Article 2: The least free money

Series: subsidies and financial health

Our family consumes around five boxes of factory-made waffles each year, bought for a good cause. With a bit of luck, we supplement them with much tastier fare: the fruits of a real waffle bake, for which an army of volunteers or young people worked themselves to the bone over a weekend to raise money for their activities. Such a waffle bake is probably a familiar fundraising tool to everyone.

Sometimes you also hear stories of waffle bakes that get out of hand. After the waffles come the mussels, the spaghetti fundraiser and the hall quiz, until the activity itself dictates the agenda and the means becomes an end. So much time and energy then goes into bringing in money that little is left for the purpose for which the organization was once founded. The youth movement that wanted to let children play becomes an events agency that still does a bit of playing on the side.

Everyone quickly understands that a waffle bake can overrun your mission. That a subsidy can do the same is far less obvious. Perhaps that is even the most insidious form of waffle-baking: you let yourself be pulled away from your mission by the money that is meant to serve that mission. You notice a hall quiz that gets out of hand in time. A subsidy framework that slowly redirects your work is much harder to see coming.

A limited number of boxes

Subsidy feels like the money that suits you best. The government wants social progress, just like you do. Yet there is a structural bottleneck. A government can only set up a handful of subsidy instruments, decrees each with their own conditions, target groups and expectations. Civil society is much more diverse than that. The decree on socio-cultural adult work was deliberately designed to be broad, and so very different organizations end up within the same framework. Some have to contort themselves to fit into it.

I see this particularly clearly, for example, in organizations that have to make great efforts to demonstrate their national relevance, while their mission primarily leads them to work locally. The same thing happens in youth work. The framework pushes them toward a scale that is not their own. The government also pays a price for this, although it rarely sees it: with a limited number of boxes, it flattens the versatility of its own field.

No funding fits perfectly

Should you then only accept grants that align perfectly with your mission? That would be naive. No source of funding fully coincides with what you want to do. An organization emerges from a citizens' initiative and looks for ways to strengthen its work. Those who wait for a tailor-made grant to come their way will wait forever.

A certain degree of mission drift is therefore inevitable. Your program shifts toward what is being funded, and your organization adopts the funder's language and rules. The question is not whether you drift, but how far you can drift and still remain yourself.

That means you must continually assess whether the framework within which you receive funding still overlaps sufficiently with your mission. This exercise becomes especially necessary when the framework shifts: a new decree, new conditions, a different interpretation by assessors or by the executive branch. What fit well at the start may become constraining five years later without you having changed anything yourself.

Drift is not always suspect either. Steering works both ways. A government may push the field in the direction of a societal need, and if that need is also yours, you can certainly shift along with it to some extent. Sometimes such a framework even brings you to a target group or a theme that you yourself had overlooked. It becomes different when you mainly start implementing policy that is not your own, or when you feel it starting to constrain you. Then you have probably already drifted too far.

Never any subsidy

Beneath that pragmatic consideration lies a more principled question: are we, given our mission, actually allowed to accept government money?

For some organizations, the answer is no from the outset. Non-governmental literally means separate from the government. Greenpeace refuses, on principle, to accept money from governments, companies, or political parties anywhere in the world. Doctors Without Borders raises the vast majority of its funds from private donors, and in 2016 refused all money from the European Union and its member states: you cannot accept money from governments while caring for the victims of their policies. Their independence is their reason for existing: they want to be beyond suspicion, stand above party politics, and always allow their voice to be heard freely, even against the government. Civil society is also a countervailing power, and that role requires distance.

That radical no comes at a high price, and most organizations cannot afford it. Precisely for that reason, they must keep asking the principled question. Does this subsidy silence us? Do we swallow what we actually want to say? Do we become guilty by association with a government whose policies we want to criticize? Even those who remain independent in practice can lose the appearance of independence and, with it, their credibility.

Strategic fit

This is where the first dimension of financial health comes into view: strategic fit. We see it as the first keystone of a financially healthy non-profit. The task is to always view all your funding streams in relation to your mission: subsidies, but equally donations, earned income, and that one waffle fundraiser.

The most cynical private equity analyst scrutinizes a company down to the last euro cent. Every cost item, every revenue stream, and every contract is weighed against one question: does this contribute to profit? A non-profit can certainly learn something from that, only with a different benchmark. You must be able to link every financial movement just as rigorously to your pursuit of impact. What does this funding stream deliver for your mission? What does it cost you in time, attention, and freedom? In concrete terms, you know for each activity which resources support it, and for each funding stream which activities it enables and which it displaces.

For subsidies, that exercise focuses on the two questions in this piece. How far do we allow this framework to pull us away from what we want to do? And what does this money cost us in terms of independence? To be able to answer those questions, you need to know your own mission more clearly than the subsidy framework. Where the two coincide, subsidies are ideal. Then you are paid to do what you already wanted to do anyway.

In the next piece, I look at the second assumption: subsidies seem like free money, but may be your most expensive source of income per euro.