Substance abuse nonprofits in Indiana are concerned. As in other parts of the United States, opioid use in the state has reached epidemic levels. With a 500 percent increase in opioid-related deaths from 1999 to 2015, these organizations are facing increasing demand for their prevention and treatment services. How will they meet this demand?
The good news is that current federal administration’s heightened interest in opioids will likely to lead to increased funding for organizations confronting the crisis on the front lines. But what happens when that interest—and the funding connected to it—recedes, as it inevitably will? Will the expected near-term funding sufficiently set them up for sustained growth and service delivery at scale, regardless of the federal funding climate?
Only if it’s the right kind of funding. Foundations and other funders who care about providing a sustained response to the opioid epidemic can learn from substance abuse prevention and treatment organizations in Indiana that have tried to scale—with varying degrees of success—to meet community needs.
Limited funding, limited growth
Substance abuse organizations in Indiana had a median annual budget of $251,812.50 between 2012 and 2015. The organizations typically allocate these funds to salaries (frequently one executive, plus direct service providers), direct program delivery (such as additional non-employee service providers and supplies), and informing people in need about available services. Given the limited supply of funders supporting substance abuse organizations, and a lack of infrastructure and personnel required to strategically and effectively pursue grants, most organizations of this size struggle to raise sufficient funds annually. But they also have difficulty leveraging one-time gifts and are frequently overly reliant on a single funding source that could disappear if funder priorities change. In the case of opioid service organizations, a breakdown in these kinds of funding streams can mean the difference between life or death—people who need critical services may never learn about them or be unable to access them in time.
Dove Recovery House for Women, a substance-abuse recovery facility specifically for women in Marion County, Indiana, illustrates this challenge. Dove House had its ups and downs in the beginning, but it began to stabilize under the leadership of Wendy Noe in 2014, at which point its budget grew to almost $250,000. In 2015, the Summerlin family donated a building worth $1.4 million. Renovating the building so that it could offer transitional housing for women in recovery was a big project, and Dove House successfully raised $1.3 million from three different funding sources, resulting in a 2015 budget of more than $2 million. But while the building and the influx of capital were significant for the organization, they were all one-time gifts and restricted to renovation—and as such, they did not help position the organization for sustained growth. Dove House’s budget has since slipped under $500,000. It continues to face growing demand for beds, but has no clear path for meeting this need.
For smaller organizations like these, more-regular grants are helpful toward building sustainability, but they often come with their own challenges. Take Pathway to Recovery, which provides housing and recovery services to people with substance abuse and mental health disorders. Launched in 1989, Pathway secured its first US Housing and Urban Development (HUD) grant in 1991: $700,000 over 5 years. Buoyed by a recurring annual $100,000, the organization purchased an average of one vacant building every five years until 2010, and raised money to rehabilitate and renovate them to provide more extensive housing and services. Simultaneously—and built into its program model—the housing facilities generate rent income. Pathway now operates six buildings, and only one of them—a full residential treatment program—is not self-sustaining. Despite this success, Pathway’s budget has yet to surpass $1 million, in part because HUD permanently discontinued funding of transitional housing in 2016, leaving Pathway to fill an important funding gap to support its core program for men battling addiction.
Leveraging large grants to scale
The examples above illustrate that while budget size does not necessarily equate to impact, it does tend to equate to sustainability. In doing research for her book Social Startup Success, Kathleen Kelly Janus found that organizations that reach a consistent annual budget of at least $2 million are usually sustainable. For 65 percent of the organizations she studied that reached $2 million, a large foundation grant played a central role in its ability to scale.
Many recipients who achieve sustainability leverage large (and especially multi-year and unrestricted) grants to create earned income streams and ultimately reduce their reliance on foundation grants for operating support. Youth First—the only addiction-related organization in Indiana under 30 years old that has grown to have a consistent annual budget of more than $2 million—offers a good example. Youth First provides prevention-related programs, including school-based social work services, that are categorically different from residential programs but important in the continuum of addiction-related services. The organization was founded with a large, recurring grant from a health conversion foundation; Welborn Baptist Foundation awarded nearly $1.7 million in grants to Youth First between 2012 and 2015 (the time frame I studied for this article). These were matching grants, so Youth First was required to fundraise alongside them. In the organization’s early years, this support made up nearly 80 percent of its entire budget. Yet the most recent grant, while still sizable—on the order of $300,000—was less than 15 percent of Youth First’s budget. These large, consistent grants enabled the organization to build the infrastructure it needed to scale, including hiring fundraising professionals. It was then able to leverage the solid foundation funding to attract state funding and secure earned income from the schools in which its programs take place.
The age-old need for better funding
The need for and benefits of large, multi-year, unrestricted grants has been well researched and documented. The call to action is not new, nor is it unique to nonprofits serving people affected by opioids. All too many nonprofits are painfully aware that while small, restricted grants may be their lifeblood, they will not provide sufficient support to scale and sustain operations over the long term. And yet, well-meaning grantmakers continue to provide funding that does not meet the needs of their grantees and the communities they serve.
Indiana’s substance abuse organizations offer yet another example of the difference large grants can make. Digging further into the numbers, we see that between 2012 and 2015, foundations and US government agencies awarded 207 grants to 20 substance abuse organizations in the state. However, only 20 were $75,000 or more, and 6 were grants from the Welborn Baptist Foundation to Youth First. The average grant in this analysis was $24,570.25, while the median budget size was $251,812.50. And although the average grant might account for approximately 10 percent of an average organization’s annual budget, the relatively small size of those grants, the costs to both get and manage them, and the restrictions typically placed on them make it extremely difficult for organizations to grow and ultimately sustain themselves. It’s little wonder that only 4 of the 20 substance abuse organizations in Indiana had sustainable budgets—greater than $2 million—in 2015.
Funders who truly care about sustaining critical direct services for those in need—and in particular nonprofits tackling substance abuse issues—must evaluate whether their grantmaking approach, as well as their current size and use restrictions, are best serving the needs of their grantees and their grantees’ constituents. Shifting some or all of their portfolios to larger, multi-year, unrestricted grants is simply the best way to help build organizations that sustainably serve community needs.