KPM

Audit Report

Before Accepting, Read The Fine Print

Many non-profits don’t have the luxury of turning down available funding. At the same time, non-profits shouldn’t blindly accept government or foundation grants simply because they’re offered, as there may be excessive administrative burdens, cost inefficiencies, and lost opportunities associated with these financial offerings. As such, it’s important to read the fine print before accepting an offer. Here’s how to evaluate grant opportunities.

Administrative & Other Burdens
Smaller or newer non-profits are at particular risk of unexpected consequences when they accept grants. But larger and growing organizations also need to be careful. As organizations expand, they usually enjoy more opportunities to widen the scope of their programming. This can open the door to more grants, including some that are outside the organization’s expertise and experience.

Even small grants can bring sizable administrative burdens — for example, potential reporting requirements. You might not have staff with the requisite experience, or you may lack the processes and controls to collect the necessary data.

Grants that go outside your organization’s original mission can pose problems, too. For example, they might cause you to face IRS scrutiny regarding your exempt status.

Costs Vs. Benefits
As for costs, your non-profit might incur expenses to complete a program that may not be allowable or reimbursable under the grant. As part of your initial grant research, be sure to calculate all possible costs against the original grant amount to determine its ultimate benefit to your organization.

Then, if you decide to go ahead with the grant, analyze any lost opportunity considerations. For unreimbursed costs associated with new grants, consider how else your organization could spend that money. Also, think about how the grant affects staffing. Do you have staff resources in place, or will you need to hire additional staff? Could you get more mission-related stretch for your dollar if you spent funds on an existing program as opposed to a new program?

Quantifying the benefit of a new grant or program can be equally (or more) challenging than identifying its costs. Assess each program to determine its impact on your organization’s mission. This will allow you to answer critical questions when evaluating a potential grant.

Over The Long Term
If your organization has lost grants during the COVID-19 pandemic, you’re probably tempted to welcome any new funds with open arms. However, it pays over the long term to scrutinize grants before you accept them. Contact us if your non-profit is trying to grow revenue and needs fresh ideas.

Related Articles

Talk with the pros

Our CPAs and advisors are a great resource if you’re ready to learn even more.