Nonprofit Funding: Buying a Cake and Restricting it Too
Nonprofits spend way too much time navigating the complex maze of funding restrictions, time that could be spent delivering services.
Article Highlights:
Dealing with the headaches of restrictive grants and funding.
For the past few months one of our staff has an eye that’s been twitching. “It’s this grant!” she says. “It’s for our after-school program. It pays for instructors’ teaching time, but not their planning time! How can they teach when they can’t plan?! How? How?!”
“Psst,” I whispered, “Let’s talk in the conference room. “Since the staff is so dedicated, they will plan anyway even without getting paid,” — I paused, looking around — “Why don’t you just increase their hourly wages?”
“This grant capped the hourly wage, so I can’t pay them more. The other grant might pay for planning time, but they don’t pay for employer taxes!” She started pulling at her hair, and both of us collapsed on the floor, weeping and beating our chests in anguish and despair.
OK, I might have exaggerated that last part a bit. But unfortunately, this sort of restriction is not an exaggeration. This challenge that we in the nonprofit sector face daily is historic and pervasive. And very, very frustrating and counterproductive.
Funders and donors are basically customers who buy products, not for themselves, but for other people who need them (I’ll talk about the weaknesses of that system in a future article). Imagine what a bakery would be like if it had the same funding restrictions that we have on nonprofits:
Baker: Welcome to the Dusty Apron Gluten-Free Bakery. Can I entice you with a cake?
Customer: Yes, a chocolate cake. It’s for some gluten-free veterans.
Baker: Excellent! We can make a delicious flourless chocolate lava cake that was once featured in Tasty Pastry magazine. How does that sound?
Customer: Ooh, the gluten-free veterans would love that. They always get fruit for dessert. How much does it cost?
Baker: For a cake serving 20 people, it’ll cost about $100.
Customer: OK, well, I can only give you $20, so you’ll have to find the other $80 elsewhere
Baker: Well, luckily, we have other customers who want to help make a cake for gluten-free veterans. At least three of them said they’ll pitch in, and we’ll ask some others too.
Customer: Excellent, so here’s $20. However, you can’t spend the $20 on sugar. You can only spend it on chocolate and up to one egg. It’s spelled out here in this cake baking plan.
Baker: What about vanilla? It’s hard to make a delicious cake without good vanilla!
Customer: You can spend $1 of the $20 on vanilla, but if you decide you need more vanilla, you have to email me about changing the baking plan.
One week later:
Customer: We ordered a gluten-free chocolate lava cake from you guys, and it was awful. It was too dense and not nearly sweet enough.
Baker: I’m sorry, but other customers also had their own conditions. One customer said he would pay for sugar, but not butter. Another said she would pay for chocolate, but we already had you paying for chocolate, so we asked her if she would pay for butter, and she said no. Our oven’s thermometer also broke down, but none of the customers would allow their cake payments to be used to fix it, saying that fixing it does not directly benefit gluten-free veterans. I emailed you to ask if $5 of your $20 could be used to buy a temporary thermometer, since we didn’t need so much chocolate, but you said it would take three weeks to change the original cake baking plan.
Customer: Well, I’m not buying any more cakes from you guys. You obviously don’t have enough baking capacity. Goodbye.
Meanwhile, another customer heard the exchange:
Customer 2: Sheesh, I’m sorry about that. If it makes you feel better, I and a bunch of other customers got together and ordered a blueberry bundt cake from you last month, and it was delicious.
Baker: I’m glad to hear you enjoyed it! I hope we’ll see you around more often?
Customer 2: Absolutely not. We only pitch in to buy a cake from any bakery once. If we keep buying cakes from you, you’ll just become dependent on us, and that’s just madness—madness, I tell you!
Baker: Well, I’m sorry to hear that. How can I help you today?
Customer 2: I just formed a committee to explore why there is such a high rate of nervous breakdowns among bakers, and since you guys were featured in Tasty Pastry, I thought I would ask you to join.
Two weeks ago I was out to lunch with a potential new corporate sponsor, who got very excited about a program we did awhile ago, where we provided computer training classes in Vietnamese to parents so that they could learn to check their kids’ grades online through Seattle Public Schools’ Source program.
“This is excellent!” he said, “That aligns really well with our priorities this year. You should apply for our employee giving grant.”
“Cool,” I said, “I did see that on your website. I’ll review further and follow up with you.”
“One thing you should know though,” he said, “we don’t fund staffing. We hate paying for people’s wages. We can pay for the computers and software for this program, but only for client use.”
I know he’s just a messenger for his company, but at that moment, I wanted to unleash the fury of a thousand EDs and Development Directors on this poor man. I would stand on the table and my eyes would glow white, and a terrifying cyclone of meeting minutes and financial statements would swirl around me, knocking everything over. People would cower under their tables as hundreds of business cards rained down from the heavens. “Who,” I would say in a low voice that would reverberate through the restaurant, “Who would make the program happen then? Elves?! Unicorns??!!!”
I calmed down, thinking of how awesome that scene would be if we had a show about nonprofit work that combines The Office with X-Men. But yeah, seriously, who would manage this program? God, that would make our work so much easier, if we could just summon some multilingual elves to come out and plan programs and fill out paperwork. That would cut down on costs, and I’m sure the elves would have a better grasp on the advanced algebra and calculus required to figure out which funder is paying for what by when.
The sad reality is that we nonprofits spend way too much time navigating the complex maze of funding restrictions, time that could be better spent delivering and improving on services. We should all focus on the final outcomes and allow nonprofits the flexibility to do their jobs. Though restricting funding in the name of accountability has been a standard practice that stemmed from good intentions, in the end, it is the gluten-free veterans who will be eating fruit again.
Vu Le is executive director of the Vietnamese Friendship Association (VFA), a Social Venture Partners investee. His column, Point of Vu, documents the fun of nonprofit work. He can be reached at vu.le at vfaseattle dot org when he is not eating his favorite cake, vegan chocolate lava cake. Check out his other posts at nonprofitwithballs.com and follow him on Twitter at @nonprofitwballs.
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- Your Nonprofit Got its Grant. Now What?
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- 9 Principles to Make Your Nonprofit Fundraising Effective — and Fun!
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About the Author
Vu Le is the Executive Director of the Vietnamese Friendship Association (VFA) in Seattle. His column, Point of Vu, documents the fun of nonprofit work. Vu also publishes regularly on his own blog, Nonprofit with Balls. He can be reached at vu.le at vfaseattle dot org.
Articles on Blue Avocado do not provide legal representation or legal advice and should not be used as a substitute for advice or legal counsel. Blue Avocado provides space for the nonprofit sector to express new ideas. The opinions and views expressed in this article are solely those of the authors. They do not purport to reflect or imply the opinions or views of Blue Avocado, its publisher, or affiliated organizations. Blue Avocado, its publisher, and affiliated organizations are not liable for website visitors’ use of the content on Blue Avocado nor for visitors’ decisions about using the Blue Avocado website.
Let them eat cake! Thanks for the great insight.
Let them eat cake! Thanks for the great insight.
This is awesome… Thank you!
This is awesome… Thank you!
Hilarious and unfortunately true. I’m thinking of our staff now as elves and unicorns. It’s as if people expect things to happen by magic and staff are willing to work for nothing.
This captures the essence of funders’ cake baking plans we face all the time. Thanks so much. The only thing missing from the plan you describe is the customer requirements (before they give you any money) for information on how you will continue to make cluten-free cakes for veterans once their funding ends — that’s always the frosting on the cake for me!
That's a great point, the sustainability question. A great sustainability plan always includes allocating 10% more staff time to praying for other sources of funding. Vu
This captures the essence of funders’ cake baking plans we face all the time. Thanks so much. The only thing missing from the plan you describe is the customer requirements (before they give you any money) for information on how you will continue to make cluten-free cakes for veterans once their funding ends — that’s always the frosting on the cake for me!
That's a great point, the sustainability question. A great sustainability plan always includes allocating 10% more staff time to praying for other sources of funding. Vu
Thank you for channeling my inner demons so well and with humor. I love it when corporations complain about nonprofits not being more business-like and then decide that their investments (donations) not go for such fluff as overhead. I did lose it once when a corporate contribution was reduced in respect to not funding overhead. The only time I have been “testy” with a funder. The interesting this is, the next year they actually did change some of their policies about overhead.
And now I’m trying to figure out how to get to the NDOA conference….
Thank you, I hope to see you there. I'll be keynote speaking. I don't have the full speech mapped out yet, but it will involve wombats. Vu
LOVE! LOVE! LOVE! I had this exact same problem with a government funder today. I finally asked the program person at the funder how our sector’s leadership could give feedback about the process (being that it is public money, there must be a process). After that, she stopped returning my emails. UGH! I finally stopped banging my head against the desk when my staff got scared. 😉
Thank you for making me laugh when I wanted to cry.
LOVE! LOVE! LOVE! I had this exact same problem with a government funder today. I finally asked the program person at the funder how our sector’s leadership could give feedback about the process (being that it is public money, there must be a process). After that, she stopped returning my emails. UGH! I finally stopped banging my head against the desk when my staff got scared. 😉
Thank you for making me laugh when I wanted to cry.
Unfortunately all too true. In my opinion the non-profit model is in need of an overhaul. Too many funders have it stuck in their "corporate head" that somehow non-profits are run by volunteers like they were for the most part in 1950! Yet, the trend for funders is "outcomes" but few want to pay for the infrastructure (including staff) to gather and report on these outcomes. Diane M. Calkins, Director of Finance, Montgomery County Youth Services
This is EXACTLY why, as a very very small-nonprofit, we avoid grants and foundations. Much better for us: corporate sponsors who understand how a business works, and individual donors who are interested and become personally involved (sometime even as volunteers). I literally don’t have time to do the required writing, planning, monitoring, and reporting and also deliver programming: it’s one or the other. So I’ve chosen programming. “Non-profit industry” ought to be recognized as the oxymoron it is.
Unfortunately, many nonprofits do not have enough support from sponsors and individual donors to be viable without grants. Grantmakers should recognize that allowing flexible funding will lead to much better outcomes. We spend probably 10% to 20% of our time, depending on programs, just trying to figure out invoicing and reporting. Vu
It is amazing how much time and money is wasted proving to funders (particularly government funders) that you aren't wasting any time or money.
Thanks, Diane, things certainly should change. Although, maybe not too fast, since all the craziness is great fodder for a pilot of a tv show about nonprofit work that I'll be writing when I'm caught up with Game of Thrones. Vu
This is EXACTLY why, as a very very small-nonprofit, we avoid grants and foundations. Much better for us: corporate sponsors who understand how a business works, and individual donors who are interested and become personally involved (sometime even as volunteers). I literally don’t have time to do the required writing, planning, monitoring, and reporting and also deliver programming: it’s one or the other. So I’ve chosen programming. “Non-profit industry” ought to be recognized as the oxymoron it is.
Absolutely perfect. Thank you. Now I have to figure out how to anonymously send this to almost every single foundation donor I’ve ever solicited. Will they recognize themselves? Or will they just eat the free gluten-free cakes leftover from their board meetings, and smugly think that sugar-free cake is healthier for veterans anyways?
It does feel sometimes like we're preaching to the choir. However, maybe because of the power dynamics, I don't think that we have been speaking out enough. Oftentimes, funders are willing to listen and change, but it does take quite a long time. We have to continue delivering the message, in multiple formats and venues. Vu
Such a delicious piece (of cake) – wish we could get stuff like this published to the general public – maybe through a civic engagement/education program (anyone want to build that non-profit?) I feel like such a whiner when I try to share this – I may try humor next time around.
Such a delicious piece (of cake) – wish we could get stuff like this published to the general public – maybe through a civic engagement/education program (anyone want to build that non-profit?) I feel like such a whiner when I try to share this – I may try humor next time around.
I was thinking of forming the Union of Cool and Remarkable Nonprofits (UNICORN), whose mission will be to inform the public of the challenges and awesomeness of nonprofit work. I don't know what we'll do, but there will be lots of happy hours. Let me know if you want to join. Vu
My college-aged daughter, who's watched mom write grants, report on grants, "AMP up her foundation relations" [or insert various other workshop titles], etc. and now laughed with me as I shared this article and some of the comments, said she's long thought a sitcom was in order and that UNICORN and the rest of us might do better on Kickstarter – we might even be able to fund happy hour, gluten-free margaritas!
I laughed out loud reading your article. Thanks so much for both putting the small organization's funders dilemma in perspective and giving me a laugh.
Very humorous take on a very real and pervasive problem! I’m always amused (and sometimes peeved) at folks who want nonprofits to function more like corporations. Investors in corporations, for the most part, do their due diligence and then have enough confidence in the business to let the managers run it. Grantmakers who are true partners often approximate this approach, and offer additional technical resources, rather than trying to micromanage.
Very humorous take on a very real and pervasive problem! I’m always amused (and sometimes peeved) at folks who want nonprofits to function more like corporations. Investors in corporations, for the most part, do their due diligence and then have enough confidence in the business to let the managers run it. Grantmakers who are true partners often approximate this approach, and offer additional technical resources, rather than trying to micromanage.
Thank you for this–it’s right on.
I am a program officer for a foundation and we were able to convince our board to allocate 30% of total annual grantmaking funds to general operating support grants.
But I have to say, the reasons for the above issues you mention are myriad and complicated. Sometimes I feel that grantees forget that foundations are nonprofits too, and we must accept guidance and decisions from our boards. You might be surprised to hear what a battle it is to educate board members about the above issues. Unfortunately, many boards of foundations are comprised of people who have little to no understanding of nonprofit finance.
A a program officer, I also hate these restrictions and find them offensive to the nonprofits I support. But that doesn’t always matter…
Just found your blog today and I'm already a huge fan. This article and the one about sustainability are fantastic. It's so nice to be reminded that my boss and I aren't alone when we start banging our heads against the table over grant restrictions and sustainability plans!