Some funders narrowly target their grants, loans, or other assistance for uses aligned with their own intentions. Other funding sources may allow broad discretion on the part of the recipient, provided accountability is maintained. Very, very few grant-makers or other funders completely cede decision-making to the recipient to use funds as they see fit. However, when a state or locality seeks funding, it usually has its own local goals to meet. 

While it may seem obvious that you should take advantage of any available funding, state and local staff and time resources are constrained, so choosing to apply for funds that meet a funder’s goals – just to have funding – can limit your ability to meet your own objectives. The trick to solving this puzzle often involves stacking, braiding, or fitting local and funder goals and objectives together before attempting to stack, braid, or fit the money into projects.

• Stacking: Funds from multiple sources can be used for any project or program expense. You layer the amounts up until you meet total project costs, and usually tracking and reporting are project-level. (Stacking and blending are very similar concepts.)
• Braiding: Funds from multiple sources are woven into a project or program so that all fund uses are covered. Some funding sources are match or cost share for the others, and/or some sources may limit costs they can cover in a project. Usually, each funding source in a braid is tracked and reported on separately.
• Fitting: A project is split into two or more components or separate projects, and each funding source is used separately for its best-fit component. An example is using HOME funds for new construction of affordable multi-family housing and using Community Development Block Grant (CDBG) funds to bring a water/sewer main up to the property or to build an adjacent playground.

The false conflict around immediate core vs. long-term, broader needs

In decades working with states and localities on community development, affordable housing, economic development, and long-term disaster recovery problems, I visited and talked to many local government staffs and seldom got asked big national or global policy questions about climate resilience or greenhouse gas reduction – the focus of recent federal funding pools. Instead, local staff concentrated on concrete, practical questions: 

• Our community has a destroyed neighborhood. How do we get started rebuilding, and how do we make sure we’re audit-proof? 
• We need to replace our aging water and sewer lines, or extend them into low- and moderate-income neighborhoods or business areas for the first time, and preserve our aging housing stock. How can we manage these projects effectively? 
• How can we partner with local lenders and nonprofits and still maintain program compliance?

The local questions often boil down to how to make limited funds available from multiple sources stretch to meet numerous pressing local needs. When your community needs the basics – such as making all housing affordable, decent, safe, and sanitary, or helping unemployed residents qualify for good jobs, or keeping water/sewer infrastructure from failure due to age or disinvestment – local residents may loudly protest the use of precious, limited resources for a stand-alone project driven by funder goals. They may call for first tackling those core needs before dealing with (for example) single-purpose energy improvements or resilience. Under constant community pressure, states and localities can be tempted to move forward with simpler, smaller, single-funding-source, short-term projects to make some progress meeting an immediate, siloed, core local need.

But based on my experience, pitting immediate and longer-term community needs (and national resilience goals) against each other is a false conflict. And the perceived conflict creates a missed opportunity to undertake transformational community improvements serving both present and future needs. 

If you first stack the goals, then the funding sources, and braid the local and external funders’ goals into practical program designs, you can greatly expand beneficial impacts. When built into a program up front, with systematic management in support, stacking can be cost-effective across the useful life of the asset or improvement. Designing resilience and energy efficiency into every project supports getting other necessary, practical work done well – it doesn’t detract from it. And combining funding sources leverages local funds and expands program reach and impact.

Combine goals for long-term, consistent, expanded impact

Complementary goals can be braided into how a locality will provide expected infrastructure, housing, services, and economic opportunities for residents, particularly for vulnerable and low-income residents – just as prudent financial management, timely communication, capacity building, and accountability to funders (taxpayers, lenders, investors, public agencies) is always part of the “how” a project gets done. 

For example, if a locality approached all its roads, water/sewers, public buildings, parks, and housing projects with an eye toward improving resilience to the worst flooding reasonably expected to occur during the life of the investment, and always directed project engineers and architects to provide current, cost-effective designs, local resilience would improve year over year even without separate resilience projects. Urban planners have long known that consistent, simple, small design actions can improve a community over time as surely as a single large project.

More complexity needs better management

That said, stacking multiple funding sources, especially federal ones, takes careful attention and can cost front-end time. 

Timing matters

Stacking federal funding is time- and sequence-sensitive; adding federal funds mid-stream in a project increases the risk of noncompliance or project cost increases. But the opposite is also true: Many funding programs are eminently stackable during the planning stages of a program or project. Braiding goals and funds into the project components for which they are best suited enables quality development meeting multiple goals, avoids stop-gap projects, and makes every precious penny count toward serving and protecting the community. For example, if your community’s CDBG or Section 108 housing rehabilitation program allows for energy-efficiency improvements such as better thermostats, insulation, and solar panels, you may be able to partner with a community development financial institution (CDFI) to tap into dedicated Greenhouse Gas Reduction Fund (GGRF) resources to leverage local CDBG or HOME funds and grow your impact beyond replacing roofs and cabinets to decreasing an affordable housing development’s utility costs, increasing its resilience to disaster events, and helping meet national climate goals. 

Take advantage of expertise

When combining goals and funds, find the experts. When stacking or braiding, a pro tip is to make sure that not only do all funders and (sub) grant recipients get a chance to review the project financing plan, beneficiaries, and monitoring rubric, and weigh in on key project documents, metrics, and reports – you also review plans with experienced project implementors. Each funder can apply its familiarity with its requirements, identify any issues, and – crucially – spot places in the project design that are unnecessarily duplicative. Recipients of assistance will often ask questions that reveal capacity issues or needs for additional clarification in core plans and documents. Finally, with this information, experienced implementors will know how to apply tools, training, and technology to carry your project to completion.

Budget for uncertainty

Pay special attention to your project’s implementation risks. How will those risks, if realized, affect project costs? The answer may seem obvious, but projects often fail (in whole or in part) because they budgeted no funding for cost increases due to realization of an unanticipated event. Up front, while stacking or braiding funds, consider which sources allow contingencies and budget some funds for reasonably anticipated increases (and for appropriate insurance/bonding). Also, budget for risk mitigation measures such as appropriate internal controls, compliance monitoring, and quality assurance. Again, this is a step where an experienced project manager or implementor will bring a seasoned understanding of risks and cost controls.

In conclusion

You want to fund and build high-quality projects and programs that you and your community will be proud of, delivering multiple benefits for years to come. Often, this means intentionally stacking, braiding, or fitting funds from different public and private sources into a single plan that can achieve multiple goals. Accomplishing this takes planning, collaboration with funders, figuring out how to budget for anticipated risks, and finding and bringing to bear the appropriate expertise.

How CohnReznick can help

CohnReznick has experience that can help speed, launch, and drive successful implementation of GGRF funds with multiple ongoing federal funding sources governed by the common federal financial management rules at 2 CFR 200, such as Community Development Block Grant (CDBG and CDBG disaster recovery), Section 108 Loan Guarantees, and other grant programs. Many project stacks use tax credit financing, and CohnReznick has recognized expertise in using federal or state tax credits such as Low-Income Housing Tax Credits (LIHTC) and New Markets Tax Credits (NMTC). Reach out to learn more and discuss how we can help you build your best, most integrated funding path.