Yo mama is a double-dipper: Funders’ micromanaging of nonprofits must stop


yo-mama-so-u1m9g5In the nonprofit sector, there are few things as grave as “double-dipping.” DD is a no-good, very bad thing. In fact, I imagine if we had a nonprofit trash-talking contest, it would go like this:

Nonprofiteer 1: #yononprofitmama so inconsiderate, she attends a meeting and doesn’t sign in.

Audience: Oh! Burn!

Nonprofiteer 2: Oh yeah? Well, #yononprofitmama so inexperienced in finance, she doesn’t know the difference between a fiscal year and a calendar year.

Audience: Oh no! You didn’t just say that about his mother!

Nonprofiteer 1: #yononprofitmama so unethical, she asked a funder or donor to pay for something that is already paid for by another funder or donor, thus, she is therefore double-dipping.

Audience: (Stunned silence)

Why am I bringing this up? Well, to start the #yononprofitmama trend on Twitter. But mainly to talk about how ridiculous and aggravating nonprofit accounting and reporting has become.

Over the holidays I had to spend about ten hours to complete a grant report (Note to funders: Please do not make anything due from December 20th to January 10th). The foundation, like most funders, did not want to pay more than 20% of any project. OK, I thought, I’ll just multiply the actuals of each line item by 20% and report that.

But wait! This foundation did not want to pay for more than 15% of unwholesome, disgusting, frivolous indirect expenses like legally-required insurance, office rent, and fundraising. Well, I’ll just multiply all indirect expense actuals by 15%, and then multiply all other expenses by 20% or more, like we had proposed in the grant application (See “10 steps for writing a kick-ass grant proposal“). Of course, this is just one funder out of ten, so I’ll have to figure out what expenses the other foundations are paying, and how much of each line item.

But wait! This foundation’s fiscal year does not align with my org’s fiscal year and they just want report on the stuff that falls within their fiscal year! Time to re-run some numbers in Quickbooks with different time periods and redo the whole Excel report.

Oh no! Because of the misalignment of fiscal years across different funders, it looks like we’re “double-dipping” by a few thousand dollars in the first half of our fiscal year, and then don’t have any funds to cover the second half! Must. Rerun. Numbers.

Six hours later, my toddler found me under my desk, rocking back and forth, murmuring something about inventing a time machine, going back in time, and preventing my parents from meeting so that I wouldn’t be born and thus wouldn’t have to do this financial report.

All right, let’s talk about finance and the effects of funders’ micromanagement of nonprofits. As anyone who has ever worked under a micromanaging boss knows, it is one of the most aggravating and demoralizing situations ever. Micromanagers, intentionally or not, communicate the message of “I don’t trust you. I don’t think you’re capable. I’m clearly better at your job than you. You look like a weasel.” The most effective bosses know that you should work with your team to set goals, responsibilities, and timelines, ask what the team needs in terms of support, and then trust everyone to do their job. You can check in once a while to see if anyone needs additional help or feedback, but overall you leave them alone because they are intelligent, capable individuals; otherwise, why did you hire them? This trusting and supportive relationship not only creates happier employees, but the outcomes are always better. Only when a team member is so new, so inexperienced, should you ever micromanage. And even so, you ease up once the newbie gets his bearing.

For all the talk about funders and nonprofits being partners, the dynamics are more like boss and employee (Or like people in King’s Landing versus Wildlings, from Game of Thrones. See “The Wall of Philanthropy, Wildlings, and White Walkers.”). We grumble about our bosses’ rules, but we have to follow them anyway. We grumble about foundations’ rules, but we have to follow them anyway. Many of us have families to support, so we don’t want to get fired, thus we often put up with micromanaging bosses and ridiculous rules. Similarly, we nonprofits have many clients to support, so we don’t want to get defunded, thus we put up with micromanaging funders and ridiculous restrictions.

Funders’ micromanagement of nonprofit finances is prevalent and hardly ever leads to anything good. Unable to avoid the myriad restrictions, we resort to doing stuff outside our plans and using nonprofit arcane accounting magic to get the numbers to line up: “Let’s see…eye of a newt, toe of a frog, a piece of Appendix A from a grant application. Double double, fiscal troubles, Quickbooks churn, actuals bubble! The numbers all align! Every expense actual is now perfectly allocated to every funder! Ahahahahahahaha!”

Or, at least that was what I was hallucinating while working on this report.

One time at my previous organization, because we were a scrappy and romantic nonprofit that scrimped and saved, we underspent by a thousand dollars while still meeting all outcomes. “Any funds unused by the end of the contract period must be returned,” the contract said. Since this funder hated paying for staff, but had no problem paying for supplies, staff went and bought dozens of pads of sticky easel paper. These are used for all sorts of things—like retreats and workshops and when we’re out of paper towels—and are expensive as hell, so it made sense to stock up on them, enough to last us through a zombie apocalypse. Still, if we hadn’t been micromanaged, this money would have been put to much better use, like building a reserve in case of emergencies.

carl-grab-the-xjpp8gBeing clever in spending and in using nonprofit accounting voodoo may sound like fun, but we are wasting a significant amount of time that could be spent on outcomes. Most people only have one boss at a time. If funders are acting like the bosses of nonprofits, then each organization has dozens of supervisors, each with his own idiosyncrasies. Imagine: twelve micromanaging bosses that you have to report to. The thousands of hours we nonprofits spend trying to navigate every funder’s restrictions could be spent, you know, helping people. (See: “Nonprofit funding: Ordering a cake and restricting it too.”)

If we are going to tackle the world’s challenges, there has to be trust and equal partnership between funders and nonprofits. Funders must stop micromanaging and trust us nonprofits do our jobs. If you trust an organization enough to select to fund it, then trust that it knows what it’s doing. Work with the nonprofit and agree to some goals, and then help it achieve those goals or get out of the way.

The restrictions foundations impose are aggravating and oftentimes nonsensical. How can any of us possibly be “double-dipping” when most of us wake up every day with night terrors about our budget gap and whether we can afford to keep our existing staff next fiscal year. Double-dipping, overhead ratios, indirect costs—all red herrings. Funders can keep micromanaging us nonprofits around these things. Or we can all focus on achieving outcomes together instead.

Either way, no one better call my mama, or my org, a double-dipper.

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  • Christy

    This. This is my pain. And what’s more it’s chronic and recurring. Thanks for expressing it in a way I can share instead of my more inarticulate, sputtering “but, but, but…”

  • Laura Carpenter Myers

    Only my second npwb blog read and already I am impressed at how well you’ve hidden the spy cam in my office. My other pet peeve is internal double dipping where an expense (such a salary) is charged against a program when the expense would be incurred whether or not the event happened. Of course this comes of having had several board members who work in the “billable hours” corporate world.

  • We all have our stories of meddling funders. Once I worked for an organization with a $5 million budget. We got a $10,000 grant — clearly not a transformational commitment. Regardless, we noticed that the check never arrived. Turns out that in the fine print we needed to provide a revised work plan to get the first $5,000, and then an interim report six months later to get the second $5,000. (I want to say that these same folks would hammer us on our administrative overhead, but I don’t honestly remember.) They did all this in the name of accountability. Blech! Needless to say… we never sought funds from that foundation again. I found it hard to believe that anyone would, but desperate organizations do desperate things.

  • I am really curious, how many nonprofit managers wield excel spreadsheets like a Jedi wields a lightsaber, and how many of them simply lie. Yes, the nonprofit could get caught – but it seems like the risk/reward ratio is such that the incentive for lying is pretty high. I jiggled every conceivable number to get our operating and fundraising expenses as low as possible without actually feeling like I was deceiving anyone. This sort of thing doesn’t actually lower operating costs. I couldn’t imagine how we could lower operating costs any further, as our staff wore little fingerless gloves to keep their hands from freezing as they typed at their used computers, printing out anything not for public consumption on the backs of donated paper. It just makes those who donate to the nonprofit feel better. Meanwhile, I could have used that time to help the people we were set up to serve. I imagine that many nonprofits simply cut out the number jiggling, and just write down numbers that are plausible (which is a lot faster), and actually attend to their missions, instead.

  • verucaamish

    I would love to by a fly on the wall at the funder Board meetings. For all of the reporting requirements, DOES ANYONE READ IT????? My husband had to complete a grant application whose INSTRUCTIONS were 54 pages long. Who will read that? My mom used to work for a funder (she’s a Generation 1.0 Vu Le – ran an MAA and left) and she let me know the E.D. gave himself an interest free loan to buy his house. I would LOVE to know the systems of accountability for funders because SOMETHING is driving this micromanagement.

  • Dorothy Adams

    I am seeing some funders starting to recognize the disaster they have created with excessive program funding and way to little general operating funding. The F.B. Heron Foundation is taking the lead and highlighted all these issues in a study by the Grantmakers for Effective Organisation (GEO) in 2007. But this national level rethink doesn’t seem to be trickling down to the regional local level that I can see. The regional/smaller foundations still do the wasteful nonsense outlined by Vu. Who is advising them to do that – the trust lawyers? the consultants?

  • Becca

    Thank you so much for writing this. Up until now, I could only express my feelings on this matter via power ballad (particularly https://www.youtube.com/watch?v=2X43XF8247E). Or sometimes even The Rolling Stones (https://www.youtube.com/watch?v=j7leQB_Oe_k)
    Seriously, definitely been in the place of rolling under my desk!!!

    • Becca, sorry this is like three months late in response (yeah, I’m not very good with keeping up with comments on the blog), but is your profile picture of Lucca from Chronotrigger? Dude! I love that game!!

      • Becca

        It is! Nerdiness is my non-profit super power.

  • Shannon Kennedy

    As a member of a government agency funding homelessness initiatives with multiple small nonprofits I used to have this discussion monthly with our accountant. He kept asking why organizations would not spend our grant each month but then max it out in a month or two. I would explain that the smaller orgnaizations cobbled together funding from many sources for the same service. They then spent down each source of funding over the course of the year. Luckily the evaluator charged with yearly reports understood this and always clarified our funding was part of a collaborative effort for services.