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Grant Proposals: An Invitation To A Nonprofit Funder Dialogue

Person writing on a paper

Words, once they are printed, have a life of their own.

 

Carol Burnett

Many foundations ask potential grant recipients to submit proposals, which can be valuable sources of primary information as well as invitations to discuss how nonprofits can make a difference. A proposal allows a nonprofit to describe the specific conditions in a community, population group or issue area that will be improved through funding, and also demonstrate how their organization will have an impact. While writing proposals, developing budgets and providing other information can seem time consuming and even bureaucratic, it is actually an excellent way for nonprofits to showcase their strengths and accomplishments, and for foundations to reflect carefully about how to invest their philanthropic resources.

For both funders and nonprofits, grant proposals can be invitations to further dialogue. Likewise, poorly constructed proposals may leave such bad impressions with funders that good ideas or diamonds in the rough may be overlooked. Given the interdependence of funders and nonprofits, both need to pay careful attention to details, mission alignment and organizational strengths in writing and reviewing proposals.

Many foundations have customized proposal forms. However, there are components that appear frequently, and both foundations and nonprofits can and should use these proposals to their best advantage. On the following page, we describe key proposal sections and questions for both foundations and nonprofits to consider.

Chart  explaining proposal component

Types of Grant Support

Each foundation will have its own funding patterns and priorities. These differences will include how the foundation chooses to support its grantees. As foundations make decisions about what types of grants to make, and nonprofits weigh what kind of support to request, the following considerations may come into play.

General operating grants, sometimes called unrestricted support — These grants, as the name implies, are broad and without restriction as to how they can be spent by the nonprofit. These grants are highly desirable for nonprofits and can be very powerful tools for foundations that are focused on building specific fields, communities or types of capacity.

Considerations

  • General operating grants allow nonprofits to put a grant to work in the most flexible way — covering otherwise uncovered costs, responding to emerging conditions or taking a risk on an innovative program or technology.
  • Some funders shy away from these grants due to a sense of discomfort over loss of control, but many other funders have found that these grants have great impact as they allowed trusted nonprofits to take the lead in solving pressing problems. This is particularly true as most foundations do not operate their own programs — it is through nonprofits that foundations accomplish their missions.
  • Unrestricted grants have a lower overhead cost as the reporting is more straightforward and will not require as much detailed accounting (at a line item level).

Project or Program grants — These grants are restricted to a particular program or project. Many funders rely on these grants in order to track more closely what foundation funds have supported. For programs within large nonprofits (big hospitals, universities, for example), these can be useful tools for ensuring that grant funds have the desired impact.

Considerations

  • If a foundation has a very specific theory of change or is interested in funding only very specific activities (for example, after-school programs with a focus on increasing competency in mathematics), program and project grants may be most appropriate.
  • For nonprofits, program grants may be challenging if they encounter a situation where they are only partially funded for a project, but still expected to deliver the full range of services.
  • Some funders will only fund a nonprofit for a set period of time (or number of proposals) and thus nonprofits are then left to continually find new sources of funding.

Capacity-building grants — These grants are generally aimed at supporting a nonprofit’s internal workings, rather than a particular project or stream of work. Capacity-building grants could include providing the initial funding to hire a development director or expand fundraising capacity in other ways, enhancing a nonprofit’s ability to measure and evaluate its impact, or other kinds of professional development training for staff.

Considerations

  • hile many funders expect nonprofits to be able to evaluate their programs, raise money from diverse funding sources, and/or recruit, hire and train highly qualified staff, few funders provide grants to actually build those capacities within nonprofits.
  • Nonprofits are often graded on their overhead ratios and assumptions are made about how efficient a nonprofit is based on a lean administrative budget, but there are costs to running a sophisticated nonprofit, in both time and financial resources. Having dedicated funding for those administrative functions such as evaluation provides a nonprofit with those key resources.
  • Investing in capacity building can help a nonprofit better position itself for future growth and stability.

Endowment or operating reserve grants — These grants help nonprofits build their endowments and/or operating reserves. The funds may not be spent immediately, and restrictions may be placed on these grants such as using only a certain percentage per year, the income alone or being used (in full) only if certain criteria are met.

Considerations

  • Nonprofit finance experts recommend that nonprofits have a minimum of three months of operating reserves (enough unrestricted cash in the bank to cover three months of full operational costs), but many nonprofits do not.
  • For funders, funding endowments may feel as though grants are just being put aside and not “to work.” However, these kinds of grants actually help insure a nonprofit’s future, as well as help hedge against emergencies.
  • For nonprofits that own buildings and/or significant program equipment, having an adequate capital reserve is key to being able to handle sudden needs such as replacing a roof or fixing water damage.

Capital grants — These are grants that are designated for big building or renovation projects (brick-and-mortar) or, in some cases, big infrastructure expenses such as a new phone system or database structure.

Considerations

  • From a funder’s perspective, if they are a relatively small foundation, these grants can feel like a drop in the bucket in terms of an impact.
  • Not every foundation may feel like it has the expertise to assess whether the nonprofit really has the capacity to raise all the funds needed for the project and/or complete the building or renovation project that is proposed.
  • For funders interested in (semi)permanent recognition, making a major capital grant, with naming opportunities, is a way of establishing a concrete legacy.

While there are many approaches to formulating or reviewing a grant proposal, our team of philanthropic consultants can work with you to determine how to best reflect your intentions and the positive impact you wish to achieve. Whether you are a funder looking to implement or improve your proposal review process, or a nonprofit working to better articulate your purpose and impact, we are equipped to help you meet these needs.

For more information, please contact your advisor.

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