Scrutinize every grant before you commit

Nonprofits often pour significant time, thought, and energy into crafting grant proposals. When a funder gives approval, it is natural to feel excited. However, it is essential to pause and evaluate the offer carefully. Some grants can bring unintended challenges, including heavier administrative responsibilities or attention from the IRS.

Small awards can create large obligations

Newly formed or smaller nonprofits are especially vulnerable to unexpected fallout when accepting unfamiliar grants. But growing organizations are not immune. As nonprofits add new programs or broaden their mission, they frequently attract additional funding opportunities, including grants that fall outside their usual experience or operational comfort zone.

Even modest grant awards can create substantial administrative pressure. You may find that you lack staff with the right skill sets or that your existing systems are not prepared to track data or complete detailed reporting. Grants that pull your work into areas unrelated to your core mission can also trigger concern from the IRS and invite questions about your tax-exempt status.

Weigh financial costs and opportunities

Take time to examine all potential expenses tied to a proposed grant. Your organization may need to cover certain costs to complete the funded program, and some of those expenses may not qualify for reimbursement. Before accepting, compare the projected costs with the funding amount to understand the grant’s true value.

Opportunity cost should also be part of your analysis. If your nonprofit must spend its own funds on a program created by the grant, ask whether those same dollars could make a greater impact if invested in an existing initiative. Consider staffing needs as well. Do you have enough people to carry out the work, or will accepting the grant require hiring new personnel or finding additional volunteers?

Evaluate before applying

It can feel counterintuitive to decline financial support, but some grants place demands that outweigh the benefit. If fulfilling the grant’s conditions strains your team or pulls your organization away from its exempt purpose, declining may be the wiser choice. To avoid spending time on proposals that are unlikely to be a good fit, think about establishing a more thorough screening process before you apply for future grants.