Grant funding breaks everything

Grant funding, which asserts that big infusions of cash can bring some operation to a new level, sometimes handcuffs nonprofits.

Think about this: when we attend a museum exhibition with an interactive technology element, we’re not at all surprised to see a lot of it not working right. There’s one very common reason for this.

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 we need that gift or the exhibition can’t be done, so we don’t often require some way to support those ongoing annual costs of about $400K. It would mean for every million dollar gift, we also need to secure a capital campaign gift of $3M or so, to endow the continuing maintenance of the project.

20% is a pretty typical maintenance figure for new tech purchases. More for computer hardware (25-33%), less for networking hardware (10%), and probably 20% for code, configuration, and content. 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 it will be something.

Well, sometimes 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% (or 10% or 30% or whatever it is) 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 hardware, not for software, and not for content, unless you stop doing something else–this thing you just built is going to get old, either with failing hardware or glitchy code or stale content.

The conundrum is this: many big donors/grant funders don’t want to fund operations. That should come out of more consistent sources of income like ticketing, memberships, and entrance fees. Grants are for the big game-changing thing.

Realistically, we can’t fix this by putting every big gift into an endowment. But what we can do is think ahead to the retirement of these systems/projects–recognizing them as having finite lifetimes, and being up-front with donors about that. It would sometimes be hard, but it’s a lot easier than saying, or implying, “by the way, we’re not going to be able to keep this expensive thing working for more than 3-5 years.”

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