In my post on August 28th, I discussed financial readiness and outlined the organizational financial records and project financial information that you will need to have ready in order to submit a grant application.
This post provides three additional points for you to consider before launching a corporate and/or foundation grants program at your NPO:
The “25% Rule”
The most common measure of nonprofit organizational efficiency is the percentage of total expenses going to program costs. Charity Navigator, GuideStar, other non-profit ranking services, the federal government and foundations definitely evaluate this percentage.
According to Charity Navigator, 7 out of 10 charities that they evaluated spent at least 75% of their budget on programs and services, and 9 out of 10 spent at least 65%.
The Combined Federal Campaign requires that participating organizations certify that their combined fundraising and administrative costs constitute no more than 25 percent of the organizations’ total revenues. (Note that this calculation differs from that used by Charity Navigator because it is a ratio of admin + fundraising costs divided by total revenue instead of total expense.)
Most foundations expect a similar if not greater level of organizational efficiency. I recently ran across a foundation that requires, “administrative and fundraising expenses of less than 20% of the total expenses of the organization.”
So, if your NPO is spending at least 65% (ideally 75% … or more) of total expenses on program costs, then you might want to consider starting a grants program to secure income from foundations.
Program Readiness
In addition to having your financial house in order, you will also need to have well-established program (or project) goals, activities and metrics in order to seek grant funding.
The Missouri Common Grant Application, referenced in my last post, downloadable here, provides a good example of what will be required. Specifically:
• What are your project goals?
• What activities do you intend to engage in or provide to achieve these goals?
Please provide an in-depth description of the activities/services, including:
1) how much, 2) how often, 3) how long activities/services will be provided
• What are the anticipated short and long-term measurable outcomes that would be
achieved by this grant?
• What is your organization’s evaluation process?
• How do you plan to track and measure the effectiveness of your project?
These goals, activities and metrics need to be included in your grant applications, and if funded, outcomes will need to be included in your grant reports.
Capacity
My final point for you to consider before launching a grants program at your NPO is capacity, both within your program staff and development staff.
Are your program staff members capable of implementing the program according to the plan outlined your grant application? Can they collect and document the outcomes that will need to be included in grant reports?
Do you have the capacity in your development department to work closely with your program staff to define program goals, activities and metrics, and compile results for grant reports? Do you have the time to adequately steward your foundation donors with ongoing communications, meetings, tours, etc.? If you spend time on a grants program, would you lose individual donors because you don’t have the time to steward them appropriately?
And, of course, I strongly recommend that you review these points with your development team. Then, if everyone is on board, you can launch your grant program; and, be sure to check back here for my continuing series on effective grant programs!
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Lynn deLearie Consulting, LLC, helps nonprofit organizations develop, enhance and expand grants programs, and helps them secure funding from foundations and corporations. Contact Lynn deLearie.
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Hank Lewis with Development Consultant Associates has over thirty years as a fundraising consultant and is a specialist in Board and Leadership Development, Capital Campaign, Bequest Program and Major Gifts.