How Boards Should Take Action in Response to Federal Grant Unpredictability
Nonprofit boards, or at least their organizations, are facing unprecedented challenges. What was once perceived to be a relatively dependable source of income is essentially vanishing. In turn and particularly for nonprofits with few other sources of income, staffing and programming will be affected, likely shrunk.
What to do now? Well, don’t panic. Take a deep collective breath. The next steps have to be even and measured. Common sense principles dictate that when a responsible body sees danger in the headlights (as well as side and rearview mirrors), it’s time to immediately assess the situation with facts — not biases and opinions — and take action based on this assessment. Panic will only result in disaster.
Assess the Situation and Identify Options
The board, perhaps with a task force formed to review in advance of the first board meeting, should call upon its management to conduct a quick but thorough analysis of what the nonprofit is now facing and what the options are. The analysis should include the collection of data, and the management report should summarize the data and highlight what is the true condition in addition to what is the “so what?” of the condition. Should management offer that current program demands limit the ability to create a clear fact-based picture, then the management should call on knowledgeable volunteers (aka key informants).
In addition to the fact-based picture, ask management to either propose or recommend options for action.
Review Options in Strategic Meetings
The board should consider the management report as its sole focus in one to three called meetings scheduled within a fairly brief period of time. Strategic meetings are likely best held to no more than three hours.
Besides reviewing and discussing the facts, members should then determine the criteria for decision-making. The criteria and facts will then inform action. The end result: A strategy for the organization’s financial future based on facts as well as criteria/rationale for that strategy. And yes, it is possible that the board may consider more than how to raise additional (aka replacement) funds, such as downsizing programs, reducing staff, merging with another organization or closing the doors.
Reconsider Reliance on Single Revenue Stream
One lesson from these current events: Reliance on a single source of income is never the optimal sustainability strategy. Boards committed to government funding as a primary source of income underscores this point. As many would argue, government funding can result in these outcomes:
- Distracting nonprofits from their core mission — oftentimes not ensuring the provision of mission-benefit outcomes.
- Establishing a nonprofit as merely an extension of government and not an independent mission-driven organization — neither a third leg of the stool.
- Be an unreliable source of support — because of the nature of government.
Of course, no single source of support is ever truly reliable, including fee-for-service, and sometimes one can just not predict what is not in their control.
But there remains that every nonprofit is experiencing the reality of funding unpredictability and the resulting chaos — no matter the size and funding strategy. This is true if for no other reason than that those destined to lose federal monies are now additional competition for those who regularly seek funds. Sustainability strategies must now be revisited particularly if they have not been regularly reviewed prior to the current state of most communities.
In summary, nonprofit boards have a fiduciary duty to consider short- and long-range financial strategies, particularly in light of the dramatic shift in government priorities. But they must discuss these realities — in a prudent common-sense manner — calmly and with facts and the recognition that all options may not be or even appear like those the organization has ever had to consider. And they must take action.
The preceding post was provided by an individual unaffiliated with NonProfit PRO. The views expressed within do not directly reflect the thoughts or opinions of NonProfit PRO.
