An organization may identify the need for additional funding and determine that obtaining a grant is the solution. Or, a well-meaning board member will tell a staff member to “get a grant,” to meet the funding deficit. Or, a newly formed nonprofit decides that grant funding is their key to success. However, before spending a lot of time and money applying for grants, determining grant readiness is a recommended best practice.
Organizations can use the following questions to determine if you are ready to pursue grant funding for your organization.
Is the organization incorporated as a 501(c)(3) tax exempt organization? While this may seem basic, it is important that the organization has obtained its IRS approval before seeking grant funding. Many foundations and government agencies request a copy of the letter along with the grant proposal
Can your organization demonstrate success? Most funders are seeking to partner with organizations that have a proven track record of success. What can you say about your experience and successes? 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.
Does the organization have a financial management system in place? Generally Accepted Accounting Principles (GAAP) should be used to track revenues and expenditures within the organization. Documenting the use of these principles will demonstrate to a funder that the organization manages its funds well.
Has the organization met its local, state, and federal reporting requirements? Along with tax exempt status come additional responsibilities. At the federal level, nonprofits are required to submit an annual 990 or 990 EZ. This document is the “tax form” for nonprofits. Many states and localities also have documents that must be submitted on an annual basis to maintain tax exempt status.
Does the 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.
Additionally, having the following documents on hand are also beneficial. Often funders will ask for:
Copies of the IRS Tax Exemption Letter
Listing of the board of directors and their professional affiliations
Current Financial Statements, 990 and audit
Current Strategic Plan
Articles of Incorporation and By-laws
Current Organizational Budget
Resumes for current key staff
Publicity received by the organization
Having these documents in one place will make the grant submission process less stressful.