Assessing the Impact of Federal Funding on Faith‐Based and Community Organization Program Spending

Abstract

This study examines the impact of federal funding levels on the program spending of faith-based and community organizations in Kentucky. Prior research indicates that organizations could increase spending on overall program expenses or decrease program spending relative to administrative costs as a result of greater reporting demands from federal funders. Three models of program spending are proposed: increased program spending relative to administrative costs (program enhancement effect), decreased program spending relative to administrative costs (administrative enhancement effect), and no net effect (neutral program-spending effect). The analysis supports the program enhancement effect and estimates that federal funding has a positive relationship with increased program spending relative to other expenses in faith-based and community organizations.Relationships between government and nonprofit organizations come in a variety of arrangements, and one of the most formalized involves funding from federal grants and contracts. In 2007, government grants and fees for contracted services provided 29.8 percent of overall public charity revenue and 48.6 percent of revenue for human service organizations (Wing, Roeger, and Pollak 2010). While governments seek to bring about societal changes in keeping with their political agendas (Hall 2010), as a substantial source of revenue for some organizations, federal funds can alter an individual organization's spending behavior. Nonprofit organizations within the United States have important implications for delivery of public services, and many eminent nonprofit scholars have labeled the increasing delivery of public

How does government funding affect nonprofits' program spending? Evidence from international development organizations

“…With the savings from administrative and fundraising expenditures, nonprofits could devote more resources to mission‐related outputs. In addition, Sloan and Grizzle () and Thornton () directly tested the relationship between government funding and nonprofit program spending. Sloan and Grizzle found that faith‐based and community‐based organizations in Kentucky receiving higher levels of federal grants have increased program spending.…”

“…One strand within the government-nonprofit relations literature examines the impact of government funding on nonprofits' program spending (e.g., Alexander et al, 1999;Sloan & Grizzle, 2014;Thornton, 2014). Generally, nonprofits' expenses serve three major functions: program services, internal administration, and fundraising.…”

“…In contrast, resource dependence theory (or coercive isomorphism theory) suggests that government-funded nonprofits have to devote substantial resources to conforming to the program and accounting requirements involved in applying for and managing government funding, leading to increased administrative expenses at the cost of program expenses (DiMaggio & Powell, 1983;Pfeffer & Salancik, 1978). Previous empirical studies have reported mixed results (Alexander et al, 1999;Ecer, Magro, & Sarpça, 2017;Grønbjerg, 1993;Sloan & Grizzle, 2014;Thornton, 2014). The key concern underlying this debate is how government funding affects nonprofits' capacity to carry out their missions, which further connects to a fundamental question about how government actions influence the role of the nonprofit sector in democratic societies.…”

Getting a Sharper View of the Humanitarian Marketplace: Introducing Conduit Engagement Theory

“…28 On the other hand, public funding clearly increases resources of FBOs, helping them expand their services to a variety of audiences. 29 Moreover, it is arguable that public funding enhances social acceptability and legitimacy of FBOs among their private donors since receiving institutional financial support can be viewed as indicative of well-developed operational and service delivery capacity.…”

Faith and Homelessness: Examining the Influence of the Faith-Based Component of a Transitional Housing Program on the Attitudes and Behaviors of Homeless Men

“…Federal funding may also encourage the legitimacy of a faith-based organization in the eyes of other donors and therefore may be the catalyst for more private giving (Smith & Gronbjerg, 2006). While many faith-based organizations welcome these funds to help accomplish and sustain their missions, Sloan and Grizzle (2014) said "they are most often accompanied by increased reporting and evaluation requirements that tax organizational infrastructure, essentially increasing administrative responsibilities that can take time away from program activities" (p. 45). Because of the potential for government influence by having to process enormous amounts of paperwork to comply with restrictions in allocating government funds, faith-based organizations, as Tanner (2001) has explained, "may end up spending more time reading the Federal Register than the Bible" (p. 1).…”