Folly #47: Easy Budgets

They may be harder than foundations think.

In my consulting work, I focus on small nonprofits. The little guys who work like crazy to do big things. I’m in awe of them. And in the nonprofit world, they’re the norm.

Of 1.5M nonprofits, only 62,500 have budgets over $500,000.

And that can be a big problem when it comes to funder expectations around budgets. (It’s also why we offer simple, free budget and proposal templates for nonprofits to use – like the real client stories at the end.)

1M under $50,000

According to the Urban Institute’s Nonprofit Sector in Brief Report (most recent data is from 2019):

• 1.54M nonprofits are registered with the IRS (plus thousands more that operate under fiscal sponsorship).

• Only 35% of those have budgets over $50,000 and are required to file IRS form 990.

Let me say that again.

Of 1,540,000 nonprofits, more than 1M operate on less than $50,000/year. At that size, they can’t pay an executive director a living wage, yet alone fund an ongoing program.

(And they certainly can’t afford any fundraising consulting. My “little guys” clients are usually in the budget range of $250,000 to $1M.)

Even when Urban Institute removed the <$50k nonprofits, two-thirds of the remaining organizations had budgets less than $500,000.

350k under $500,000

Back to the data. Of the half-million nonprofits with budgets larger than $50k, two-thirds still spend less than $500,000 on programs and staffing.

So now we’re down to 62,000 nonprofits with budgets over $500,000.

Only 4% of nonprofits have annual budgets over $500,000.

Yet foundations think nothing of asking for budgets restricted to a specific program and, usually, straddling fiscal years.

4% of 1.5M

When only 4% of nonprofits (62,500 of 1.54M) spend more than $500,000 each year, the vast majority do not have the staffing or systems to break down their budgets into smaller pots for the convenience of funders.

Here’s how it looks to a smallish nonprofit (real examples from recent clients):

1. A volunteer-led organization seeking stable funding for professional development programs serving lower income, non-white workers did not have a budget because everything had been donated. What a great service this would be from foundations: to offer assistance to small, start-up, or volunteer-led nonprofits in creating a budget, rather than demanding one.

2. Another volunteer-led organization seeks stable revenue for transitional services for newly housed families. Their organizational budget is their program budget, and they’re concerned that they will be seen as ineligible for restricted grants.

3. A growing nonprofit has two main programs. Resources are shared by both, and not separated in the G/L accounts. They have to manually track and report line-item budget information to fit each restricted grant.

And this is why I write.

Those nonprofits contort themselves to fit the funders’ demands. Their chances of getting a grant are low to begin with, and they sure as heck aren’t going to poison the well by stating the obvious about the proposal requirements. So I will.