Jun 28, 2017
Lindsey Williams CPA
As a nonprofit organization, one of your main focuses is to secure funding to carry out your service mission and organizational goals. Fundraising is so fundamental to a nonprofit that typically when you are eying grant or donation opportunities, you are thinking of your funding goals and not necessarily the implications that can come along with a funding source. However, sometimes the costs of maintaining and tracking a source of funding can outweigh the benefits resulting from the grant or contribution.
When considering a grant, your organization should have a system to perform a cost-benefit analysis to determine if the grant requirements are something that the organization can handle with its existing resources. All of the requirements should be spelled out in the award letter or grant agreement. If a new grantor requires an annual financial statement audit and your organization is already in the practice of performing such an audit, it probably won’t create any additional issues. However, if the organization isn’t accustomed to having an audit, then the audit will present additional costs that will need to be considered. Maybe the grant amount is so substantial that its benefits undoubtedly outweigh its costs or the grant is expected to be the beginning point for securing even more grant funds.
The cost-benefit analysis may be more complicated when it comes to tracking donations. A nonprofit must consider resources needed to track restricted contributions or other donor stipulations. A common issue with donor restrictions is that these restrictions can be made verbally, in writing, or they can be in response to solicitation materials. Nonprofits must clarify the donor’s intent so that they can successfully track and manage the contribution. Once the organization knows how the contributions can be used, a system must then be in place to keep track of that money until it is spent as the donor outlined. Ideally, all contributions would be unrestricted for management to carry out the organizational goals, but this is often not the case. Therefore, donor restrictions will need to be managed appropriately.
It’s easy for nonprofit staff to be consumed with simply securing each and every grant and contribution they can for their organization. However, it’s critical for true fiscal efficiency that every contribution and grant requirement be evaluated to ensure it aligns with the nonprofit’s immediate organizational goals and that it has the resources necessary to comply with the strings attached to every opportunity.