When Operating Expenses Really Aren’t Operating Expenses
If you have been in the grants world even a short amount of time, you know that operating funds are difficult to raise through grants. Few funders are interested in paying your electric bill or your executive director’s salary. Compared with food for hungry families, vaccinations for people at risk of disease, or scholarships for low income students, your rent just does not look that appealing—no matter how critical it is to your organization’s ability to fulfill its mission. This is why many organizations struggle to pay their basic operating expenses even as they win grants to support programs.
But there is good news. Most likely, many of your operating expenses are really program expenses in disguise. By taking a careful look at your organization’s budget and by identifying some of these program costs, you can include them in your grant budgets for funding.
Here are a few common program expenses that may be masquerading in your budget under “operating” costs:
Space
Many organizations have a mortgage or rental expense that accounts for a large part of their budget. In my organization (a domestic violence shelter), we have a 14,000 square foot facility and the rent isn’t cheap. However, if you deliver programs in your facility, at least a portion of your rent is a program expense. For example, if ¼ of your total space is used 100 percent of the time for program delivery, then one-fourth of your monthly rent is a program expense. Include it in the grant budget for that program.
At our organization, we recently won a grant to fund our in-shelter support groups. We have a room in the shelter in which we hold these support groups. This space is used for no other purpose. So, when compiling the grant budget, I calculated our rental expense per square foot, measured the square footage of the support group room, and included the rental cost of this room in the grant budget.
However, if your program is delivered in a space that is used for other purposes, after you calculate your square footage cost, calculate what percentage of the time the space houses your program. Then include that percentage of the costs in your program budget request. For instance, if the monthly rental cost of a space is $200 and the program in question uses the space half the time, include $100 per month in your grant budget.
Utilities
Will your students be able to receive tutoring in a dark room? Will you be able to house the homeless in winter without heat? If not, then your electric and gas bills are program expenses—at least the portion used in your program. This calculation should be based on your space calculation: if 25 percent of your space is used to deliver the program, 25 percent of your utilities should be included in the budget.
Staff
Most of us are accustomed to including program managers in our grant budgets. The people who actually deliver tutoring, provide counseling, or teach classes usually make it into the budget. But what about other staff who may be involved? If new program staff will be hired, what about the time the Executive Director will spend in recruiting, interviewing, and training this staff? If a construction project is proposed, what staff member will oversee this process?
These are all program expenses and should be calculated the same way as a rental or mortgage expense. If the Executive Director will devote 10 percent of her time to the project, then 10% of her salary should be included in the budget.
The above described expenses are just a few of the “operating expenses” that you may be able to include in your program budgets. Of course, it is important to remember that funders define “operating” and “program” expenses differently. For example, some will not fund salaries—not even for program personnel—no matter how good a case you make for the necessity of staff. Others will not fund rental expenses under any circumstances. In these instances, you are out of luck and should not attempt to request funding for line items you know the funder prohibits.
However, many funders have vague or undefined notions of what “operating expenses” are. In these cases, it is incumbent on you, the grant professional, to make the case for the program expenses you propose. If possible, contact the funder and pitch the program – “operating” expenses and all.
In Conclusion
Try to look a little harder at your budgets. I’m sure that you will find some “operating expenses” that aren’t really general operating costs. But if you are still in doubt, I will convince you by sharing with you a conversation I had with a potential funder earlier this year.
I called the program officer and was told that the funder would, under no circumstances, fund rental expenses.
I replied, “I’m sorry to hear that. We were hoping to submit a proposal to support safe shelter for victims of violence. We were planning to request funding for the rooms that these women will stay in which will keep them away from their abusers.”
“Oh,” the woman replied, “well, we fund that.”
This article was originally published by CharityChannel press: https://charitychannel.com/when-operating-expenses-really-arent-operating-expenses/