Tuesday, February 5, 2013

Grant Readiness – Checklist

If you’re a $5MM organization and you have a strong portfolio of grants and Foundations, this isn’t for you :).
If you’re an ED or board member venturing into fundraising for a new and emerging nonprofit, keep reading!

We’ve found a baseline of grant knowledge is desperately lacking. Therefore, we’ve created this comprehensive checklist as you think about your organization’s grant readiness.

Have your 501c3 IRS Determination Letter
Although contributions made to an organization between submission of the IRS application and approval of the 501c3 are tax-deductible, most Foundations require that the organization have the 501c3 in hand before applying for a grant.

You’re better off spending those early months building your infrastructure – recruit board members, write board and officer job descriptions, create a first year operating budget, create your website, write your mission statement, roll out your programs – than writing grants.
100% of your board must give
If all your board members aren’t making personal financial contributions, go directly to your next board meeting, do not pass go, and alter your bylaws/pass a resolution that 100% of the board give.   

If your own board members won’t give, why do you expect others unconnected with your work to give?

The 100% of board giving is a critical threshold. Even if some board members make modest gifts, you’re fine. But, get to 100%. 

Foundations usually request copies of your board members and affiliations, so if you have community activists and others who are not wealthy philanthropists, the Foundation will have a context for the total amount given.

Have a Board-approved annual operating budget
We’re always surprised at nonprofits functioning for 3-5 years, but lacking a written operating budget. If that’s you, start with some numbers, talk about it at the board level, commit to something on paper and get a vote. Forecast how much you will spend. Then, forecast how much you can bring in. (You may need to revise it later on, but that's ok!  It's worth the time and effort to later revise.)

Special pet peeve:  when a program officer asks for your annual budget, please don’t tell them how much money your organization has in the bank. Even if it’s a respectable amount. 

True story. As a consultant, we joined on a conference call with a Foundation, when the ED incredulously responded to a request for the budget by quoting (to the penny) the amount in the bank.

We quickly reassured the program officer that the nonprofit had the last 3 fiscal year budgets (at the very least, reflected in the 990s on Guidestar) and that Joe Smith was like every other ED who kept working capital at the front of his mind. (Yes, we did wait until we hung up with the program officer before explaining working capital or 990 to this ED.) 

If your annual budget has recently exploded, you can tell the program officer what you’ve raised to date, your board-approved budget, and your plans to revise to reflect higher actuals.

But, don’t confuse an operating budget for your bank balance.

Have an organizational fundraising plan
Grants aren’t generally awarded when nonprofits can’t demonstrate strong support from the community.

You don’t need a fancy template, but you need strategies laid out. How do you raise funds? What are you doing to reach individual donors? What’s your major gift plan? How many donors do you have? What will happen if you’re turned down from this Foundation? Be able to articulate a plan.

File an IRS Tax Form 990
This is often-to-usually required by foundations. Even if your budget is modest and below IRS standards for submitting a 990, we recommend you submit one.

It signals your infrastructure, grant-readiness and ability to comply with external requirements.

It also prepares you to re-position your lovely operating budget into the square pegs of outside requests – something you’ll get a lot of practice doing when you apply for grants!

Do you have a recent audit?
This isn’t required for all Foundations, but when it is required, don’t ignore it. Foundation requirements aren’t optional. One client thumbed his nose at this requirement, ignored our warnings and applied without an audit, without telling us.

I’m not going to say we cheered when we received the decline letter. But, the program officer quoted the requirements and bolded the audit line, and advised that any future proposal without an audit would not even receive a response. To call the language terse is generous. 

Now, if your first organizational audit will be ready one week after a Foundation’s annual deadline, do contact the Foundation’s staff to see if an exception can be made so you can submit your audit after the deadline.

Otherwise, a nonprofit boldly ignoring requirements makes Foundation staff wonder whether the nonprofit can handle a grant or meet the proposed objectives.

Once you start hiring staff, think seriously about an audit. Without an audit, you’re simply out of the running for several Foundations. And, for some you are eligible for, you’re limited by how much you can request.