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Why Fund Nonprofits, Public Agencies, and Other Organizations Through Grant Applications At All?

March 25th, 2012 · by Jake Seliger · 6 Comments

Donna Shelley asks a perceptive question in response to my post on how Upward Bound means more narrative confusion:

Why is this [grant-making process] done at all? It continues to be a mystery to me. What is the point of grant making? If it is to give money to a qualified applicant, then what are all these games about? It appears that making the process as arcane and frankly, insane as possible.

There are at least two big issues here: why does the U.S. grant-making system persist in the weird way it does, and how did it evolve into its current state? My guess is that the two are linked, and the big reason it remains involve signaling. By creating byzantine, inefficient requirements for distributing money, government agencies and, to a lesser extent, foundations, ensure that the only people who will bother are the ones who really, really want the money.

The devotion of resources to a pointless-seeming endeavor signals the applicant’s commitment. Applicants who care the most will invest the most in deciphering RFPs, and those who don’t care as much won’t. The grant-maker can’t tell who is qualified, but they grant-maker can try to get applicants to signal their quality (one sees something similar in college applications: most colleges teach orders of magnitude more than high schools do, so one could see high school as a long signaling process for college, which is part of Bryan Caplan’s argument in his forthcoming book The Case Against Education). In this reading, insanity becomes sane because funders are trying to gauge the fundee’s commitment level using the best tools they have, which aren’t very good.

Professional grant writers—like us—are a logical byproduct of this process: many nonprofit and public agencies specialize in providing services rather than in writing abstruse, detailed proposals. So people who are good at service delivery specialize at that, and they don’t specialize in plumbing, vehicle repair, grant writing, and so forth. This may also be why nonprofits find it hard to hire good grant writers: most don’t actually specialize in grant writing.

If you’re curious about how signaling works more generally, there is a rich evolutionary biology literature summarizing it.

The next sentence is the sort that, like any sentence using the phrase “the Progressive Era,” may come dangerously close to boring you to death, but bear with it and me. As far as I can tell, the roots of the grant-making process lies in political reforms that got started in the Progressive Era and reached their culmination in the 1960s. Prior to the 1930s and the New Deal, the Federal government and state governments basically didn’t spend enough money to have a grant-making apparatus and bureaucracy like they do now. To the extent such activities happened at all, services were provided directly, or via pass-throughs straight to agencies.

Such practices engendered lots of corruption—see further Chicago, New Jersey, All the King’s Men, etc. In addition, there were problems related to whether, say, the feds in DC actually had any idea what people in urban Chicago, or rural Mississippi, or Oxnard, California, might actually need. So the inability to decide need and the problem of corruption yielded a solution: instead of the feds (or state governments) simply funding services directly or picking organizations to run programs, they’d run competitions to see who has the best proposal for the provision of services.

This being the government, however, anything that starts simple rapidly complexifies, like cellular automata (for another example of this phenomenon, see the tax code). So over the last couple of decades, Congress creates lots of well-meaning laws; rule-making bodies make well-meaning rules; courts probably throw their spices into the broth; some organizations steal or misuse the money, thus leading to more rules so that Won’t Happen Again; and finally one gets to something like Upward Bound, which was the subject of my original post, and had something like a hundred pages of guidance written in a style only especially obtuse lawyers could love. Not only that, but the difficulty of understanding an entire RFP becomes hard even for the agency issuing the RFP, which increases the likelihood of errors or internal contradictions on their part—without even discussing the grant writers who are trying to decipher the instructions.

Around the office, we’ve observed that a lot of grant applications could be done via postcard: will you perform these services for x participants over y months and achieve z outcomes? Then you’re in the running. If that happened, we’d be out of business, of course, but there’s no real political constituency for the simplification of the grant-making process. There is a real constituency for the simplification of the tax code, and that’s an issue that’s gone nowhere and appears likely to continue to go nowhere, like that one bridge.

Tags: Grants · Nonprofits · Programs · Questions