Delaware Public Media

New challenge for Delaware nonprofits: state money with strings attached

Jun 30, 2010

Children squealed with joy as they shot basketballs into a hoop outside the Children’s Beach House in Lewes. Their camp counselors watched as one by one these children with special needs practiced a new skill.

Inside the building, however, there was little joy.

State budget cuts have left the nonprofit struggling to make ends meet. While funding cuts are an ever-present threat, this year the General Assembly added new challenge. Language in the 2011 grant-in-aid legislation increases regulations on “pass throughs”—non-government programs that receive funding via state agencies. Pass-throughs such as the nonprofit Children’s Beach House now must supply quantifiable evidence of the efficacy of their programs in order to continue to receive state funds.

“It will create more accountability and transparency,” said Erica Waples, a Milton native who helped develop matrices for the City of New York and now works as a fundraiser for the Twenty-First Century Foundation. “It definitely is important as far as showing that the government is accountable because we want to know how our tax dollars are being used, and this definitely is an advancement in this direction.”

But Waples cautions that requiring nonprofits to quantify data presents challenges.

“There’s a risk that some groups that have been doing great work up until now may no longer qualify. Organizations are already working with very limited resources. They have to have the infrastructure to support the evaluation and reporting that will be needed in order for them to comply.”

The problem, Waples notes, is that the criteria for measuring progress is subjective—and can be controversial.

“It’s always political when you start setting numbers,” she said. Some programs have solid anecdotal or qualitative evidence but lack the hard numbers to support the programs. So, she said, the question becomes, “Who makes the cut?”

Last budget year the state placed $14.5 million in pass-through funds, but it shifted $6 million of those funds to grant-in-aid programs and cut $3 million from the pass-through budget this year. Most past recipients took a 10 percent cut in funding.

For many nonprofits the new requirements create extra burdens on already strapped budgets.

“It’s going to take more work,” said Richard Garrett, executive director of the Children’s Beach House. But Garrett notes that the requirements follow a national trend in the nonprofit field of reporting quantifiable data, and Delaware lagged behind the trend.

“It’s something the state should have done a long time ago,” he said.

He suggests that successful nonprofits have already shifted toward collecting data in quantifiable ways, but that many small- and medium-sized nonprofits will struggle to meet the reporting burden.

“People will lose funding,” he said. “It will be interesting to see people position themselves to work the political system to retain funding without necessarily measuring anything.”

State officials acknowledge that the new reporting requirements may create an added burden on some small nonprofits that are working at capacity. But Delaware Health and Human Services Secretary Rita Landgraf stresses that this oversight should not be thought of as a punitive measure.

“We do recognize the struggles and challenges for our partners,” Landgraf said. Her agency is one of the major sources of pass-through funding.

Landgraf encourages nonprofits to view these measures as an opportunity to strengthen the relationship between the state and the non-government organizations. To reduce the reporting burden, the Department of Health and Human Services will provide technical assistance to struggling nonprofits that receive pass through funds.

“We don’t want to be punitive in nature,” she said. “We don’t want a paper exercise. We want to be in partnership.”

Landgraf suggests that while nonprofits that have an effective program but lack the expertise to report their progress will receive guidance in the process, programs that squander government funds may lose them.

She stresses that the state is holding themselves responsible to the same standard and has spent a of energy looking at how to best leverage its resources.

“We’re doing the same thing for the state agencies as well,” she said.

In creating accountability standards for state agencies and nonprofits, the state doesn’t need to recreate the wheel, Landgraf said. Rather, it seeks to modify existing models.

“We’re looking to adopt the way the United Way does outcome-based services,” she said.