Posted on 2 Comments

Cliff Diving: Sequestration and A New Year’s Resolution for Nonprofits and Local Public Agencies Worried About the Fiscal Cliff and Grants

EDIT: It looks like we’re not going over the supposed cliff. But much of the analysis below will remain relevant in the coming years, as political fights about debt, spending, and taxation continue.

EDIT 2: The analysis below has been augmented with “Sequestration Still Looms Over the Grant World: Two Months and Counting.”

I find it hard to believe, but as I write this post in the waning hours of Sunday in the waning days of 2012, it seems that the President and Congress are actually going to do a Thelma and Louise and send us collectively off the dubiously named “fiscal cliff.”

If this happens, we may see sequestration. As I understand the implications of sequestration on domestic discretionary spending, including funding for block granted and competitive grant programs, this would mean at least an 8.8% haircut across the federal spending board. Since we’re now already three months into the FY ’13 budget year, however, there are only nine months left, meaning that the cutbacks could be as high as 15%.

Now, what “across the board” means is still subject to interpretation, as this has not actually been done before. One assumes current grantees would get an immediate budget reduction notice, while open RFP competitions might be scaled back. There would also significant impacts for federal sub-grantees for such locally administered block granted programs as CDBG, CSBG, OAA, and so on. The mechanics of sequestration are subject to murky federal regulations and a cadre of anonymous GS-12 and GS-13 budget officers spread across the departments, who are going to be in particularly bad moods coming back after their Christmas holidays to this morass.

The short-term impact of sequestration for garden-variety nonprofits and public agencies that have direct or indirect federal contracts, or are vying for discretionary grant funds, is sure to be confusion in the short term and chaos over the medium term. But—and this is big “but” (so to speak)—it’s not the end of the world. To quote REM, “It’s the end of the world as we know it and I feel fine.” While media pundits and trade association/advocacy groups will make a lot of noise, the grant world will return to normalcy once the temporary Federal crisis passes.

Despite sequestration and ongoing budget battles, I think significant cutbacks in federal funding for discretionary grants are unlikely, as least for the next few years. What is more likely is a slowing of the increase in federal spending, or as it is more popularly called in a phrase I’m beginning to intensely dislike, “bending of the cost curve.” Keep in mind that we have not had a federal budget in four years and probably won’t have one anytime soon, as the feds will continue to operate with continuing resolutions and baseline budgeting. Thus, unless there is a sudden come to Jesus moment among Democrats and Republicans, it will be the same as it ever was.

This brings me to my suggested New Year’s resolution for nonprofits and local public agencies–take a hard look at your current programs and new initiatives in the planning stages. While there will still be plenty of RFPs available, the competition for government grants is sure to be more intense as the nation stares down its tax and spending challenges.* Seek foundation grants too; as the economy has staggered out of the Great Recession, foundations have recovered investment losses and are going full steam in grant making.

For those nonprofits that survive mostly on donations, a bigger issue is the potential of limits on the charitable tax deduction, which we wrote about recently in “Nonprofit ‘Whales’ May Face Extinction with Potential Tax Law Changes.” In other words, diversify and your organization will thrive in the exciting new year.

* Free proposal word here. In grant writing, there are never any problems, only challenges.

Posted on 1 Comment

Seliger’s Quick Guide to Developing Foundation Grant Budgets

Faithful readers will remember our post “Seliger’s Quick Guide to Developing Federal Grant Budgets.” This is a companion post for developing foundation budgets.

Unlike federal budgets, foundations rarely provide budget forms, or, if they do, the form is usually fairly simple and most grant writers, even novices, should be able to figure out how to complete it. The challenge is deciding what to present to the foundation and what format to use when a budget form is not provided. We opt for a simple Excel spreadsheet. If the concept of using Excel makes you break into a cold sweat, stop reading and learn how to use Excel immediately. I could place an illustration of a typical foundation proposal spreadsheet here, but we never post sample work products. For our reasoning, see “If You Want Free Samples, Go To Costco; If You Actually Want Proposal Writing, Go To A Grant Writer.” You’ll have to use your imagination to visualize what the spreadsheet should look like, but you’re grant writers and should have at least a soupçon of imagination.

Most of the foundation proposals we write are for project concepts involving operating support, a human services delivery project, start-up costs for a new nonprofit, or a capital campaign. The following applies to the first three (I’ll write a future post discussing capital campaign foundation budgets, which are structured differently):

  • Place a descriptive title at the top of the spreadsheet, such as “Project NUTRIA Three-Year Line Budget Spreadsheet and Justification.” Don’t forget to add your agency name above the title.* I like the look of the Center Across Selection tool in Excel, but choose your own actual formatting.
  • We use two broad line item categories: “Personnel” and “Other” in column A, which is usually titled “Line Items” or similar.
  • Starting with a “Personnel” header, list each administrative or project position as a line item row in descending order from the Executive Director down. Provide a subtotal row, then a row for fringe benefits. It is not necessary to itemize fringe benefits. Instead, express them as a percentage of the personnel subtotal in the first calculation column. Finally, provide a Personnel Total row.
  • Everything else goes into “Other” header. Provide enough line items to cover the activities noted in the proposal, but not so many as to make the spreadsheet print on two pages or be otherwise difficult to read. Typical “Other” line items include local travel, professional development, equipment, printing, communications, insurance, hourly staff (e.g., tutors for an after school program) expressed as hours (there are 2,080 hours in a person year, so two FTE tutors = 4,160 hours) in the first calculation column times an hourly rate in the second calculation column, and so on. Provide an Other Total row.
  • Provide a Total Cost row, which is the sum of the Personnel and Other Totals. If your agency uses an indirect rate, the Total row will be called Total Direct Costs, followed by an Indirect Costs row (expressed as a percentage of Total Direct Costs in the first calculation column) and a Total Project Costs row.
  • Moving across the spreadsheet from column A (line item names), the next two or three columns should be for calculations (e.g., numbers, months, percentages, etc., so the readers can figure out how your formulas are derived). The next three columns will be Year One, Year Two and Year Three yearly totals. The formulas in these cells will be multiplications of the calculation cells for each line. The next column will be the project period total for each line.
  • The last column should be larger and be titled, “Narrative Explanation” or similar. Place a brief description of the line item (“10 iPhones @ $200 ea. to enable Outreach Workers to connect with participating at-risk youth through social media, as detailed in the attached project narrative”). As I discussed in my post on federal budgeting, I see no reason to have long-winded budget narratives that regurgitate the proposal like Jon Voight by the eponymous snake in Anaconda.
  • Provide a bottom sum row for each project year and the project budget year total, perhaps with a cost/participant total, and you’re done.
  • Actually, you’re not quite done, as you will have to struggle with font sizes, row heights and such to get Excel to print the spreadsheet on a single, readable page. But grant writers love struggle, so this should be the fun part of the exercise.

It is OK to estimate most line items. As with all budgets, however, the most important aspect is to make sure that the budget is consistent with the narrative. For example, if the narrative discusses having Outreach Workers using social media to engage at-risk youth, there should be a line item in the budget for the cost of buying the phones and/or computers, as well as a separate line item for phone service charges. Also, I like round number budgets—say $250,000/year for a $750,000 project total. The round number can be easily achieved by making one row (e.g. participant incentives or advertising) a “plug number” (guessed flat per year number for a particular line item), rather than a calculated total. Keep adjusting the plug number in each year until you achieve the round number.

Although this kind of spreadsheet may seem too simple, it will provide enough detail for the foundation to understand your budget request. If the foundation gets interested in funding the project, you’ll know because, in most cases, the foundation will request additional budget details.

* “The Name Above the Title” is the title of a 1991 CD by the somewhat forgotten folk-rocker John Wesley Harding. I’ve been asked many times about the music I listen to while writing proposals. One of these days, I compile a playlist or two and post them. J.W. Harding might be on one of them.