February 04, 2018

How do you know which grants your organization should apply for? 

To use your limited resources effectively, it's important to pursue only those opportunities that fit your organizational and programmatic capabilities. Pursuing grants your organization is unlikely to win doesn't make sense. On the flip side, there are grant opportunities you shouldn't apply for because the cost of implementation is too high, either monetarily (e.g., the funder will not cover 100% of the implementation costs) or programmatically (the grant might pull your organization away from its mission). 

There are many factors to consider when deciding whether to respond to a grant opportunity, from the difficulty of the grant application to the likelihood you'll be able to put forward a competitive application. 

The three factors below touch on issues that can easily be overlooked when there's pressure to bring in new sources of grant funding. 

THREE FACTORS TO CONSIDER WHEN DECIDING WHETHER TO SUBMIT A GRANT APPLICATION

1. Is the Donor Funding Organizations Like Yours?

Reviewing a funding opportunity announcement is an iterative process. The first time you read through a call for proposals you may be scanning for the eligibility requirements and the application deadline. The second time through you may focus on the goals and objectives of the grant program. The third time through you may be looking at the specifics of the application process and what you will need to do to apply. 

The steps taken so far have focused entirely on the funding opportunity announcement. If you make your decision based solely on the funding opportunity announcement, you may decide to apply. If the application seems manageable, the subject matter seems like a fit, your organization is eligible, and the award amount is what you are looking for—why not apply?

Maybe there is no reason not to move forward.

On the other hand, if you research the donor, you may learn information that indicates it might not be such a great opportunity after all.

Example: On the funder's website, you may discover that, although the funder says it funds projects nationally, 90% of the funder's past grants have gone to organizations within the city or state where they are headquartered. You may also learn that, although the funding opportunity announcement says the grant range is from $25,000 to $500,000, they've never awarded a grant larger than $150,000 in the last ten years except to one large, local nonprofit. The average grant size is $50,000. This is a concern because your organization has determined that grants under $100,000 are not worth pursuing because the administrative costs are too high relative to the grant amount. In addition, looking at the donor's funding history, you see they rarely give grants to organizations of your size, instead favoring much smaller organizations. 

With this information, should you still apply? Maybe, maybe not. If you do apply, based on information in the scenario above, you should categorize this opportunity as a low-probability win. You might win an award, and maybe it's worth throwing your hat into the ring if the opportunity costs are low enough (i.e., it's an easy application that will require few resources to pull together). If the application process is lengthy, or will require lots of time on the part of several staff members, it may not be worth it.

The bottom line: Looking carefully at the funding opportunity announcement is the first step when considering whether to apply for a  grant. To make an informed decision about whether an opportunity is worth the effort, you should research the funder's giving patterns to see if they have historically funded organizations like yours.  Look at the funder's website to read about their current and past grantees. If the funder does not release grantee information on its website, if it is a US-based foundation, look at its IRS filings (Form 990) on Guidestar. On the 990, you'll find the names of grantees and grant amounts listed (some foundations also add a short description of the purpose of the grant).

You can learn more about using Form 990s in the Peak Proposal's post Researching Potential Funders: Tools for Prospect Research.

2. Is there a strong fit between the funder's programmatic interests and your organization's mission?

The emphasis here is on "strong fit." It is not enough if your organization does work loosely related to the funder's programmatic interests. Your organization's programmatic goals should closely align with the donor's funding priorities.

Example: A donor is interested in funding programs for at-risk children. Your organization serves orphans. At first glance, it appears worth applying for a grant. However, looking at a donor's general area of interest is only the initial step in the vetting process.  The next step is researching the donor's funding priorities. In this example, let's say the funder is interested in funding job training programs for teenagers with disabilities. In the application guidelines, the donor states that grants will be given to cover programmatic costs only, no overhead expenses, and applicant organizations must have a track record of success in delivering services to disabled children.

Should you consider this funder if your organization is a residential facility for orphans and you're seeking funds for basic operating expenses like rent and utilities? 

The answer should be an obvious no. This is not a funder that you should pursue. Even though the funder has an interest in vulnerable children, and your organizations serves vulnerable children, the funder is interested in a different group of beneficiaries than your organization serves. In addition, there isn't a match between what the funder will fund (program costs) and what your organization needs (funds for operating costs). 

Could there be a scenario when it still might be worth applying to this funder even though it's not a strong match? Yes, there could be cases when it would be worth submitting a grant proposal even if though it's not a perfect fit on all fronts. If your orphanage serves children with disabilities, and you're interested in developing a job training program to help them become financially independent when they age out of the orphanage, there's an opening. However, this only addresses the programmatic level. On the financial side, you'll still need to weigh the implications of potentially winning a grant that will not cover your operating expenses. If you have money to pay staff to work with your disabled residents, that's a benefit, but if you don't have other sources of funding to pay for your basic operating costs, the grant may ultimately cause your organization more financial strain than it relieves. Additionally, if serving the disabled is a new area for your organization, and the donor clearly wants to fund organizations with an established history of managing programs for the disabled, your organization will not be competitive.

The bottom line: Before deciding whether to apply for a grant, look at all aspects of the donor's grant program.  Is there a match between what they are willing to fund and what you need covered (e.g., operating expenses, staff salaries)? If a donor is unwilling to cover a portion of your overhead costs—and you don't have access to unrestricted funds to cover those costs—-the funding opportunity may not be worth pursuing.

3.  Can Your Organization Meet Match Requirements?

Many foundations and government-sponsored grants require applicants to contribute matching funds. The matching funds can come from a variety of sources such as other grants or donations from individuals, corporations, or the local government. At the time of the application, the donor may only require that potential sources of matching funds be named. In other words, you don't have to have the other funding sources secured at the time of the application, just identified. However, if you win the grant, you'll be held responsible for coming up with the matching funds or risk being in violation of the terms of the grant.

Match requirements range from modest (10% or less of the total project budget) to significant (50% of the total project budget). Before you apply, you'll want to be very confident you can meet any match requirements because if you win the grant, you'll be on the hook for those funds.

Example: A call for proposals comes out and looks like a perfect fit. The funder's priorities align well with your organization's mission, the donor funds programs in your geographic area, and the grant amount is in the right range. You also have a history with the donor and have received a grant from them in the past. In the application instructions, the donor states that a new application requirement is a 1:1 match: They'll provide a grant of USD 50,000, and the applicant needs to come up with $50,000 from other sources for a total project budget of USD 100,000. Your organization's total operating budget is under $1 million. Minus about $10,000 that comes in through various fundraisers each year, the organization is entirely dependent on grant funding to meet annual expenses. Based on your history with the donor and the strong fit between your program area and the donor's funding priorities, you think there's a very good chance your application will be successful. The only catch is the match requirement. Other than the $10,000 that comes in through fundraising—a figure you think you can reliably raise during the current fiscal year—your only source of match is other grants, which are still pending at the time of the application. Given the steep match requirement, should you apply?

This scenario is a tough one. If you apply for the grant and promise that matching funds will come from other grants, unless those grants have been awarded, it's risky.  Using the numbers from the example above, if the program costs $100,000 a year and the match amount is small (e.g., $5,000), it's probably safe to apply for the grant. However, if you apply for several small grants and each has a match requirement—or if you apply for a large grant that has a 1:1 match requirement—things can get complicated quickly, particularly if you lack a robust financial system to track your commitments. 

The bottom line: It's always a good idea to review funding opportunity announcements carefully to see if there's a match requirement. Seeing a match requirement (also referred to as cost-share) is not automatically a reason to forego submitting a grant application. However, you do need to make sure you're not over-committing your resources.

What happens if you fail to come up with the match amount you promised in a grant application? If you fail to meet a match requirement, the implications depend on the type of donor. If you received the grant through a private foundation, the foundation may be willing to reduce the requirement, especially if you have a strong relationship with them. If the grant came from a government entity, government-sponsored grants tend to offer less room for negotiation. If you accept a government grant and agree to contribute X dollars in match, you risk having the grant terminated if you fail to keep your end of the bargain. The worst-case scenario is that the donor enforces the grant agreement and demands that your organization come up with cost share or return the grant funds received to date.

Sometimes nonprofit leaders will say, "That's a good problem to have" regarding a challenge the organization will face if it wins a particular grant. Winning a grant is usually a good thing. However, it's not a good thing if your failure to meet the terms of the grant agreement will make it difficult to secure future grant funds. 

To read more about cost share see Making Sense of Cost Share on the Peak Proposal's blog.

IDENTIFYING YOUR ORGANIZATION'S EVALUATION CRITERIA

Maybe the three factors listed above don't concern your organization. Perhaps you have a deep pot of unrestricted funds to cover match requirements and your organization doesn't believe in factoring the probability of winning when applying to new opportunities.  If that's the case, that's fine. Replace the factors above with the criteria your organization uses, just make sure you do have clearly articulated criteria. If your organization lacks evaluation criteria to determine which opportunities to pursue, you'll apply to everything you're remotely qualified for, which for most organizations is not a feasible long-term strategy.