How Charities Can Manage Enormous Public Money Dumps

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Charities and nonprofits are critical for a functional modern society. We need these change agents to provide services that the government can’t and grease the wheels of life.

Naturally, this function sometimes attracts grants, large sums of money rained down from on high. Usually, when this happens, it is cause for elation for the management and the people they help. But it also comes with problems.

The good news is that this post can help. We look at some of the techniques charities can use to manage public money dumps and make their organizations better for them.

Focus On The Long-Term Impact

When a large sum of money arrives, the overwhelming temptation is to spend it. Charities often have a list of priorities they want to check off as soon as possible. After all, the immediate need seems overwhelming.

However, it is wise to be more cautious than this. While short-term spending feels good, it doesn’t always produce the best long-term outcomes.

The superior approach is to manage the money over several months or years. After all, manna from heaven is rare. Politicians and officials might change their minds.

The trick used by most charities is to invest in so-called “capacity-building” projects. These enhance the nonprofit’s ability to deliver services and raise money in the future. Such spending isn’t always favored by donors, but since it is coming from the government, that side of things doesn’t matter as much.

When you consider the long-term impact, you ensure that the effects of funding go beyond their initial boost. You can build your base while focusing on raising more money for front-line projects.

Invest In Scalable Technology

The second step is to invest in scalable technology. Putting the right systems in place can serve you for many years, allowing you to deal with the trials and tribulations of nonprofit life.

Most charities use conventional accounting solutions, but grant management software is the obvious choice for those in the know. Unlike regular bookkeeping apps, it doesn’t just pay lip service to nonprofits. Instead, it makes your requirements a central feature.

You also want to put money into automating and streamlining your outreach efforts. Subscribing to software that sends automated emails is a good idea because it brings down costs. You also want to automate donor tracking and communications, including reporting, so you don’t have to waste staff time on repetitive tasks.

Get Ready For Donor Scrutiny In Advance

It’s also advisable to prepare for donor scrutiny in advance after public money dumps. Those associated with your nonprofit will want to know how you’re spending the money and what you intend to do with the funds.

Again, you can wrap this into your regular compliance and reporting processes. However, you may also want to hire a trained media spokesperson who can communicate on your behalf. After all, you don’t want to say the wrong thing.

These professionals are excellent at spinning grants in a way that the public will accept. They explain the necessary work you have to carry out behind closed doors, and how it will improve service provision in the future.

Join Up With More Experienced Organizations

If you’re finding it hard to plot a path forward, then consider joining up with experienced organizations. These entities often have expertise you can use to spend the funds more effectively.

Often when small charities receive a large amount of money from a source, they pair with a larger organization to implement it. The former delivers the front-line services, while the latter provides the administrative support, working with the in-house team.

Joining up with more experienced organizations is time-consuming, so you will want to begin the process as early as you can. Getting key stakeholders on board can speed up the process.

Be sure to prepare a pitch deck in advance (borrowing from the startup world). Explain why the partnership is mutually beneficial and how it can benefit both charities.

Manage Expectations

You also want to be on the ball when it comes to managing expectations after receiving a large lump sum. If it is public knowledge, then almost every stakeholder will want you to produce great things.

The first step is to discuss what’s possible with the money available (before spending anything). Talking about what can realistically be done is important because it helps frame everything that comes next.

Don’t allow the grant to push your charity outside of its mission or scope. Just because you’ve received some money, doesn’t mean you have to solve the whole world’s problems. What counts most is your objectives. Solving them first should be the priority.

The next step is to communicate with the people associated with your organization. Talk to them about the realistic outcomes of your efforts and how money may still be a limiting factor in what you achieve. Be specific with your expectations so that audiences can see that you aren’t just trying to lower the bar. Demonstrate to them the expected costs, outcomes, and where the money will go.

Engage Full Reporting

To achieve this, you need a robust reporting system. Simply telling your stakeholders what’s happening is no longer sufficient. Details are essential.

Start by providing regular updates on spending and program outcomes to boost public confidence. Try to get a couple of early wins you can publicize to the masses, convincing them that you’re doing the right thing.

Then, drill down into the details. Talk about things like:

The number of people you serviced
The number of services provided
The cost per service user
The long-term projects funded

Providing this information is an excellent way to instill confidence and keep donors up to date. It builds trust and proves you’re using the money responsibly (instead of for private gain).

Create A Reserve Fund

Related to the first point about planning for the long term, it also helps to create a reserve fund. These give you a financial cushion or buffer you can use when things get tough.

Creating a reserve fund allows you to become more resilient over time. You can make it through lean periods without payoffs and deal with crises as they emerge.

Reserves also help you with your ongoing mission work that might not be as appealing to donors. Even if you lose some subscriptions, reserve sources can keep them going.

For example, let’s suppose that you support an AA club for men. Funding for these initiatives is important, but it might be lacking if there are more pressing concerns, like hungry children. In these cases, it makes sense to have a strong reserve fund, particularly if some of your activities are unpopular because of the demographics they help.

Scale Staff Slowly

When nonprofits receive a lot of money suddenly, the temptation is often to scale staff as quickly as possible. Bringing more people into the fold extends their reach and takes the strain off existing people.

But this impulse is often counterproductive. Sometimes it leads to an overshoot where the charity topples over under its own financial weight, leading to mass layoffs.

So what’s the answer here?

The trick is to add staff and technology at the same time with advisory consultants. The latter can direct spending on the former and help with planning, and scaling up the enterprise at a sensible rate while enhancing its capacity to deliver to front-line service users.

Hiring should focus on supporting the sustained impact of the charity. Putting enormous amounts of money into an organization that won’t last is a bad idea.

One reasonable (but unpopular) way to spend money is on a superstar manager. Getting the right person in place can be highly effective when attempting to improve strategic spending. Buying in financial advisors is also handy since these professionals can guide planning and help entities make better use of the available resources.

Improve Oversight

Another way to manage enormous money dumps is to improve oversight. Financial audits make large funding influxes less prone to corruption.

Charities will often subject themselves to external audits after they receive a large sum of money. Continuous monitoring helps to track spending and boost accountability, preventing mismanagement.

Many nonprofits also put multiple controls in place to prevent one or two people from having the final say over how money is spent. These prevent unnecessary spending and act as a check on any one individual’s power.

Set Allocation Plans

Lastly, setting clear allocation plans is essential. People in the organization need to know where the money will go.

Allocation plans are critical because they provide everyone with a focus. This directs operations while also building trust with the public. Then, auditors can ride in, measure what the company has been doing, and create reports showing how they line up with allocation plans.

Let’s say, for instance, that your charity receives a substantial grant. You could propose an allocation plan detailing immediate relief and long-term recovery, showing how you are thinking across multiple time horizons.

Overall, adopting these tactics should help your charity deal with a large money dump better.