When seeking grant funding, remember your financials tell a story
The competition for grant funding is high, and foundations and other grantmakers are faced with making very difficult funding decisions during every grant cycle. Many foundations, for example, decline more than half the proposals they receive. Tightening funding streams also means that some funders have less resources for grantmaking than in the past, making funding less secure for even long-time grantees. With all these challenges facing grantseekers, all nonprofit organizations can benefit from taking the time to ensure that every aspect of their grant applications are telling positive stories about their organizations.
Grantwriters often spend significant amounts of time crafting the narrative sections of their proposals. While the narrative is an essential component of grant success, many organizations fail to realize their financial information often tells equally important stories about their organizations. For many organizations, the financial information is often attached as an afterthought but plays a significant role in how a grant reviewer interprets a grant application.
To share financial information with a grant application, here are some suggested topics to cover. In other words, here are some stories your financial information can tell about your organization:
Positive information: Nonprofit organizations record items like multi-year pledges, cash reserves, building a capital fund and other positive situations in many different ways. While most program officers are skilled at interpreting financial statements, it is sometimes difficult to discern what these mean for an organization. If an organization is building significant cash reserves for a capital campaign but does not explain the purpose of the fund, a grant reviewer can interpret such a fund as sitting on too much cash. He/she may think the organization is not using it to advance an organizational mission or it is at a comparatively lower level of need for funding compared to other applicants.
Negative information: The last few years have been difficult for many nonprofit organizations, with organizations dipping into cash reserves, experiencing deficits or shrinking budgets. These scenarios are obvious on financial statements, yet financial statements almost never come with any explanation from the applicant organization. If your organization’s financial statements reflect one of these situations, it can be important to explain the root causes, how the situation has affected your organization and the steps you are taking to control or reverse the situation. Without these kinds of explanations, a funder is often left with only one reasonable interpretation: the negative trend will either stay steady or continue, making a grant a risky proposition.
Scope of activities: Financial statements often help verify an organization’s priorities. If an organization is seeking funding for a specific program and states in the narrative the program is a top priority, a grant reviewer can use financial statements to gauge whether or not the program is reflected as a priority in how the organization uses its financial resources. Financial information can also help a grant reviewer assess the depth of an organization’s programs. For example, if an organization states that it serves thousands of individuals but has a very small cash and in-kind budget, a reviewer can conclude that an organization is not providing a high level of service or may be exaggerating its reach.
When submitting grant applications, it is always wise to minimize the red flags. Many funders do a preliminary review of proposals that does not include phone calls, site visits or requests for additional information. If your proposal contains a few red flags with regards to your financial information, a funder can decide to decline your application during the preliminary review, which never gives your organization the opportunity to provide additional information that might eliminate concerns. Because so many nonprofits are facing financial challenges, many funders will be far more sympathetic when an explanation and course of action are shared, rather than leaving a funder to make an interpretation on his/her own.
Many grant applications, including the Colorado Common Grant Application, allow applicants to submit a budget narrative. In reviewing hundreds of grant applications in recent years, I have seen very few organizations use this optional attachment but have seen dozens of financial statements that tell a negative or unexplained positive story about an organization.
These scenarios leave the grant reviewer to interpret the situation, rather than rely on information directly from your organization to explain the situation. To help increase your success with grant funding, take the time to see what story your financials are telling about your organization and if it leaves room for negative interpretations. Take the time to help your financials tell a more complete version of your organization’s story. By taking the time to explain your organization’s financial situation, you can help minimize red flags and maximize your organization’s chances at funding success.
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