Grant Management: A Nonprofit’s Complete Guide
Thursday, January 14, 2021
When your nonprofit crafts your annual budget, you separate your revenue sources into various categories including that from individual contributions, corporate sponsorships, fees for service, membership fees, event revenue, and grants. Most small to mid-sized organizations operate on a rather tight budget, meaning that every penny of revenue counts and can make a rippling impact on various projects at the nonprofit.
Grants can make up a significant portion of a nonprofit’s budget, accounting for around 10% of all nonprofit funding.
Foundations, government, and private institutions design grants to be distributed to worthy causes for specific projects. With a donation, you’re competing against the supporters’ own buying habits—for example, a donor might have to decide whether to eat out for dinner or give to your nonprofit. However, with a grant, you’re working to convince someone that your organization should receive funding over another organization. For a grant funder, they’re donating to a nonprofit either way, but need to decide if it should be your nonprofit or your a different organization.
In this guide, we’re going to walk through the steps that are necessary to show funders that your organization needs the money more than other applicants. Using our experience helping nonprofits work grants into their own budgets, we’ll help you identify the next steps that you should take to make grants a seamless part of your revenue plan.
- Search for Grants
- Write Grant Proposals
- Tracking Your Grants
- Recording Grant Monies
- Tips to Avoid Rejection
Ready to learn more about finding and applying for grants for your nonprofit’s mission? Let’s get started.
Grant Management Step 1: Searching for Grants
The first step to obtaining grant funding for your mission is to search for grant opportunities that match the needs of your nonprofit. Instead of diving straight in to look for grants that might be available to you, you’ll need to get started by analyzing your own organization and your needs.
How to Get Started
Nonprofits rarely apply for grants that are not intended for a specific purpose. Consider the aspects of your mission that may need additional funding. Then, make it easy for funders to consider providing the monies for those projects.
When you start your grant management process, you’ll need to:
- Prioritize your needs. Consider your nonprofit’s goals and what needs to be accomplished to move forward toward your mission. You’ll also want to consider which of these projects will be easy for funders to agree to.
- Determine the costs. Break down the goals you’ve just prioritized. Get as specific as possible so that you can determine how much it will cost to accomplish that goal. For instance, instead of saying that you want to “teach kids music,” you should break down the expenses including the cost of instruments, a teacher, and a venue for classes.
- Create rough outlines. Create rough outlines for when you need to have the funds by in order to get your project started. Different grants will have different timelines, and you’ll need to make sure the two timelines will match.
For example, if your nonprofit needs to purchase a new security system for a local orphanage, this is a very specific, fixed cost that will make it an easy project to implement when you have the funds. You should look up the security system that will best suit your needs, determine the cost, and look for grants that will help you fund that need.
Where Grants Come From
Next, you’ll need to consider what type of grant you’re looking for. After all, grants can be sourced from a number of different organizations, each with different motivations for providing the grant monies to worthy causes.
Some organizations who may choose to fund your organization include:
- Government. Grants can come from any level of government—federal, local, or state. The advantage of these grants is that they can often fund your organization’s operative and administrative expenses, something that other grants rarely do.
- Public charities. When public charities engage in grant-making, they must choose a recipient that is in line with their own mission and goals. This means that your organization should be prepared to show the public charity how the project your planning to fund aligns with both your mission and theirs.
- Community foundations. Community foundations are a specific type of public charity that provides grants only to the nonprofit missions that reside in the community. For instance, a community foundation in Atlanta, Georgia would only fund nonprofits within the Atlanta area.
- Family foundations. Family foundations tend to be smaller funding sources. They are rarely professionally staffed, but provide grants from a family’s endowment. They usually fund locally and have a more personalized approach when choosing a recipient. Make sure to develop personal relationships when seeking a grant from a family foundation.
- Private foundations. Private foundations are similar to public foundations, but rely on individual contributions and funding rather than public funding to make grants. Similar to family or community foundations, you may find that building relationships is especially useful when seeking a grant from a private foundation.
Keep an eye out for the type of grant that will best suit your nonprofit’s needs. For instance, if you need to fund your organization’s operating expenses, you should consider a government grant. Meanwhile, if you’re looking for a potentially smaller grant for a very specific project, you could search for a family or community foundation to build a relationship with.
But that still leaves the question, where can you look to find these types of grants?
Where to Look for Grants
Researching nonprofit grants can be particularly challenging for many organizations, especially if you don’t have someone working full-time to search and apply for these opportunities.
However, grants may be closer than you expect; you just need to look for them strategically. We suggest using the following resources to look for grants for your nonprofit:
- Your nonprofit board. If they’re on a nonprofit board, members are probably at least remotely connected to the community. Perhaps they know of a potential opportunity. Maybe their own families have foundations. It never hurts to ask, particularly because they’re so accessible. You might also find that you’ve got board members willing to help write or edit grant proposals, which can give you that extra boost when it comes to the effort needed to secure funds.
- Online search results. Use a reputable search engine to search specifically for grants related to nonprofits and your organization’s mission, but also spend some time looking at related organizations. Often, they’ll list what grants they’ve been awarded, which is a great way to build your list of places to apply. As you search, vary the keywords you search and identify good resources from the scamming sites.
- Grant management firms. If you’re willing to outsource some of the work to find grants for your nonprofit, a grant management firm will help you identify and apply for relevant grant opportunities. Often, these organizations will help you with not only the research process, but also with the grant writing itself.
- Social media. Turn to your personal and organizational social media to see what connections or resources you may have. A lot of times, people aren’t offering because they don’t know that you’re looking. Use social platforms to ask about funding opportunities on behalf of your organization and see what turns up—you just might be surprised by what you find out!
Ultimately, you can’t expect every connection you make or lead you have to be fruitful—the grant prospecting process can be long and frustrating, often resulting in no money. Still, it is helpful to engage with your community, learn to ask for help, and develop lasting relationships. Even if something doesn’t turn out this time, building relationships now can help you secure future funding.
Grant Management Step 2: Write Grant Proposals
Writing grant proposals can seem tricky and does take practice. The important thing to remember is that you need to make it easy for the funder to choose your organization as the recipient of the funds. In order to make it easy for them, stick to the following best practices: building relationships, telling your story, getting specific, and asking for feedback.
Because awarding organizations receive so many grant applications, it’s imperative that you make yours stand out. You can do this in a few different ways, but one of the most effective is to establish a personal connection by laying the foundation for a relationship with the funder.
Before you submit your proposal, get in touch with relevant program managers and ask if they have time to chat about what they’re looking for in a grant proposal. Sometimes, you’ll get an inside scoop about the selection process which can help guide your writing. Worst case, you increase your chances of name recognition when award recipients are being chosen.
Tell Your Story
Grant writing requires you to share your story in a way that tugs at the heartstrings of your reader without losing focus on the funder’s goals. This doesn’t mean that you should dwell in industry-specific language and generalities. Instead, tell your story in a way that demonstrates your need for funding (not just, “we need money”) and is compelling for readers.
Give an initial background of your mission. Look for key terms that align your own mission with that of the funding organization to highlight your similarities. Then, dive into the “why” of your grant proposal. How does the project you’re proposing fit in with your overall mission? Why is it necessary? Use both pathos to create an emotional appeal and statistics and facts for the logical appeal. A combination of the two will set your organization apart from the rest.
Don’t take a too-large approach when you’re describing your nonprofit’s need for funding. Grant reviewers like to see that you have specific plans for potential funding, so choose one specific goal that you’d like to accomplish with the funds that the organization provides, then create a specific plan about how those funds will be applied.
For example, if you’re asking for funding to increase security at a community center, you can identify the security cameras that you plan to purchase and describe where they’ll be placed around the building. You may also discuss other cases regarding security systems and how they’ve decreased crime in the same area. This provides the “impact statement” that proves the effectiveness of your plan.
Reviewers don’t want to guess how you’re going to use the money—doing a little extra legwork to make it easy for the reviewer can lead to better results.
Ask For Feedback
Because you or other nonprofit leadership may have spent hours writing a fabulous grant proposal, you may be too close to the project to take an objective look after the writing process is complete. If possible, allow someone completely outside of your organization or industry to review your work and look for areas that lack specificity, clarity, and necessary detail.
Be sure to ask your objective third party person to review the content for clarity and grammar, but also to take a look at the instructions. Ask them to double-check and make sure you’ve followed all of the directions to a tee. Technical (and usually simple) mistakes can take you out of the running even if you’re otherwise qualified.
Finally, read your proposal aloud. A simple typo can raise a red flag for reviewers, so do everything you can to catch these before they’re noticed.
After you’ve won a grant with your awesome writing skills, you’ll need to track the progress of that grant and how it’s used to help your organization achieve its goals.
Grant Management Step 3: Tracking Your Grants
Tracking grants is an incredibly important step in the grant management process. Not only is it usually required for you to track the grant funding that you receive, but it’s also a part of your fiscal responsibility to do so. Plus, tracking your grant monies will help with your financial project management.
The first thing that you’ll need to do when you start tracking grants is to set up a budget. This will allow you to compare the projected and actual flow of grant funds as you use them. This provides the start of the imperative documentation that you’ll keep regarding your grant. Keeping accurate and detailed information will help you to report back to your funder and analyze your use of the grant funding to see how much is left and where the monies have gone.
In this documentation, keep track of the program and the purpose of the grant money expenditures. For example, if you’re given a $100 grant and $50 goes to purchasing supplies for a program, $25 goes to fundraising expenses, and $25 goes to administration, be sure to accurately track and record the allocations of all those levels of expenditures.
Finally, as we stated before, one of the important reasons to track your grant funding is because it’s usually required by the funder. Set up reminders about all reporting deadlines and requirements. We recommend adding a reminder in your calendar at least a week ahead of time so that you can make sure all documentation is pulled together and complete by the deadline agreed upon between you and the funding organization.
Accurately tracking the progress of your grant is critical to show your funders that your organization is financially responsible and takes the grant management process seriously.
Grant Management Step 4: Recording Grant Monies
Just like you need to track the progress of your grant for your funding organization, you also need to accurately record the grant funds that you receive as a part of your organization’s income.
Recording grant money can be confusing. There are specific guidelines that you should follow based on the type of grant you receive. We’ve broken down the process for each type of grant that your organization can receive: an unconditional grant, a grant with contingencies or restrictions, or a reimbursable grant.
Recording an Unconditional Grant
Unconditional grants are just what they sound like: monies provided with no restrictions. Donors or grant-makers can add conditions to grants depending on how much you’re able to accomplish with the funds. However, unconditional grant funds are provided upfront and can be used at your discretion.
In the case of unconditional grant management, you can record the funding as soon as you know you’ve won the grant. That is, you’ll record it as soon as you receive the award letter or (if there is no award letter) at the time that you receive the grant itself.
For example, let’s say a school won an unconditional grant for $10,000 to build their music program. They receive the grant award letter on March 15th and the actual funding arrives on April 10th. The school should record the grant on March 15th.
Recording a Grant with Restrictions and Contingencies
Grants with restrictions and contingencies require that your organization fulfill certain conditions as designed by the grantor. The money comes in installments over time when you’ve shown the grantor that you have met their requirements and effectively managed the money.
In the case of grants with restrictions/contingencies, your organization would only record funds as you’re rewarded them. When/if you receive the award letter, you’d only record the monies of the first installment. Past that, you’ll record the rest of the funds as you receive them.
Let’s revisit the example of our school working to build out the music program again. Let’s say the school won a grant that has a total award of $30,000, but that money is awarded in two installments of $15,000 if the program shows they have 30 students for three months. The school receives the award letter on March 15th, and they record $15,000 on that day. Three months later, they’ve shown that they have 30 students in the program, so they’re awarded the rest of the funds. That means on June 15th, they record the additional $15,000.
Recording Reimbursable Grants
A reimbursable grant is one where you receive the funds only after you’ve incurred the costs for your program. This means that you pay for the project initially, then the grantor pays you back the funds that you’ve already spent.
In the case of reimbursable grants, your organization will record the expenses as they occur then funds after you’ve received them.
Revisiting our school example once more, let’s say it costs $10,000 for musical instruments for the program and $5,000 for combined marketing, technology, and lesson plans. The school won a $15,000 grant for expenses associated with the music program. When the school has incurred the $15,000 it takes to build their program, they’ll let the grantor know. The grantor sends the funds and the school records the funds as soon as they receive them.
When you apply for a grant, be sure to take note of what type of grant it is so that you’ll know exactly when to record the funds in your own system.
Expert nonprofit bookkeepers and accountants (like those at Jitasa) can help you make sure that your grant funding is recorded properly and at the right time. That leaves your team free to focus more heavily on the grant application and implementation process.
Grant Management Step 5: Tips to Avoid Rejection
Chances are, your organization won’t win every grant you apply for. It would be an incredible feat if you did! Although everyone is bound to receive rejections at some point, you can limit the number of rejections you see by understanding the common reasons why rejections occur.
Here are some of the most common reasons that grantors reject grant proposals:
- The grant proposal doesn’t have detailed research. Research can be tedious and time-consuming. However, grantmakers don’t try to understand why nonprofit’s didn’t put the time into research. For instance, imagine if you had several people sick during the week and didn’t have time to put in the research for a grant. The grantmaker won’t take that factor into their selection considerations as they review your grant proposal. So be sure to delve into the complexities of the grant you are applying for and plan ahead so that you have ample time and available resources to be sure all of the grantor’s questions are answered thoroughly.
- The grant proposal didn’t follow specific instructions. In order to provide an accurate and complete grant proposal, you must thoroughly read its directions. Be sure that you understand them fully before you begin writing. Then, after you’ve written the proposal, double and triple check that you’ve met all requirements. Then, ask a third-party to review it too.
- There were errors in the financial figures of the proposal. Errors in your mathematical calculations, padded numbers (additional, unrelated expenses), and unrealistic budget configurations lead to a misrepresentation of your organization’s plans and a confusing experience for the grantor. That’s why it is important that your financial data and proposed budget are correct and realistic. Enough emphasis cannot be placed on double and triple checking all figures and documentation.
Do you remember in school when teachers would say, “I’ll be able to tell if you leave your work to the last minute”? While students rarely believe this, it’s likewise a valid point when it comes to grant proposals. The reviewers can tell when you’ve rushed through the proposal and they’ll be more likely to reject it. Essentially, in order to avoid rejection in your grant application process, take your time and review your work.
The grant management process may seem overwhelming to many organizations. However, when you put in the right amount of research and hard work, you’ll find the whole process much more manageable.
It all starts with research, which means that you’re off to a good start by reading this guide! If you’re interested in conducting research to boost other aspects of your nonprofit’s financial plan, check out the additional resources below:
- Nonprofit Budgeting: Understanding the Basics [+Template]. As you apply for grants, you should understand how they’ll fit into your overall budget. Check out this resource to learn more about crafting your organization’s annual budget.
- Working with a Nonprofit Accountant: What to Expect. Nonprofit accountants can help you make effective financial decisions based on your budget and documentation. Learn more about how an accountant can help your organization with this comprehensive guide.
- Bookkeeping and Accounting Services Exclusively for Nonprofits. Working with experts in nonprofit bookkeeping and accounting can augment your financial health by helping you make smart financial decisions. Learn how the experts at Jitasa can help!