We receive phone calls and emails on an almost daily basis asking about grant writing services. Unfortunately, all too often, after a brief phone conversation, I have to tell the individual that their organization is not “grant-ready.”
To be grant ready, an organization needs to have its nonprofit status from the IRS or, at the very least, a fiscal sponsor. Most funding sources will not give to an organization without 501(c)(3) tax exempt status because according to their agreement with the IRS, their funds can only be given to recognized nonprofit organizations. Sometimes, when an organization is in the process of applying for its 501(c)(3) status, a fiscal sponsor can be used. A fiscal sponsor is a recognized nonprofit that agrees to manage the new organization’s funds, this is usually done for some fee. However, some foundations will not consider funding an organization that operates with a fiscal sponsor. Foundations usually request a copy of the official IRS letter indicating tax exempt status and those that do not request it will use a sophisticated database to verify the organization’s tax status.
- So, first item on the checklist is to obtain 501(c)(3) tax exempt status.
Next, the organization needs to be able to demonstrate success. In other words, what has your organization accomplished? For many, this question poses a problem…. “we haven’t been able to accomplish much because we don’t have funding, so we need funding to meet our mission.” For new nonprofits, it is important to discuss how/why your organization is unique and how it will be approaching the issues you have identified. It should be noted that new and emerging nonprofits will often find it difficult to obtain grant funding until they are able to document some success. Foundations will often consider a nonprofit a new organization for three years. During this time, the organization should seek funding from individual donors and engage in other fundraising activities. Another strategy for new nonprofits is to identify local foundations that can relate to your work in the community, talk with them and explain your mission and vision. Additionally, new nonprofits will also want to seek out funding sources that indicate they will give to “start-up” organizations.
- Next, develop a portfolio of successes and accomplishments.
When a funder provides grant funding, they are taking a chance…a chance that you will manage their funds appropriately. For this reason, many funders want to ensure that your organization has an effective financial management system in place. Specifically, they are looking to see that you are using Generally Accepted Accounting Principles (GAAP) to manage and track both revenue and expenses within the organization.
- Set up financial management system.
Has the organization met its local, state and federal reporting requirements? Many local and state governments require an annual report from all nonprofits in their jurisdiction. It is your responsibility to know the requirements in your area and to abide by them. All nonprofits are required to file an annual 990 with the IRS. The 990 is essentially, a nonprofit tax form. It should be noted that small nonprofits can file a short form; the important thing is to ensure the report is filed on an annual basis.
- File annual government reports.
Does your organization have a clear mission statement? Organizations need to have a clear sense of their purpose, in other words, they need to ask themselves “why do we exist.” Then, identify potential funding sources that align with their mission. Mission drift occurs when organizations begin chasing dollars instead of focusing on obtaining funds to support their purpose.
- Revisit the organizational mission statement annually.
These tips will help your organization prepare for successful grant submissions and grant funding.
Do you need help putting any of these into place? Does your organization need an assessment of its grant readiness? Contact us, we can help!