Challenge Grants

Foundation & Corporate Grants Alert:
June 2007 – Vol. 6, Iss. 9
Funding Q & A

©2007 LRP Publications

Funding Q&A provides readers the opportunity to ask experts questions about a variety of funding activities.  This month, Tony Silbert, President of Silbert Consulting Services, Inc., addresses the issue of grants goal development.  Founded in 1996, Silbert Consulting Services is a Los Angeles, CA-based firm that provides grant development, research, strategy and evaluation services for nonprofit organizations of all shapes and sizes.
Question: My organization received a large challenge grant and I am afraid we will not be able to raise the funds required to meet the terms of the challenge and actually receive the money.  What can we do?
Answer: First of all, take a moment to appreciate your large grant award.  Many organizations can be resentful of awards that come with strings attached.  Clearly, the funder believes in you and is willing to commit a large sum of money to your cause.  So, enjoy your success for a moment…. Okay, enough.It is important to understand that all challenge grants are not created equal.  Funders make challenges for a variety of reasons and the strategies for fulfilling the challenge depend on the purpose of the award.  Here are some of the different types of challenge awards and how you may be able to approach them if things are not going well:

  1. The “Make Sure It Gets Done” Challenge.  Many funders have made grants to projects that are never completed – or worse, never get off the ground – because full funding was not realized.  By making a challenge grant, they hold onto their money until the project is certain to proceed with sufficient resources.In this case, the funder has essentially based the terms of the challenge on your grant proposal.  You have told them what you need for the project and they are saying, “Fine.  When you have what you need (minus the grant amount), we will cut you the check.”  So, it may be possible to re-frame the challenge terms as long as you still demonstrate the capacity for completing the project.  For instance, in-kind support, a reduction in the project budget, contributions from unrestricted funds, or even a loan could help you meet the challenge.  The important thing to convey to the foundation is that you have what you need in-hand to complete the project and all you need is the payment of their grant to get it done.
  2. The “It Will Be Good For You” Challenge.  This is the m.o. for perhaps the best known challenge grantor, The Kresge Foundation, and others as well.  This is, in some ways, the opposite of the previous kind of challenge.  For a Kresge-type challenge, the project is secondary to how you will use the challenge to increase/expand your fundraising base.  You still need a viable project, but successfully meeting the challenge is measured by the number of new donors, increased gifts from past donors, and other indicators of a strengthened fundraising infrastructure.This may be the most difficult kind of challenge grantor to negotiate with.  First and foremost, you must demonstrate a vigorous and concerted effort to leverage the challenge.  You must reach out to new and existing constituencies in a variety of compelling and creative ways.  If you give it your best and show some results, it is conceivable that the funder will show you mercy.  If, for instance, you attracted many new donors but their average gift was not enough to reach your goal, you have still been successful in achieving the funder’s main objective.
  3. The “We Don’t Want To Be Alone” Challenge.  This is favored by government – such as the National Endowment for the Humanities – and other funders interested in seeing their grants matched by other funds.  While there may be requirements regarding the project to be funded as well as restrictions on the types of funds that are applicable in meeting the challenge, the fundamental goal is to multiply the grantor’s contribution.  For this kind of award, it may be possible to get “partial credit.”  If you raise money in response to the challenge – but not as much as originally proposed – the funder may match the amount you have raised. In their fundraising drives, public radio stations seem to have a “challenge” every hour in the form of a matching gift.  I suspect that many of those donors actually give the full gift regardless of how successful the station is in raising the matching funds during the challenge period.

Regardless of what kind of challenge grant you have received, it is important to recognize the opportunity it presents and get the entire organization behind it.  Since challenge grants almost by definition are secured by the “grant department,” it is not uncommon to see the challenge as their problem.  To successfully meet a challenge, you will need the support of the Board of Directors, major gift program, annual fund, planned giving, special events, and all other facets of your fundraising program.  Individuals, as much as foundations, like the idea of multiplying their gift and will respond to a challenge.  So, get everyone together and promote the challenge in every venue possible, get all of your staff to own it, and then – regardless of whether or not you meet the specific terms of the grant – your organization will be a winner.

Lastly, remember that by making a challenge grant the funder is expressing a sincere appreciation of your organization and desire to help you meet your goals.  As always, an open and honest dialogue with them will not only maximize the chances of receiving full funding for the current grant, but will establish a strong relationship for the future.  If you need more time to meet the challenge, ask for it.  If you come up short, admit to it.  In the end, the grantor is on your side and wants you to succeed.  In many cases, as long as you give it your best, they will help you find a way to meet the essence of the challenge and declare success.