How Budgets Can Strengthen a Funder-Grantee Relationship

At the Jim Joseph Foundation, we aspire that Jewish youth, their families, and friends will lead lives filled with connection, meaning, and purpose. Talented, committed grantee-partners are vital to realizing this aspiration and, guided by a relational approach to grantmaking, we strive to offer them more than just grant support. This can be technical support, data gathering or other research efforts, or something else that fills a void either in the field or in their organization specifically. Today, we are responding to a need with a video series, Non-Profit Budgeting Best Practices: How Stories are Told and Partnerships are Strengthened Through Numbers in Spreadsheets. The series title captures the oft-overlooked role a budget can play in fostering a positive funder-grantee relationship.

To be clear, we do not offer a prescriptive methodology for how everyone should present their financial reports. Nor do we require a special budget format for every grant approved. The Jim Joseph Foundation employs a type of trust-based philanthropy that employs guidelines rather than red lines and gives the benefit of the doubt to our grantee-partners. They are the ones who actualize the initiatives the Foundation cares about. From a reporting perspective, we adjust our submission needs based on the amount requested (i.e. under $100k; $100k-$250k; $250k and up). We also only request formalized reporting annually since we have regular communications with grantee-partners at least once per quarter. This provides space to discuss a majority of the updates, successes, and challenges of the grant. 

With that in mind, the practices in these videos are intended to offer help in compiling budgets that articulate an organization’s priorities, ambitions, and story—while also helping organizations anticipate questions about financials from funders. It is our hope that these videos will provide a succinct illustration of what we have learned over the past fifteen years as best practices in the space. Organizations can select what makes sense for their needs. We offer what has worked for us and provide insight into why we think budgets prepared in this manner are effective. Even as we share these, we recognize that every situation has its own factors that inform the grant budget and application process. Over the last two years, for example, the Foundation took new steps to streamline a parallel application process through the Jewish Community Response and Impact Fund (JCRIF). The Foundation understood that some grantee-partners were facing unprecedented challenges caused by the pandemic and did not have time or resources for a normal grant application process. They also needed support quickly. In this instance and others, we heard from our partners and did our best to respond accordingly while also continuing to help them be the best versions of themselves. 

Based on questions we received from grantee-partners, the series is comprised of five sections that can either be watched collectively or as independent videos on funder-grantee relationship:

• Part 1: Welcome to Nonprofit Budgeting Best Practices
• Part 2: Best Practices of an Organizational Budget
• Part 3: Best Practices of a Program Budget
• Part 4: Understanding Annual Budget Reporting and Variances
• Part 5: Understanding Cumulative Cash Reserves

As a funder supporting organizations that create and provide Jewish learning opportunities, the Jim Joseph Foundation inherently is in a position of power in the funder-grantee relationship. While we acknowledge this reality, we also try to minimize this “power dynamic” when possible. So, when we produced the series, we tried to do so with great care and intention. In this regard, the descriptive videos cover areas and questions that our grantee-partners have asked us during the Foundation’s years of grantmaking. To ensure that we were responding directly and clearly to their needs, our development process included time for grantee partner review and input.

It’s important to note that we also saw an opportunity to help grantee-partners better reflect the full costs of their work into proposals. Many experts in our field have addressed the challenge of the Overhead Myth—the misnomer that intrinsically the less an organization spends on administration, the more efficient it is. We believe for an organization to function effectively with an extended time horizon, it needs to share its real costs. This requires the grantee-partner to trust that the funder will act in the best interest of the grantee-partner. The funder also needs to demonstrate flexibility about the levels and percentages of those costs.

Non-monetary grant assistance has been a staple in thinking around successful grantmaking for decades. In the Center for Effective Philanthropy (CEP) 2018 report, Strengthening Grantees: Foundation and Nonprofit Perspectives, researchers noted that 83% of foundation CEOs say that their staff provides direct assistance beyond the grant and 67% enlist a 3^rd party consultant to provide that support.  Even with those promising numbers, the report shares a stark disconnect between what foundation professionals are offering and what nonprofit CEOs say they actually need. According to the report on the funder-grantee relationship:

Almost all foundation leaders say that their foundation:

• feels responsible for strengthening grantees;
• cares about grantee organizations’ overall health; and
• is aware of grantees’ needs.

In contrast, the majority of nonprofit CEOs say: 

• their foundation funders feel no or little responsibility for strengthening their organization;
• most foundation funders do not care about strengthening the overall health of their organization; and
• most foundation funders do not ask about their organization’s needs beyond funding.

The report shared dichotomous perspectives about who makes decisions about consultancies, the nature of ancillary services provided, whether follow-up takes place to the interventions that are provided, and overall responsiveness to requests beyond the dollars granted. While some of this divide can be attributed to communications challenges, more can be attributed to succumbing to the power divide.

Undoubtedly, we have made some mistakes with our grantee-partners that are noted in this report. Operating from an office that in certain cases is thousands of miles away from these partners leaves plenty of room for error and assumption, and we recognize that there are grantee perspectives that remain un-shared due to the nature of the funder-grantee relationship.

Still, relational grantmaking is an attempt to ensure that knowledge-sharing and open communication are prioritized by both funder and grantee. This approach creates more meaningful and impactful investments. Grantee partners expressed a desire for more support in budgeting. We do our best to respond. In the same way that we engaged grantee partners in the process, we want to continue to ask questions of our funding and grantee partners alike: What knowledge and information are needed currently, what do you anticipate needing moving forward, and what has been most useful to your organization in the past? The video series is only one of many areas that we think could be addressed. We hear from grantee partners about needs in evaluation, R&D, communication, and many other areas of technical and personnel-based assistance. The best way to learn more about these areas—and to identify others—is to start by asking.