Ten Nonprofit Funding Models
7. BENEFICIARY BROKERSome nonprofits, such as the Iowa Student Loan Liquidity Corporation, compete with one another to provide government-funded or backed services to beneficiaries. Nonprofits that do this use what we call a Beneficiary Broker funding model. Among the areas where Beneficiary Brokers compete are housing, employment services, health care, and student loans. What distinguishes these nonprofits from other government-funded programs is that the beneficiaries are free to choose the nonprofit from which they will get the service. The Metropolitan Boston Housing Partnership (MBHP), a regional nonprofit administering state and federal rental assistance voucher programs in 30 Massachusetts communities, is an example of a nonprofit that uses the Beneficiary Broker funding model. Since launching the organization in 1991, MBHP has developed a reputation as a reliable provider of housing vouchers for families in need. MBHP is the largest provider of housing vouchers in the Boston area, connecting more than 7,500 families to housing at any one time. MBHP also provides related services, such as education and homelessness prevention programs. More than 90 percent of MBHP’s revenue comes from the small administrative fees the state provides as part of the voucher program. The remaining funds come from corporations and foundations. Nonprofit leaders considering the Beneficiary Broker funding model should ask themselves the following questions:
* Can we demonstrate to the government our superior ability to connect benefit or voucher holders with benefits, such as successful placement rates and customer satisfaction feedback?
* Can we develop supplemental services that maximize the value of the benefit?
* Can we master the government regulations and requirements needed to be a provider of these benefits?
* Can we fi nd ways to raise money to supplement the fees we receive from the benefits program?
8. RESOURCE RECYCLER Some nonprofits, such as AmeriCares Foundation, have grown large by collecting in-kind donations from corporations and individuals, and then distributing these donated goods to needy recipients who could not have purchased them on the market. Nonprofits that operate these types of programs use a funding model we call Resource Recycler. Businesses are willing to donate goods because they would otherwise go to waste (for example, foods with an expiration date), or because the marginal cost of making the goods is low and they will not be distributed in markets that would compete with the producer (for example, medications in developing countries). In kind donations typically account for the majority of revenues, but Resource Recyclers must raise additional funds to support their operating costs. The vast majority of Resource Recyclers are involved in food, agriculture, medical, and nutrition programs and often are internationally focused. The Greater Boston Food Bank (TGBFB), the largest hunger relief organization in New England, is an example of a nonprofit that uses the Resource Recycler funding model. This organization distributes nearly 30 million pounds of food annually to more than 600 local organizations, including food pantries, soup kitchens, day care centers, senior centers, and homeless shelters. TGBFB acquires goods in many ways. The dominant sources of goods are retailers and manufacturers. It also receives surplus food from restaurants and hotels. In 2006, corporate in-kind support accounted for 52 percent of TGBFB’s revenues. Federal and state government programs provide TGBFB with in-kind goods and money, accounting for 23 percent of its annual budget, which TGBFB uses to purchase food for distribution. Cash donations from individuals make up the remaining 25 percent of revenues, covering overhead and capital improvements. Nonprofit leaders considering the Resource Recycler funding model should ask themselves the following questions:
* Are the products that we distribute likely to be donated on an ongoing basis?
* Can we develop the expertise to stay abreast of trends in the industries that donate products to us so that we can prepare for fluctuations in donations?
* Do we have a strategy for attracting the cash we’ll need to fund operations and overhead?