Why numbers matter…Part 1, private money

One of the questions we often get asked here at the MTM blog is “why is there such an emphasis by PCRM management and board of directors to expand the number of people whom they service way past what are community norms?” The simple answer is “money”. From an outsiders perspective, it would make sense to create local fundraising that generates revenues from our community that then serves the local needy. But to those who are unfamiliar with the workings of many non-profits and organizations that offer charitable services, it is an important foundation to understand that fundraising is big business with literally billions of dollars each year being shuffled around to the most high profile organizations that can establish the most “need”.  Below is a screen shot from the website of Foster Associates who operate “Capital for Compassion”. (http://www.capitalforcompassion.com)

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Foster and Associates are just one one multiple companies that have found financial opportunities to collect commissions by offering technical advice to non-profits. This advice is in the form of helping individual organizations create a higher perception of “need” therefore establishing themselves to be more relevant and deserving of grant dollars. This company alone during the year of 2010 bragged of participating in over $62,000,000.00 in awarded grants. From their own website under the “services” tab: (http://www.capitalforcompassion.com/services/)

Fund Sourcing: Unlike many other companies, we are not fundraisers. We do not make pitches to multiple sources, or appeals to individuals. Instead, we work with a select group of private financial institutions that grant forgivable loans. Because Foster Development has earned the trust of a select group of financial institutions that have designated resources for compassion, we are able to bring our clients’ needs directly to those who can fund them.

Proposal Creation: Because we represent private money, managed by professional financial institutions, it is essential that the proposal be strong and clear. We articulate our clients’ narrative, needs, and financial information into the appropriate format that the funding sources require to determine whether the proposal is a worthwhile investment of their resources.

Fully Managed Funding Source: Foster Development not only prepares the proposal, but continues to administrate the grant beyond funding. This  includes construction reporting, disbursement of funds, project completion reporting, completion auditing, and developing a template for annual reporting.

Funder Relationship: Six figure grants require three things: 1) a good story to to tell, 2) telling it well, and 3) a receptive audience. For years, Foster Development has established and actively maintained positive relationships with the personnel at each of its funding sources. We understand how they think, and what they find compelling when evaluating proposals.

Expertise: The proposal process entails an exhaustive financial analysis, and is unlike any other grant process, with a steep learning curve and cryptic terminology. The single most important difference between organizations that get funded from those that do not is a compelling (and truthful) narrative, told in the funder’s language. It takes skill and experience to craft this type of story.  For example, the first grant that Foster Development obtained was for $482,000, but later we learned that we could have gotten $702,000 for that project if our proposal had been a bit stronger. Since then, we have obtained over $93 million from our sources for our clients. Along the way, our team has developed the ability to maximize awards and net more dollars to a project (even after our fees), than clients would if they pursued funds on their own.

Organizational Analysis: Since our funders are financial institutions, they look at grant proposal with the same scrutiny that they would evaluate a loan application. Oftentimes, improvements in leadership systems, financial controls, and board management are a prerequisite to tendering a proposal.

So the question becomes, “where does all this money come from?”. The Federal Home loans bank system (http://www.fhlbanks.com/) was created by congress in 1932 as a “government-sponsered” bank system that provide stable, on-demand, low-cost funding to American financial institutions (not individuals) for home Mortgage loans, small business, rural, agricultural, and economic development lending. With their members, the FHLBanks represents the largest collective source of home mortgage and community credit in the United Sates. As part of of the congressional charter, the system contributes 10% of their net income to affordable housing through the “Affordable housing program” (AHP). This competitive grant program is the largest source of private sector grants for housing and community development. Since 1990, the system has distributed over 4.83 billion ($4,300,000,000.00)

The dollars awarded each year are significant and the  challenge for organizations around the country is to somehow rise to the top of the list in a way that makes them most eligible. One key way of doing this is creating an dynamic where there are artificially larger numbers. When a nationally known expert comes to Panama City and professes that we as a community have a homeless problem that is “ten fold” what it should be by population, the mindset of those running the mission is that this is a good thing. Significant numbers with multiple outlets and programs, implies a “need” making the ability to tap into large grants that much easier. This is also the same reason why the PCRM management have been so reluctant to participate with other local organizations with the development of the Bay Area Resource center. Having outside involvement from other organizations dilutes the pot of money. The fact that other agencies and organizations have unique skill sets and resources that when working in conjunction together would give an enhanced program for our communities needy becomes secondary to the discussion .

Larger and larger numbers allows the PCRM to tap into larger revenue sources which supports bloated payrolls.

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