Current financial pressures mean that your non-profit probably cannot afford to pass up offers of support; however, you should be careful about blindly accepting grants. Smaller non-profit organizations that do not have formal grant evaluation processes are at risk of accepting grants with unmanageable burdens and costs. In addition, large organizations also need to be careful because they have significantly more grant opportunities, including grants that are outside their current expertise and experience.
Following are tips on how to evaluate grant opportunities and avoid costly and time-consuming errors.
Some grants could result in excessive administrative burdens. For example, you could be caught off guard by the reporting requirements that come with a grant as small as $5,000. You might not have staff with the requisite reporting experience, or you may lack the processes and controls to collect the necessary data. Often, government funds passed through to your non-profit still carry the requirements that are associated with the original funding, which can be quite extensive.
Grants that fall outside your organization’s original mission can pose problems, too. Managing the grant may involve a steep learning curve and could even result in an IRS challenge to your exempt status.
Another risk is cost inefficiencies. A grant can create unforeseen expenses that undermine its face value. For example, new grants from either federal or foundation sources may have explicit administrative requirements your organization must satisfy.
Your non-profit also might run up expenses to complete the program that are not allowable or reimbursable under the grant. Before accepting a grant, net all these costs against the original grant amount to determine its true benefit.
For any unreimbursed costs associated with new grants, consider other ways your organization might spend that money and expend those staff resources. Could you get more mission-related benefits if you spend it on existing programs?
Quantifying the benefit of a new grant or program can be equally or more challenging than identifying its costs. Evaluate every program to quantify its impact on your mission. This will allow you to answer the critical question when evaluating a potential grant: Are there existing programs that can be expanded using the same funds to yield a greater benefit to your mission?
Do Your Homework
Grants from the government or a foundation can help your non-profit expand its reach and improve its effectiveness in both the short and long term. However, they also can restrict your organization in unexpected ways. Contact us for help or more information.