Receiving a multi-million-dollar gift out of the blue sounds like every nonprofit leader’s dream. But it can also pose unexpected challenges. So how do you know if your organization is ready to accept a windfall grant? And what should you do if the hoped-for grant actually arrives?
The Allure of Unsolicited Windfall Grants
Most contributions to nonprofit organizations are solicited. Development teams work hard on annual appeals, grant proposals, fundraising events, and donor cultivation strategies. Occasionally a donor approaches an organization, rather than being approached first. But that’s the exception not the norm.
So MacKenzie Scott’s massive, and secretive, approach to philanthropy has had many organizations hoping they end up on her list.
In 2022 alone, MacKenzie Scott has given away almost $2 billion to 300+ organizations. For many grantees, it’s the largest single gift they’ve ever received. And there are eye-popping headlines to match:
What could possibly go wrong when an organization receives an unsolicited windfall grant? Plenty. You could expand quickly, only to lay off staff a couple years down the line. You could spend the funds only on new projects, while core areas of work languish. You could be too conservative, not investing in innovation, and let the funds slowly drip away.
Spending money is easy. Spending money smartly can be as challenging as raising it.
Here are four tips we give to nonprofit organizations when they receive major contributions:
1) Update your strategic plan
First, if your nonprofit doesn’t have a strategic plan, a major unrestricted gift is the perfect opportunity to create one. Research shows that having a written strategic plan doubles an organization’s chance of achieving its goals. Using your fundraising windfall to set your organization up for long-term success is always a smart move.
If your nonprofit already has a strategic plan, make sure it’s up to date. If it’s been more than a year since you and your board reviewed the plan, it might be time to invest in a refresh. At Funding for Good, we talk a lot about how strategic planning is a process not a product. If you haven’t touched that strategic plan in a few months, consider organizing a facilitated retreat for your staff and board leadership to review and update your strategic plan.
2) Create a spending plan and timeline for your windfall grant
Now that you have your strategic plan, it’s time to get serious about budgeting. Just like a household budget, grant budgets can easily get eaten up by unplanned expenses. At the end of the month (or the year) you wonder where on Earth all those funds went. That’s why we recommend laying out grant spending guidelines such as:
- Over what period will you expend the grant funds? If you received $6 million, will you spend that over three years or over five?
- Will you spend the same amount each year? Or do you anticipate periods of more substantial investment, such as when launching a program expansion?
- How will additional internal requests to tap into these funds be considered? For example, what if your communications department can’t keep up with all of the new program work (funded through the grant) and requests funds for a consultant or staff position?
Being clear and thoughtful about how spending decisions will be made can go a long way toward minimizing dreaded cross-department budgetary conflicts.
3) Set aside a portion of grant funds for immediate needs
We recommend setting aside a small but meaningful portion of your grant for more immediately giving back to your staff, volunteers, and community. As much as we encourage organizations to think long-term—whether through strategic planning or proactive program design—a major unsolicited contribution is worth celebrating. Your celebration could include creative ways to acknowledge your staff, board, and volunteers. It could also include spending on the most immediate and urgent needs that are keeping you and your team up at night. Being able to quickly meet pressing community needs—rather than spending time scrambling for resources—can be a major morale boost in your organization.
4) Plan for sustainability beyond the windfall grant
Finally, we’d be remiss in not mentioning sustainability. Time and again we’ve seen the impact of unsustainable funding cycles on nonprofit organizations. Painful program cuts. Staff cutbacks. Scaled back services. It’s not where any organization wants to end up.
If you’ve received a major grant that you intend to spend over five years, how will any new expenses added to your operating budget be covered in year six, seven, and beyond? If you’re increasing your annual organizational budget significantly—whether 10%, 20%, or more—are you investing a proportionate amount in your fundraising and operational infrastructure? Answering these questions in advance can help your organization avoid painful decisions later.
Leveraging Windfall Grants to Build Capacity
If managed smartly, a windfall grant can meet immediate needs while building long-term organizational capacity and sustainability. So, after you celebrate, we recommend taking a deep breath, gathering your leadership team, grabbing your strategic plan, and getting to work.
Want to learn more about nonprofit capacity building? Check out our 2023 Webinar Series: Growing with Intent.