I’m working on this post. I’ll update it for a while. Here is what I want to write about: grant funding, which asserts that big infusions of cash can bring some operation to a new level, handcuffs nonprofits.
The issue is this: let’s say you get your $2M for the tech in the new gallery. On average that will cost $400K annually to support (20%). But you didn’t want to look the gift horse in the mouth, so you let it go. You didn’t say “hey donor, that is fantastic, thank you so much … now listen, that investment in infrastructure will result in ongoing annual costs of about $400K. Can you please also provide a capital campaign gift of $6.7M, to endow the continuing maintenance of this improvement you have funded?”
Do you see what I mean? 20% is a pretty typical maintenance figure for new tech purchases. If someone gives you $2M for some new gallery, or any kind of installation, most likely it will mean $400K in annual maintenance. Maybe less, maybe more. But YOU KNOW it will be something.
Well, we don’t tell donors that. We look at the big gift and we need it so we say “thank you,” and we figure that we’ll somehow work that 20% into our existing budgets. In truth there are often ways to do that, so a lot of the time 20% is going to be an overestimate. But not for things like computers, printers–operations in general.
The horrible thing is this: ask most big gift funders, and they don’t want to fund operations! That, you know, that should come out of your BUDGET. They want to fund the big game-changing thing.
I don’t know what to do about this except to put every gift into an endowment, unless it’s specifically about funding ways to generate new revenue.