nonprofit use

When a Crisis Creates Special Funding

These past few weeks, many foundations are quickly offering grant money to help with the impact of the coronavirus. This is good news since the Federal money will not be coming for weeks or months.

I’ve written a few grants already and read over a few others. The foundations do not require much information. Some grant requests are by invite only and a few foundations are sending money to nonprofits they know are directly impacted without needing a grant request. I expect more foundations will offer money to cover coronavirus related expenses.

There are good and bad things about quick money during any crisis.

The good news is that foundations want to help and they make money available easily long before the federal government can respond. The bad news is that a nonprofit could find it hard to justify receiving money in a crisis, such as the coronavirus, when their programs are not impacted.

For many nonprofits, the impact is a loss of income such as in donations.

Nonprofits should resist the urge to justify receiving coronavirus money unless their programs were impacted. Chasing after crisis money, like coronavirus funding, can force a nonprofit to become what they were not meant to be. When the crisis is over, the nonprofit can be labeled something else, future money cannot be justified, relationships get broken, and the path forward could be lost.

More importantly, the reputation of the nonprofit could be hurt if they received money outside of their mission without a logical reason.

Yes, some nonprofits can readjust their resources to accommodate a specific crisis and they should receive crisis money for doing so. In the end, I think the responsibility is more on the nonprofit than the foundation to rationalize accepting crisis money or not.

A Nonprofit’s Need for Stability

Nonprofit operations need to continue in a consistent manner each time and every day. Without this stability, mistakes occur and, when a problem happens, the people struggle for a solution.

Most of the time, nonprofits (and other organizations) rely on people staying in their same position over time to maintain stability. Unfortunately, when these people leave, the operations must be relearned. This costs time and other resources and could be a significant point of failure in the mission or a program.

A simple list of what to do is sufficient to keep operations stable when people leave. As an example, when receiving grant money, the instruction should state what spreadsheet to use, what information to enter, who to inform about the grant, and who will be accountable for spending the money (receive, record, inform, and establish accountability). The instructions do not have to be long.

While it can seem daunting to write instructions for each activity and process, they can be written without many details. Do not write about every possible contingency that may come up. Keep the instructions simple so they can be used as a baseline for what to do. Keep the instruction to one page or two at the most. Make sure there is plenty of white space on each page, maybe use an outline form. The reader does not want to feel like they are reading War and Peace.

I am trying to follow my own advice with the nonprofit I’m involved with. While I already keep records of everything, I am writing out the steps I take to accomplish each process. Now is a good time for everyone to do this since most of us are home. I’m also doing it because I do not plan to stay with the nonprofit the rest of my life.

What it means to be a nonprofit

I have become involved in a small nonprofit that existed for many years. While the previous board members were familiar with the mission, they were unfamiliar with operating a nonprofit. They assumed that being small meant they were okay with not following all the nonprofit rules.

If the IRS approves a letter of determination and the nonprofit receives money, they must follow basic nonprofit rules. Size matters only in what rules to follow.

For example, this nonprofit had not filed an income tax form for several years. Previous members decided that the nonprofit’s small income exempted them from filing. This caused the nonprofit status to be revoked and it was reinstated at a cost.

Every board member should learn how to run a nonprofit. Of all the things to learn, the two most important ones are:

  • Protect the money by creating financial guidelines. Include at least two unrelated people on the bank account and require dual signatures on all expenses. Also, establish a process to balance the bank account and report to the members.
  • Keep the bylaws updated. These are the operating rules of the nonprofit and should be reviewed at least every two years. The most important part of the bylaws is what makes a quorum. Too low a number and changes could be made without members having a say. Too high a number and nothing can get change, even when needed.

Other matters to pay attention to are having a budget, maintaining archives, and keeping a set of operating procedures updated.

Everyone in a nonprofit has responsibility to make sure that, not only is the mission met, but that the nonprofit operates according to the rules. No matter the size of the nonprofit.

RISK

When a foundation funds a grant request, they are making more than an investment in the nonprofit’s mission. The foundation is also investing their reputation in the success of the nonprofit.

When a nonprofit receives grant money, they receive more than money. They make a commitment to the foundation that the money would achieve success.

Investment and commitment come with risk that success is achievable. While reputations are at risk (including the money), it is the nonprofit who stands to lose the most if some measure of success is not found.

I think most foundations know about risk. It is usually a determining factor when awarding grants. However, I discovered some nonprofits do not understand that their future investments are at risk when receiving a grant.

If a nonprofit achieves success, the foundation will likely continue with future funding. Also, other donors are likely to invest in the nonprofit’s mission. How is success determined?

People evaluate success, not facts and data. The nonprofit staff should ask themselves if the mission caused positive change in people’s lives. I hope it did.

In a follow up post, I will write about measuring success. Most of the time, success is hard to determine and it is never absolute.

Yes, I missed a blog post last week (for December 9). My problem is that I write a blog post on the weekend with a Monday posting. I have ideas to use, but nothing prepared if life envelopes my time. This is what happened last week with a trip to a wedding, painters in the house, and volunteer stuff. I should have several posts ready ahead of time, but I don’t. You think I would learn.