Owing
to the financial problems everygovernment is facing,the non- profits mostly
dependent on government for their funding need to revisit their funding model
which is “a methodical and institutionalized approach to building a reliable
revenue base to support an organization’s core programs and services."
The
basis of any such funding model suggests something that has been neglected over
the years i.e. the fact that most non-profits have 2 customers— the
beneficiaries who earn the support and the financers who pay for the work. Generally
these are not the same parties. What is required is a proper planning of funding
operations of the entity as religiously as the one that is done for creating an
impact on the people i.e. promoting itself via various media. A secure and
careful approach to future planning can help sustain the activities of the
non-profits in a fruitful way. But, this is seldom undertaken by the
non-profits because major part of their energy and attention goes into the program
model and not the funding model.
The
conventional wisdom is that non-profits need to diversify their funding across
various sources of funds— foundations, high net worth donors, small donors,
corporate philanthropy, government, etc. —to grow and sustain. In majority of
large non-profits, especially that with budgets of $50mn and above, it is worth
focussing rather than diversifying.Large non-profits normally secure their funding
from 1 primary source – government or philanthropy or individual contributions.
In case of mission-driven work, a funding agency is there to value a mission to
test if it is strong enough to be financed.The competence that non-profits must
develop to maximize the funding from their primary source is quite different
from the ones needed to maximize a number of such sources simultaneously. In practical
world, the non-profit which can leverage a single source to its maximum is
better off than the ones who put in efforts to draw funds from several sources
at a go.
This
goes well with the fact that most human service non-profits todayrely mainly on
government as the natural funding agency for their social work to foster youth,
homeless families, impoverished seniors, educate masses, etc. they have gained the
trust and expertise to handle such government grants and also succeed in
winning, managing or renewal of the contracts over a period of time.
But
now the governmentis reducing funds, lowering the prices and thus making life
miserable for non-profit providerswho are the Ngo "partners." Here
comes the importance of other funding sources but still government resources
are incomparable to any other private, individual voluntary source of funding.
Still there is no plethora of private funds waiting to finance the social
projects on a regular basis, so the non-profits need to review the approach of
seeking government funds and for this they need to be certain about their
mission which is to be conveyed to the government by its operations. The 5
traditional aspects to be considered for securing government funding are:
Government
is your customer: Government enjoys
power over the non-profits which are dependent on it for funds. Though there is
frustration, agony, resentment, in accepting that govt. controls the destiny of
the non-profits, but still a responsive, customer-oriented ethical behaviour
would be appreciated and invited. The non-profits ought to treat government as
their customers in the same way as they do.
Non-profitsrely
on service delivery contracts with government for their success, so they need
to think differently. They are the sellers thus government as a buyer has the
discretion to buy or not. Considering government’s presence as a problem and
not an opportunity to exploit is like ignoring the agency decision-maker’s
problems for which they have no solution. They need to approach properly and
understand the needs of the government agencies they are dealing with in a way similar
to the business world.
Execute, plan and
review carefully:The process of
formulating a funding model and evaluating its performance is a complex process.
It requires similar exercise of data gathering and analysis, self-assessment,
priority setting, detailed planning, and sustained implementation, optimizing,
asa program model needs. A proper timely review can reap success for the social
entity.
Sustainable
growth prospects should be real: New
approach in practice is: once the non-profits acquire a good source they can
resource from it and sustain their operations and growth by such renewable
sources of funds. This alongside philanthropy is a new version of the
traditional strategic philanthropy that has gone into providing growth capital
for scaling and replicating high-performing non-profits. The source is
generally assumed to be public funding which is definitely not renewable and
reliable. The situation that has been faced due to recession emphasizes the
need to explore all such potential available which is reliable and available
even in times of scarcity. Many of the non-profits that are expanding solely on
the expectations from the govt. would be left with the same operating budget
shortfalls as usual.
Sensibly
supplement public funding: "If you rely
completely on government for your future, you are done,” so you need to find potential
options outside government. Some may succeed serving beneficiaries covered by
private insurance also. The reimbursements can be at better ratesthan the government,
but this sudden change in the funding module in favour of private payers might call
for a verification as to what could be the implications faced by the non-profit
in times of different treatment protocols, billing process, shorter stay time,
etc.
If
80% of an agency’s funding comes from government but 80% of the CEO’s funding
work is courting philanthropists, there is something wrong with the picture, so
take precautionary measures i.e. non-profit leaders need to ensure that the
time they invest cultivating funding sources is roughly proportionate to their
budget contributions.
Diversification
within the government: The
non-profits which have survived on public funding can’t just continuously keep identifying
and harnessing resources from various other sources. This defocusing may not be
worth the effort. Still they should diversify their funding streams across
different government agencies, programs, and contracts in order to reduce their
exposure to the risks inherent in relying too much on any one source.You can take
services being contracted for in one jurisdiction and secure contracts to
deliver the same services in adjacent jurisdictions— i.e., serve the same population
in the same way but at a different place. You can even offer an integrated care
service — for ex: a youth serving agency that offers intensive residential
services with therapeutic foster care and other community services. This gives
you a competitive advantage vis-à-vis less integrated non-profits because of
the ability to offer a range of solutions to government agencies depending on
client needs. The purpose in both instances is for non-profits to avoid dependence
on one contract or agency so that they do not collapse if
the economy turns down.