Is Your Organization Grant-Ready? Nine Issues for Emerging Nonprofits

Early on in the evolution of most nonprofits, operating costs exceed available revenue and at that point, most organizations begin looking for grants to sustain their programs and grow their core operating income. Small, emerging nonprofits face a chicken-and-egg problem – without grants they can’t grow, but without growing they can’t compete for grants. So how can leaders determine if their organization is ready to begin intensive grant seeking?

First, it’s important to note that here I’m using the term “grant” in distinction to the words “gift” and “donation.” Smaller, younger nonprofits might well be in a position to begin growing their donor base and securing donations and a blend of small, mid-sized and large gifts. But as I’m using the term, a grant is given by a foundation, corporation or government agency, generally through a competitive process that includes a formal application and commitment to specific terms for the grant’s use. With a paltry few exceptions, grants are not gifts to the organization to do with as the organization sees fits. They are, instead, funds committed to uses specified in agreements that reflect the stated programmatic or other use of funds. Grants confer duties to the organization – the duty to pay only for identified purposes, the duty to track performance and outcomes, the duty to account for expenditures through sophisticated financial management systems and the duty to report to the funder on work performed and objectives achieved.

With the foregoing caveat, nonprofit leaders can take inventory of their current status to determine their grant readiness. If you have considered seeking or been told by a board member or other well-intended supporter, “You should get a grant for that!” following are a few items you’ll need to have in place if you want to compete with other organizations for critical grant support.

  1. Tax-exempt determination and evidence of current good standing
Example of IRS determination letter

This might seem obvious, but all grant writers have been approached by start-up organizations with pending applications for nonprofit status, or organizations with federal recognition but lacking essential items. At a minimum, to compete for grants your organization should have obtained IRS approval as a 501(c)3 or other nonprofit type. You should have a determination letter issued by the IRS and you should also have a determination letter from your state’s Franchise Tax Board or equivalent agency. In most states, the Secretary of State’s office will provide you with evidence of good standing to demonstrate your organization’s compliance with filing and declaration requirements. You should have all these items in place. Most grant funders will require proof of nonprofit status at the time of application and many will verify the authenticity and current status of your nonprofit standing through online databases.

  1. Mission Statement

A mission statement should be a single sentence long and should capture your organization’s overall purpose. It should answer the question, “Why do we exist?” The mission statement is an important element in an organization’s branding. It should be the first thing a representative mentions when describing the organization’s scope and services. It will be required in all grant applications and it will help you to determine whether your nonprofit aligns with the intent of prospective funders. A well formulate mission statement also helps leaders adhere to their purpose, rather than chasing dollars. The phenomenon known as “mission drift” occurs when organizations begin to fit themselves to any funder available, rather than seeking out funders that address the mission for which the organization was formed.

The following is an example of a clear, complete, compelling mission statement:

“Catholic Charities Diocese of San Diego exists to witness actively on behalf of the scriptural values of mercy and justice, to acknowledge the sacredness of the human person by working to enhance the quality of life of each individual, and to advocate for a just society by calling men and women to action on behalf of the poor.”

  1. Vision & Values Statements

Your organization’s vision differs from your mission statement in that the latter describes the organization as it would appear in a final, ideal state. It answers the question, “If you achieve 100% of your strategic goals, what will the organization and its service community look like?” A strong vision statement is inspirational and aspirational, sharing a picture of your success and setting a standard for your growth and ambitions. Oxfam’s vision statement is an excellent example:

“A just world without poverty”

A values statement describes what the organization believes in and how it interacts with its clients, funders, partners and the community. In a values-led company, values are the moral compass for leadership and staff. The values statement guides decision-making and sets a standard to measure its actions. A values statement defines the organization’s core beliefs and principles and help to shape its internal culture. A good example is Buffalo State College’s statement of core values:

“We, the Buffalo State College community, are committed to:

  • Access to quality public higher education.
  • Quality teaching and learning.
  • Opportunities for individuals to realize their full potential.
  • The rigors, joys, and fulfillment of intellectual discovery.
  • Supportive and collegial relationships.
  • Respect for diversity and individual differences.
  • Service to society.”

A values statement can include commitments to diversity, social responsibility, transparency and other critical components of a 21st Century nonprofit.

Many grant applications will ask for vision and values statements in addition to the mission statement. Additionally, the vision and values statements can help form a standard organization narrative.

  1. Program Descriptions

Whether you provide a single service or many, your programs should be named and well described. Describe your target population, the hours and days of your services, the staff who provide them and what, precisely, is provided. Describe the qualification process for recipients, the location where services are provided, the benefits to those you serve, staff qualifications and the total volume of your activities. Also include a list of partner organizations and other resources leveraged from the community, as well as the program’s goals, objectives and outcomes achieved.

  1. Demonstrated success

    Example of outcome tracking metric

Successful grant seeking follows proven capacity. Donors and supporters are more likely to get behind a good idea than grant making institutions. Institutional grants are made to organizations with a demonstrated track record of success in managing funds and producing outcomes through well-documented services, strategies and/or interventions. Your organization may have received awards and recognitions and those do matter, but they are part of your general narrative. Grant makers also look for success in the implementation of activities to fulfill your mission.

For each service you provide, especially the program for which you are seeking support, you should be able to document the number of people served and some tangible measure of the benefits they received. Ask yourself how your recipient population is better off for the service you provided and answer that question in quantifiable terms. Document before and after conditions to the greatest extent possible and note how you measure success.

  1. Financial management system

At a minimum, your organization should ensure that Generally Accepted Accounting Principles (GAAP) are used to track revenues and expenditures within the organization. Create financial policies and procedures that document the use of these principles and ensure that grant revenues are associated with permissible costs and comply with all relevant federal and state regulations governing nonprofits.

  1. Meeting local, state and federal reporting requirements

Nonprofits are required to submit an annual 990 or 990 EZ federal tax return. This document is the organization’s tax form and it is not optional. Many states and localities also have documents that must be submitted on an annual basis to maintain tax exempt status. Ensure that all tax filing documents are current and available for inclusion with grant requests. Nonprofit filings are public record by law, as are all other internal governance records, including board meeting minutes, financial statements and audits. Virtually all grant makers will require demonstration of compliance with minimal compliance standards and many will require independent audits, board records and more.

  1. Boilerplate materials

If you have met all of the above conditions, the next step in becoming grant-ready is to assemble all of your standard documents, attachments and accompaniments in a master file. The file should include:

  • Tax exempt status letters, both state and federal
  • Articles of incorporation and bylaws
  • Board roster with professional affiliations and contact information for all board members
  • Bios and resumes of key staff
  • Current organizational budget
  • Separate program budgets, if applicable
  • A list of all funding sources and levels
  • An organization chart
  • For mid-sized or larger organizations, a financial audit for the most recently completed fiscal year: for smaller organizations in their first few years of operation, complete unaudited financial statements for the most recently completed year
  1. Additional materials

Not all organizations will have a robust set of marketing and promotional materials, but to the greatest extent possible you should assemble a file containing:

  • Any previous grant applications
  • Newsletters, brochures
  • Links to or copies of any news coverage or public recognition
  • Annual reports
  • Strategic plan

For a fantastic example of organizational literature, click here.

If your organization has addressed all nine of these key elements of grant-readiness, chances are there is a grant source for you. If you are in the process of meeting all of the above standards but could use guidance, an outside consultant might help. Consider having a third party review your readiness before seeking a contract grant writer. A good grant writer will tell you if you need to do more groundwork to make yourself grant ready and many can help in the process or refer you someone else for that purpose. Doing the work up-front is worthwhile and will save countless hours of chasing down missing materials on the back end.