The answer is in the timing of the NOFA release and deadline.

The timing issue caught my eye because the FY ’11 ICDBG deadline was June 15. The FY ’12 ICDBG NOFA was released on October 4 and the deadline is January 4, so two “annual” funding cycles will be completed within a year! Faithful readers will recall that I wrote several posts in halcyon days of the Stimulus Bill passing in early 2009, including February 2009′s Stimulus Bill Passes: Time for Fast and Furious Grant Writing. In it, I correctly predicted that the feds would have more than a little trouble shoveling $800 billion out of the door.

The Stimulus Bill also distorted the more or less predictable flow of other discretionary grant programs like ICDBG; while the Stimulus Bill unleashed a huge quantity of additional grant funds, there were few, if any, additional personnel to manage the process, as I observed then:

My experience with Federal employees is that they work slower, not faster, under pressure, and there is no incentive whatsoever for a GS-10 to burn the midnight oil. Federal staffers are just employees who likely don’t share the passion of the policy wonks in the West Wing or the grant applicants. They just do their jobs, and, since there are protected by Civil Service, they cannot be speeded up. Also, there are no bonuses in the Federal system for work above and beyond the call of duty.

The nearly back-to-back release of ICDBG NOFAs is likely the result of the Stimulus Bill backlog—something like the boa constrictor eating an elephant in Saint-Exupéry’s charming novella, The Little Prince. ICDBG-eligible applicants had to wait for the FY ’11 grants to be digested, and then they have the opportunity to apply all over again a few months later.

The lack of a federal budget for three years and the reliance on Continuing Resolutions (CRs) to fund federal agencies likely doesn’t help. While the media focuses on the upcoming election and never-ending economic challenges, Congress passes appropriation bills using CRs, which allows FY ’12 funds, like ICDBG, to become available. You can expect a flood of backlogged federal programs to issue RFPs in the next few months.

Given the chaos in the federal budgeting process, it seems like a good bet to apply for any grant programs that come along now because the funding cycles for ICDBG and lots of other programs are pretty screwed up. In the case of ICDBG, I have no idea when the FY ’13 ICDBG NOFA will appear, but there’s an opportunity for a second bite of the apple this year. It seems to me that any ICDBG-eligible entity should bite that apple (or is it a salmon? I leave it to readers to decide).

Unlike federal budgets, foundations rarely provide budget forms, or, if they do, the form is usually fairly simple and most grant writers, even novices, should be able to figure out how to complete it. The challenge is deciding what to present to the foundation and what format to use when a budget form is not provided. We opt for a simple Excel spreadsheet. If the concept of using Excel makes you break into a cold sweat, stop reading and learn how to use Excel immediately. I could place an illustration of a typical foundation proposal spreadsheet here, but we never post sample work products. For our reasoning, see “If You Want Free Samples, Go To Costco; If You Actually Want Proposal Writing, Go To A Grant Writer.” You’ll have to use your imagination to visualize what the spreadsheet should look like, but you’re grant writers and should have at least a soupçon of imagination.

Most of the foundation proposals we write are for project concepts involving operating support, a human services delivery project, start-up costs for a new nonprofit, or a capital campaign. The following applies to the first three (I’ll write a future post discussing capital campaign foundation budgets, which are structured differently):

• Place a descriptive title at the top of the spreadsheet, such as “Project NUTRIA Three-Year Line Budget Spreadsheet and Justification.” Don’t forget to add your agency name above the title.* I like the look of the Center Across Selection tool in Excel, but choose your own actual formatting.
• We use two broad line item categories: “Personnel” and “Other” in column A, which is usually titled “Line Items” or similar.
• Starting with a “Personnel” header, list each administrative or project position as a line item row in descending order from the Executive Director down. Provide a subtotal row, then a row for fringe benefits. It is not necessary to itemize fringe benefits. Instead, express them as a percentage of the personnel subtotal in the first calculation column. Finally, provide a Personnel Total row.
• Everything else goes into “Other” header. Provide enough line items to cover the activities noted in the proposal, but not so many as to make the spreadsheet print on two pages or be otherwise difficult to read. Typical “Other” line items include local travel, professional development, equipment, printing, communications, insurance, hourly staff (e.g., tutors for an after school program) expressed as hours (there are 2,080 hours in a person year, so two FTE tutors = 4,160 hours) in the first calculation column times an hourly rate in the second calculation column, and so on. Provide an Other Total row.
• Provide a Total Cost row, which is the sum of the Personnel and Other Totals. If your agency uses an indirect rate, the Total row will be called Total Direct Costs, followed by an an Indirect Costs row (expressed as a percentage of Total Direct Costs in the first calculation column) and a Total Project Costs row.
• Moving across the spreadsheet from column A (line item names), the next two or three columns should be for calculations (e.g., numbers, months, percentages, etc., so the readers can figure out how your formulas are derived). The next three columns will be Year One, Year Two and Year Three yearly totals. The formulas in these cells will be multiplications of the calculation cells for each line. The next column will be the project period total for each line line.
• The last column should be larger and be titled, “Narrative Explanation” or similar. Place a brief description of the line item (“10 iPhones @ $200 ea. to enable Outreach Workers to connect with participating at-risk youth through social media, as detailed in the attached project narrative”). As I discussed in my post on federal budgeting, I see no reason to have long-winded budget narratives that regurgitate the proposal like Jon Voight by the eponymous snake in Anaconda.
• Provide a bottom sum row for each project year and the project budget year total, perhaps with a cost/participant total, and you’re done.
• Actually, you’re not quite done, as you will have to struggle with font sizes, row heights and such to get Excel to print the spreadsheet on a single, readable page. But grant writers love struggle, so this should be the fun part of the exercise.

It is OK to estimate most line items. As with all budgets, however, the most important aspect is to make sure that the budget is consistent with the narrative. For example, if the narrative discusses having Outreach Workers using social media to engage at-risk youth, there should be a line item in the budget for the cost of buying the phones and/or computers, as well as a separate line item for phone service charges. Also, I like round number budgets—say $250,000/year for a $750,000 project total. The round number can be easily achieved by making one row (e.g. participant incentives or advertising) a “plug number” (guessed flat per year number for a particular line item), rather than a calculated total. Keep adjusting the plug number in each year until you achieve the round number.

Although this kind of spreadsheet may seem too simple, it will provide enough detail for the foundation to understand your budget request. If the foundation gets interested in funding the project, you’ll know because, in most cases, the foundation will request additional budget details.

* “The Name Above the Title” is the title of a 1991 CD by the somewhat forgotten folk-rocker John Wesley Harding. I’ve been asked many times about the music I listen to while writing proposals. One of these days, I compile a playlist or two and post them. J.W. Harding might be on one of them.

* When you first read the RFP, ignore the budget instructions, except for the following: what is the maximum grant allowed, is the maximum grant for an annual budget or project period, is there a minimum, and what are the eligible and ineligible cost items? These answers are all you’ll need to develop the project concept and write the first two drafts of the narrative. When the second draft of the narrative is finished and incorporates changes to the first draft from all interested readers, you’ll have a more or less complete narrative description of the project concept, including a staffing plan. Budget development time will arrive.

* Learn to love the SF 424A, which is, as it sounds, the federal Standard Form (“SF”) for budgeting. The SF 424A is part of the SF 424, which is the basic “Application for Federal Assistance” or cover sheet used for most federal grant applications. This being the federal government, there are of course many different versions of the not-quite-Standard Form SF 424 and 424A, including alternate versions used by the Department of Education, HUD, DHHS, etc., as well as hard copy and Grants.gov versions.

But all SF 424A variants share common “Object Cost Categories”, which are found on Section B of the form. Object Cost Categories are the categories into which you have to allocate all budget line items. You’ll notice that the SF 424A Section B includes Object Cost Categories summary input boxes for grant costs only, which means you’ll have to create a line item budget using Excel or a similar program to calculate the Object Cost Category subtotals—unless you love using a pencil, legal pad and calculator and want to return to the Disco Era.

Once you have a line item spreadsheet created using the Object Cost Categories in column one, add as many columns as you need for the number of years. Keep in mind that you will usually need three columns for each budget year (“Federal,” “Non-Federal” and “total”), as well as three columns for the multi-year total, unless it is a one-year grant. Even though the SF 424A Section B only requests information for use of grant funds, you’ll need the non-federal amount to fill in the SF 424 and Section A of the SF 424A (I know there’a a lot of “A’s” and “B’s”" in all of this, but welcome to federal grant writing), as well as for the budget narrative (see below).

It’s always handy to have two or three calculation columns as well, which enable readers to easily see how you developed each line item (e.g., 12 mo. x $4,000 = $48,000 for the salary of the Project Director). Having been in business for 18 years, we have lots of SF 424A templates to use as a starting point, but I’ve never seen the feds bother to make one available. As far as I can tell, no one has told federal grant making agencies that Excel exists and it is still 1977 at the Department of Education.

* Now that you have a spreadsheet, it’t time to dream up the costs. That’s right, I said “dream up.” This is because federal budgets are rarely scored and all you really have to accomplish is stay within any maximum/minimum amounts and eligible/illegible item instructions in the RFP (see step one above) and make sure the budget is consistent with the narrative (this is why it is a waste of time to work on the budget until the narrative is gelled). “Consistency” means, for example, that if the narrative lists two Outreach Workers and a van for them to cruise around in, the budget needs to have these two positions listed under the Personnel Object Cost Category and a van lease under the Contractual Object Cost Categories. Most human services program budgets are composed of about 75% personal/fringe benefit costs and 25% everything else.

Thus, start with personnel and estimate salary costs, based on your agency’s current salary structure, calls to other agencies or the ever popular WAG method. Keep in mind that a person year is 2,080 hours, meaning that 1.5 FTE Outreach Workers can be calculated as 3,120 hours x $15/hour. Fringe benefits are expressed as a percent of salaries. Depending on the agency, fringes usually range from 15% to 30%. Part-time employees, interns and the like who do not receive full benefits are best listed in the Other Category, using an hourly rate jacked up by a dollar or two per hour to account for their reduced benefits.

* Once the Personnel and Fringe Benefits Categories are complete, it’s time for the rest. We rarely have more than about 15 line items beyond Personnel and Fringe in our budgets because it is a waste of time to have 100 line items. Remember, the budget is usually not scored, you’ll have to create a Budget Narrative (see below), and the more line items you have, the more complex the Budget Narrative becomes. Also, after you receive a Notice of Grant Award, you’ll have to negotiate a real budget with a federal Budget Officer anyway.

* The Travel Category usually includes milage reimbursement (always a popular line item with staff) and travel for conferences (an even more popular line item with staff). Your agency probably has a reimbursement rate of around .50/mile and, depending where you are in the country, $1,500 – $3,000 / person trip is about right for conference travel and per diem.

* We rarely use the Equipment Category in federal grants and you should avoid it as well. This is because the feds consider anything with a unit cost of less than $5,000 to be a “supply” and you can buy $4,999 copiers the same way you buy paper clips. As soon as the unit cost goes over $5,000, you enter the realm of federal purchasing rules, which is not a place you want to be. This is one reason vehicles and other big ticket items are better proposed as leases, even though it may make little economic sense. Remember, you are in the Proposal World, not the Real World.

* The Supplies Category is used for consumables and things most normal people would think of as equipment,but cost less than $5,000 each. Consultants, partner subcontracts, leases and similar items go into the Contractual Category. Construction is another Category we rarely use. Most federal grant programs specifically preclude the use of grant funds for construction and, guess what, there is yet another budget form, the SF 424C, for construction programs, which I will ignore in this post. Any quasi-construction “paint-up/fix-up costs,” modular buildings, etc., that you think you can squeeze by your Budget Officer should be put in the Other Category. The Other Category is loaded up with anything that doesn’t fit in the other Categories, including matching funds from your agency and partners, if applicable. This leaves the Indirect Charges Category.

Unless your agency has a federally approved indirect cost rate, based on an approved cost allocation plan, $0 is the correct entry for this Category. If you have an approved rate, it will be expressed as a percent of salary costs, total direct costs or whatever your rate approval letter states in the Indirect Charges Category. If you don’t have an approved rate and want to claim administrative costs, they would be placed as individual line items in the Other Category, assuming the RFP states that administrative costs are allowable. Typical administrative line items would be accounting, payroll, janitorial, purchasing, personnel administration, etc.

* It’s time for the fun-filled budget narrative. Typically, the feds do not provide a format for the budget narrative, instead going on for pages about what the narrative is supposed to include. If you want to return to the Disco Era I mentioned above, you could respond with something like the following for every line line item, ending up with a 25 page budget narrative:

Two Outreach Workers are needed to reach out to the target population because the target population is difficult to reach, doesn’t trust the government and is too busy doing other things to readily accept wraparound supportive services without being dragged to the intake center. The Outreach Workers will conduct outreach, using the Project NUTRIA van (see the Van Lease line item below in the Contractual Category for more detail), since the project area is pretty big and outreach will be conducted mostly at night, when it is also pretty scary. By having two Outreach Workers, outreach will be able to be conducted seven days per week for at least ten hours per day . . . and so on. Cost calculated as follows: 2 Outreach Workers x $2,500/mo. each x 12 months = $60,000. This salary is reasonable, based on salaries paid to Outreach Workers by the applicant and other agencies in Owatonna.

It’s easy to see how the above can get pretty tedious to write and even more tedious to read, particularly since the explanation for why Outreach Workers are needed should already be in the narrative. Instead of all this regurgitated drivel, we usually present our budget narrative in one of two ways: a “Narrative Justification” column in the Excel spreadsheet or a Word table that models the spreadsheet.

For the above example, the narrative justification would read something like this: “Two Outreach Workers to conduct outreach and intake, as detailed in the attached Project Narrative, 2 @ $30,000/yr.” That’s it. In 18 years of presenting simple and easy-to-understand budget narratives, I’ve yet to see any review comments that said the proposal would have been funded if only it had included an incomprehensible 25 page single spaced budget narrative instead of a one page Excel spreadsheet or two page Word table.

Now that you know how to tackle the federal budgeting challenge, go forth and budget.

EDIT: If you’re into budgets—and really, who isn’t?—you should also check out our “Quick Guide to Developing Foundation Grant Budgets.”

I recently wrote about the unfolding FY 2011 federal budget fiasco. While cruising in the droptop to Palm Spring this weekend to visit relatives, I got to thinking about the next step: what happens when the Republicans win control of at least one house of Congress? Regardless of one’s politics, this looks certain. We’ll have a lame-duck Congress for a few weeks, during which a budget is unlikely to pass, and then an all-out political brawl when the new Congress starts fulminating on January 3. I’m guessing that the budget won’t get resolved until around March, which means the feds will probably operate under Continuing Resolutions for another three to six months.

If you have a direct federal grant and have been a good boy or girl this year by obligating your grant funds, filing timely reports and doing more or less what your grant agreement calls for (e.g., offering family support services but not leasing Porsches or going on site visits to Bimini), Santa may drop in. Provided that the stars align perfectly by having a full-scale budget rumpus unfold, preventing budget adoption by the lame duck congress, the political appointees who run federal agencies (e.g., the Under Secretary of Education for Undersecretarial Affairs) will quickly realize that they need to spend existing budget authority under their Continuing Resolutions ASAP or risk losing the money when the Federal budget is finally adopted.

In some cases, this will mean hurried-up RFPs processes, like the Department of Treasury’s CDFI program, HUD’s Healthy Homes Production Production Program (open, but with short deadlines), and the Department of Education’s Talent Search program (expected to be issued 10/22 with a deadline of 12/9—see theDraft Talent Search RFP for a glimpse of Days of Future Passed.* In other cases, however, the Program Officer may skip the RFP process entirely, however, and request applications from existing grantees. If you are a grantee, don’t be surprised if you get a call or email from your Program Officer in the next few weeks or months asking for a proposal with a week or two turnaround. While you’ll have to submit a technically correct proposal and be willing to accept whatever offer is made, you’ll have no competition. Just submit the proposal, sign the contract, and off you go!

In addition to trying to spend existing budget authority, Program Officers also sometimes have returned grant funds they need to “re-program.” This happens when a grantee screws up their grant, and, assuming that the grantee hasn’t obligated (there’s that word again) their funds, the Program Officer cancels the contract and takes the unobligated money back. To avoid losing the money when the next budget arrives, the Program Officer will sometimes unload the funds on another grantee she likes.

We wrote a funded HUD Lead-Based Paint Hazard Control (LBPHC) Program grant in the FY 2009 funding round, which was one of only about 30 grants awarded. Last week, I was talking to this client, and he told me that one of the other grantees had already had their grant pulled because of inactivity. The grantee simply couldn’t get their program launched and the HUD Program Officer lost patience. This gives the LBPHC Program Officer another $2 or $3 million for re-programming. I told our client to be ready for the re-programming call—and so should you!

I’ve experienced the joy of re-programming a few times before I was a consultant. When I was Development Manager for the City of Inglewood in the 1980s (per 2Pac, “Inglewood always up to no good”, I wrote about $20 million in funded FAA grants to support redevelopment under the city’s Airport Noise Control and Land Use Compatibility (ANCLUC) program. This was during the Reagan/Congress budget battles and I was invited to submit a last minute ANCLUC proposal once or twice when my Program Officer got the shanks (note for non-golfers: this is different from “being shanked” in prison).

I’ve heard similar tales from clients and others over the years. Between re-programmed funds and the irresistible urge of Program Officers to shovel money out before the budget door slams shuts, a perfect storm for multiple Christmases is brewing. If you get such a call and feel like sharing, post a comment and we’ll keep you anonymous. Let the grant holidays begin.

For grant applicants and writers, this means that the avalanche of federal RFPs that I noted in “Here They Come: RFPs Are Thundering Down the Plain, So Look out for the Carol M. White Physical Education Program (PEP), Upward Bound, Choice Neighborhoods, REACH CORE and More” will continue over the coming months. HUD has still not issued most of their FY ’10 NOFAs for programs like Healthy Homes, while we wait patiently for the Department of Education to issue the FY ’10 RFP Talent Search. I suspect that the political appointees (Secretary, Deputy Secretaries, etc.), who run the federal departments knew months ago that Congress was going to use continuing resolutions this year and as a result were in no hurry to issue FY ’10 RFPs. Since they will have continuing resolution authority, they can also speed up the issuance of what would be FY ’11 RFPs.

For those of us who have been writing grants since dinosaurs walked the earth, continuing resolutions are not new. They generally happen when Congress is actually busy in the fall with something important (a rare occurrence), when there is lazy or incompetent leadership in the House and/or Senate (much less rare), and for political reasons (least rare). This year, the lack of a budget is obviously due to political considerations, as many House and Senate races that would ordinarily be considered “safe seats” are hotly contested. No representative or senator is dumb enough to want to vote on a budget bill and then face voters carrying pitchforks and torches, like the mob in one my favorite Mell Brooks movies, Young Frankenstein.* As a result, all incumbents can run on a platform of “cutting spending” and “eliminating waste,” which is always popular. And there will be a Lame Duck session this year, which will still be controlled by the Democrats, regardless of the election results.

If the Republicans take back one or both houses, or just gain a lot of seats, they will be tempted to repeat Newt Gingich’s United States federal government shutdown of 1995. President Clinton outsmarted Gingrich by using the close the Washington Monument approach to public sector budget problems. Seliger + Associates was less than two years old when this bit of political puppet theater unfolded. While I was mildly concerned about grant writing prospects, experience had taught me that, in the end, all politicians love discretionary spending, and, despite the rhetoric, grant-funded programs would not only continue, but expand. When the smoke cleared, federal spending for grant programs was off to the races and our business obviously succeeded. I first learned learned how much politicians love discretionary spending when President Reagan was elected with much fanfare about eliminating federal departments. While a few discretionary programs were axed, such as the HUD UDAG program, the government was soon back to business as usual, and a flood of new discretionary grant programs blossomed.** It happened in 1983, again in 1996, and will happen again eventually in 2011, regardless of the rhetoric and election outcome.

The reality of the near 10% unemployment rate and the depressing news from the 2010 Census that the poverty rate is 14.3%, the highest it’s been in 15 years, will be used to argue for continuing discretionary grant programs. (Erik Eckholm reported on this for the New York Times in Recession Raises Poverty Rate to a 15-Year High).*** As a result, you’ll hear plenty of discretionary grant program defenses built around not hurting widows and orphans. This sort of bad Census news is good news for grant applicants and grant writers, as I predicted in The Census During Hard Times: A Gift That Keeps On Giving.

If the Republicans do well in the election, however, and while the nation is fixating on the political sparring, I think the political appointees will start shoveling money out the federal door even faster, since they will anticipate nominal cuts in the eventual FY ’11 budget that will emerge in the early days of the new Congress. As a result, we should see a renewed flood of RFPs by the end of 2010, as political appointees rush to spend money while they have the budget authority to so.

** For an insider’s view of the budget battles of the early 1980s, see David Stockman’s disenchanted memoir, The Triumph of Politics: Why the Reagan Revolution Failed.

*** Note that 15 years ago almost perfectly matches the Gingrich/Clinton tiff briefly described above. Political history repeats itself.

Some obnoxious programs, however, won’t tell you how much you can request, which makes it harder to find guidance. Last year, an e-mail blast from the Seliger Funding Report included the National Mentoring Programs RFP (warning: .pdf link), which provides grants to national organizations who then offer mentoring services to special populations. In 2008, the RFP didn’t provide guidance about how much money to ask for or how much was available, so I sent an e-mail and called the Department of Justice (DOJ) to ask if they would tell us or were just going to play hide the salami. Patrick Dunckhorst, Program Manager, wrote back to say:

Thank you for your inquiry. Applicants should request the amount of funding they assess/deem necessary to support the requirements of the National Mentoring solicitation.

To solve the world’s problems I need all the world’s money, but that’s not likely to happen. The DOJ probably received applications with wildly divergent and zany funding requests, perhaps ranging from the absurdly small to all the world’s money. In the Funding Report, I quoted his second sentence and left it at that.

In 2009 the max grant amount is $10,000,000. Evidently Patrick got tired of inquiries like mine, because this year the contact person is Eric Stansbury, and he won’t get questions about the amount available save from those who can’t read.*

* One other recent example of random change: the Improving Literacy Through School Libraries Program, which existed under that name in 2006, 2007, and 2008, is now called the Improving Literacy Through School Libraries Competition. I feel more literate already.

The upside of using a fiscal agent is that the project proponent can try to get their snout into the funding trough without going through the time consuming process of forming a corporation (e.g. finding folks willing on the board of directors, obtaining a nonprofit charter in their state, etc.) and applying for and getting a Letter of Determination of Tax Exempt Status from the IRS. While it is possible to form a new nonprofit and obtain a Letter of Determination by yourself (I first did it when I was about 21), most people use a attorney and/or accountant to do the paperwork and must pay application fees at significant expense while waiting from six to nine months for the paperwork to wind its way through the state and federal bureaucracies.

This makes using a fiscal agent attractive, particularly if the project proponent wants funding for something urgent, like, say, cleaning oil-soaked birds in the Gulf today, providing post-Hurricane Katrina disaster relief in 2005 or offering case management for those newly diagnosed HIV in 1985. It is also a good approach for artists and other individuals who want to concentrate their creative energies on outcomes, not process.

The advantages to the grant user are obvious, but what’s in it for the fiscal agent? Some established organizations genuinely are interested in expanding availability of services in their community and want to lend a hand to emerging nonprofits. Others, a cynic like myself might conclude, are looking to collect administrative fees and influence the direction of service delivery in their bailiwick. But, whatever the motivations on both sides, fiscal agency remains popular.

As a result, we occasionally accept selected grant writing assignments involving fiscal agents, but only after we explain the potential pitfalls and challenges, such as:

• The plausibility of the fiscal agent/grant user relationship, which increases if the fiscal agent conducts activities at least vaguely similar to the grant user. It is hard, for example, to explain why a domestic violence prevention organization is serving as the fiscal agent for a documentary on the American Revolution. It is important to not give the impression to the funder that the 501(c)(3) fiscal agent is “renting” its tax exempt status.
• It is not good if the 501(c)(3) fiscal agent appears to be a shell organization to serve only as a pass-through to the ineligible grant user. For example, for-profit medical groups sometimes set up a “captive” 501(c)(3) affiliate. While the captive may be an eligible applicant, if it has no track record and grant funds will be used to hire the medical group, or some of its docs, the relationship may be seen as a sham. There are many situations, however, in which this affiliated nonprofit relationship is perfectly innocent and accepted, such as when a school district establishes a 501(c)(3) “educational foundation” to raise money through donations or grants to supplement tax revenues. Since many foundations will not fund entities like school districts, which are taxing entities, the affiliated nonprofit structure has become quite common and accepted.
• Even if the intentions of both parties in the fiscal agent relationship are believable, the real problem often emerges when the grant seeking effort is successful. It’s fine to contemplate the nuances of fiscal agent responsibilities in the proposal world, but the real world complicates things. To paraphrase Grandmaster Flash in one of the first rap anthems, White Lines, “The money gets divided / The fiscal agents get excited.” When grant funds start flowing, the fiscal agent will often suddenly develop a need and deep interest in what the grant user is doing. In extreme cases, the fiscal agent may simply deep-six their “partner” to run the program themselves and there will be little, if anything, the grant user can do about it.

If your idea is good enough to be grant-worthy, it is probably worth your time and money to establish a new nonprofit and obtain tax exempt status instead of using a fiscal agent. Unless there is urgency to the problem being addressed, it is best to form the new nonprofit at the start. Otherwise, you are telling the funder that you are hedging your bets by not investing in the new organization until the grants are approved, implying that you want the funder to take a risk while you are unwilling to do so.

We were also hired by a fellow seeking grants through a fiscal agent to set up a reserve for Komodo Dragons. We lost contact with our client after he left for Komodo Island in Indonesia, where he may have been eaten by a dragon. His fate is unknown, but I will leave the rest of this tale for another post.

This is that post, except I’m writing it instead of him, so one might say I am supplanting him. Or am I supplementing him? Read on to find out.

Supplanting Versus Supplementing: A Key Distinction

A grant applicant always, always, always should assure the funding source that funding of any kind will supplement, not supplant, existing programs. Some RFPs make this explicit; for example, the HUD NOFA for the Capital Fund Recovery Competition Grants says on page 26:

No Supplanting of Funds. The applicant must certify that: (1) the CFRC funds, if awarded, will not supplant expenditures from other Federal, State, or local sources or funds independently generated by the grantee; and (2) the CFRC funds, if awarded, will not supplant any leverage related to this grant, if any (that is, the grantee must have pursued and secured leverage to the fullest extent possible in order to ensure that expenditures from other Federal, State, or local sources or funds independently generated by the grantee are not supplanted).

Last year we had a client who decided that he wanted to fund his existing staff positions with a new HUD Rural Housing and Economic Development Program grant. That’s a big no-no: it’s supplantation, and if he tells HUD that he wants to use their money to replace the money he’s already got, at best they’ll deduct it from his budget. At worst, they’ll reject the proposal outright. It’s also possible that they won’t notice until after the grant is awarded and implemented, and if our client is unlucky enough to get a program audit they could demand repayment of the grant amount that “supplanted” existing funding. This is the same as a college student asking his mom to supplant her $100 to cover his cell phone bill so that he can use the original $100 on beer. Moms know not to fall for this and so do most funders.

Still, there are ways of getting around this proposal world problem. For example, one could announce that people already employed by the agency will spend 10 – 20% of their time managing the proposed program, so that money should come from the grant. If an organization has enough major grants, they might cover 100% of management team salaries. Actually, some agencies claim more than 100% of the time of certain staff, which is another no-no and an issue that we’ll cover in a future post. Another method is to give multiple job titles: previously, an existing staff person was a Housing Counselor, and now she is a Program Specialist for Client Assistance. Suddenly, she’s being paid because she’s in a new position related to the new grant.

Why Supplantation Happens Anyway

Although the rules usually forbid it, supplantation happens all the time anyway, mostly because money is fungible—meaning that many organizations just have a big money pot at the center of their financial systems, so money goes in one side and out the other, making it almost impossible to determine whose dollar was spent on what.*

So if you have a grant and you need, say, new computers, you might put them in the budget for the grant—and those computers no longer need to come from your equipment replacement fund. And does the Executive Director spend “15%” of their time on the grant? That’s another small but real amount of money that doesn’t have to come from the central pile. Do you have a Program Director? Put her in charge of the new program, and hire someone else in her place. Technically none of that is supplantation, because it’s part of what you need to run the program.

I explained all this to my girlfriend, who asked why the rules about supplantation exist. The answers:

• They work sometimes and aim to prevent egregious abuses;
• The rules weed out unsophisticated applicants who announce they’re going to stop using local funds and donations and start using Federal dollars;
• Such rules pass the New York Times test, which means that the funding agency or the funded agency aren’t as likely to see themselves on the front page of the Times, if a nonprofit proposes to do Bad Things (the theme song from my guilty pleasure, True Blood) with their money.

So far, President Obama is talking about freezing some domestic spending programs in FY ’11, which doesn’t start until October 1. He also seems to love spending for things like education, stimulating jobs, green energy, etc. The proposed FY ’11 budget, which debuted February 1, shows increases in a number of discretionary programs along with freezes in others. But remember that appropriations for most domestic discretionary programs in the current FY ’10 budget are wildly higher than in the FY ’09 budget. At the moment, there are unprecedented amounts of money available for all kinds of initiatives. As I wrote last September in “Graffiti, Windmills, CAP Agencies, and an Answer to the Question As to Whether This is 1975 or 1965,” “This really is the best of times for grant applicants, so let’s all party like its 1965.” Or, to paraphrase Max in Where the Wild Things Are,* “Let the wild grant writing rumpus continue.”

Despite the happy talk above, however, there is one not-so-minor thing to worry about—the dreaded “R” word. No, not the recession “R” word, which, as I have pointed out repeatedly, is actually good for grant writing. I’m talking about “rescission”. Rescission should strike fear into your hearts, as shown in the following Congressional definition:

“Rescission–The cancellation of budget authority previously provided by Congress. The Impoundment Control Act of 1974 specifies that the President may propose to Congress that funds be rescinded. If both Houses have not approved a rescission proposal (by passing legislation) within 45 days of continuous session, any funds being withheld must be made available for obligation.”

Since the Democrats control both houses of Congress, and assuming that President Obama is good at herding cats, he could propose rescission of any authorized spending program anytime he wants to. As with so many aspects of grant writing, I actually experienced a budget rescission when I was a Community Organizer Intern in 1972 in North Minneapolis, as noted in my first post, “They Say a Fella Never Forgets His First Grant Proposal.” When I started work, one of my first tasks was to explain to low-income homeowner applicants for home rehabilitation loans that they could not get their money because the funds had been rescinded by President Nixon. At that time, there was nothing Congress could do about a rescission, which led to the 1974 law that requires Congress to go along with a presidential rescission. Given the hysteria that is building over the huge budget deficits, compounded by the upcoming election, a successful rescission is quite possible, and much more worrisome that supposed spending freezes.

This means that if your organization—nonprofit, public agency or eligible business—is thinking about applying for a grant, stop thinking and start writing.

If you write proposals, don’t be this cat.

Any time you’re writing to an RFP—which, for grant writers, is virtually all the time—you’re required to respond to the RFP. If the RFP says, “give services to 300 participants per year,” you should say in your proposal that you’re going to serve 300 participants per year, not 30 or 3,000. If the RFP says, “run a three-year program,” propose a three-year program, not a five-year program. I could go on indefinitely in this vein, but I shouldn’t have to. The point is simple: do exactly what the RFP says you should do. As a grant writing rat in an RFP Skinner Box, you get the treat (money) by pressing the bar (following RFP directions), not by running in circles trying to get out of the box.

Clients sometimes direct us not to do what the RFP says, even when we advise them that it is best to follow the RFP. Ignoring the RFP instructions almost guarantees they won’t be funded; Isaac has already written about one example in True Believers and Grant Writing: Two Cautionary Tales:

Writing a YouthBuild proposal is very much a “cookbook” exercise in that the DOL pretty much tells applicants what they want applicants to do, and successful proposals have to regurgitate this stuff within the absurdly short page limit and the obtuse data required by the funder. In other words, if you want a YouthBuild grant, you should, as Rupee says, just Do the Damn Thing.

The clients for the four funded proposals listened to us, and we were able to craft compelling, technically correct proposals that warmed the stone-like hearts of the DOL reviewers. In contrast, our True Believer client had a vision of how she could use a YouthBuild grant to attack a whole slew of problems faced by at-risk youth in her rural community. Almost none of what she wanted to do, however, had anything to do with YouthBuild, and she fought us throughout the proposal development process. We did our best to make the proposal fundable to no avail. Despite her passion and commitment, no YouthBuild funds are available today to help the young folks she cares so much about.

A more recent example involved a Department of Education program in which the exact student cohorts to be served are mandated in RFP, as well as the underlying legislation and regulations. It doesn’t get any more specific than this. For reasons that were not made clear to us, our client insisted on removing one of the specified student cohorts from the draft proposal, even though we told him that he could save the postage, as the proposal will likely be deemed technically incorrect, which it is, and be thrown out before it is scored. This particular RFP also includes specific fill-in-the-blanks objectives, which were to be replicated word for word in the proposal. In the first draft, our client modified the wording of the objectives.

While some RFPs provide significant latitude in program design, many do not and are essentially cookbooks. If you have a cookbook RFP, follow the cookbook. For example, YouthBuild demands that participants being trained in the construction trades have on-site training experiences in the construction/rehabilitation of low-income housing, so you shouldn’t propose a retail mall as a training site, no matter how good an idea that might be to the Executive Director or Board. On a similar subject, remember that every question in the RFP applies to you, no matter how dumb it may seem, how repetitive it may be, or how little you think it should apply. I explain how this works in RFP Lunacy and Answering Repetitive or Impossible Questions.

Part of not thinking outside the box includes telling the funding agency what they want to hear. One such example is the infamous “sustainability” sections that many federal RFPs include, which we wrote about in detail here. These sections require applicants to state how they will sustain the project after federal funding ends. As Isaac said in the post:

For the vast majority of nonprofits applicants [...] grants and donations [are the only viable financial resources available]. If we know this simple truth, how come foundation and federal program officers seem clueless? If the agency had the couple hundred thousand dollars sitting around to fund a given program, it wouldn’t need the grant and wouldn’t apply.

Furthermore, the major cost for most human service providers are staff salaries and other operating costs. So it’s improbable that you’ll just need a bunch of money to get off the ground; although startup costs are real, they’re still dwarfed by staffing and ongoing operations costs in most cases. There might be a hypothetical dream project out there, somewhere, that just needs that DHHS grant to get started and then can run indefinitely off of revenue, but we’ve never seen it.

If you don’t like an RFP’s inane restrictions, remember the golden rule, as articulated in Studio Executives, Starlets, and Funding: “He who has the gold makes the rules.”

Very occasionally, you have to invent a box for yourself because the funder hasn’t given it to you. Foundations will do this by not putting a maximum cap on requests and/or by having maddeningly opaque guidelines. In such cases, you should look at how much they’ve previously offered in funding; if they’ve historically made grants in the $10,000 – $50,000 range, asking for $400,000 is unlikely to work (for more on this topic, see my post “So, How Much Grant Money Should I Ask For?“).

Most of the time, however, you’ll be given a box, and if you step outside it, you’re not going to be praised like a precocious high school student. You’re going to be treated like a cat who’s decided to show its creativity by ignoring the litter box. The RFP is your litter box. Ignore it at your peril.

EDIT 1/25/2010: Isaac wrote a follow-up to this post regarding the importance of conventional wisdom, even when it’s wrong. Debunk conventional wisdom on your blogs and through your other writing. Repeat it in proposals.

EDIT 2: For another example of the principles above at work, see “What happens to doctors who think outside the box?” Answer: nothing good, much of the time. If you’re looking to understand the many problems in medicine, this is an excellent starting point, both for the specific event and for the general principles inferred from that event.