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Heavens to to Murgatroyd: Grant Competition Is About to Heat Up for Community Services Block Grant Grant (CSBG) and Community Development Block Grant (CDBG) Recipients

Cuts to Federal discretionary spending are coming, whether at the larger percentages proposed by congressional Republicans, more modest levels offered by the Obama administration or more likely somewhere in between. An opinion piece in today’s New York Times highlights this new reality: “The Easy Cuts Are Behind Us” by Jacob Lew, director of the White House Office of Management and Budget (OMB). Between the political euphemisms and doublespeak, Mr. Lew actually lifts the curtain to offer several specific cuts to be proposed in the administration’s soon-to-appear FY 2012 budget, including the following two which have significant implications for thousands of nonprofit and public agencies across America:

* Community Services Block Grant (CSBG) Program: The CSBG Program has been around since 1981 and provides formula grants for the nation’s 1,086 Community Action Agencies (CAAs)—AKA “Community Action Programs” (CAPs) for those of us old enough to remember their inception in the original 1965 War on Poverty. States also receive CSBG funds, which are distributed in areas not served by a CAA.

In most states, CAAs are nonprofit organizations, although in California many cities and counties have absorbed the CAA into their bureaucracies. CSBG formula grants are the lifeblood of CAAs because the CAA only has to exist and file reports to get the money. While most CAAs receive a plenitude of other nominally competitive grants (e.g., Head Start, the Low Income Home Energy Assistance Program (LIHEAP), Weatherization, etc.), CSBG forms their financial bedrock. In larger cities and urban counties, CSBG block grant funds are sometimes made available to nonprofits through local RFP processes. Thus, CSBG funding is a big deal, albeit somewhat hidden from popular consciousness because most civilians and all reporters don’t have a clue that it exists. Here’s what Mr. Lew said about the administration’s plan for CSBG:

The president is proposing to cut financing for this grant program in half, saving $350 million, and to reform the remaining half into a competitive grant program, so that funds are spent to give communities the most effective help.

That’s right, a 50% cut—and making the CAAs compete for what’s left! Instantly, every CAA will be fighting with each other for the scraps of the CSBG program. This means that each CAA will have to get a lot better at grant writing, not only to get their piece of the shrunken CSBG pie, but to find other funding sources to make up the slack. The local nonprofits at bottom of the CSBG food chain will be in even in more dire straights, as many will lose a sure source of annual funding. As Snagglepuss says, Heavens to Murgatroyd!.

* Community Development Block Grant (CDBG) Program: The CDBG Program was created in 1974 and consolidated a slew of then-existing HUD discretionary grant programs into a single formula block grant to “entitlement communities,” which are more or less mid- to large-size cities and urban counties. Like CSBG, states also receive CDBG funds for use in smaller cities and rural counties. While entitlement cities and counties use CDBG funds for all kinds of public programs, most also make sub-grants to local nonprofits through annual RFP processes. The mechanics for all of this organizational walking-around money are five-year Consolidated Plans and their daughter Annual Action Plans, prepared by entitlement entities. CDBG funds not only pay for a lot of municipal and county administrative overhead and pet programs but also fund thousands of nonprofits. Although somewhat competitive through the Annual Action Plan process, lots of nonprofits have come to view their annual slice of CDBG pie as automatic.

Back to Mr. Lew, who has this to say about CDBG funding:

While we know from mayors and county leaders how important these [CDBG] grants are for their communities, and are very aware of the financial difficulties many of them face, the sacrifices needed to begin putting our fiscal house in order must be broadly shared, and we are proposing to cut this program [CDBG] by 7.5 percent, or $300 million.

Uh oh, there goes $300,000,000 in CDBG funds. Heavens to Murgatroyd redux!

I’ve been blogging about impending budget cuts and/or rescissions for about a year and some specific proposed cuts are now evident. More will emerge in the coming weeks as the budget battle unfolds in anticipation of the need to increase the federal debt ceiling in March or April.

If your agency receives CSBG, CDBG or most any other federal grants, it’s time to ramp up your grant writing efforts, as I have been advising for months. Don’t wait until the cuts take place. If you think grant seeking is competitive, wait a few months, and you will experience what those of us working with grants went through in early days of the Reagan administration, when wholesale cuts in federal funding were made. That round of cutbacks culminated with the demise of the ultimate free federal grant ride: General Revenue Sharing, which started in 1972 and ended with a thud in 1987. Today is Super Bowl Sunday, and like every player on the Packers and Steelers, all we can say is “put me in, Coach.” We’re tanned, fit and ready for the grant writing frenzy that is about to unfold.

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Getting Your Piece of the Infrastructure Pie: A How-To Guide for the Perplexed*

One of our favorite marketing sloganspie-1over the years has been, “We help you get your piece of the grant pie.” Well, Congress is cooking up the mother of all grant pies with the “infrastructure” component of President Obama’s stimulus package. If you’re wondering how your agency can get a bite of this tasty treat, you’re not alone. Peter Sanders and Christopher Conkey of the Wall Street Journal report in Mayors Struggle to Get Piece of Stimulus that even Los Angeles Mayor Antonio Villaraigosa has been unable to figure out how to get his fork in. I think Mayor Villaraigosa actually knows perfectly well how to step up to feed at the federal trough but was just being coy for a reporter not steeped in the ways of government largesse. After all, Mayor Villaraigosa was Speaker of the California House of Representatives and knows more than most about this topic. Essentially, the Mayor is unhappy that President Obama has said to no to earmarks, so he can’t just hang his favorite projects on the bill like Christmas ornaments. Instead, he and his minions will have to work for the money—no wonder he’s unhappy. For those readers not in the know, here is how the stimulus funds are likely to find their way to you . . .

Despite all the breathless reporting on the stimulus package, no story I’ve seen explains how thunder in Washington, DC will make it rain Pennies from Heaven** in Los Angeles. The answer depends on how the feds decide to get the money on the street, which will be in the bill that eventually emerges from Congress. Here are the four basic possibilities, assuming no earmarks:

1. Congress can fund programs, new or old, to be administered at the federal level through some sort of competitive RFP processes. In this case, any eligible entity can pitch any eligible project by submitting a proposal, which is more or less the way most discretionary grant dollars are distributed.

2. Congress could use the existing Economic Development Administration (EDA) Public Works and Economic Development Program to fund infrastructure and facility projects. Unlike any other federal agency, however, EDA uses a byzantine system of regional Economic Development Representatives (EDRs), which have to agree to pass your project up the food chain by inviting a “pre-application.” To get this invitation to the big dance, the project generally has to be listed in the region’s Comprehensive Economic Development Strategy (CEDS), which replaced the earlier Overall Economic Development Plan (OEDP) process. We’ve threaded our way through this particular maze many times, resulting in lots of funded EDA grants; although it’s daunting at first, it is eminently doable.

3. Congress can block grant funds to the states, who can then use existing systems to distribute the funds. For example, highway transit funds could be sent to states’ transportation departments, which could then fund projects ranked on the State Transportation Improvement Program (STIP) (see here for the California version of this). It’s not quite that simple because some regional TIPs feed into statewide TIPs, but the main point is that the project has to be on the relevant TIP(s) to get federal transportation dollars.

4. Congress can block grant funds to the states and/or large cities and counties, who can then run RFP processes to dole out the money, more or less in the way that Community Development Block Grant (CDBG) funds are distributed. For that matter, Congress could simple dump money into the CDBG pipeline, since every eligible jurisdiction already has a Consolidated Plan with dozens of prioritized projects they lack money to fund. I don’t think this will happen, because it is too simple, and where’s the fun in that?

Confused yet? Actually, all of this is fairly straight forward in the sense that the feds have to use one or more of these methods to get the money on the street. Your question involves the the best way to get in position for to catch the funds that are about to be pitched for infrastructure and facility projects. To do so, follow these easy steps:

1. Finalize the project design for any infrastructure-style project you have simmering and get as many of the permits and approvals as you can in the time you have. For example, having all environmental approvals and a building permit is ideal. Remember that federal funding typically triggers National Environmental Policy Act (NEPA) and, for those of you in California, California Environmental Policy Act (CEQA) requirements.

2. If you are a nonprofit, school district or college, see if you can entice the local city or county to be the applicant and fiscal agent for the project.

3. Develop submittal plans for all of the above options. The agencies that move fastest with the most “cooked” projects are likely to be funded.

After you’ve baked your project, lie down in a comfortable place with a good book*** while waiting for the legislation to emerge. Since we are not lobbyists, we never look at pending legislation early-bird-color-j-pegand instead wait for the sausage to be extruded. Until the stimulus bill is actually signed into law, no one can say exactly how an agency can apply. But it will be the Oklahoma Land Rush as soon as the ink is dry, so, “Start Your Engines!” As always, like Maimonides, Seliger + Associates is ready to offer a guiding hand to help you get your piece of the stimulus bill pie.

EDIT: See additional posts on this topic: Looking at the Stimulus Bill from a Grant Writer’s Perspective and Brush the Dirt Off Your Shoulders: What to Do While Waiting for the Stimulus Bill to Pass.

* My apologies to Maimonides for lifting this line.

** This is one of my favorite, if somewhat disturbing, movies from the early 1980s—another time of recession. The movie harkens back to the Depression, making it great viewing for the current economic meltdown. To paraphrase another song from the ’30s, “Brother, can you spare a trillion.”

*** I’ve been reading Love in the Time of Cholera. Nothing like Gabriel García Márquez to get me in the mood for the magical realism of the federal grant making process.

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The Secrets of Matching Funds Exposed: Release the Hounds and Let the Scavenger Hunt Begin

This is YouthBuild season at Seliger + Associates, so I spent most of the weekend slaving over a hot YouthBuild proposal. YouthBuild has a curious take on the somewhat mysterious concept of “matching funds.” Newly minted grant writers will soon learn that there are two basic types of matching funds: in-kind and cash. The former can be anything from the value of food given to clients to volunteer time,* while the latter is just as it sounds, real money, which most agencies are as likely to encounter as a unicorn.

In working with matching funds, the following concepts are essential to understand, particularly for federal proposals:

  • Matching funds can be calculated in two ways: as a percentage of the grant amount or of the project cost. If the RFP specifies 25% of the grant and the maximum grant is $100,000, the required match is $25,000. But, if the RFP specifies 25% of the project cost and you have a match of $25,000, the project cost is $125,000 and the required match is $31,250, so get your tin cup out and look for more match.
  • Previously received funds, along with already expended funds, usually cannot be used as matches.
  • Estimated values for in-kind resources should be included in commitment letters and should be realistic. Several years ago, we wrote a proposal for a small school district in Illinois that claimed (against our advice) the value of its high school, about $5 million or so, as a match. The proposal was not funded.
  • Keep in mind that, if you are funded, you will have to track and account for all matching funds. If you don’t and you are unlucky enough to get a program audit, any matching funds for which you cannot account will be disallowed and you will have to pay an equivalent amount back to the feds. This is likely to ruin your day and maybe put your agency out of business, so be prepared to track those matching funds!
  • Unless the RFP says that you will receive additional points for a match above the minimum, there is no reason to go over the minimum. Similarly, if there is no matching requirement, don’t waste time getting match letters. Savor a fine single malt scotch instead (I like 18-Year-Old or Nadurra Cask Strength Glenlivet).
  • When your agency cannot come up with enough matching funds, be creative. You can try to claim indirect costs as a match. For example, if you have an approved or imagined indirect cost rate of 25% and the required match is 20%, voilà: you have your match. While not strictly in keeping with federal regulations, I’ve made this work lots of times, because federal program officers are often not exactly up to speed on their own regs and grant reviewers almost never are. A strong argument can be made that this counts—unlike in the example of the hapless school district above. Another strategy is to imagine in-kind support from the applicant (e.g., use of facilities, equipment, training et al), which usually does not require a letter, since applicants can self-certify their own support.

Confused yet? For YouthBuild, the Department of Labor has managed to take this fairly convoluted concept and add yet more knots. In the YouthBuild SGA*, there are actually two kinds of matching funds: “match” and “leveraged funds.” The “match” is more or less as described above, except that you can only use funds as a match that is “an allowable charge for Federal grant funds.” So you can’t count those free escort services that have been offered to your trainees by the local branch of the Emperors Club VIP, unless you’re Eliot Spitzer.

“Leveraged funds,” however, can be pretty much anything you can dream up, so you may want to visit the local Porsche dealer to see if they will donate a 911 for use in transporting clients. After the grant award, one only has to account for the claimed match, not leveraged funds, so YouthBuild applicants often come up with tons of leveraged funds. But, what the DOL gives, the DOL also taketh away by effectively limiting the number of match/leveraging letters to 16 pages. In YouthBuild proposals, the real fun is in trying to decide which letters should be designated as match and which as leveraged funds, a process that usually takes place under extreme pressure right before the deadline. After this process, it’s a good time to return to the Glenlivet.

When planning a proposal, look at the matching requirements at the start of the process and line up your letters. It is a time honored tradition for nonprofits to “trade” match letters with each other for the same or different submissions, so feel free to engage in some creative mutual back scratching. Think of matching funds as an elaborate scavenger hunt game and you’ll be fine.

One other important point: make the match realistic relative to the size of grant. Claim to leverage $3 million for a $150,000 application is silly. If you do something like that, the reviewer will pop up like a prairie dog and say, “Look at this guy!”, so all her colleagues can laugh at your expense. There isn’t a hard and fast limit to this, but leveraging more than $1:$1 is very uncommon.

* Unless your volunteer is a physician or has just won the Nobel Prize in physics, it is standard to value volunteer time at $10/hour, so a FTE volunteer is worth $20,800 @ 2,080 hours in a person year.

** For reasons that are not clear, the Department of Labor uses the cryptic phrase, “Solicitation for Grant Applications” (SGA) instead of the much more commonly used “Request for Proposals” (RFP). Whatever they call it, DOL SGAs are still mostly gobbledygook.

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Reformers come and go, but HUD abides

Sudhir Venkatesh*, a Columbia University Sociologist, wrote “To Fight Poverty, Tear Down HUD,” and in it he suggests imploding HUD (like the infamous Pruitt-Igoe Housing Project) to increase regional collaboration. Having just finished a HUD proposal, it made me think about HUD’s evolution and previous attempts to reform the agency. Venkatesh gives a brief overview of HUD’s emergence in 1965 and its mission to carry on the Progressive Era’s notion that slums are the root of urban problems, rather than the inhabitants—see here for detail. Still, Venkatesh argues that HUD had outlived its usefulness and needs to be eliminated or reconstructed.

He uses the HOPE VI Program as a supportive example. Jake briefly covered Hope VI in “On Gangs and Proposals,” and the program more or less pays housing authorities to tear down public housing and replace projects with “mixed-income” developments, resulting in outcomes like those described in “American Murder Mystery.” Regardless of whether Venkatesh thinks HOPE VI and other competitive** HUD programs can be used to dismantle the agency, he’s wrong about the potential for reform because of the Godzilla of HUD, The Community Development Block Grant (CDBG) Program.

CDBG agglomerates dozens of competitive HUD programs as they existed in the early 1970s into a single grant, awarded without competition to eligible cities and counties. Being designated as “CDBG-eligible” is the local jurisdictional equivalent of being elected Prom Queen. CDBG jurisdictions can spend the money however they want, provided that the use can somehow be justified under one of the eight statutory CDBG requirements—meaning that just about anything can be made CDBG eligible through the jurisdiction’s “Five-Year Comprehensive Plan” and associated “Annual Action Plans.”***

Thus, local officials often use CDBG funds as “walking around money” for favored nonprofits in the name of “developing viable communities,” which is the stated purpose of CDBG. The witch’s brew of local politicians, other people’s money, hand-in-the-till nonprofits and a plethora of interest groups involved in CDBG means that there is zero chance of HUD going away. I’ve watched the “let’s get rid of HUD” movement for years, starting in 1980 with the Reagan Revolution**** (he gave up), Jack Kemp’s appointment as HUD Secretary by Bush 41 (failed at achieving promised reforms), and most recently, HUD being on Newt Gingrich’s hit list in 1994 (HUD survived to fight another day, while Newtie ended up bloviating on Fox News and writing historical novels of questionable literary merit).

Not only has HUD lived on, with the help of its legion of CDBG-engorged supporters, but it actually continues to grow, throwing off new programs like the small monsters sloughing off the Big Guy in my favorite recent Big Animal movie, Cloverfield. We’ve come full circle: the CDBG program was created to unify a bunch of categorical programs to give local officials the ability to address their pressing local needs, and now the CDBG program, along with a couple dozen assorted competitive programs, hangs on the HUD funding tree like Christmas ornaments.

While Venkatesh can speculate on dismantling HUD or using the block grant approach “to provide incentives for municipal and county governments to collaborate,” HUD is a permanent fixture of the grant landscape because it was created to solve some of the problem he identifies, and the result of a supersized CDBG program is likely to be even more walking around money and self-interested entities at the CDBG trough, not more collaboration between cities and counties. To paraphrase, “Reformers Rail, but HUD Abides.”

* Venkatesh wrote a terrific book on life on the streets in Chicago’s Southside, Off the Books: The Underground Economy of the Urban Poor, which mirrors my experience growing up and later working as a community organizing intern in the North Minneapolis ghetto. Would-be grant writers should read it.

** Grant writing tip: government agencies mostly make two kinds of grants, formula (the grantee does nothing to get them money other than open its mouth like Jabba the Hut) and competitive (applicants submit proposals that are evaluated against one another). One will occasionally see a hybrid version, a competitive process in which the grant amount is based on a formula of some sort, but most grant writers won’t encounter this chimera.

*** I’ve read dozens of Comprehensive Plans from all around the country over the years, and, despite supposedly being individually written to reflect the jurisdiction’s unique problems, they are basically all the same—a rehash of census data, oddball stats on homeless issues and the like, and a pastiche of platitudes designed to get HUD to okay the plan and uncork CDBG funds. In other words, the local CDBG planning process is at best a cookbook exercise.

**** See Stockman’s The Triumph of Politics: Why the Reagan Revolution Failed, which is a great political read and covers the first failed attempt to disassemble HUD. Robert Penn Warren’s All the King’s Men complements it.