Ethics Of Meeting Payroll With Grant Dollars

December 19, 2017       The NonProfit Times      
    Meeting payroll costs is an ongoing challenge. “One of the most frequent questions I hear is whether grants can cover staff salaries,” said Barbara Floersch of The Grantsmanship Center in Los Angeles, Calif. “The answer is, ‘yes,’ however, there are only three circumstances in which grants are a good source for staffing costs.”

  • Program-Specific Staff: A grant to support a program usually covers salaries of staff members to implement the required activities. Some funders will support the ongoing costs of a program, but in general, program implementation grants have a one to five-year life span.
  • Administrative Overhead Related to a Specific Program: For a grant-funded program to operate, the applicant organization must provide basic administrative support. For example, someone must answer phones, handle payroll, oversee the finances, keep the technology running, etc. Because of this, program-specific grants often include some amount of funding for the organization’s administrative activities. That overhead-related funding can be applied towards the salaries of staff members who handle these necessary administrative (i.e., indirect) tasks.
  • General Operating Grants: When funders have a strong commitment to a nonprofit’s mission and confidence in the organization’s effectiveness, they sometimes provide general operating funds. These grants can usually be spent flexibly to meet the organization’s most pressing needs, including the need to cover staff salaries.

“Grants can often help cover personnel costs, but looking at grants as the long-term solution to ongoing staffing needs is unrealistic,” said Floersch. “Grants come and go, but it’s not in the best interest of a nonprofit for staff to do the same.” It’s imperative that nonprofits diversify funding streams and move beyond grants to incorporate annual fund drives, major gifts, events, contracts, earned income, and other approaches into their long-term plans.

“While a few funders may help new organizations put basic staffing into place, that’s the exception,” said Floersch. “Funders usually want to see that the applicant organization is strong and has the capacity and expertise to improve the community. And, if they do support start-up staffing, they’ll want to see a solid plan for maintaining positions after the grants run out.” © Copyright 2017 The Grantsmanship Center.