Braiding Funds Without Getting Tied up in Knots – Approaching budgets with pre-award and post-award in mind by Julie Alsup, GPC

Braided funding, supplanting, and leveraged funds are important concepts to understand for the purposes of effective grant planning (pre-award) and for successful grant management (post-award).

Put simply, braided funding refers to the concept of using multiple funding streams to support the expenses of an organization, program, or project. Having more than one funding stream helps to minimize risk should one funding stream dry up. In addition, having one or more confirmed revenue source helps build confidence among other potential funders. Funding streams may include things like grants, contracts, event revenues, reimbursement dollars, individual contributions, fees, and earned income. Diverse funding streams may include a combination of restricted and unrestricted dollars. Restricted dollars are just like they sound– there are rules and restrictions to what the money can be used for. Typically grants and contracts are restricted- specific money to be used for a specific purpose. Unrestricted dollars may be used at the discretion of the organization, within the scope of the agency mission and IRS guidelines for charitable entities. Typical examples of unrestricted dollars include program fees, annual campaign funds, special event revenues, or earned income initiatives of an agency. Unrestricted funds are often used to support operating expenses that grant funders are often less excited to support (e.g. occupancy, administrative salaries). During COVID-19 many funders have released their restrictions to allow general operating support.

An agency should have an overall understanding of any expenses that are specifically funded by existing designated sources. For example, if a full-time position was added with a federal grant then that position should not be presented as needing funds in any additional grant budgets for the same period.  These funds (and that position) should be considered “allocated.” Large organizations with accounting software often utilize separate codes for each expense that makes this easier for grant management. However, not every entity creates account codes for revenue sources as consistently. Small organizations that are doing their own accounting would be wise to, at a minimum, utilize spreadsheets to offer a visual understanding of which funding sources support the primary expenses of key programs.

Post-award tracking should take place for each restricted revenue source for multiple reasons. First, it is important to be able to ensure donors/funders that their dollars are spent on expenses that are both legal and eligible according to the organization’s bylaws. Second, tracking each funding source and what it is utilized for will help ensure that more than one funding stream is not used to cover the same expense. This is what would be called “double dipping.”

Finally, some funders, mostly those administering federal dollars, have rules against supplanting. Supplanting means replacing funds designated to an existing expense with new funding. There is often confusion about this term, especially in the case of braided funding strategies. For example, say an agency is applying for a grant for a time that will not begin for six months. The salaried position that they want to support is currently funded by another grant but one that will end in six months and there is no other revenue source designated for that salary support. This is not supplanting. But if the salary was supported by a grant from a foundation during an overlapping time period as is being proposed in a new grant, this is supplanting and the future request should only be for the appropriate allocation of time and effort not funded by the initial source.

Once an organization has a better understanding of what expenses are covered by what funding sources over what period, it is much easier to craft a request for additional funds to cover the gap. This introduces the concept of “leveraging.” Basically, leveraging is approaching another funder to join in on a collaborative effort that is underway and that other funders have already invested in. Funders don’t like to go it alone. A project with a history of community investment is less risky, and they see it as value added. Some funders (again, often public) require that leveraging is in place. This is what is referred to as required cost-share or match.  Depending upon the funder, these funds may have to be tracked with the same diligence as the grant dollars.

One of the most common questions I ask agencies that want to fund their programs through grants is what funding sources they already have committed, and how they are already allocating their unrestricted funding sources. In my opinion, when agencies can look at all their program income and expense budgets side by side it offers an opportunity to see if they can create more compelling expense budgets for prospective grant funders. Agencies would be wise to consider building program budgets with a reasonable allocation of administrative costs (the executive director’s salary, occupancy) built in, supported by unrestricted cash match. Then they can request the compelling direct program expenses, such as program salaries and supplies from the grant funder.

Just like learning how to braid, there are multiple ways to do it, and multiple opportunities to get into knots. Grant professionals can help talk through strategies and anticipate where the knots are likely to occur to make sure you are diversifying your revenue streams and maximizing your opportunities to leverage new opportunities!

Competency #4: Knowledge of how to craft, construct, and submit an effective grant application

Skill 4.9 Identify sources of cash, in-kind, and/or leveraged matches for project budgets

Skill 4.10 Identify factors that limit how budgets are written (e.g., matching requirements, supplanting issues, indirect costs, prevailing rates, performance-based fees, client fees, collective bargaining, allowable versus non-allowable cost)

Competency #5: Knowledge of post-award grant management practices sufficient to inform effective grant design and development

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