further research.
Maya Benysh is a senior at the O’Neill School of Public and Environmental Affairs studying Law and Public Policy, with minors in Spanish and International Economics.
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