10 archaic and harmful funding practices we can no longer put up with

[Image description: A ring-tailed lemur, staring directly at the camera, looking very annoyed. Normally, these pictures have little to do with the content of the post, but in this case, this is how I look when I hear about inane, harmful funding practices, like the RFP that requires 20 paper copies to be hand-delivered, during a global quarantine…for $3500! No. Just no. Pixabay.com]

Hi everyone. I hope you are hanging in there. I’ve heard from so many colleagues of the devastating impact that COVID has had on organizations and people. Here are a few quotes from across the sector:

“My agency that serves people with disabilities is closed, except for essential staff. The other approximately 90 staff have been furloughed without pay or laid off.”

“I work at a food bank that serves people living with HIV and other serious illnesses, the majority of them are seniors. Demand is at an all-time high as clients are losing work or family/caregiving support. Our program is mostly run by volunteers, and we have lost hundreds of hours per week of volunteer support. We had to cancel three fundraising events and dozens of food drives, which would have raised hundreds of thousands of dollars in food and cash. So basically demand is increasing sharply while funding and volunteer support is decreasing even more sharply. Many staff are immunocompromised and/or caring for children without childcare while trying to keep the place running.”

“Our organization runs 2 theaters and a bar and have had to close all 3. Hourly employees were furloughed on 3/19 and the salaried staff are soon to follow. I’ll be on reduced hours and salary starting tomorrow and will be completely furloughed by the 13th. We don’t expect we’ll be able to reopen for months. I know many other arts orgs are in this boat.”

That’s just three stories. There are thousands more. The federal stimulus bill that was just approved does allow nonprofits to apply for loans up to $10M for organizations that have fewer than 500 employees, and this fund may be converted to a grant if they keep their employees on payroll from February 15th to June 30th. See this Chronicle of Philanthropy article for more details. This is good. However, with so many nonprofits applying, and with lots of logistics to work out, many critical organizations will be left behind.

In the past two weeks, foundations have stepped up by converting their existing restricted grants to be flexible, waiving deadlines for reports, and setting up emergency response funds. Some have greatly increased their giving, and are getting money out the door fast. These are all very helpful. Thank you, funding partners, for stepping up during a time of unprecedented crises.

Unfortunately, there are still funders who remain in denial about how serious the situation is, who still insist on carrying out backwards, time-wasting, harmful practices. Today I encountered an RFP that requires 12 paper copies plus electronic submission, a tailored budget, and a workplan, for grants of up to $5,000. Another colleague mentioned submitting a grant proposal that requires 20 copies to be HAND DELIVERED…for $3,500.

Holy hummus, these stories are horrifying. These foundations need to read the room. Given everything going on, we just no longer have time or energy to put up with these destructive practices. They show a level of cluelessness that during good times may have been amusing, like an eccentric uncle at a wedding. Now, when nonprofits and the people we serve are in crisis, with lives literally on the line, they are unconscionable. Here, in no particular order, are 10 archaic and destructive funding practices that need to end now and forever:

1. Restricted funding: Many foundations have converted existing restricted grants into general operating funds. This is great. But it needs to stay this way. It should have always been this way. The flexibility and autonomy that nonprofits need right now to do their best work are the same flexibility and autonomy they need at all other times. Restricted funds are silly and archaic, like powdered wigs. It’s great that some foundations have woken up during this crisis and realized this. But after this all settles down, they will still remain silly and archaic. If you don’t wear a powdered wig, don’t restrict funds. All funding should be Multi-Year General Operating Dollars (MYGOD!)

2. Paper submissions: Besides the environmental impact, there’s the logistical and equity issues. Many folks don’t have printers at home while they’re in quarantine. No more paper copies; have applications online. I understand that some folks don’t have access to the internet. Sure, make exceptions when necessary. But forcing folks to print out multiple paper copies as a default as a practice is time-consuming, inconsiderate BS, and right now when there’s a pandemic and we’re trying to keep physical contact minimum, it’s downright irresponsible.

3. Character counts: Yes, I know we nonprofits can get very passionate and talk on and on about our missions and impact and stuff. But when you give us 1,000 characters to explain our theory of change, logic model, and evaluation strategies, we end up spending dozens of hours trying to cut down characters, whereas it will take you a few more seconds or minutes to read an extra paragraph or page. Writing and editing take significantly longer than reading.

4. Bespoke budgets: There are few things that annoy me and other nonprofit folks more than grant proposals that require applicants to fill out a special budget template created by the foundation. It entails taking our existing budget and charts of account and translating them and spending time recalculating line items. This is a pointless and time-wasting practice, and when you have your form in Word instead of Excel (so we can’t use formulas and automatic calculations), it is madness-inducing. Knock it off completely and forever. Just use whatever budget the organization has. If you have questions about the budget, ask. (Although, seriously, it’s way better to get over the whole budget thing and just focus on outcomes).

5. Requiring board signatures: Wow, I am surprised that this paternalistic and insulting practice is still around. Boards, at least the good ones, trust their staff, including in writing grant proposals. When you require a board chair or board officer signature, what you are saying is “We don’t trust you, and we don’t think your board trusts you. Also, you’re ugly and you smell like sardines.” I am sure you don’t mean to imply any of those things, but that is how it’s taken. Never require a board chair signature on a grant proposal again. If you need to know how the board is involved, ask in the narrative section.

6. Taking forever to make a grant decision: It is pretty impressive how fast many foundations are able to get funding out the door during this time. I know lots of nonprofits are extremely appreciative. But if it can be done now during this crisis, then it can be done any other time, because all nonprofit work is in some way about addressing various crises in the community. There is no longer any excuse for foundations to take 3 to 12 or more months to make decisions.

7. Reimbursement-based funding: Having grant funding be reimbursement-based is one of the suckiest, most inequitable things funders can do. Many nonprofits do not have the cash on hand to spend and then wait for a reimbursement. Organizations led by and serving marginalized communities have even less cash to work with. I remember having to loan my own organization from my personal savings account one time because a reimbursement check was four months late. This is a terrible and harmful practice based on suspicion and lack of trust, and it needs to end. Pay upfront and in full, and let nonprofits do their jobs.

8. Requiring bespoke reports: The grant above that requires 12 paper copies also requires semi-annual reports. Just like we have to translate our budgets into various funders’ budget templates, we have to take reporting data and converting those into various reporting forms, wasting more time. Just let organizations have one report on each program and all funders can just read that, or better, just wait for the annual report. It is silly and arrogant to for foundations to think that their contributions somehow warrant a special report. One time a foundation asked me to “report what outcomes our foundations paid for, and also report on what outcomes we did NOT pay for.” Sure, buddy, I’ll do that and won’t make up stuff at all.

9. Punishing orgs for having reserves: Many, many organizations are forced to layoff staff because most nonprofits in the sector have one to three months of operating reserves. And a lot of this is because of terrible philanthropic practices, including the one where foundations refuse to fund organizations that have more than a couple months of reserves. One thing that this crisis has shown us is that organizations need at least six months of reserves to remain stable. Don’t screw them over by not funding them for being prepared for emergencies.

10. The 5% payout rate: I mention this often, as recently as two weeks ago in “Funders, this is the rainy day you have been saving up for,” but it needs to be repeated over and over. The 5% should be the floor, but many foundations have treated it as a ceiling, concerned more for their corpus than for the untold human lives that are at stake. Surviving this crisis this year and then rebuilding society gradually over the next several years requires foundations to double or triple their payout rates, which will save endless funds that will need to be spent in the future.

There are lots of other practices that are harmful. Nonprofits have given feedback on many of these things for decades, and yet some funders continue to remain in denial about how destructive they are. These practices are hindering nonprofit work. We need to agree to put an end to them. Not just now when we are all reeling from this pandemic, but forever.

And honestly, these are all rather tame, boring recommendations. If your foundation is still stuck on them, then we cannot have more challenging conversations about systemic change, including advocacy, political engagement, power building, tax reform, etc.

The pandemic reveals critical flaws in society and in our sector. We no longer have time for these same old discussions about things that should be obvious to everyone by now. End these inane practices, and let’s move on. We have much more important things to discuss.

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