Before Your Nonprofit Celebrates New Grants…

By: Helen Weeber

January 5, 2023

Most not-for-profits can’t afford to turn down offers of financial support. At the same time, you shouldn’t blindly accept government or foundation grants simply because they’re offered. Some grants may come with excessive administrative burdens, cost inefficiencies and lost opportunities. Here’s how to evaluate them.

Administrative and Other Burdens

Smaller or newer nonprofits 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 of New Grants

As for costs, your nonprofit 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 bang for your buck 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.

Grants Over the Long Term

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

@2023

Please note: The Ohio Attorney General’s Office recently introduced Charitable University, or CharitableU, a platform that provides training resources and tools for Ohio nonprofits. CharitableU also recognizes organizations that have completed courses and provides certifications that can be shared with stakeholders and funders. Learn more and register for the portal at charitableuniversity.inquisiqlms.com.