Indirect Costs in grant applications

I was recently invited to be a guest on Nonprofit Everything, a podcast co-hosted by the amazing and wonderful experts from the Alliance for Nevada Nonprofits - Andy Schuricht and Stacey Wedding. We discussed a listener question they recently received on the topic of indirect costs in grant applications. The podcast is available here, but below I’ve summarized some of the thoughts I shared with Stacey on this topic.

“What type of buzz words or language can you include in a grant to cover General & Administrative costs, or is it best to just include a line item in the budget? Is 10% G&A a reasonable request for coverage per grant?”

  • General & Administrative Costs, General Operating Costs, Indirect Costs, Overhead, and Operating Costs are all interchangeable terms in the grant world that essentially mean the same thing, which is your organization’s costs of doing business. These are the items that cannot be directly attributed to the project or program for which you are requesting funding, but are necessary for the organization to operate. The types of items that can be included in this category include things such as: facility rent, utilities, general office supplies, salaries for executives, accounting and legal expenses, insurance, and human resources and payroll costs, among other costs that are specific to your organization.

  • The language you use in your proposal narrative and/or your budget narrative should reflect the specific expenses your organization has that are included in your overhead calculation. Your fiscal manager should be able to help you identify what those costs are. They do vary among different organizations, so it can be helpful for funders to understand exactly what categories of expenses are included in your indirect. Use general terms when describing this in your grant proposal or budget narrative—“Human Resources/payroll expense” is an example of a good descriptor.

  • The indirect rate that is reasonable to request is one of two things:

    • The maximum allowed by the funder—if the funder allows for 20% indirect, you should include the full amount allowable. This is because indirects are unrestricted dollars, meaning the organization can invest them where they are most needed. As this type of funding is the most difficult to raise in the grant world, it is best to maximize this wherever allowable.

    • The maximum your organization already operates with. To calculate this figure, refer to your organization’s audited financial statements. Add your Management & General Expenses total to your Fundraising total, then divide by your total expenses. This should be converted into a percentage. That’s your organization’s overhead rate. If you’re required by the funder to request no more than the maximum you are currently spending on your overhead, use this number. If your overhead rate exceeds the amount allowable by the funder, you will need to follow the funder’s maximum allowable guidelines, rather than your organization’s effective rate.

  •  The indirect cost line should be included in your line-item budget and budget narrative, but should be a distinct line item on it’s own. Ideally, a full program budget includes columns for both revenue and expenses and line items for salaries, benefits, program costs (whatever those may be), subtotaled, then a line showing the indirect percentage and the dollar amount, followed by a sum total at the end.

  • Remember that the indirect calculation is included in the maximum request amount. For instance, if a funder is offering a $100,000 grant, and indirects are allowed up to 20%, you may allocate $80,000 to direct program expenses and $20,000 to indirect costs. You may not tack on an additional $20,000 to a $100,000 request.

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Nonprofit Myths...a multi-part series!

I recently sat down with some outstanding fundraising & nonprofit management colleagues (who also happen to be kind and wonderful people and good friends) to discuss an upcoming presentation we’ll be giving to a group of local business and community leaders. Very quickly, as it often does when in the company of kindred spirits and trusted colleagues, our conversation turned to the common frustrations we have with the various myths and misunderstandings we encounter as nonprofit professionals. We have each tried to counteract these as much as we can in our respective spheres, and I applaud the work that Stacey, Andy, and Clay do to fight the good fight for our sector through their endeavors: the Nonprofit Everything podcast, Annual Fund Lab blog, Valor CSR, Professionals in Philanthropy. Stacey and Clay are on Twitter too, dispensing oodles of fundraising wisdom!

As the four of us chatted, we collectively created a list of more than a dozen irritating, harmful, and downright absurd myths and misconceptions that we encounter frequently in our work. Often, these questions are posed by folks who aren’t intimately familiar with the nonprofit/public sector, or who haven’t been in/around the work long enough to understand some of these challenges. Many who ask these questions genuinely don’t know the reasons why these issues are irritants to those of us who spend our entire lives in this work, and they mean no harm or disrespect—it’s often simply a lack of exposure.

So, over the next several weeks, I’ll be tackling the issues on our collective list, starting with myth number one: Nonprofits need goods/services or time & talent from board members, volunteers, and the broad community more than anything.

I’ll start with the aspects of this myth that are accurate: Many nonprofit organizations lack deep capacity in certain operational and/or other specialized professional services areas…this is true. Nonprofits recruit board members that have specialized skill sets, professional connections, and access points that they would otherwise not have access to, due to limited or restricted funding, and lean operations. Many nonprofit organizations seek to place individuals on their boards and committees that have the ability to bring goods and services to the table (donated, at-cost, or discounted) for the benefit of the organization. Likewise, nonprofit organizations may seek the involvement and professional skills from people in various fields to supplement their operations or other functions: for example, many nonprofits seek to have attorneys serving on their boards, to have the option of accessing or obtaining legal advice should that be needed.

Here’s where this issue becomes an irritant for nonprofits: Those that are tapped for board, committee or volunteer service with an organization often see that as the only contribution they can or should make, or that the goods/services they are donating are all that the organization may need. The hard truth: For nonprofit organizations, the best thing to receive as a donation is cash. Dollars. Unrestricted funding. Moolah. Bucks. Money. While it is valuable, necessary, and even vital for many organizations to receive donated goods/services, the almighty dollar is the highest value donation, and the unrestricted dollar is the gold star ultimate donation.

It’s easier for many board members who are volunteering their time and are likely not fundraisers by profession to ask for goods/services to be donated. It’s easier not to have to make a direct ask for financial donations. However, that does a disservice to nonprofit organizations that are almost always in need of additional financial support. As a volunteer, how can you counteract this? ASK the organization their needs. Ask them to prioritize their requests. There are need to have’s, and nice to have’s, and “oh god, now we have this thing we have to deal with” on the nonprofit side. Make sure you are assessing whether your gift of goods/services is truly beneficial for the organization, and whether it creates additional burden for an organization to administer, manage, or otherwise address. Also, give cash whenever you can :)

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The Scarf Store

I've been a nonprofit/public sector professional for my entire career, beginning 16 years ago in college as an unpaid intern at a non-public school for children with ADD/ADHD and Autism Spectrum Disorders. Over the years, I've worked in direct service in a variety of functions, on fundraising teams, as a development shop of one, in nonprofit senior management, for public and quasi-governmental agencies, as a consultant, as a university professor & instructor, and as a speaker. I have seen and experienced a lot throughout my career, much of it fascinating, inspiring, and uplifting, but also frustrating, challenging, and agonizing. As I have moved through each phase of my career, my motivation and passion has grown and changed. I'm now solidly and confidently mid-career, at a phase where I know enough to be dangerous; but I also recognize that there's far more that I have yet to discover. A side effect of growing out of Impostor Syndrome & caring less about what others think as you grow into experience and wisdom *(ahem, aka aging) is that illusions tend to fall away also. Long gone are my Pollyanna days where I believed everyone always acted from pure intentions and wanted the best for our organizations, our clients, and our communities. These realizations have been difficult at times, but they have also been instructive and powerful.

Facing mediocrity head-on is it's own unique challenge that comes with a huge energy drain. On occasions when I feel particularly flattened by the realities and disappointments of my sector, I find myself dreaming of an escape to an easier path, one with less complexity and lower stakes. Enter, the concept of The Scarf Store. One day, while discussing our annoyance at some inane leadership decision or bureaucratic nightmare with my girl tribe, I hit my limit of exasperation, and proclaimed "That's it! This is insanity! I'm quitting all of this! I'm just going to open....a....scarf store, or something!" (Now: caveat that I fully understand that running a small business is no joke, and this wouldn't be a realistic escape from the frustrations of Interacting With Other Humans, but, the fantasy of a simpler life is appealing.) The concept of Scarf Store has now become shorthand among some of my friends--a recognition that at times, this work is so intricate, infused with power dynamics, and frustratingly layered with divergent motivations that it can feel like no forward progress can be made. Sometimes you just have to throw up your hands and mentally escape for a minute. #nonprofitselfcare

The Scarf Store will not ever likely be a reality, at least not in my world. I'm too committed to the field, to advancing progress and justice in any small way that I can. This work is difficult, infuriating, heartbreaking, inspiring, joyful, transformative, crazy, and weird. I love it. 

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Getting Started as a Grant Professional

If I've learned anything from my decade in the grants & fundraising world, it's that experience is the best teacher. My first job out of graduate school was as a Grant Writer, and the day I started in my role two things happened: My new supervisor (the agency's Director of Development) told me that my first assignment would be to complete and mail out two LOI's to foundations during that week, and also...she was putting in her two week's notice that day. My shock was likely palpable, and it was pretty evenly split at hearing both of these things. I had no idea what an LOI was, so I fervently googled around until I learned it was a Letter of Inquiry/Letter of Interest, and found a few articles and templates that at least set me on the path to completing my first task. My searches for "what to do when your boss quits on your first day" led to far less concrete guidance. 

I now have thousands of LOI's, proposals, rejections, grant reviews, hours of mentoring, and years of teaching grant writing skills under my belt as a development professional; and am often asked how to get started in this field. There are a few pieces of advice I give, as well as interesting (hopefully useful) things I've learned through my experience: 

  • You can read all the books, listen to the podcasts, take courses, go to workshops, and take part in a whole host of other learning activities to understand how to do this work (my list of recommended resources can be found here), but nothing is as valuable as getting in there and trying it for yourself. Throughout my career, I've rarely known exactly what I was getting into with specific funding agencies, applications, etc., but I've found that diving in and just doing it has led to a greater confidence in simply figuring it out, along with valuable development as a fundraising professional, and deeper knowledge of the nuances of this work. 
  • There's no magic formula. Anyone who tells you there is--is lying (and is probably trying to rip you off as well). Even when you're doing a great job--clear, concise, brief, powerful storytelling combined with rich, impactful data--your work is only 50% of the equation when funders are looking for a match. Speaking of which...
  • Rejection is a huge part of this work. The MAJORITY of grant proposals written are not funded, and cultivating a successful partnership with funders takes a significant investment of time and effort. As a development professional, you must learn to understand this, and take rejection as an opportunity to glean valuable information, as well as deepen your organization's relationship with a funder. 
  • Cultivation is also a huge part of this work. Identifying a match between your organization and potential funders is critical. Developing a relationship over time that is mutually beneficial is critical. Funding is not a one-way relationship, and the sooner you understand that as a development professional, the sooner you'll see success. Stewarding funders is vitally important. Growing a relationship with supporters over time is the lifeblood of most organizations, as it leads to stable funding (of course, this is relative in the nonprofit world!) and hopefully, increased giving. 
  • Gratitude is the single most important quality to possess and to put forward in your relationships with supporters. Say thank you, sincerely, as often as you can.
  • This work is not rocket science. It is not nearly as difficult to do successfully as people believe it is--grant writing is seriously not that hard! Follow instructions. Put yourself in the shoes of your potential funders as much as possible, everything you do should be to make their lives easier. Make their jobs less work, and you'll see greater success. 
  • Asking questions, not knowing everything, needing time and information to put things together...all of this is okay, and moreover, makes you a better development professional.  Be curious, ask for information, clarify when you don't know the answers. This applies both to relationships with funders as well as those within your organization. 
  • Nonprofit sustainability is a myth. Vu Le of Nonprofit AF has written eloquently and extensively on this topic, so I'll just link some of his amazing posts on the subject here, here, here, and here
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Recommended Reading and Resources for Changemakers!

Assembled here are my personal recommendations for great resources across the board: books, blogs, article series, videos, podcasts, and more for those of us who are changemakers! 

Videos: 

Books: 

Blogs/Articles: 

Websites: 

Podcasts

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That's Unethical!

The most frequent ethical issue I've come across throughout my grants development career is compensation. Organizations, board members, and even nonprofit staff with limited experience in the grants field will often ask if it is acceptable for grant writers to be paid based on a percentage of grant funds awarded, other type of commission based on win rate, bonuses based on successful grant proposals, or finder's fees for grant awards. To be crystal clear: NONE OF THESE ACTIVITIES ARE ETHICAL! Warning bells go off in my head anytime a prospective client, board member, or nonprofit professional ask me these questions.

The ethical standards of the Grant Professionals Association and those of the Association of Fundraising Professionals specifically state that compensation for professional fundraising services, including grant writing, shall be based on salary or fee-for-service (i.e. hourly rate, retainer, per-project fee, etc.). Performance-based compensation such as bonuses in addition to salary or fee-based compensation is acceptable only as long as it is a standard practice within an organization and it bears no relationship to the amount of funds raised. 

Other ethical issues that often arise in the grants world include: 

  • Confidentiality-grant fundraisers deal with sensitive and proprietary information all the time, and must treat it as privileged information. 
  • Plagiarism-professional work must be original and sourced appropriately.
  • Use of Funds-grant monies must be used in accordance with the grant's intent. Expenditures must be aligned to the budget documents and narratives supplied to the funder in applications, and organizations must adhere to funder regulations regarding modifications to budgets.
  • Conflict of Interest-grant professionals must disclose relationships that constitute or could potentially constitute a conflict of interest with the organizations they work on behalf of, as well as funders. 
  • Relationships with Funders-as with any fundraising activity, grants fundraising is largely driven by relationships (see my posts on that here and here!) and it is critical that grant fundraisers do not misuse these relationships to benefit themselves or the organizations on behalf of which they work. 

Further reading, for those interested in the topic of ethics in the grant profession, can be found at the following links: 

https://www.grantprofessionals.org/ethicsfaqs

https://charitychannel.com/ethics-throughout-the-grant-profession-writing-implementation-and-reporting/

Happy Ethical Grant Writing! 

 

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Grant Professionals are matchmakers

Grant professionals occupy an interesting place in the nonprofit ecosystem. In an ideal world, the grant professional in any organization is responsible for the full spectrum of activities involved in a complete grant lifecycle, which range from deeply understanding the work and programs of the organization; identifying and researching prospective funding sources; developing relationships with funders; preparing, submitting and monitoring grant proposals; managing compliance for existing grants; maintaining grant records; collaborating with colleagues on organization and program development, fundraising, and other institution-wide activities; and much more.

 The grant professional in any organization should be a go-between, understanding their own organization and translating its’ needs to match those of prospective funding sources, ensuring that the mission, vision, and goals of the funder are met through investments of general and program support of their organization. The grant professional needs to thoroughly understand their organization’s mission and programs, opportunities for expansion and innovation, plus the ‘wish list’ of needs for future program and organizational development. Likewise, the grant professional needs to research, understand, and filter potential funding prospects with a similar focus. Grant professionals are constantly seeking the perfect match between their organizations and the current and prospective funders that are eager to effect change in the world through their investments.

Grant matchmaking requires several things to be most effective: the time and ability to thoroughly research prospective funders, commitment to extensively understanding your organization’s services and programs, the ability to effectively communicate internally with colleagues from various disciplines to obtain the information you need, the ability to communicate externally with current & prospective funders to tell effective stories and convey critical information, the discipline to synthesize a large volume of information, the ability to manage confidential information with discretion, a high level of sophistication in communication (in all forms), willingness and ability to build relationships with funders over time, and the skills of strategic planning, critical analysis, tactful communication, and high-volume multitasking.

Grant writing and management is a skilled, professional craft. An ability to write well is a prerequisite for becoming a grant professional, but it is only one component of the role. All of the areas of responsibility for grants professionals require a commitment of time and significant expertise to be done well. A specialized, skilled grants professional is a vitally important team member, one that many organizations mistakenly conflate with general resource development work or one of many duties assigned to an ED, top leader, or volunteer. Grants work is time- and effort-intensive, and producing high-quality, competitive grant applications and growing relationships with grant funders demands investment by organizations.

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