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Positive Signs For Reimbursement Of Overhead Costs

You may remember back in January that I wrote about the new rules promulgated by Office of Management and Budget (OMB) requiring that any entity receiving federal funds much cover at least 10% of a non-profit’s overhead costs.

Don’t worry, its okay if you don’t remember. But this is relatively important and bears repeating.

One of the concerns at the time was that state and local governments and other funders might pressure non-profits with whom they contract or provide grants to waive a their right to receive overhead costs. The OMB rules prohibit this, but if a non-profit isn’t aware of the rules or are afraid to advocate for themselves, the problem may continue.

Given this context, it was a positive sign when the L.A. County Board of Supervisors voted to adopt the OMB guidelines and to write a letter to the state government to do the same.

It may not seem significant for a governing body to agree to adhere to the conditions under which federal funding was allocated, but as Non-Profit Quarterly notes there are “rob Peter to pay Paul” concerns about how funding may be manipulated.

Rules do not implement themselves without strong nonprofit monitoring and oversight—hopefully, as in this case, in partnership with government authorities. In this case, not only are the supervisors talking to state officials, but they will also be developing an implementation strategy in consultation with Los Angeles nonprofits, which we presume, based on what we have seen as policy statements from CalNonprofits, ought to address how to ensure that higher indirect cost reimbursements do not occur at the cost of lessening service delivery.

As I had noted in my earlier post, the National Council of Non Profits created a guide to educate organizations about the rules and provide responses to assertions from funding entities that the rules don’t apply.

One thing I had mentioned was that arts organizations should note that these rules likely apply to the funding you receive through your state or regional arts organization:

One- it doesn’t matter whether it is called a contract or grant or any other term, the rules are based on the substance of the transaction.

Two – Sub-recipient non-profits who are required to acknowledge part of the funding is received from the federal government are covered under these rules.

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Info You Can Use: Holding A Mirror Up To Fundraising

Simone Joyaux wrote a must-read, “physician heal thyself” post for development teams in a recent Non-Profit Quarterly post.

In her column, Fundraisers: the Good, the Bad and the Ugly, she enjoins development teams to look in the mirror before blaming others for failures. (If you have a hankering to listen to the theme music for The Good, the Bad and the Ugly movie while reading, there is an interesting guitar rendition here.)

Joyaux addresses many common complaints development departments have about board members not providing assistance with fundraising, board members not donating, issues with opinionated executive directors and weak economic conditions inhibiting efforts.

She provides some advice about dealing with each situation, mentioning a different approaches to use. In nearly every case though, she challenges fundraising staff to examine their assumptions and understanding of the situation to see if they are at least partially contributing to the difficulties.

Often she asks if the development team has sat down and spoken with someone to understand their limitations and concerns and whether the development staff has been providing sufficient support to a board member’s efforts on their behalf.

There are some things Joyaux writes about that I have rarely, if ever, heard mentioned in relation to fund raising efforts.

(By the way: How do you define fundraising? I hope you aren’t thinking about asking for money only. There’s so much more to fundraising than the asking point. Do you know all the steps and the neuroscience and the psychology and communications and all the rest? Can you help board members apply that, in partnership with each other and in partnership with you?)

When she mentions them, neuroscience and psychology make sense as factors to consider, but I can’t remember ever hearing them mentioned in connection with development before. (Actually, I have to admit I only have guesses on how neuroscience relates.)

As Joyaux notes, becoming effective at development is a process and there isn’t anyone who hasn’t committed some sort of poor practice.

In my early years, I know I must have behaved this way. I saw glimpses in the mirror. How about you?

Bad fundraising performance #1: The fundraiser didn’t handle well leads suggested by several board members.

Bad fundraising performance #2: The fundraising staff didn’t ask for specific support from a specific board member, and explain why, and provide support.

Bad fundraising performance #3: The fundraising staff doesn’t spend much time learning about the program. The fundraising staff doesn’t collect stories from program staff. The fundraisers rarely observe a program or talk with client beneficiaries. This produces weak solicitations, bad links with our heroes, the donors.

Oops, actually that last point reminds me I need to follow up with some participants of an education service we hosted last week.

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Info You Can Use: Non-Profits and Loans

If you didn’t catch it, in June Non-Profit Quarterly had a good 101 guide on when it is appropriate for non-profits to take out loans.  Most times you hear about non-profits and loans it is once the non-profit is in financial trouble and deep in debt.  The discussion of constructive use of loans by non-profit arts organizations is relatively rare.

In my own experience, conversations among arts administrators usually touches on earned revenue, fund raising/sponsorships and grants.  I have never heard anyone talk about using loans to fund an initiative. This might be, as the NPQ article suggests, there is a stigma of failure associated with taking out a loan. Or it might be simply that we are so used to worrying about falling attendance, lack luster fundraising and onerous grant writing that no one really thinks to mention loans.

In addition to discussing the times it is and is not appropriate to seek a loan, the article notes that there are no “one-size-fits-all” loans so organizations can negotiate terms that suit their needs.  They also provide a general sense of what answers and materials you might expect to be asked to provide as part of the loan process.



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How Dare You Refuse That Money?

Really interesting story out of Australia via Non Profit Quarterly. The Arts Minister has asked the Australia Council to develop a policy penalizing arts organizations who refuse private funding based on idealistic or political motivations.

Refusing funding from tobacco companies is mentioned in a couple instances, but this was brought on by artists in the Sydney Biennale objecting to its association with a company involved in a controversial detention center used to house asylum seekers.

Senator Brandis responded to that by saying, “What I have in fact asked the Australia Council to do is to develop a policy so that it would be a condition of the receipt of Australia Council funding that the arts organisation concerned not unreasonably refuse or unreasonably terminate private sponsorship.” When pressed on who would be responsible for deciding what is to be considered “unreasonable,” Brandis replied, “I don’t frankly have a fixed or dogmatic view about whether it should be the Australia Council or whether it should be the Minister or whether it should be some third party arbiter.”

We can only hope that the option adopted is not the current Minister. Brandis has since said that while it was reasonable for arts companies or festivals to reject corporate funding if they had concerns about a sponsor’s financial credentials, it was unreasonable for them to refuse sponsorship on political grounds.

While the funding model in the United States is different than that of Australia and the amount of support U.S. arts orgs receive from government sources is comparatively small compared to private and corporate support, I can easily see a similar rhetoric being used politically in the U.S.

“X Theater has been on the public dole (equal to 2% of its budget) for years and they are perennially saying they are in financial straits. But just last year they refused a donation from Y Company (seeking to charity wash its reputation after that last scandal), even after they offered to double their usual donation. Where do they get the nerve to ask the people of this great state for more of their hard earned money after refusing Y Company’s generosity?”

To a certain extent, refusing money from tobacco companies might be easy because there has been a decades long nation wide campaign about the problems brought on by smoking. With other companies, issues like environmental damage and sweatshop like conditions with low pay may be mitigated by widespread employment and improvement in the general standard of living, causing more ambiguous views about refusing support on ethical grounds.

I think it would be difficult to pass a law or rule to this effect in the U.S. because it is easy to see how that there will be no end of trouble. (How can such a poor school afford to refuse Playstation’s sponsorship in return for painting their gym and cafeteria with the logo?!)

Just merely employing the rhetoric to equate arts organizations refusing private funding with the unemployed refusing a crappy job can be damaging enough.

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