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Public Funding: Pros and Cons

Nonprofits have to find ways to raise revenues constantly. Without funds, they cannot move towards achieving their purpose. Often, fundraising is not quite enough, and there have to be some fixed revenue streams of substantial quantity to ensure that the nonprofit operations can continue regularly.

Often, these income streams exist in the form of product sales, or fees for services – earned income – or come as charitable donations in giving programs from individuals as well as corporate funding as part of any commercial organization’s corporate social responsibility.

Another source of regular income for nonprofits can be public funding. Public funding is the benefit nonprofit organizations receive from all levels of government in various sectors such an education, healthcare, etc. Federal, state, and local government grants are used to fund many programs hosted by nonprofits.

While it may seem like an ideal option, there are some pros and cons of public funding to keep in mind before you pursue it.

Advantages

  • Public funding can help you raise large amounts of money.
  • Once you have obtained one grant, it is easier to receive others.
  • Receiving grants is an excellent way to improve visibility and credibility for your organization
  • The guidelines for receiving public funding are clear and usually simple
  • Usually less restrictive in what they will fund in a budget. Many private funders are willing to pay for programs but not for administrative or indirect expenses.
  • Public funding can open doors for private funders as well. Proposals for financing often ask about funding history. Proving that you managed to secure public funding successfully previously will look good on your proposal.

Disadvantages

  • Usually, government entities are more risk-averse than private entities, and thus do not provide funds as a lump-sum. They choose to reimburse expenses, which can be difficult for nonprofits because of the waiting period between payments and waiting for these reimbursements.
  • Proposals for public funding are often challenging to write and tedious.
  • Reporting requirements for public funds can be extremely time-consuming and tedious.
  • Government contracts are involved. If you are not well-versed in legal terms or are not big enough as a nonprofit to have a legal advisor, you may not want to go ahead with this step.
  • Government entities are very rigid in their operations and do not allow for any flexibility or agility. The organization will have to adapt to any changes in the environment on its own without expecting any leniency from the government.
  • There are many nonprofits that need grants from the government. Thus, competition is fierce, and the success rate is often low. To secure public funds, you will have to work extra hard than you would for private funds.
  • Most grants are short term and will thus run out after a short while. After this, you will have to start over from scratch, and this can be tedious.
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