My inbox flooded with messages after I wrote about submitting the same idea twice (or more). About continuing the fight for your idea to become reality instead of waiting for one donor to decide, then approaching another, maybe months later. So let me be clear. I do not mean that you should cash in money twice for a single cost. What I mean is, keep asking until you have a yes. (in a transparent way) Then inform those that have not said yes yet, that their contribution is not needed at this time. Or look for a scenario of co-funding. So what is co-funding and why is that not double funding?
Double funding is, very simply, receiving double the money for once the cost. If donor A and B both fund the exact same project, in the exact same moment, and you receive more money than you need as per your budget. In effect, you needed only one of these donor’s money to be able to implement the project properly as presented in the proposal. (say, you ask different donors to pay for the same tree)
What is so bad about that?
In a double funding scenario, both donors are paying for something they see as ‘their result’ while in fact, only one of them was needed to achieve that result. That means one of them is paying for ‘thin air’. And could have invested in another project instead, supporting social impact in another way. Many grant-making donors work with public money, which is wasted in this scenario.
Worse, the money ends up as a profit (excess of income over expenditure) in another organization, a nonprofit, that is not accountable to the taxpayer, very often the original source of the grant money. So the money may or may not be used for the original objective for which it was granted – and that is out of the span of control of the source of the money.
To put it very bluntly, this is a case of fraud. Where money is requested for a purpose for which it is not needed and might not be used. I guess I don’t need to explain that fraud is not something I recommend you engage in.
So how is co-funding different? Co-funding is a situation where different donors are contributing together to a single project. Your total budget needs are met by a mix of different donors. In the case of double funding you, for instance, needed EUR 10,000 and received 2 times EUR 10,000. In case of co-funding, you would receive maybe EUR 5,000 and EUR 2,000 and EUR 3,000 from three different donors, that way collecting the total budget required to implement the project as planned in your proposal. (So that you can plant a whole forest, for instance, to stick to the example and the picture)
In this case, all donors know other donors are contributing – and they know the size of each other’s contributions. There is no secret. Each donor also knows that without the others, the project could not be achieved in full. This transparency starts right with the proposal and the budget presentation with the proposal. (and it needs to be backed up with your systems, that keep track of the different contributions and corresponding expenses)
Many donors actually prefer a situation of co-funding because this shows that you are capable of attracting different donor and it shows that your project enjoys wider support. These two elements create bigger confidence in the sustainability of your operations. This is important for donors, because if you are stable and will be around long after the end of the project the impact from the project activities is likely to be bigger and longer-lasting, too.
Another term you cane hear a lot when it comes to co-funding is ’matching funds’. This usually refers to a contribution of a second (or more) donor that depends on the amount raised and/or the amount spent. So it is co-funding with specific conditions. For instance, a donor promises to double the amount you raised. Or they promise to cover 25% of the total costs incurred. In both cases their contribution is matching an amount that is, to an extent, within your control. They may limit their matching, of course. They could say: we will double the amount raised, with a maximum of EUR 5,000. That way they keep some level of control over what they can be asked to contribute at the end.
My key tips
- Always be transparent about your financial needs and the contributions you are requesting / receiving from different donors.
- If you have multiple donors contributing to one project, make sure your systems can process this properly – including generating detailed reports per donor and overall, out of your bookkeeping system – so that you can be transparent and accountable on the level of expenses, too, and report with integrity.
How I can help you
Here is how I can help you set up your nonprofit finance and admin professionally so you can stop worrying about this:
- If you would like simple steps to set up and organise your finance & admin foundations guidance by me, you can get a bundle of six simple and short workshops here: https://bit.ly/financeadminbundle
If the bundle is too much for you at this moment, feel free to pick one or more of the workshops individually:
- Set up your financial processes: https://bit.ly/workshopfinancialprocesses
- Understand important basics of bookkeeping for nonprofits: https://bit.ly/workshopbookkeepingbasics
- Be sure you are keeping all the documents you need for project donors, auditors, or officials: https://bit.ly/workshopdocumentationbasics
- Plan your cash flow for a year: https://bit.ly/workshopcashflow
- Get a feel for how time sheets can be helpful to everyone in your nonprofit and set them up straightaway: https://bit.ly/workshoptimesheets
- Learn how to calculate the price of time spent of your team members, including allocations for general costs that are used in different projects: https://bit.ly/workshopfeecalculation
Please note, the bundle is cheaper than buying all six workshops separately. https://bit.ly/financeadminbundle
Here is how you can join my free nonprofit support community
If you want to discuss this more – jump into my nonprofit support community and get input from a wide range of peers and from myself!
You can join my free nonprofit support community on the Heartbeat platform here. This group is a safe space for open exchange and discussion on potentially sensitive topics like boards, nonprofit management, fundraising, etc.
You can visit the community via a browser or via an app. Here is the link to download the Heartbeat chat app in the Google Play store.
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