The Right Mindset for Nonprofit Grants

3 Questions Organizations Should Ask

After graduating from college in 1994, I landed a job as a program coordinator with a family service agency. My main responsibility was writing proposals for nonprofit grants. I also managed grant reporting for the agency’s homeless program.

Though I graduated summa cum laude with a degree in social work, the agency took a risk in hiring me. I had absolutely no grant writing or grant management experience. To say the least, I had a steep learning curve those first few years. I had to find appropriate nonprofit grants, write the grant proposals, and manage the post-award and implementation process.

Despite the learning curve, I loved every minute of this job. I’d often wake at 3:00 a.m. to write proposals before work. Those early morning writing sessions paid off in the first six months when the U.S. Department of Housing and Urban Development (HUD) sent an auspicious fax. We unrolled the curled and glossy fax paper to learn that HUD awarded a $343,000 grant in response to one of my earliest proposals.

RELATED: Responding to Grant Rejections 

Receiving the large grant captured my executive director’s attention. He quickly created a new position for me: agency grant writer. While in that position, I grew the organization’s grant annual portfolio from $350,000 to over $2.4 million per year. Along the way, I learned a lot about making wise choices as a grant writer.

Among those many important lessons: Organizations and their boards have to ask themselves the right questions to maintain a financially responsible perspective when applying for nonprofit grants. Three questions in particular stand out.

1. Will our prospective nonprofit grants support existing or planned programs?

That $343,000 grant from HUD was a true game-changer for our organization, but it also required that we start a drop-in addiction program for our homeless clients. Not surprisingly, the federal funding didn’t cover 100 percent of the implementation cost. Therefore, we had to raise additional funds to support full program implementation. With additional resources, this program enjoyed nearly two decades of success.

A few years ago, however, my former employer made the strategic decision to transition the program to another organization. A large homeless program ended up not aligning well with our mission. All the resources we spent growing the program might have been used to expand programs that better fit the mission.

The federal funding didn’t cover 100 percent of the implementation cost, so we had to raise additional funds.”

As another example, a prominent and large national financial services company is known for making grants to support financial literacy programs. Homeless service organizations and workforce development agencies often apply for a grant—and receive only $5,000 or $10,000 to provide financial literacy to their clients. With such a relatively meager grant, grantees often end up in an unenviable position. They have to create a curriculum, hire or reallocate a staff member, provide training, track the outcomes, and report the results to the funder.

For many nonprofits, this would require a diversion of program, fundraising, and administrative resources from other mission-related activities. In fact, a small organization without a pre-existing financial literacy program could inadvertently destroy other programs in an attempt to fulfill the grant requirements.

This leads to the next question organizations should consider before writing any grant proposal.

2. Do we understand the administrative requirements of our potential nonprofit grants, and can we meet them?

My city has a local funder that asks grantees to provide the name and zip code of every client. The funder requests this information with innocent intentions: It just wants to ensure grant funding directly supports the service work outlined in the initial proposal. Most organizations don’t have an issue complying with this request. It should, however, cause grave hesitation for domestic violence programs, healthcare centers, mental health agencies, and AIDS service organizations.

After all, a grant writer would probably want to know about this requirement before applying to the funder. The writer could even use the opportunity to educate the funder about their client population. Then would come the funder’s response, which would further help the writer determine if applying for funding would make sense.

That $343,000 HUD grant required an annual data report that took two weeks to compile.”

That’s certainly an extreme example of burdensome administrative requirements, but there are other good examples as well. That $343,000 HUD grant my first employer received, for example, required an annual data report that took about two weeks to compile. The funder also required a day-long site visit with the agency’s entire management team every six months. Not to mention, it required several new workplace policies that were not entirely popular with staff.

Now, if your organization is receiving $250,000 or more from a single federal grant, it might be worthwhile to pay someone who maintains data and generates reports. But if you’re only getting $25,000, you might rethink applying for funding.

Of course, getting a larger grant is not always the solution, and it’s critical that organizations ask themselves this third question.

3. Will we risk becoming overly reliant on one of our nonprofit grants?

Ideally, every program develops diverse funding that probably includes foundation and government grants, individual giving, special event income, government grants, and sometimes earned income. Though not an exact science, no single funding source should represent over 40 percent of a program’s budget.

I know of one organization, for instance, that receives more than 85 percent of its budget from one federal funding source. This means the organization is really in the business of serving clients until the federal program changes its priorities (or until congress eliminates the funding source entirely). By being so precariously funded, the organization puts the well-being of clients, staff, and its very mission in jeopardy.

Though not an exact science, no single funding source should represent over 40 percent of a program’s budget.”

For this reason when seeking funding, always ask yourself if the organization risks becoming overly reliant on one or two grant sources. This is especially true when a grant source wants to “give” you ever larger amounts of money without having to raise additional dollars.

If your organization plans to apply for funding after answering these three questions, you will want to learn as much as possible by researching the funder. My next blog shares tips on researching foundations to find the likeliest funding sources for your nonprofit.

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