Nonprofit funding: Ordering a cake and restricting it too


cake-486874_960_720For the past few months one of staff has an eye that’s been twitching. “It’s this grant!” she says, “it’s for our after-school program. It pays for instructors’ teaching time, but not their planning time! How can they teach when they can’t plan?! How? How?!”

“Psst,” I whispered, “let’s talk in the conference room. Since they are dedicated they will plan anyway even without getting paid,”—I paused, looking around—“why don’t you just increase their hourly wages?”

“This grant capped the hourly wage, so I can’t pay them more. The other grant might pay for planning time, but they don’t pay for employer taxes! ” She started pulling at her hair, and both of us collapsed on the floor, weeping and beating our chests in anguish and despair.

OK, I might have exaggerated that last part a bit. But unfortunately, this sort of restriction is not an exaggeration. This challenge that we in the nonprofit sector face daily is historic and pervasive. And very, very frustrating and counterproductive.

Imagine if other businesses ran like this. Funders and donors are basically customers who buy products, not for themselves, but to give away to other people who need them (I’ll talk about the weaknesses of that system in a future post). Imagine what a bakery would be like if it had the same funding restrictions that we have on nonprofits:

Baker: Welcome to the Dusty Apron Gluten-Free Bakery. Can I entice you with a cake?
Customer: Yes, a chocolate cake. It’s for some gluten-free veterans.
Baker: Excellent! We specialize in gluten-free cakes. We can make a delicious flourless chocolate lava cake that was once featured in Tasty Pastry magazine. How does that sound?
Customer: Ooh, the gluten-free veterans would love that. They always get fruit for dessert. How much does it cost?
Baker: For a cake serving 20 people, it’ll cost about $100.
Customer: OK, well, I can only give you $20, so you’ll have to find the other $80 elsewhere
Baker: Well, luckily, we have other customers who want to help make a cake for gluten-free veterans. At least three of them said they’ll pitch in, and we’ll ask some others too.
Customer: Excellent, so here’s $20. However, you can’t spend the $20 on sugar. You can only spend it on chocolate and up to one egg. It’s spelled out here in this cake baking plan.
Baker: What about vanilla? It’s hard to make a delicious cake without good vanilla
Customer: You can spend $1 of the $20 on vanilla, but if you decide you need more vanilla, you have to email and talk to me about changing the baking plan.

One week later:

Customer: We ordered a gluten-free chocolate lava cake from you guys, and it was awful. It was too dense and not nearly sweet enough.
Baker: I’m sorry, but other customers also had their own conditions. One customer said he would pay for sugar, but not butter. Another said she would pay for chocolate, but we already had you paying for chocolate, so we asked her if she would pay for butter, and she said no. Our oven’s thermometer also broke down, but none of the customers would allow their cake payments to be used to fix it, saying that fixing it does not directly benefit gluten-free veterans. I emailed you to ask if $5 of your $20 could be used to buy a temporary thermometer, since we didn’t need so much chocolate, but you said it would take three weeks to change the original cake baking plan.
Customer: Well, I’m not buying any more cakes from you guys. You obviously don’t have enough baking capacity. Goodbye.

Meanwhile, another customer heard the exchange:

Customer 2: Sheesh, I’m sorry about that. If it makes you feel better, I and a bunch of other customers got together and ordered a blueberry bundt cake from you last month, and it was delicious.
Baker: I’m glad to hear you enjoyed it! I hope we’ll see you around more often?
Customer 2: Absolutely not. We only pitch in to buy a cake from any bakery once. If we keep buying cakes from you, you’ll just become dependent on us, and that’s just madness—madness, I tell you!
Baker: Well, I’m sorry to hear that. How can I help you today?
Customer 2: I just formed a committee to explore why there is such a high rate of nervous breakdowns among bakers, and since you guys were featured in Tasty Pastry, I thought I would ask you to join.

Two weeks ago I was out to lunch with a potential new corporate sponsor, who got very excited about a program we did a while ago, where we provided computer training classes in Vietnamese to parents so that they could learn to check their kids’ grades online through Seattle Public Schools’ Source program.

“That’s excellent!” he said, “that aligns really well with our priorities this year. You should apply for our employee giving grant.”

“Cool,” I said, “I did see that on your website. I’ll review further and follow up with you.”

“One thing you should know though,” he said, “we don’t fund staffing. We hate paying for people’s wages. We can pay for the computers and software for this program, but only for client use.”

I know he’s just a messenger for his company, but at that moment, I wanted to unleash the fury of a thousand ED’s and Development Directors on this poor man. I would stand on the table and my eyes would glow white, and a terrifying cyclone of meeting minutes and financial statements would swirl around me, knocking everything over. People would cower under their tables as hundreds of business cards rained down from the heavens. “Who,” I would say in a low voice that would reverberate through the restaurant, “who would make the program happen then? Elves?! UNICORNS?!!!”

I calmed down, thinking of how awesome that scene would be if we had a show about nonprofit work that combines The Office with X-Men. But yeah, seriously, who would manage this program? God, that would make our work so much easier, if we could just summon some multilingual elves to come out and plan programs and fill out paperwork. That would cut down on costs, and I’m sure the elves would have a better grasp on the advanced algebra and calculus required to figure out which funder is paying for what by when.

The sad reality is that we nonprofits spend way too much time navigating the complex maze of funding restrictions, time that could be better spent delivering and improving on services. We should all focus on the final outcomes and allow nonprofits the flexibility to do their jobs. Though restricting funding in the name of accountability has been a standard practice that stemmed from good intentions, in the end, it is the gluten-free veterans who will be eating fruit again.

  • Mark Okazaki


    We should collect all of those “cakes” and save them for the next dessert dash fund raising event!


    • Vu

      That’s exactly what an ED would think to do with cakes. I can never look at a cake like a normal person any more.

  • I *hate* Big Shiny Object (BSO) syndrome. Yes, we’ll buy you a handicapped accessible van. Because that’s a BSO, and your volunteers will drive it around, and other people will see our name on it, and that will make us feel good. But we won’t pay for the van’s gas, or insurance, or its maintenance. We won’t pay for you to recruit the volunteers to drive the thing, or screen or train them. And we certainly won’t pay you to work with the clients who need it for their transportation. That’s all your problem.

    In my heart of hearts, there would be a generic Big Shiny Object that we could buy, and then, when the funder’s glance is turned, we could sell the damn BSO to pay for what we really need: money for staff salaries, mostly.

    • Vu

      BSO? That’s brilliant.

  • Sarah

    All I want to know is how you framed the grant that allowed you to pay for this blog!!?!?!

    • Vu

      Sarah, it costs all of $26 a year to have this blog. Wait, I mean, yes, it is extremely costly to maintain this site. If anyone wants to donate to VFA so I can keep this going, please go to and click on Donate.


        Done! Happy blogging – love this!

    • Vu

      Thank you so much! Ms. Crocker just donated to cover an entire year of blogging, and more! And another generous donor also pitched in with $20. This has been my most successful fundraising effort in 2013 🙂

  • Hey that cake in the picture looks so good I want one!

    • Vu

      Right? I’m vegan, and I could kill for some of that cake right now.

  • paola

    Word, Vu. Word.

    • Vu

      Thanks, Paola. You coming to EDHH next week, yeah?

  • Hey, Vu, we wrote the book on unrestricted funding!!!! 🙂

    • Vu

      Paul, can you please get people to actually read this book? And write a book report?

  • You’re awesome. Great post.

    • Vu

      Thanks, Eric. Awesome work with all you’re doing at Splash. We take clean drinking water for granted and forget the millions who don’t have access to it.

  • Mijo Lee

    This is hilarious and totally on point. I should mention that Social Justice Fund’s grants are almost all for general operating funds AND that all the staff have X-Men names.

    • Vu

      Mijo, we’ll be applying 🙂 I bet you’re Jean Grey. She’s awesome.

      • magan

        Mijo is Magneto. Jean Grey isn’t radical enough.

        Also, great post!

      • Vu

        Thanks, Magan. Mag-Mijo I will now call her.

    • Michelle Williamson

      I was going to comment on the excellence of SJF as well. As far as restrictive fund metaphors go, I was previously partial to the vending machine (you can’t choose only the kit-kat, we need butterfingers for success) but this is much stronger.
      Thanks Vu!

      • Vu

        Thanks, Michelle. Whatever the metaphor, it is clear that junk food rocks.

  • Joy Scott

    This was the perfect post to read after I spent three and a half hours fixing a $10 glue gun. We can’t buy another one – no more grant funding left for supplies – but at least we have funded staff time left to learn these new and valuable skills! 🙂

    • Vu

      Joy, maybe we should combine forces. We have a grant here that won’t pay for staff time, but will pay for supplies. We seriously bought like 10 easel pads. I mean, easel pads are awesome, and we’ll put them to good use, but we could really use some staff planning time!

  • Rebecca

    Wow, what a great post! Is your organization having any events soon where you’ll be speaking, that I could attend?

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  • I’m going to use this to explain to my board why unrestricted funding is so important! I have the exact same problem right now, we have mountains of supplies but no money for program staff to plan their programs.

    • Vu

      One time, we had money left that could only be used for supplies. So what did we do? We bought easel papers, 30 pads of them. These things are expensive, at like $35 each. We had no room to put them, so now they are under the office futon. Sometimes I wake up worrying that they might get stolen, these precious easel pads…

      • What I have: reams upon reams of white copy paper donated by a nice company that supports our mission. I’ll trade three reams of paper for a box of those clear plastic name tag holders that people use at events – ideally the kind that hang around your neck. Deal?

      • Vu

        We should start a nonprofit supplies exchange program! I have tons of easel paper. If I can trade them for some name tag covers, then I can trade those name tag covers in to Claire for some reams of copy paper. Then, I can trade those reams of copy paper for easel papers! We always need more easel papers…

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  • Mat Despard

    The cake analogy is fantastic. Much better than the candy bar one I use in my classes! Not sure funders understand the multiple negative effects restricted funding has, including the higher bookkeeping and accounting costs. Another is the opportunity costs to the nonprofit – below-cost reimbursement guarantees the nonprofit will spend less time on community impact and more on finding other cake ingredients.