Budget Policy
Grantees and funder staff point to budget policy barriers including fixed overhead rates, annual budgeting that impedes multiyear commitments, and pauses to refresh budget strategy, which disrupt grantee rhythms.
Data Highlight
Funders and nonprofit leaders both rated budget policies as the number one barrier to more multi-year grants, and nonprofit leaders also rated budget policies as the number one barrier to more flexible grants (Accelerating Equitable Grantmaking Survey, MilwayPLUS, November 2021, n=30).
Additional Resources
“Pay-What-It-Takes Philanthropy,” SSIR/Bridgespan article on the need for funders to cover grantees’ full overhead costs
“Funders, you want to help build organizational capacity? Then stop trying to build organizational capacity and just give multi-Year General Operating Dollars (MYGOD!),” blog post by Vu Le of Nonprofit AF
“The Nonprofit Starvation Cycle,” SSIR/Bridgespan article on the vicious cycle that leaves nonprofits unable to effectively accomplish their missions
“The Looking Glass World of Nonprofit Money,” Nonprofit Finance Fund article on the irrationalities of nonprofit funding
“Building Strong, Resilient NGOs in India: Time for New Funding Practices,” Bridgespan article on the underinvestment in nonprofits in India, and better funder practices that can change this
Getting Started:
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Discuss segmenting your budget into ongoing program funds and emergency funds, and/or carving out a special fund to move ongoing program grants to multi-year over time. Discuss moving to a multi-year budget to support multi-year grantmaking.
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Make this tool kit the subject of your next board meeting. Discuss what it would mean to make multi-year, flexible funding your default grant structure. Identify the specific policies and practices you would need to change.
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Define expenditure responsibility grants and programmatic grants broadly, so they act like general operating support. Offer a simple, low-touch grant renewal process as a step toward multi-year funding.
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Introduce your full organization’s needs to support objectives, even if the grant is structured as a project. Define for your funder what “flexible funding” means to you, the ways it will be used, to eliminate confusion. Equip regrantors with data to make the argument to their grantmakers for longer-term funding.