Is That Grant Worth It? A Guide for Non-Profits

Your non-profit invests significant time and resources into writing grant proposals. Receiving a "yes" is a moment of celebration. But before you uncork the champagne, it's crucial to pause and do your due diligence. Accepting a grant without careful consideration can sometimes lead to unexpected administrative headaches, financial strain, and even IRS scrutiny.

Small grants can cause big problems

Both new and established non-profits can fall into the trap of a problematic grant. Smaller or newer organizations are particularly vulnerable, but even larger, growing non-profits need to be cautious. As organizations expand, they often seek new programming opportunities, which opens the door to a wider range of grants. Some of these may fall outside the organization’s core expertise.

Even a seemingly small grant can come with significant administrative strings attached, such as complex and extensive reporting requirements. Your team may not have the experience to handle this, or you might lack the internal processes needed to collect the required data. Grants that pull your organization away from its original mission can also create issues, potentially causing the IRS to question your exempt status.

Understand the true cost of acceptance

Before your organization accepts any grant, take the time to review the full spectrum of potential costs.

Financial Costs

A grant might not cover all the expenses required to complete a program. Your non-profit could be left covering costs that are not allowable or reimbursable under the grant's terms. It’s essential to perform a thorough cost-benefit analysis. Calculate every possible expense against the grant amount to see what its actual financial impact on your organization will be. This will help you determine if the grant is a net gain or a hidden drain on your resources.

Opportunity Costs

Beyond the direct financial implications, you must also consider the opportunity cost. If a grant requires your organization to cover unreimbursed expenses, think about how that money could be used elsewhere. Could you achieve a greater mission-related impact by investing those funds in an existing, successful program instead of a new one?

Staffing is another critical factor. Do you have the personnel to manage the new workload, or will you need to hire additional staff or recruit more volunteers? A new grant can stretch your team thin, pulling them away from other important duties.

A better approach to grant applications

It might feel counterintuitive to decline financial support, but it’s a necessary part of smart strategy. If a grant’s terms demand resources that could be better used elsewhere or if they threaten your non-profit’s core purpose, it's often wiser to decline the offer.

To avoid wasting time on unsuitable applications, consider implementing a more rigorous screening process before you even apply. This proactive approach ensures you only pursue grants that truly align with your mission, capacity, and financial strategy.

Let's find the right path for you

Navigating the world of grants requires more than just good proposal writing; it demands strategic financial planning. If you need advice on managing grants or growing your non-profit’s revenue in a sustainable way, we're here to help. Contact us to ensure your funding strategy supports your mission for the long haul.