Despite the good nonprofits do, they're being hit six ways to Sunday with funding cuts.

The Senate Appropriations Committee recently announced a two-year moratorium on earmarks. Many nonprofits have depended on earmarks, especially for capital projects or start-up funding for new projects.

How will the moratorium affect the people your nonprofit serves?

How many of your employees will be out of work because of the cuts?

How close is your agency to closing your doors?

The Nonprofit Finance Fund just received a $400,000 grant from the Rockefeller Foundation to explore the feasibility of social impact bonds in the United States.

I’ve been missing in action from this blog as life, budget cuts, and same old, same old got in the way. But suddenly I’m feeling energized again, thinking about how nonprofits will survive the aggressive budget cuts that the Republican House is proposing.

So, what do you think about this idea? NFF press release

A Social Impact Bond is a concept that aligns the interests of the public, private and philanthropic sectors around a shared vision of desired social outcomes. Instead of creating compensation based on the number of services delivered, incentives are tied to positive results. Social Impact Bonds have the potential to save taxpayers money while concentrating investment in proven, high-impact interventions that create measurable social benefit.

The Social Impact Bond was piloted in the U.K., where investment is focused on a program designed to reduce re-offending rates among released prisoners. The U.K. government will make payments to investors based on the program's measurable success stemming returns to prison. If the Social Impact Bond model is moved beyond a pilot and brought to scale, it is expected that the payout to investors will cost the government significantly less than housing re-offenders in prison – thus saving the tax payer money in the end and providing a sustainable, long-term solution to a social problem. Adapting the Social Impact Bond model for the U.S. could have tremendous implications for the way social needs are funded.

If you’re interested in following this development, check it out here.

NFF also just launched a new open, online community for any organization interested in exploring this topic and sharing resources. The group will host its first in a series of web chats on February 23, 2011 at 1:00 pm EST. The first chat will feature expert panelists on the topic: 'The Federal Government's Role in Implementing the Social Impact Bond in the United States'. All are invited to join the group and the web chat, which are designed to facilitate idea-sharing around this new concept. Visit www.nonprofitfinancefund.org/SIB for details.

This Washington Post article by Ezra Klein lays out how the administration will spend it's program grant money. It’s great to see this rationale in plain English. In the past, we’ve usually had to read between the lines. Each RFP and each agency handled each project differently.

The Obama administration's favored funding structure involves a three-tiered test. The top tier is for programs that have tested themselves using a randomized control trial in multiple sites, or something close to it. That's the gold standard in evidence, and those programs get the most money. The second tier is for programs with preliminary evidence, and they can get some money. And then there are programs that can make a case for why they're worth trying, and they can get a bit of money -- enough, essentially, so they can develop evidence and come back to qualify for a higher tier. Program funding is being moved to this model across the government, in education and energy and transportation and more. "This is one of the few times I've regretted being a Republican," Haskins says happily. "I just think this is the exact right thing to do, and they’re being so thorough about it."
Then there's the systemic level. The model here is the Race to the Top program, which has been at the core of the administration's efforts in the education space. That initiative ran a competitive grant program in which states needed to submit a reform plan, then pass it through their state legislatures, before they could qualify for cash. The money, essentially, was used to buy votes for a broader reform vision.

Popularity funding vs. greater outcome accountability
Years ago, when I lived in Chicago, I read an article detailing the method used for determining the most popular exhibits at the Museum of Science and Industry. The method was simple -- how often the tiles in front of the exhibit needed to be replaced.

The most popular exhibit was the incubator where chicks were hatching day in and day out. How did the tiles play into it? People stood there quite fascinated, watching the miracle of birth, shuffling their feet, wearing out the tiles in front of the exhibit. (Perhaps this was the origin of the concept of voting with your feet.)

This story came to mind when I read yet another article about funders looking for ways to hold agencies, museums, arts programs accountable. We've talked about the struggle to find meaningful, short term, and do-able measures of accountability before. It's a challenge.

The same afternoon I received an email from a local soup kitchen asking me, and everyone else on their email list, to vote daily for their program in Pepsi's Refresh Everything campaign. And, get all our friends to do the same. Pepsi is giving away $15.6M in grants ranging from $5000 to $250,000 -- all based on which agency got the most votes. Kohl's retail chain ran a similar popularity-based grant program this summer, Kohl's Cares, $500,000 to 20 public and private K-12 schools.

Whether we're talking $5K or $500K, we're talking real money here. Money generating a lot of publicity for the sponsors, Pepsi and Kohl's, without any accountability for whether that money will "do good." Is this a viable program that will benefit the community? All we really know is that the winning agencies can get out the vote.

This "social media grant-giving" is heavily weighted in favor of communities that are digitally sophisticated, the digital-haves,leaving behind those with less access to digital tools and a social media-savvy population -- the digital-have-nots.
So, there we have two conflicting trends. Traditional foundations seeking ways to hold grantees more accountable while corporate foundations seek ways to make grant-giving into tax-free advertising. (Pepsi Refresh site on Facebook notes 92,000 monthly active users. KohlCares indicates 2,729,440 people "like" this.)

Hmmm. Your thoughts?

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How do you determine what to charge a client? I can tell you that my rate is an amalgam of what I need to live, what the market will bear, what I think the competition is charging, how poor the nonprofit is, how complicated the RFP, the turnaround time, and a bit of hocus-pocus, divided by the phase of the moon.

That's not a rational way to develop a fee structure, so I was interested to read a post by Alan Mutter at Reflections of a Newsosaur. He was writing about the exploitation of journalists -- writing for "exposure," not money. While arguing that writers should resist the exposure argument, he addressed what to charge and included a spreadsheet-calculator for determining freelance fees.

The post generated a lot of comments, including one from Greg Smith with a link to an alternative calculator developed by the National Press Photographers Association for for freelance photographers that will work for writers; just change some of the expense categories. Greg offered a rule of thumb that sounds about right -- you need to bring in two-to-three times what you expect as salary to cover your overhead and expenses.

How do you determine your fees? If you try one of these calculators, let us know how what you actually charge compares with what the calculator suggests you should charge.

Personally, I hate thinking about fees and would probably do this for nothing if I could. So, I'll probably stick with the phase of the moon.

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