Winning a grant in the early 21st century is tough: fewer are available and more nonprofit agencies are pursuing each of them.
Add in that donations are typically coming in lower and slower – and that client bases grow, but program fees can’t – and a won grant is more important to the revenue stream than ever before.
But after the grant is won, the real work begins. Your agency needs to deliver whatever it promised in the grant application, and it often needs to report to the grantor on funds that are used.
In the grant process, there are at least two opportunities to assure the grants work both for the giver and the recipient. First is when the application, “the ask,” is made. It should be crafted to best facilitate the needs of both parties within the grant application context.
Second is during the grant period itself. The minimum level of control and reporting is defined in the grant documents, but the wise agency will look beyond these and report its progress with even greater frequency.
“It makes them feel more part of what is going on,” says Dennis Kennedy, the CFO of Auberle, a large social services agency outside of Pittsburgh, Pa. “Furthermore, if you are staying in touch on a regular basis and, for some reason you are having trouble launching programs that would fully utilize those funds, it is less of a rude surprise to them later.”
Grant funds can be viewed in three categories: Unrestricted, temporarily restricted and permanently restricted.
Unrestricted funds are monies that the donors have not required to be spent upon specific programs or efforts, or within defined time frames. Often these are individual donations or proceeds from special events that have been advertised as benefiting the agency in general.
Occasionally, some grant funds may go directly to pay for general operating expenses as defined in the grant documents, but more often grant funds are subject to some restrictions.
Temporarily restricted funds are constrained either by a donor-specified purpose or a time period.
In the case of a purpose restriction, for example, a donor may give $10,000 toward buying office equipment. If the agency can buy the equipment for $8,000, the remaining $2,000 often can be added to the general operating fund.
An example of time-restricted funds may be an individual donation of $2,500 for agency employees to receive this year’s continuing education. The first of next year, unspent funds from the $2,500 may be moved from temporarily restricted funds to the general fund.
An example of permanently restricted funds might be an endowment for a music education department or a donation specified to pay only for adolescent medical services in a full-service hospital. Regardless of the needs in the other areas of these institutions’ operations, those particular gifts must be used exclusively for music education in one and adolescent medical services in the other.
Often, permanently restricted funds are further limited in that the principal – the donation itself – cannot be spent. Instead, only the proceeds earned from investing the principal may be allocated directly to the granted program.
Consequently, it is important to accurately control and report on the uses of restricted funds. Control and reporting begins with “the ask,” Kennedy says.
“When seeking donations, the agency should try to craft the donation as open as possible,” he says. “The agency will be much better off.”
Reporting and controlling restricted donations can be further complicated when more than one restricted grant is won for a single program. Frequently, each grantor will have different restrictions. Some will be more difficult, less “open,” than others.
“It is prudent to apply expenditures to the most restrictive funds first,” Kennedy advises. “In other words, if you incur an expense that might apply to three different [restricted] funds, each more restrictive than the other, apply it to the most restrictive first. Later on, it might be more difficult to find the fit.”