How To Reset The Funding Models In Human Service Non-profits

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.