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Most not-for-profits believe they cannot afford to turn down offers of financial support. At the same time, such organizations should not blindly accept funding simply because it is offered. Some grants may come with excessive administrative burdens, cost inefficiencies and lost opportunities. This requires the need for evaluation.

Administrative and Other Burdens

Smaller or newer nonprofits are at particular risk of unexpected consequences when accepting grants. But larger and growing organizations also need to be careful. As organizations expand, they usually enjoy more opportunities to widen the scope of programming. This can then open the door to more grants, including some that may be outside the organization’s expertise and experience.

Even small grants can bring sizable administrative burdens — for example, potential significant reporting requirements. There could be a lack of staff with the requisite experience, or the lack of internal processes and controls to collect the necessary data.
Grants that go outside your organization’s original mission can pose problems, too. For example, they might cause you to face IRS scrutiny regarding your exempt status.

Costs vs. Benefits

As for costs, a nonprofit might incur expenses to complete a program that may not be allowable or reimbursable under the grant. As part of the initial grant research, be sure to calculate all possible costs against the original grant amount to determine its ultimate benefit to the organization.

If the decision is made to move forward with the grant, be sure to analyze any lost opportunity considerations. For unreimbursed costs associated with new grants, consider how else the organization could spend that money. Also think about how the grant affects staffing. Are the staff resources in place, or will there be a need to hire additional staff? Is there more mission-related “bang for your buck” if the funds were spent on an existing program as opposed to a new program?

Quantifying the benefit of a new grant or program can be equally (or more) challenging than identifying its costs. Assess each program to determine its impact on the organization’s mission. This will allow for answering critical questions when evaluating a potential grant.

Over the Long Term

If your organization has lost grants due to economic changes, you’re probably tempted to welcome any new funds with open arms. However, it pays over the long term to scrutinize grants before you accept them. Contact us if your nonprofit is trying to grow revenue and needs fresh ideas.