Foundations Don’t Fund General Operating Costs – Or Do They?

Do you still believe that tired old legend about how difficult it is to find foundations that support general operating expenses?  

It’s one of the grantwriting myths that even I bought into.  Why not?  The foundation that I worked for for a number of years generally dissuaded grantseekers from applying for general operating expenses, preferring to fund specific programs and capital.  Foundation trends did, for a number of years, steer away from funding organization general operating expenses. 

Because foundations’ founders and their leadership tended to be from the corporate world, there was a major push in the 1980’s through the 90’s for nonprofits to be accountable and goal driven.  Funding was directed to short term projects – ones that could deliver measurable outcomes. 

But we all know that project-based accounting often forced grantees to sacrifice long term effectiveness.  

After all, if your organization is continually adding more programs or sites while your underpaid (frequently revolving) staff is working on obsolete computers without proper supplies, where will you be in five years? 

I am pleased to report that that is changing. 

In 2004, the Independent Sector Board of Directors unanimously endorsed a statement to “opt for general operating support over project support when feasible and when the goals of the two organizations are substantially aligned.”

Further, they encouraged foundations, when providing project support, to pay “the fair proportion of administrative and fundraising costs necessary to manage and sustain whatever is required by the organization to run that particular project.” 

And now a recently issued report from the Foundation Center notes that, not only has foundation giving increased by 14.6% in 2006, but foundation grants for overhead costs grew by 6.7%.   Likewise, the Center for Effective Philanthropy, after surveying 20,00 grantees and 79 foundation executives,  noted that foundations “should make larger, longer-term operating grants” of unrestricted funds that can be used to support the organization and its overall mission, not just specific projects or programs. 

Hallelujah! Foundations are finally recognizing that nonprofit organizations don’t operate in a vacuum!   

So where do you find foundation grants for general operating costs? 

Check out your core of current donors, those who have been most consistent in the past, who are already enthusiastic supporters of your programs.  If you’re doing your foundation research on a regular basis, you should be compiling a steady roster of new foundation prospects.  And don’t forget those foundations to which you’ve applied but have never funded you. 

Make your case for support not only as clear as possible - but as compelling as possible as well.  

 

Metasoft BIG Online Vs. Foundation Center's Foundation Directory Online

And what to do if your budget allows for neither ...

Awhile back the “Grants” listserv of CharityChannel, the Internet’s premier resource for nonprofit information, featured a lively debate about the merits of Metasoft’s BIG Online subscription database versus The Foundation Center’s Foundation Directory Online database. The merits of Guidestar's Grant Explorer were even touched upon.

Both programs offer their users a variety of methods to seek out foundation funders. Both obtain their information through foundations’ 990 tax forms. And, based on feedback, both BIG Online and Foundation Directory Online share an equal number of loyal fans.

However, the fact is there are many nonprofit organizations whose budgets (or executive director’s mindsets) do not allow for choosing ANY foundation prospecting tool, let alone BIG Online, which will run you thousands for a six-month (their shortest) run.

What’s a smaller nonprofit organization with limited resources to do? Is it possible to still seek out those little known national and regional foundations whose missions align with yours? Without expensive tools and connections, how will my little $250,000 annual budget children’s arts organization find foundation support to grow and create new programming?

With an internet connection, preferably high speed, some time and practice, and a number of detecting tools, even those on very limited budgets can regularly seek out foundations that will support your mission – year after year.

Your best start is a foundation directory. Almost every state, with exceptions such as Alaska and Hawaii, publish one and sometimes several. More and more these directories are moving to Internet subscription-based services – but they’re still a deal.

Now take some time to really explore these websites if you’re not already familiar with them:

www.guidestar.com: Note that you must register to use Guidestar but registration is free. Guidestar does offer paid subscriptions, however, there is no charge for viewing a foundation’s three most recent 990’s.

www.taxexemptworld.com: This clunky little site can be a boon to the grantseeker on a budget.

http://fdncenter.org/: The Foundation Center; one of the oldest and best resources on the web. The Foundation Center offers a number of paid subscription programs – but they also offer free services.

http://www.cof.org: The Council on Foundations

http://www.smallfoundations.org: A relatively new organization devoted to 60,000 smaller United States Foundations

https://www.nozasearch.com/: In October of 2007, Noza began offering free foundation searches.

Between your state foundation directory and these sites, you should have enough resources to get you started on the path to funding.

Check out my book, Five Days to Foundation Funding, available at www.writegrantproposals.com for more ideas on writing an effective, funded grant proposal on a budget!

Be a 990 Private Eye!

The following article was first published a few years back, but I thought it bore repeating.  A quick easy way to add to your grant proposal is to research your prospective funder as thoroughly as possible (given your busy day!).

Five Things to Look for in a Foundation's 990 ...

Prospect research is the absolute key when you're investigating potential sources of foundation funding and there is no finer tool for truly observing the workings of a private foundation -- and whether or not their mission provides a match with yours than with a thorough investigation of a foundation's federal 990-PF form (downloadable at a number of sites for free, including Guidestar). Download the past three years of the foundation's 990s to get a true picture ...

What, exactly, should you be looking for?

Assets: Note, of course, the total fair market value of all assets recorded on line 16 for the last year reported. Now take a look back - has the XYZ foundation's assets declined or grown over the past few years? Are they a new operating foundation with considerable assets (that can be a sign that they have yet to hone a finely tuned methodology of awarding grants) - and you'll want to approach them towards the end of the year (October through early December) when they may be rushing grant monies out the door.

Part VIII - Information about officers, directors, trustees, foundation managers, highly paid employees and contractors: You will certainly want to note the names of the trustees. Could members of your board possibly know any of the trustees of XYZ Foundation? Does the XYZ Foundation have staff members or is it entirely family-run?

Part IX-A - Summary of Direct Charitable Activities: Here's where you find out the exact dollar amount given in grants.

Part XV: This section will tell you how grant applications should be prepared, if there are any deadlines, etc. along with a listing of grantees. Although it's still a good idea to phone and get grant application guidelines directly from the foundation in question, this section will get you started (and don't write a foundation off if they specifically note that they only grant to pre-selected organizations - I've had success with smaller grants of $250-500 with these foundations when there was an otherwise good match in giving!) Are there organizations similar to yours on that listing of grants given in 2003? What is the dollar range in their grantmaking and where would your organization fall?

Income from investments: Why would this be of interest to a potential grant-seeker? Taking a look at the XYZ Foundation's investments can give you a generalized idea of their overall philosophy. Are their investments centered in "grandfather" stocks? Their philosophy may be rather traditional and conservative. Do they invest in eBay and Amazon? Perhaps they're more open to creative approaches to problem solving and would welcome a more inventive grant application.

Do a little detective work to really "get to know" the foundation you're seeking funding from and increase your chances of successful funding!