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Don’t Overmatch: You Need to Look Like You Need the Money

As you no doubt know, many grant programs require matching funds, and we’ve exposed the secrets of matching funds. But in that post we didn’t mention one other key aspect of matching funds: don’t overmatch.

If there’s a 10% match, get a 10% match—and no more. There’s a signaling hazard: If you come up with a 90% match when only 10% is required, you’re demonstrating that you don’t need the money because you already (theoretically) have the money necessary to run the program. This in turn implies the dreaded supplantation problem, which is about as welcome in grant proposals as Sauron is in Gondor.

Beyond that top level reason, there are others. Let’s say you have a $250,000 project cost and in your proposal you say that a huge match will bring the project cost to $450,000. Somehow get funded anyway: now you’ll have to spend $450,000 on the project as part of the contract with the funder. Whatever you say the project cost is, that must be the project cost in the eyes of the Federal government. If you happen to get a project audit, you’re going to have to account for every dollar of $450,000. In the real world, people who happen to have an extra $200,000 sitting around can just add it to the program anyway, without promising to the Federal government that they’ll spend the extra $200,000.

There’s also the fact that funders calculate matches in two different ways: as a percentage of the grant or as a percentage of the total project cost. The first is easy to calculate: 10% of a $1,000,000 grant = $100,000. In the second method, however, its not quite as simple: Assume a $1,000,000 grant and a required match of 10% of the total project cost.

If you propose a $100,000 match in this scenario, you’re actually proposing a 9% match ($100,000/$1,100,000 = 9%). To get to a 10% match, the match must be $110,000 ($1,000,000 grant + $110,000 match = $1,110,000 total project cost and .10% of $1,110,000 =$110,000). Always make sure you know which method is being used by the funder before you start gathering match letters. In scenario two, if you document a $100,000 match, the proposal will likely be rejected as technically deficient and not scored. In Monopoly terms, you do not pass go and do not collect $200.

The only exception to the rule that says you should avoid overmatching happens when a program offers extra points for extra leveraging. YouthBuild is a prime example. In this case, if the required match is 10% but there are bonus points for a 25% match, applicants should find a larger match—but only to the point that gets the extra points.

In general, though we counsel clients not to overmatch. But, as we’ve said before, we’re like lawyers: we offer our clients advice, based on our 20 plus years of business experience, and they’re free to accept or reject it. Our advice is good and if we say that a thing should without doubt be done one way and not another its prudent to follow of advice (there are many other occasions in which there is no right answer, only sets of tradeoffs, and when that’s true we describe the tradeoffs). We were once working for a rural school district on a Department of Education proposal. The superintendent wanted to claim the value of all of their school buildings as a match, and therefore wanted to offer something like a $20 million match. We counseled him not to, and he didn’t.

The grant was funded.

In addition, take care about where the match is coming from. In most cases, federal dollars cannot be directly matched with other federal dollars, usually with the exception of CDBG funds. If you do, and anyone notices, your application will again likely be thrown out.

Anyway, there’s a pernicious line of thinking that goes like this: if some is good, more must be better, right? Wrong: if you take more Tylenol than you’re supposed to you could end up dead or on the waiting list for a liver transplant. Working out or running is great, until you lift so heavy or run so far that you hurt yourself.*

Maybe the overmatching rule seems unreasonable. Much of the grant world is a set of imagined behaviors and situations that don’t correspond well to reality. The matching fund process is one of those fictions that applicants have to go through, like a marriage of convenience to get a visa, to get to the end goal of the money—or, in the case of the marriage of convenience, to get to America.**

* Having done this recently, it’s a salient example that’s on my mind.

** I’m reading a wonderful book called A Bintel Brief: Sixty Years of Letters from the Lower East Side to the Jewish Daily Forward, which is a collection of pithy advice columns for Jewish immigrants from Russia and Poland in the early 20th Century, so the idea of making it to the promised land of America is on my mind.

But many of the immigrants discovered that, although America was a much better place than Czarist Russia (it’s also a better place than contemporary Russia for that matter), the streets were not and are not paved with gold, and all of God’s children have problems. In my own family, lore has it that one set of my grandparents used a marriage of convenience to escape Nazi Germany.

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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.