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Chatham commissioners provide direction on nonprofit grants

Posted Thursday, December 16, 2010

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Funding for administrative costs will decrease over five years

Pittsboro, NC - On December 13, the Chatham County Board of Commissioners provided direction to the management team on the county’s nonprofits grant program, which served 34,000 residents last year. The board set the funding level at $400,000, close to a half-cent on the property tax rate, and approved a five-year plan to gradually limit county support of nonprofit administrative costs. By next year, the board will determine priority areas for the grants program.

“Nonprofits provide crucial services and can often provide them more effectively and efficiently than the county could, due in part to their network of volunteers and additional sources of funding,” said Commissioner Chairman Brian Bock. “Before the 2012 grant cycle, we will work toward setting board priorities for the program so that we can better serve the interests of taxpayers and residents with crucial needs.”

For several years, the county has partnered with the United Way of Chatham County to solicit, receive and review applications from nonprofits, because many agencies apply to both for funding.

Assistant County Manager Renee Paschal, who oversees the program for the county, reported that nonprofits funded by the county last year leveraged 71,237 volunteer hours, equal to 34 full-time employees and $1.4 million in salaries. “The county’s total funding of $392,005 for nonprofit grants last year, excluding arts-related nonprofits, leveraged $1,119,792 in other funds. This is nearly a three-fold return on our investment.”

Commissioners agreed with a management team recommendation to initiate a gradual process to scale back the percentage of county grant funds that can be used to cover a nonprofit’s administrative costs, but the county will increase its efforts to help nonprofits develop other funding sources. Over time, funding for administrative costs has increased to nearly 64% of the county’s grants.

The previous Board of Commissioners had agreed to limit administrative funding for start-up nonprofits receiving county grants to no more than two years. However, the Dec. 13 board action addresses established nonprofits receiving county grants by adopting a schedule to slowly scale back administrative funding over the next five years. The rate of reduction would be slower for nonprofits with greater dependence on the county for overall budget support.

For nonprofits where county funding is less than 5% of their total budgets, the county funding of administrative costs would be reduced as follows:

Year 1 - 10%, Year 2 - 20%, Year 3 - 40%, Year 5 - 100%

For nonprofits where county funding is 5% or more of their total budgets, the county funding of administrative costw would be reduced as follows:

Year 1 - 5%, Year 2 - 10%, Year 3 - 20%, Year 4 - 40% and Year 5 - 100%

Paschal said, “It is important to provide start-up administrative costs. Several of our more effective nonprofits received a major boost in their early years when they needed it and now have a strong base of administrative funding.”

The five-year schedule will ensure that the county does not make sudden major reductions in administrative funding that would put undue stress on the agencies, Paschal said. “We also will devote half of the funds saved from reducing administration allocations to help the agencies develop and secure additional administrative funds.”

Paschal reviewed a checklist that county departments will use to review nonprofit applications relevant to their areas of responsibility and provide feedback to the volunteer panels on the value of the applications. The commissioners decided to increase the weight of departmental feedback so that it is could be as high as 45% of the total score considered by review panels. However, this percentage could be readjusted in the future.

The Board of Commissioners approved a recommendation related to the required submission of a financial review by small nonprofits with total revenues less than $50,000. At no additional cost, the United Way will perform an in-house financial analysis of these smaller agencies, which typically lack the resources to provide their own financial review.

Paschal said, “In the past, any nonprofits with revenues less than $300,000 have had to submit a financial review instead of the full audit report required for nonprofits with revenues exceeding $300,000. However, the smallest agencies have struggled to meet this requirement.”

Chairman Bock said, “We greatly appreciate the United Way stepping up to perform this important fiscal role at no additional cost to the county. This will help provide accountability but allow smaller nonprofits to compete for funding.”

Commissioners also opted to at least temporarily move Chatham Trades and Chatham Transit into the county’s regular budget process, instead of the competitive grants process. However, commissioners clarified that the total funding available for nonprofit grants will be reduced by county’s budget allocations for Chatham Trades and Chatham Transit.

Paschal noted that Chatham Trades receives a relatively high proportion, 12.75%, of its total funding from the county. “One reason is that the sources of state funding for mental health have been frozen or drastically cut. Chatham Trades, which provides paid work for mentally disabled residents, offers irreplaceable services that the county might have to assume. For these reasons, we recommend funding it as part of our regular budget, similar to the Council on Aging and the Economic Development Corporation.”

Commissioners also decided to move Chatham Transit’s, which also has limited funding sources, to the county budget. It provides general transit as well as human services transportation, such as taking senior citizens to medical appointments.

Commissioners agreed with county management that the county should work with Chatham Trades and Chatham Transit to identify and secure additional long-term funding sources, similar to what will be provided to nonprofit grant recipients.

In January 2011, the county will recruit volunteers to serve on the review panels for the nonprofit applications. After training sessions for the volunteers, the panels will thoroughly review the applications based on specific criteria. The panels will make recommendations for county funding as part of the budget process for 2011-12.

 
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