For nonprofits, it can be hard to turn down funding. You have programs to run, people to serve and expenses to cover. When a new grant opportunity comes along, the natural reaction is often to ask, “How do we get it?”
I would encourage you to ask a different question first:
“Does this funding actually align with our mission goals?”
Not Every Grant Is Worth Pursuing
Across my career, I’ve seen many nonprofits go after any dollar they can get in the door, only to find out later that the funding didn’t fit what they were trying to accomplish. In one case, a nonprofit hired an industrious grant writer who was very successful at securing grants. The problem was that the organization had not given that person enough context about its programs or capacity, and several of the grants the writer secured came with requirements the organization simply could not meet. Getting the funding was not really the win it appeared to be.
Before pursuing or accepting grant funding, take some time to truly understand what comes with it.
Does the funding fit your mission and strategy?
Start with what the grant is asking you to do. Does it support a program or priority that already fits your mission? Or are you considering changing what you do because funding happens to be available?
There are times when new funding creates an opportunity worth pursuing. But the availability of money should not be the only thing driving the decision. The board and leadership team should understand how the grant fits into the organization’s broader goals like mission impact and revenue strategy.
That also means thinking beyond the grant period. If the funding pays for a new program, new staff or additional services, what happens when the grant ends? You do not necessarily need recurring funding for every project, but you should know what you are committing the organization to before you begin.
What will it take to administer the grant?
The dollar amount on the award is only part of the equation.
Some grants are relatively straightforward. Others come with extensive documentation, reporting, tracking or compliance requirements. Those requirements can mean additional staff time, new processes, outside professional costs or audit considerations.
That does not mean complicated funding is bad funding. If the grant meaningfully advances your mission and your organization has the infrastructure to manage it, those requirements may be well worth it.
But understand the administrative cost upfront. A $100,000 grant that requires a significant amount of staff time and new compliance work does not have the same impact as $100,000 with very little administrative burden.
Can your cash flow support it?
Timing is another piece that can easily get overlooked. With some funding arrangements, the organization has to incur eligible expenses before requesting reimbursement. That means the grant may ultimately cover those costs, but you still need enough cash available to pay them first.
If a significant portion of your funding works that way, the timing matters. How long will you wait for reimbursement? How much will you need to spend before the cash comes in? Can you still keep the lights on and make payroll while you wait?
A grant can look great in the budget and still create pressure on your cash flow. Understanding when the money will actually arrive is just as important as knowing how much you have been awarded.
Is the investment truly worth it?
Finally, consider how the grant fits into your longer-term funding strategy.
If a one-time grant requires your organization to build entirely new processes, add substantial reporting requirements and spend considerable staff time managing it, you may decide the award is not worth the effort.
On the other hand, if the grant could become a recurring source of funding, investing in those processes upfront may make a lot more sense.
There is no single formula that tells you whether a grant is worthwhile. The important thing is to look beyond the award amount and consider the full relationship between the funding and your organization.
Grant funding can be an important part of a healthy nonprofit revenue mix. Before you pursue the next opportunity, make sure you understand what it will ask of your organization and whether that tradeoff makes sense for the work you are trying to accomplish.
Looking for more nonprofit resources?
Learn how to build a Grant Compliance Checklist to stay audit ready, distinguish exchange transactions from contributions, or access our Nonprofit Board Governance Framework to help strengthen your nonprofit’s governance practices.
If you are evaluating a new funding opportunity or working through how funding may affect your organization’s financial reporting, compliance or audit requirements, Wegner CPAs’ nonprofit advisory team can help you think through the broader financial impact and determine what your organization needs to manage the funding well.
