Is your nonprofit organization ready to receive funding? Not just grants, but sponsorships, gifts, donations and in-kind contributions. Some organizations believe that simply having a 501(c)(3) is all that is required to receive grants. This could not be further from the truth. Funders require substantial assurances that their financial investment is being placed with a reputable organization. Here are the basic requirements:
State & Federal IRS Filing documentation
Articles of Incorporation & By Laws
Active Board of Directors
– List of officers and affiliations/experience & expertise
– Board meeting minutes
– Board approval to apply for & receive funds (enter contract)
Final annual budget (approved by Board)
– Matching funds and/or diversified funding stream
– Proof of organization sustainability (other revenue generating streams)
– Independent Audit
Scope of service
– Program descriptions – Marketing Material
– Measurable goals and objectives
– Location(s) where services are provided
– Target Audience (age, race, gender, socioeconomic status)
– Service area . – Days/Hours of Operations
Staff qualifications and experience
Ability to pay grant writing consultant up front for services rendered
Why are funders asking for these requirements?
Funders have to screen their applicants. Just like screening applicants for a job, they want the most qualified. These requirements help them to determine an organization’s qualifications.
1. IRS Approved 501 (c)(3) Status – The law stipulates that funders are only approved to issue grants to organizations approved by IRS and issued a section/code that explains the organization’s charitable purpose.
2. Active Board of Directors – Under IRS rules, the board of directors is the decision-making body of the organization. Proof of their involvement demonstrates that the decision-making body is active and carrying out their fiduciary responsibilities. It also ensures the funder that the organization has an entity focused on fundraising, and not just relying on outside sources to keep the organization financially viable. Meeting minutes provide proof of decisions made by the board on behalf of the organization. It should demonstrate forecasting, participation, and strategizing by the board to strengthen and grow the organization. Board member affiliations and professional background helps a funder to understand the organization’s leadership. They give a better picture of who is leading the organization and what type of expertise they lend to decisions and the direction of the organization. Because the Board is responsible for the financial landscape of the organization, both the Executive Director and the Board President (representing the Board) must sign any legally binding contracts. Board approval ensures knowledge of and responsibility of funds disbursed. In the event of any mismanagement the Board is held liable, and can be sued.
3. Final Annual Budget – Funders require the final (not projected) approved budget by the Board. This document speaks volumes about the organization. Funders look at the line items to determine where the organization’s focus is. Are you spending money on salaries? Programs and services? Events? Consultants? How much is the Executive Director’s salary (below or above the state’s average)? How much money is being raised by the Board of Directors? What’s coming in versus going out? This information gives a funder an indication of what they can expect will happen with the monies they would grant.
4. Form 990 – gives funders a snapshot look at the organization’s management of their funds. This document should be filed by every reputable organization, failure to do so raises suspicion of the organization’s transparency and management of funds. An independent audit should be administered by a paid outside agency and not the organization’s CPA or Financial manager.
5. The scope of service – should be clear, concise and succinct. It should provide the funder with an overview of the services and/or products the grant will fund. If an organization is unable to clearly define what it does, a funder will not feel comfortable with investing its funds in that organization. The goals and objectives should be measurable so that the funder will be able to determine whether their contribution made an impact.
6. Demographic information – The organization should be able to provide the demographic information of the program. This information is used by the funder to determine whether or not the services and/products match their funding criteria (population – income, race, gender, etc., program focus, type of services, area).
7. Staff qualifications and experience – much like the interviewing process for an individual applying for a job, the funder (employer) wants to hire the most qualified person (organization) to do the job. Providing the funder with staff qualifications and experience gives them the reassurance that the organization can deliver on its promises because it has the most qualified individuals delivering the services. Years of educational experience, along with a variety of professional experience helps the funder compare competing organizations’ staff to determine who is best qualified to deliver at the standard they feel most comfortable with funding.
8. Ability to pay grant writing consultant up front for services rendered – a grant writer is a consultant like any other professional (Accountant, Lawyer, etc.). It is a well documented misunderstanding that organizations believe grant writers can and should include their fee for developing a grant in the award. Not only is this illegal, but it is disrespectful to the professional. Would you ask an accountant to invest hours presenting your organization’s financial solubility, with the caveat that “he’ll get paid if the IRS doesn’t fine them?” No you wouldn’t. Writing a grant takes an enormous amount of time, research, and effort to effectively represent your organization. Grant writers are expected to be paid for services rendered, not based upon whether or not your organization receives an award. Asking the grant writer to obtain their fee on the back end “IF” (as there is no guarantee the grant will be awarded) they win the award is essentially asking the grant writer to work for free. This could be considered a kick back in some instances, and is illegal. But for the record, this is just poor professional business practice. The rule of thumb is: If you cannot afford to pay a grant writer, you are not ready to receive a grant.
These are the basic requirements before a funder will consider you eligible for funding. However, competition for grants is fierce and therefore determined by a ranking system. The more the organization meets the criteria of the funder, the more likely they are to receive funding. The criteria are outlined in their Grant Guidelines. Remember, the more of these components that you have, the better your chances are in receiving funds, as they speak to your ability to run a strong, meaningful, and sustainable organization.
NOTE: Most organizations typically apply for grants at Step Three without having the components of Steps One and Two in place. Funders view this negatively as the components in Steps One and Two help to establish the foundation for a successfully ran organization.