Depending on Government Funding: Impacting Your Nonprofit Organization?

Visitors to the EHL Consulting’s web site in November spoke out about depending on government dollars.  What do we recommend?

Certain types of nonprofit organizations believe that they cannot survive on fees and charitable support alone. Albeit they may be the financial lifeline but there are other resources to consider.  Although no two organizations are exactly alike, many depend on different types of government funding to help finance an organization’s programs. Even during difficult financial times, we note that over $500 billion in federal grants are made available annually. Receiving consideration requires basic research and then active filing.

There are advantages and hurdles associated with seeking and receiving federal, state, or local government funding. The obvious advantage is supplemental funding for needed causes. Often government funds are perpetual and agencies become dependent on these monies. The disadvantage of the funding can often be various political motivations. Both Democrats and Republicans have social causes that they favor or not and these motivations can sometimes affect federally funded programs. This may have been one of the factors that prompted almost one-third of our web site survey respondents in November to acknowledge a decrease in governmental funding in 2011.

Another issue is timing. Governmental allocations are not necessarily synchronized with the fiscal calendars of every organization. Funding cycles can vary from year-to-year, too. For example, a nonprofit organization could be in the need for the funding of a special screening or a periodic program; thus questions arise regarding whether the allocations should happen each year or in other timeframes. Much depends on the accounting controls set forth by the organization as well as the proposals submitted to request funding.

Government favors nonprofits that serve social and health-related services but arts and cultural institutions are also likely to qualify, too. There are new barriers with some federal funding. Just two years ago, the government reduced funding to nonprofits that have CEOS that earn more than $500,000. The thought process is that government dollars are being funneled into programs as opposed to administrative costs.

Our advice in the times of the “new normal” is to  position your nonprofit to survive on charitable support, fees and reputable programs because government dollars will become even more unlikely, more difficult to secure, and be paired with restrictions that may be almost crippling.  If fortunate enough to procure a government grant, try to use it as an enhancement for organization purposes that will not be in jeopardy once government dollars vanish



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