A Lesson in Passthrough Funds and Capacity Building: ACF’s Non-Profit Capacity Building Program NOFA

If you read this week’s grant newsletter, you probably saw the NOFA for the Administration for Children and Families’s “Non-Profit Capacity Building Program,” which I first thought meant “pass-through funds,” since the purpose is “to increase the capacity of a small number of intermediary grantees to provide specific assistance to improve the sustainability of and expand services provided by small and midsize nonprofits in communities facing resource hardship challenges.” Do you know what would help those agencies? Money.

Unfortunately, I was wrong: it initially looks like pass-through funds but isn’t.

If you dig into the NOFA, you’ll find that “specific assistance” means that applicants should propose activities like “a comprehensive strategy of various learning activities and methods to increase the knowledge, skills, and abilities of recipients to implement performance management systems as well as any other best practice areas to target for improvement.” If I were a small nonprofit, I’d prefer that “specific assistance” mean “direct funding,” but here it doesn’t; the best you can do is use “a small portion of funds [. . .] to provide minor capital investments in the capacity of certain recipients such as the purchase of specific software or systems to improve infrastructure.”

I’m guessing that, if you surveyed the nonprofits “facing resource hardship challenges” to be “helped” by well-meaning but paternalistic intermediary organizations if they’d prefer “various learning activities and methods” or “cold, hard cash,” they’d prefer the latter. Isaac has written extensively on the challenges and opportunities nonprofits face in the current climate, and a dearth of training hasn’t been one. As he said, when donations and contracts dry up, smart nonprofits turn to grants. Less smart ones disappear. I think the ACF’s nominal purpose in running this program is to help small nonprofits. Its real purpose, however, is to help the intermediate nonprofits that are supposed to run a variation on train-the-trainers.

How do you do that? The NOFA itself says that “applicants will focus their organizational development assistance program on developing and implementing performance management systems that enable organizations to measure their progress and improve their performance towards intended outcomes.” So it wants nonprofits to basically act like Accenture, IBM Global Services, or the other big consultants that are frequently the target of Dilbert. We’ve written a number of funded proposals over the years to do activities like this, and one key is understanding what I’ve laid out above: you’re passing out training, not money.

You don’t see a huge number of pass-through awards because they just increase administrative friction: ACF is paying staffers to write the RFP, review applications, and so forth, it isn’t going to give grants to “intermediary” nonprofits to… write a mini-RFP solicit applications, review applications, and so forth, probably to the tune of 10 – 30% of the grant. You’ll find pass-through grants at the state level, but very rarely lower than that.

Foundation appeal clients occasionally want to run variations on pass-through programs. Some clients, for example, will provide scholarships to people with a particular illness, like Groat’s disease. We tell them not to do this, however, because if the funder wants to fund any kind of cash payment scheme, they’ll do so directly and cut out the middleman. You want to look like something more than the middleman. Foundations mostly like direct services. As the “Non-Profit Capacity Building Program” shows, so do the feds.

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