Is your organization…
- Facing a financial crisis?
- Launching a new program?
- Hiring a new staff member?
- Building a new facility?
Often, these situations require the board of directors to respond to the question
“How are we going to raise all this money so quickly?”
In our experience, board members make one of the following two suggestions:
“We plan to write more grants!” or “We need another fundraising event!”
Today, we intend to put the grant writing process into perspective!
While grants certainly can serve as a great way to secure seed money, expand a program, support a capital campaign, or complete a one-time project, they are by far the least effective way to raise big dollars on a short timeline.
Grant writing is more than simply putting words on paper. The next time your board proposes grants as a solution for short-term fundraising needs, take into consideration the following facts every board member should know.
1. Consider it a RED FLAG if your organization is more than 30% dependent on grant funds for general operating expenses!
Grants are great. However, if your organization is incapable of keeping the lights on, staff in place, and critical programs running without grant dollars, you are playing “Russian Roulette” with your mission. What happens if one more of the grants you depend on is not awarded? Are you prepared to fire staff, reduce program hours, or worse…close a program down? Donors request copies of your finances, proof of community partnership, and an outline of your sustainability plan for this very reason! They do not want to create dependency or contribute to a sinking ship.
2. Even the highest quality proposals might not be selected for funding.
It’s easy to blame the grant writer if proposals are not getting funded. However, while the skill and experience of the writer are extremely important, even the best grant writer cannot guarantee the proposal will be awarded funds. Many foundation donors make their decisions based on the priority areas and their personal passions. Your proposal might be perfect, but someone else’s might “resonate” more with that donor. State and federal dollars are dependent on many factors…some of which can be controlled (such as the quality of the narrative) and others that cannot (if your organization falls within a specific tier/geographic region.)
3. Most grants are part of a competitive grant cycle. Just because your organization is “encouraged to apply” does NOT mean you will receive funding.
Program officers are often instructed to encourage all “eligible” participants to apply. Donors love to entertain diverse proposals and like to have options. Encouragement is amazing but is not an award notification, so do not begin spending those dollars in your head before you receive them! There is a lot of relationship building that needs to happen between and organization and a prospective donor (be it a foundation, business, church, or individual). Donor-relations that build donor-retention apply to the foundation world too.
4. Grants are not FREE Money!
A grant is an investment. Donors want to fund your organization’s IMPACT, not your existence. Your organization must submit realistic proposals, establish efficient tracking systems, and report your impact to the donor and stakeholders. It is easy to focus on the size of the check and forget that your grant proposal is essentially a contract. You cannot use grant dollars for anything you want or need, but rather must restrict the use of those funds to the line items you submitted to the donor in your proposal. If you do need to make programmatic or budget changes, you must reach out to the donor to request authorization to do so. In many cases, donors even expect grantees to sign a contract acknowledging that if funds are not utilized in the approved manner or performance goals are not met, and the organization may be required to reimburse those dollars.
5. Quality proposals depend on quality program designs.
Your team must develop a strong program design before ever submitting a proposal. The grant writer must have access to key information such as the program/project need, financial documents, prior impact data, partnership agreements, goals/objectives, and evaluation processes. Even if your organization has the most gifted grant writer on earth, they cannot be expected to “whip up a winning proposal out of thin air” any more than a professional jockey could be expected to win the Kentucky Derby riding a pony.
6. Grants alone do not create sustainability but certainly can contribute to support capacity building and sustainability initiatives.
Since donors are investing dollars in your proposed project or program, your board and staff should actively seek ways to invest those dollars instead of simply “expend” them. Rather than utilize funds on low-impact line items, consider ways to maximize the long-term impact. Capacity building initiatives could include the creation of new program infrastructure, development of a comprehensive marketing plan and outreach materials, creation or update of your website to increase visibility, engagement, and online contributions, board development training, or any other initiative that will benefit your organization beyond the grant cycle.
7. Grants can take 6-9 months to secure.
Grant cycles vary, and while some may happen on a “rolling basis,” others involve a longer process that can last 6-9 months. A few steps in the grant process include research, identifying prospects, relationship building with prospective grantors, waiting for grant cycles to open, crafting a proposal, waiting for award notifications, and finally receiving a check! For this reason, most professional grant writers recommend that organizations identify their projects and begin prospecting for grants 12-18 months before the organization needs the dollars in hand. When referring to state or federal grant cycles, the initial process can take 12+ months.
8. Donors base their award selections on their stated priorities and personal passions.
In a nutshell, this means your “perfectly written proposal” might not resonate with the donor enough to be granted.
9. Grants are never guaranteed from year to year.
If your organization has been awarded the same grant each year for the past decade, that’s wonderful, but not indicative of future awards. Unless a grantor has specifically committed to long-term support, you must budget as if those dollars might not be awarded. Many multi-year grants are dependent on the achievement of annual goals and can be canceled if stated goals and/or benchmarks are not being met.
10. Grants that support project materials but not staff salaries and overhead can create a burden on your organization if your team is not prepared for the increased workload.
Before you pursue a grant to hire a new staff member for one year, carefully consider how you intend to sustain that position after the grant cycle. It is not realistic to expect that within their first 9-12 months, a new employee can learn the organization, connect with clients and the community,” master their job, and successfully raise their salary for the next year! If you are not hiring new staff, consider your current team’s capacity to manage the increased workload that comes with the program and grant reporting requirements.
11. Be prepared to modify project design and fundraising strategies should you only receive partial funding.
Grantors often ask, “Will you be able to successfully implement this program/project if your organization is only awarded a portion of the funds requested?” Be prepared to respond to this question by considering questions such as: Can you break down the service cost per client? Can you reduce program hours without jeopardizing the program impact? How will you leverage the additional support on time?
12. Most grant proposals require that you include a sustainability plan to ensure that the program/project can continue after grant funds expire.
Donors seek to make an investment in your mission and expect the board and staff to be diligent in creating a diverse and sustainable funding base. General operating and program grants are wonderful resources if your organization understands that those dollars are a steppingstone as the organization continues to leverage community support to grow and maintain your mission.
13. Many grant proposals require that the organization share the percentage of board members who contribute financially to the organization annually.
Yes…you read that correctly. Donors want to know that board members have some skin in the game! Why should a foundation or any community members open their wallets to support a cause if every single governing board member is not willing to do the same? Grant applications most often request the percentage of board members who contribute financially to the organization. However, it is not uncommon for grant applications to require the total dollar amount board members collectively contributed in the past year or the percentage of the total budget comprised of board member contributions.
14. State and federal grants often award funds on a reimbursement basis.
This payment schedule can present lots of challenges for nonprofits with limited cash flow! Ideally, your organization should expect to pay out 3-4 months of program expenses before receiving reimbursement funds. (Because we all know that the government’s top priority is making sure you get your checks on time! Right?)
Many organizations prepare for state or other reimbursement grants by creating a reserve fund. Others partner with their local bank to establish a line of credit to specifically cover grant program expenses to ensure that there is no lapse in programming in between reimbursement checks.
As you work to build capacity within your organization, education of your board on such matters as grant funding is vital. Board support is needed at all levels, and understanding the ins and out of grants is a great place to start. Maybe you want to print a fact sheet to share with the board, review it for 5 minutes at a board meeting and take questions so everyone is on the same page. Adding a grant update to this might be a great addition to an upcoming board meeting.