I've written before about Project Streamline, the initiative now housed at the Grants Managers Network that is working to improve grant application and reporting practices. I'm a fan of the initiative -- not only because it supports what we're doing here at PhilanTech, but because I believe in the potential it has to improve grant-related information, practices, impacts, and social outcomes for the whole nonprofit sector.
Grant writing, as anyone who has written any grant applications on behalf of a nonprofit knows, is a time consuming affair. Grantmakers generally request a lot of information in fairly particular ways -- they are giving away money and have a responsibility to ensure that they are giving it to the organizations that will best meet their missions and their donor's intent, not to mention to organizations that will use the funds well. But there is a significant cost to the information collection practices -- both at the front end of the process (the proposal) and the tail end (the final report), and sometimes in between (the interim report(s)).
A Center for Effective Philanthropy report determined that 13% of every grant dollar is spent on grants administration. From Indicators of Effectiveness:
Over the 2.1 year duration of the average grant, a grantee spends roughly 100 hours preparing the proposal and engaging in evaluations and other formal monitoring. The average time required of grantees by the 23 foundations [in the survey] ranged from a high of 227 to a low of 26 hours per grant.
The median grant size for the grants awarded by the foundations in the study was $129,000. $129,000 is a significant grant, so spending time putting together a good proposal and monitoring the funded initiative is not an unrealistic expectation.
But what about a $10,000 grant? If a $10,000 grant requires a similar amount of time to prepare and write the proposal, then monitor, write, and submit reports, how valuable is that grant to the nonprofit?
Assuming an average nonprofit staff member hourly rate of about $25 (based on a $50,000 salary, working 2,000 hours/year), that $10,000 grant nets $7,500 to the nonprofit. One quarter of the grant is spent administering the information that the funder requires about the grant. And if the staff salaries are above average (or if the executive director spends some time on the proposal, etc), the return on investment for the nonprofit diminishes that much further.
I'd argue that the return on investment for the funder is much lower too.
Nick Geisinger at the Washington Regional Association of Grantmakers has taken this calculation one step further, looking at the cost to the sector of the grants administration process, with a figure he calls the net grant to the sector. The math goes like this (from Nick's post, "Paperwork vs. progress: the case for streamlining"):
To determine your net grant to the sector as a whole, you would include costs incurred by the applicants that don’t receive grants.
Here’s an illustration of this issue, modified from a previous column:
- A small nonprofit spends about $400 per working day on salary and benefits for its development person.
- If this person spends a total of one day applying for your $10,000 grant, half a day managing it, and one day on the report, your net grant was $9000.
- If 10 other nonprofits sought the grant unsuccessfully, your net grant to the sector was $5000.
- If 25 applied, you de-capitalized the sector. Yikes! (Note that this example does not take into account CEO and CFO time spent managing relationships, etc.)
Applying that logic to all grantmaking in the nonprofit sector, the costs are staggering.
I'm in the midst of compiling some data from a survey PhilanTech conducted with GrantStation entitled "The State of Grantseeking 2010," and a future post will apply the costs of managing grants to that survey data.
In the meantime, please check out Project Streamline for information about how to streamline your grants administration.
Photo credit: http://www.flickr.com/photos/lwr/2568935346/
Post updated to include photo credit.