Every year, our Abila experts put together a list of predictions for nonprofit finance and accounting. One of the big trends we’re keeping an eye on this year is funding instability. We believe it has the potential to be a formidable issue for those of you working at nonprofit organizations, and may affect the way you approach revenue generation.
So, what exactly is funding instability? With the three branches of our government – Executive, Legislative, and Judicial – taking on a more conservative profile, it begs the question: Will changes in the policy ecosystem threaten government programs and government funding? This fear of the unknown could impact the stability of nonprofit funding.
We think this funding instability will likely force a shift in the nature of funding, with more grantors looking to fund mobilization versus intervention (basically, working to prevent social issues instead of dealing with them after they occur). In other words, being proactive versus being reactive.
For example, we’re seeing organizations looking at new and innovative ways to provide services to the constituents they serve. Think about Smokefree.gov and the innovative use of mobile technology to help smokers quit smoking. Teens are very engaged with mobile devices and mobile apps – what better way to reach them than through the medium they’re already using?
Grantors (whether they be government organizations, individuals, or private foundations) will be looking for their grant dollars to be used in the most impactful ways possible, and will assess many organizations on their ability to be efficient with their dollars, while also being highly effective.
How do nonprofits address this challenge? Here are some ideas. For nonprofits heavily dependent on federal grant funding, revenue diversification should be researched in an effort to mitigate risk. Where else can you get the money you need to implement the most important programs? Partnerships with private entities might be an option.
Develop scenarios that consider funding reductions on program delivery (worst-case scenario planning) and share with executive management and the board for planning purposes. What would you do if you lost all your money from Grant X? Would you stop the program it funded? Explore different alternatives? Find creative ways to deliver services without the grant money? Scenario planning is a must for managers and administrators to ensure the impact of any funding shortfalls is minimized or offset through comprehensive planning.
Hopefully, these are some useful ideas to get you thinking about how you might cope with a funding shortfall in 2017 if grants start to dry up.
What are you doing to address the challenges with funding instability?