Many professionals in the world of nonprofit financial management rely upon grant funds to maintain their operating budgets (and other budgets, too.) If your organization depends heavily on grants, it’s time to find out what funders REALLY look for in a nonprofit. The better you can align your grant application to what they are looking for, the more you increase your chance of a successful award.
A report entitled Social Solutions: Foundation Report Study examined the metrics by which foundations and granting organizations determine which nonprofit organizations to awards funds. The results offer insights into what foundations and granting organizations really look for when they review your applications. Get ready for a few surprises; their responses are eye-opening.
Three Surprising Considerations for Funding
Those responding to the survey agreed almost unanimously on the main consideration for granting an award: IMPACT.
98% of those responding to the survey picked “impact” – as in the award they gave would make an impact on the project or people – as the most important consideration for funding.
In second place is MISSION. How well does the nonprofit state its case that its mission aligns with the foundation or granting organization’s objectives?
Lastly, nonprofit legal status is cited as the third most important consideration. This may be surprising to many but foundations are inundated with applications from organizations who either lack legal status as nonprofit organizations or who fail to provide the requisite proof of their status. In that case, their application may be immediately discarded, putting them out of consideration for any grant funds.
How Can You Evaluate Impact?
Impact wasn’t even questioned as THE most important thing the granting organizations looked for in the applications from nonprofits. But how do they measure impact? Impact is measured against the following criteria:
- Outcomes
- Detailed data
- Consistency to mission
- Outputs
- Community
- Financials
- And other criteria
Other things that can demonstrate the impact that your nonprofit makes are clear reporting and strong community outreach. Both are seen as a sign of commitment and higher impact.
Communications around both project and organizational goals are also important. Funders want to be sure that nonprofits are utilizing their grants in ways that help them achieve their state mission. Public-facing communications, good annual reports and other marketing materials help the granting organizations see that communications are important to your nonprofit.
The Importance of Detailed Reports
Nonprofit financial management includes the preparation of the annual report and other documents These reports are deemed very important by foundations and granting organizations, so taking the time to ensure that yours are error-free and clearly written is vital.
Reports from your nonprofit to the foundation after a grant is received are equally as important. The foundation is comparing your reports to your application to see how well you’ve matched your stated objectives to what has actually occurred. And of course, they want to know how their money has been spent, and what potential impact it has made.
Donors Prefer Stories
No matter what the size of the foundation or granting organization, all preferred to see stories (82%) over other forms of reports. Stories paint a great picture of how funds have made a difference A variety of documents ranging from spreadsheets to narratives can all tell the story of how the funds were used, but it’s up to you to frame the narrative.
Start Early to Prepare Your Report
Nonprofit financial management professionals understand the importance of early and thorough preparation. It’s never too early to think about how you are going to prepare a grant report.
Consider all of your options when you receive grant funds. You may want to photograph or videotape events, record individual stories of who was impacted by the foundation’s gift and more. This information can fill out the report so that your organization is well-prepared to respond to a foundation’s request for information.
Get Your Paperwork Ready
Lastly, about that nonprofit status – have copies of your incorporation papers and nonprofit status ready to add to the grant application. Don’t leave them out. Foundations must have them to verify that your organization can make a legitimate claim to nonprofit status. Keep several photocopies on file for occasions when foundations want hard copies and add a scan to a shared drive so that others in the company can add it to their foundation applications when needed.
Takeaways for Nonprofit Financial Management
In sum, granting organizations and foundations respond best to:
- Nonprofits who have their paperwork in order – including proof of nonprofit status and incorporation
- IMPACT statements and tracking so that you can prove how their gift is making a difference
- Clear, concise reports that demonstrate 1) communication to the public and 2) communication back to the foundation on how money is spent
- Stories to show how the funds are fulfilling your mission
- Thoroughness
All of this is within your power to provide to the foundation offering grants. With additional work and preparation, you’re well on your way to improving your ability to secure more funds.
Beck & Company
Beck & Company is an independent certified accounting firm offering accounting and tax service for nonprofits, nonprofit financial management, auditing services and more. Since 1987, we have helped many nonprofits in the Washington D.C. area and along the Eastern seaboard with their accounting and financial management needs. We provide audit, tax, accounting, and consulting service that addresses all aspects of a small to mid-sized nonprofit organization’s business. Contact us or call 703-834-0776 x8001.