Federal funding uncertainty, new tax bills, and recent executive orders have significantly impacted nonprofit organizations across the nation, particularly those already working with limited resources. New legislation requires political appointee review and approval of federal grants, making it easier for federal agencies to terminate existing grants. Additionally, new restrictions on fund usage could make some causes ineligible to receive federal funding at all.
The restriction and loss of federal grants underscore the need to diversify revenue and seek funding from mission-aligned, private grantmakers. However, Montana nonprofits juggling fewer resources with a higher demand for services can’t afford to waste time and labor on misalignment with these potential funders.
In this article, we’ll explore common obstacles to productive funder-grantee collaboration and offer actionable ways to overcome them.
1. Misaligned expectations about impact.
Funders and grantees often have different ideas of what “impact” looks like. Nonprofits come face-to-face with their impact each time they rescue a litter of kittens or provide meals for a food-insecure family. Still, funders are often seeking a more concrete, quantitative impact measurement.
This often means funders want to see metrics that nonprofits can’t reasonably provide, and nonprofits may struggle to communicate their outcomes accurately with limited time and data tools. For instance, if a nonprofit’s mission is to educate its community about an issue, it may struggle to report impact.
Actionable Tips
- Dialogue with funders early on. Spark early-stage conversations to define what success looks like for your nonprofit and mission. This ensures both parties are on the same page and can help you rule out incompatible funders before your staff spends time conducting an impact evaluation.
- Tie deliverables to existing workflows. Limited staff capacity and financial resources are significant barriers to conducting in-depth impact evaluations. Look for ways to tie these evaluations into your existing, day-to-day workflows and use the outputs for additional mission-critical purposes. For instance, you may use impact data to support fundraising appeals or marketing campaigns.
- Take advantage of AI and automation. Streamline tasks like manual data entry, outcome tracking, and outlining reports and proposals using these emerging technologies. By saving time on these repetitive, logic-driven tasks, you can free up staff time for tasks that require creativity, emotional intelligence, and contextual understanding.
2. Power imbalances.
The reality of the funding relationship often places grantees in a subordinate position relative to funders. This makes it challenging or intimidating for nonprofits to provide honest feedback or request flexibility, stifling the growth and collaboration that are needed in today’s fundraising landscape.
Actionable Tips
- Seek funders using the participatory grantmaking approach. As UpMetrics explains, this approach aims to correct the power imbalance by shifting decision-making authority from the grantmaker to the communities affected by funding decisions. This strategy gives communities greater voice and influence and promotes civic engagement. For grantmakers, it offers better funding outcomes and stronger alignment with community priorities.
- Share internal challenges openly. Not only does honestly sharing challenges build trust and authenticity, but it also surfaces processes that are broken, need adjusting, or are simply unrealistic. This can help funders make processes more accessible to rural organizations, those struggling with limited resources and staff capacity, those working with vulnerable populations, etc.
- For funders — Normalize collecting feedback. As the dominant party in this power imbalance, restoring balance is largely the responsibility of funders. Use feedback tools that protect anonymity and gather authentic responses. Aim to implement this feedback and follow up with your community of grantees when possible. Also, establish conversational, two-way check-ins rather than formal “reporting only” meetings.
3. Rigid application and reporting requirements.
Understanding and adapting to the steady stream of new federal legislation can feel like a full-time job, on top of meeting increased demand for nonprofit services and maintaining daily operations. Time-consuming, overly complex applications and reporting structures increase the burden on already-strained nonprofit resources and can exclude smaller groups from applying altogether.
Actionable Tips
- For funders — Simplify applications and reports. Focus on collecting information that truly matters rather than adhering to certain formats and processes for tradition’s sake. Accept common grant formats so nonprofits don’t have to reinvent the wheel each time they apply for funding, and allow oral reporting to foster more nuanced, real-time conversations.
- Request examples of successful submissions. As an applicant, seek out or request submissions from past grantees. Pinpoint similar approaches across the submissions to identify what metrics, angles, or writing styles the funder prefers. Then, plan ways to implement these into your submission.
- Prioritize data hygiene and health. Small changes in your nonprofit’s daily workflows can make a big difference in data accuracy. For example, use standardized formatting and frequently remove outdated information to ensure your data is reliable. This also reduces the time and effort required to prepare reports. Your nonprofit can tell a comprehensive, unified story, easily respond to unexpected funder requests or questions, and limit miscommunications across team members or departments.
4. Limited local context among national funders.
Montana’s nonprofit landscape faces unique structural barriers that national funders may not fully grasp. For instance, federal funding contributes billions to Montana’s economy, supporting nonprofits and individuals. The nonprofit sector is the state’s third-largest employer, making up an even larger share of rural economies. Additionally, Montana is heavily reliant on federal funding to support daily life (e.g., healthcare, housing, infrastructure).
This means that federal funding cuts have disproportionately impacted Montanans and local nonprofits, vastly increasing demand for nonprofit services to fill in the gaps left behind. Not only are nonprofits tasked with doing more with less, but they also lack the bandwidth to meet rigorous grant requirements.
Actionable Tips
- Educate funders on local realities. National funders likely won’t understand the unique challenges Montana-based organizations face. Educate them on how issues like geographic spread or staffing challenges impact your work, and what they can do to meet you where you’re at.
- Highlight collaborative models that are already working. Grantmakers will likely be more receptive to change if they have evidence that those changes will work. Returning to participatory grantmaking, Native Americans in Philanthropy (NAP) has a long history of using this approach. Its new model, the Indigenous Tomorrows Fund (ITF), aims to engage younger decision-makers to gain the perspectives of those who understand their communities’ nuanced needs.
- Invite funders to get involved. Help funders see the impact your work has on its community by inviting them to attend upcoming local events, volunteer opportunities, behind-the-scenes tours, or even virtual site visits. This shows them the more intangible impact of your work without requiring additional effort from staff.
Funder-grantee collaboration should be about partnership, especially for areas and organizations where every dollar and hour counts. Building funding relationships that are grounded in mutual respect, shared goals, and realistic expectations is crucial to allocating funding where it’s needed most.
As nonprofits, we can advocate for these shifts by sharing our realities and pursuing adaptive, trust-centered relationships. Funders, in turn, should support this change by listening to nonprofits and communities.