It's Not Your Money!

It's Not Your Money!

This week, The NonProfit Times reported that Louisiana State Treasurer John Kennedy has demanded that 36 organizations either outline what they’ve done with state appropriations or return the money. If these organizations do not comply with reporting requirements by September 4 (original deadline was August 31), Kennedy will refer them to the newly-created Office of Debt Recovery. (http://www.thenonprofittimes.com/news-articles/authorities-go-after-36-charities/).

This is a scenario that is paying out far too often. In New Mexico, 15 mental health nonprofits' state funding was recently withheld and management teams from out of state were brought in to take over management of the agencies as a result of an independent audit which found gross errors in spending of Medicaid dollars, double billing, excessive salaries in some cases, and other problems.

A CEO of a nonprofit I volunteered for some time ago admitted that he found it 'necessary' at times for cash flow to take money out of restricted funds for day-to-day expenses. WHAT?

Another CEO, passionate about her agency's mission to serve troubled teens, realized that funding restrictions forced her to drastically shorten the average length of treatment so much that her agency couldn't provide adequate services for clients, and she wanted to serve more and more kids, so she found ways to circumvent the 'system' and allowed some 'creative' billing programs.

It's Not Your Money!

While I decry some of the restrictions placed on donations, grants, and so much of  federal funding, nonprofits have got to be clear about this: It's not your money! Nonprofits just cannot be fast and loose with funding, regardless of the pressures placed upon them to do more with less. They have to follow the rules set by the funding source ... or find another way to sustain themselves and their critical programs and services.

Those nonprofits who have, for years, relied heavily on grant funding from governmental sources are perhaps most prone to finding creative ways to make the funding 'work' and create ways around the restrictions. I can understand the temptation, but the fact remains: It's not your money.

Question: Do some funding sources wait too long to investigate the uses of their restricted funds? Does a donor have a way to check on the uses of a restricted gift? Do some funding sources make it too easy for some agencies to get creative with the use of funds because the restrictions are confusing and perhaps not mission-driven? Are some agencies so stressed for funding to serve more and more that they seek funding that isn't 'right' for their missions in the first place?

Sure. All of these scenarios are possible and probably happen every day many times over.

Here is what I think after more than 45 years as an agency CEO, board leader and nonprofit consultant: Nonprofits simply must find ways to diversify their funding sources, moving away from their heavy reliance on government grants and other sources of restricted funding.

I know, easier said than done, but the recent trend toward earning money through social enterprise is one excellent way many nonprofits are gradually reducing their reliance on these restrictive funding sources.

Until that reliance is drastically reduced, however, the fact remains: It's not your money!

Jean Block
Jean Block Consulting Inc/Social Enterprise Ventures LLC
www.jblockinc.com/wwwsocialenterpriseventures.com