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Building Community Capacity for Federal Funds: How Municipalities Can Help

Invest Atlanta’s Resurgence Grant Fund relaunch to support local businesses and nonprofits, February, 2022.

By Megan Sheekey

The Infrastructure Investment and Jobs Act (IIJA), also known as the Bipartisan Infrastructure Law, provides unprecedented funding for local governments, authorizing over $973 billion through fiscal year 2026. This historic legislation brings investments in energy, water infrastructure, public lands, broadband, environmental remediation, transportation, and more. Federal and state agencies will be tasked with administering these funds to local government recipients through a variety of mechanisms, including grants, appropriations, and other funding structures. Taken together, the IIJA and the American Rescue Plan Act of 2021 (ARPA) offer funding for cities and their community partners to undertake and implement transformative projects and programs that will impact communities for decades to come.

In order to effectively pursue and manage ARPA and IIJA funds, municipalities must increase their operational capacity as well as strengthen community partners. Most community-based organizations lack the resources associated with managing grant funding, including the programmatic and fiscal requirements that come with government grants. However, these partnerships are essential to the successful implementation of programs and services facilitated by IIJA and ARPA funding.

A recent workshop offered by Bloomberg Philanthropies’ Federal Assistance e311 program, in collaboration with the U.S. Conference of Mayors, highlighted these challenges and proposed strategies local jurisdictions can deploy to overcome them. Fortunately, current federal programs are encouraging municipal leadership to rethink the status quo and increase meaningful collaboration.

Building Stronger Networks.

A common theme in recently released ARPA funding guidance is promoting an equitable recovery. The U.S. Department of the Treasury requires recipients to report on community engagement activities undertaken in connection with ARPA funds. This reporting requirement further underscores the importance the Treasury Department has placed on providing equitable recovery to communities.

Where and how to access federal funding opportunities is particularly challenging for smaller organizations with access to fewer resources. Most community organizations lack the capacity to navigate key challenges associated with managing grants. As one youth services leader shared, “With little staff and our head down in the work, finding and securing government funding can be impossible to do.”

To ensure organizations can take advantage of available grant funding, municipalities are working more intentionally to reach targeted populations and providers. In the City of Atlanta, its economic development authority, Invest Atlanta, took their outreach activities to the streets. Invest Atlanta contracted with over a dozen community providers, set up hubs in targeted communities, and hired advocates to engage and support small businesses across the city.

Local governments are also forging strategic partnerships with coalitions and alliances as trusted networks that allow stakeholders to collectively cast a wider net. Resources include the National Council of Nonprofits, the Council on Foundations, local community foundations, and state associations.

Enhancing the Application and Awards Process. 

All grantors need critical information to responsibly award funding; however, onerous requirements can discourage many entities from applying. Obstacles that challenge potential applicants and awardees include language barriers such as governmental legalese, pre-award risk assessments, the complexity of multiple automated systems and applications, formalized procurement guidelines, and single audit requirements, among other things. Entities can be disqualified as applicants or have funding disallowed simply for not having the staff or expertise to understand and follow grant requirements.

To level the playing field, municipalities are developing creative strategies both internally and through external partnerships. The City of Dayton, Ohio, allocated ARPA funds for consultants to offer workshops and provide targeted technical support to nonprofit organizations and small businesses. With a goal to reach historically marginalized community providers, the City posted Notice of Funding Opportunities on their website, providing a mechanism and process for community groups, nonprofits, and the private sector, including small businesses, to submit ideas and projects for possible ARPA funding through its Dayton Recovery Plan.

Melissa Wilson, Acting Deputy Director for Dayton’s Department of Procurement, Management and Budget shared: “The majority of the City’s overall ARPA spend for the Dayton Recovery Plan is being reallocated into 5 distinct Focus Neighborhoods that will seed the movement of transformational change and impact. The City of Dayton, in conjunction with community partners, will continue to strive beyond the ARPA dollars to enhance and fortify impact in the journey for sustained transformational neighborhood change.”

State and county alliances, professional associations, and foundations across the country are also providing technical support and making capacity grants available. For example, the City of Minneapolis partnered with a local foundation and launched the One Minneapolis Fund to deploy a capacity building grant program targeting smaller and mid-size nonprofits. In recent remarks, Ben Hecker, Managing Associate at Hagerty Consulting and former Deputy Chief of Staff for the City of Minneapolis Mayor’s Office noted: “It’s important to remember that we can use government and private grant funds, and the grant process itself, to increase the ability of our communities to deliver goals and outcomes that we’re looking for.”

“We can use government and private grant funds, and the grant process itself, to increase the ability of our communities to deliver goals and outcomes.” — Deputy Chief of Staff for the City of Minneapolis Mayor’s Office

In another example, the City of Atlanta simplified paperwork requirements by having small businesses sign an affidavit attesting that they had supporting documents, such as recent tax returns, rather than requiring them to compile and submit each document. Cities should take care to balance reduced administrative burdens with the risk of non-compliance and fraud.

Increasing Shared Data Sources. 

Substantial data is typically required to support a funding request; however, data collection, management, and modeling work can be costly and labor intensive. Data can be particularly hard to capture for organizations working with unique and vulnerable populations or tackling complex issues.

By working with philanthropic organizations, educational institutions, and other third parties, local governments can help connect their community partners to resources and data they can use to improve their services. The Pew Charitable Trust Evidence Project, for example, gathers data to inform policy makers, researchers, and funding organizations, and to help stakeholders develop effective ways to use this data in decision-making. Community partners can also leverage the resources provided by similar organizations to improve their ability to receive funding. As illustrated in Baltimore, Maryland, Johns Hopkins University Carey School of Business worked with a youth development provider, HeartSmiles, to create data models highlighting the organization’s unique characteristics. This exercise, which included walking staff through the process of data collection and display, will help to strengthen the organization’s case for funding.

Rethinking Policies. 

Policies and requirements around government grants have not historically been sensitive to the realities of most community organizations and have impeded equal access to funding. Rethinking these government policies requires collaboration and open communication with stakeholders and governing bodies to formulate policies that will benefit all entities invested in these efforts.

Reimbursable or matching grants, for example, prevent entities without cash reserves from taking advantage of these funding streams. This year, after surveying local providers, the City of Chicago announced a new policy to allow up to 25% cash advance on the annual value of a contract for organizations with a demonstrated need. Other cities are partnering with local foundations to provide a bridge loan program with low and no-interest loans to help organizations meet a financing gap.

Keeping It Going.  

This is a critical moment to prioritize continuous stakeholder engagement. With public and private funding available to build community capacity, local governments can better assess needs, establish strategic priorities, and leverage resources.

“Cities are reliant on community partners to be our service providers, whether that is as a grantee, contractor, or a vendor as a subrecipient.” — Ben Hecker, Managing Associate at Hagerty Consulting and former Deputy Chief of Staff for the City of Minneapolis Mayor’s Office

In summary commentary about the importance of stakeholder engagement, Ben Hecker noted: “Ultimately, cities are reliant on community partners to be our service providers, whether that is as a grantee, contractor, or a vendor as a subrecipient. The more capacity we can build in our partner organizations, the better shape cities will be in terms of being grant ready and able to manage compliance risks on the back end.”