Unicorn Spotted in the LA Times: A Large Nonprofit Gives Back Huge Federal Grants

In the 280 or so years I’ve spent grant writing (grant writing years should be considered as dog years because of endless deadlines and dumb RFPs), I don’t believe I’ve ever come across a nonprofit that voluntarily gave back significant federal grants.

Faithful readers will know that I use the term “unicorn” for anything I find exceedingly unlikely in the fun-filled world of grant writing (see, for example, “No Experience, No Problem: Why Writing a Department of Energy (DOE) Proposal Is Not Hard For A Good Grant Writer“). I nearly choked on my daily ration of Chemex-brewed coffee on Saturday morning when I spotted this “unicorn” story by Alexandra Zavis in the LA Times: Homeless shelter to drop government-funded programs. How can this be?

The Union Rescue Mission (URM) is a giant homeless services provider in L.A. It is obviously a faith-based organization (FBO). Remember that there are two kinds of FBOs. The first kind gives you a bowl of soup when you’re hungry, and the second kind gives you a bowl of soup when you’re hungry but makes you listen to a sermon before you get the soup. URM is presumably the second kind, which means it is not directly eligible for government grants because it intertwines service delivery with religion.

The first kind of FBO is often eligible for government grants, and we often work for those FBOs. To get around the pesky problem of grant eligibility, URM apparently set up another nonprofit, EIMAGO, to serve as the grant applicant and recipient for federal grants. This is not unusual. EIMAGO is described in the article, however, as a secular “subsidiary” of URM. Nonprofits don’t usually describe affiliated organizations as “subsidiaries,” preferring “affiliate,” “partner,” etc., to preserve at least an appearance of independence and deflect the impression that the “subsidiary” exists only as a grant conduit.

Leaving aside the relationship of URM and EIMAGO, the article says that Alan Bates, URM President and apparently spokesperson for EIMAGO, says that they (URM or EIMAGO?) can no longer operate government-funded programs because the costs are not fully covered and it takes months to get paid:

Bales said the Christian mission has been using private donations to supplement the government contracts operated by its secular subsidiary, EIMAGO. “In the last six or seven years, we have subsidized those operations about $4.5 million because we never get enough money from the government to operate the programs as they should be operated,” he said.

But, Bates also goes on to say that “no one would be forced onto the streets because of the decision.”

Let’s do a small Gedankenexperiment or “thought experiment” to test the logic of the article.

1. URM/EIMAGO exist to help the hungry and the homeless.

2. Joe is hungry and homeless and needs three hots and a cot, as they say in the shelter biz.

3. URM/EIMAGO gets $100/day in federally derived grant funds to take care of Joe, and the money comes from the Los Angeles Homeless Services Authority (LAHSA, which is the primary homeless grant spigot in LA County), FEMA, Department of Veterans Affairs, HUD, or another government agency.

4. For whatever reason (extra piece of mystery meat in the stew, designer blanket, one too many case managers, etc.), URM/EIMAGO spends $105/day taking care of Joe, meaning they have to get Harry to donate $5 to URM/EIMAGO to keep Joe fed and housed.

5. URM/EIMAGO says its too tough to get $5/day out of Harry to supplement the $100/day from Uncle Sam to take care of Joe, so they are going to reject the $100/day from Uncle Sam.

6. Without $100/day from Uncle Sam, how much will URM/EIMAGO have to get from Harry to take care of Joe?

$105/day. If you grasped this point, you are quicker on the uptake than the reporter. Without the federal grants, URM/EIMAGO is either going to serve a lot fewer Joes or will need to find a lot more Harrys. This is why I’ve never run across any large profit that would voluntarily cancel federal grants—or any grants for that matter. URM/EIMAGO is a unicorn.

In addition to pointing out the logic problem presented above and highlight an unusual unicorn story, this post is really intended for those nonprofits who want to become “multi-program, multi-funded agencies,” and particularly nonprofits that aim to supplement project grants, general purpose grants and donations with contracts for capitated services (e.g., most homeless services, primary health care, substance abuse treatment, foster care, etc.). For these grantees, which provide a service for some agreed upon per head/per day/per visit/per whatever fee, the capitated payments, like other grant funds, are often fungible (Jake covered fungible grants last year in “Supplementing Versus Supplanting Grant Funds: Examples from the Rural Housing and Economic Development Program and the Capital Fund Recovery Competition Grants“).

In the case of a soup kitchen, you could ask: which dollar bought the carrots in the stew that Joe is eating? The LAHSA grant, the Department of Veterans Affairs Grant, the donation from Harry? Nobody knows. For that matter, Joe is fungible. If he’s a veteran, the agency can claim him on their Vets grant, if he’s an ex-offender, he could be tallied on their Department of Justice grant, if he has a substance abuse challenge, he could be covered by a CSAT grant, or, ideally, all three.

One of the unspoken realities of running large nonprofits is that clever multi-funded, multi-program agencies can often pay for services for a particular individual more than once, sometimes intentionally and sometimes by accident. Funders don’t seem to care, as long as this is never stated in grant proposals or reports and reporters are too naive to inquire.

I don’t know anything about URM/EIMAGO other than what I gleaned from this article, as we’ve never worked for either organization. To forestall the potential lawyer inquiry, I am not making any accusations about either organization, which I am sure are great service providers. The situation described in the LA Times article seems implausible to me, particularly given this quote from it: “The mission’s difficulties come at a time when many nonprofits are struggling to raise the funds they need to keep up with demand for their services in a bad economy.” Seems like someone at URM has been reading Grant Writing Confidential, as I have been making this point for over two years. It’s a bad time to be trying to replace hard-to-get grant funds with even harder-to-get donations.

The article also provides an opportunity to illustrate how larger nonprofits often use multiple grant sources to keep the lights on. For those newer and more nimble nonprofits in L.A. that want to provide homeless services, it looks like you’ll have an opportunity to dine on the LAHSA grants that URM/EIMAGO rejects. Some agency is going to need to serve the legions of hungry and homeless in L.A. Go get your bowl of LAHSA grant soup!

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