Nonprofits have various Inputs including cash infusions from donations, grants, fees, etc. Cash resources are becoming increasingly important as the volunteer pool shrinks, demand for services increases, and administrative costs rise. How should a small nonprofit think about grants if they are new to them or only apply for them intermittently?

1. Defining a Grant
2. The IPOOG Grant Management Lifecycle
3. What is This Money Going to Cost Us?
4. Start with the End in Mind
5. What Could Possibly Go Wrong?
6. Internal Controls and the Grant
7. A Scalable Tool in the IPOOG Belt
8. References
9. Annex – Definitions

Defining a Grant

Everyone knows what a grant is, right? Perhaps not as it is one of those words which is both a verb and noun. For this blog, the definition is:

A Grant is Disbursement of cash or In-Kind Assets to a nonprofit that supports the programmatic objectives of both the donor and recipient of the funds. If awarded, a grant is a contract and hopefully the basis for a long-term relationship between the parties. A granter will establish a competitive process, eligibility criteria, and is subject to funding availability.

See the annex below for additional role definitions. This includes recognizing that there are three parties to any grant: the Funder (giving money), the Recipient (getting money), and the ultimate beneficiary. Secondary actors include grant managers, funding officers, and review committees which support both the Funder and Recipient processes.

Speaking of definitions, the following are other sources of potential funding but not discussed in this post.

• Grant: see the above definition.
• Donation, Gift or Contribution: A voluntary and irrevocable transfer of money, services, or property from an external donor for unrestricted or restricted use. Normally there is no formal reporting back to the donor. If Charitable, there may be further restrictions on the funds usage as defined by the Canada Revenue Agency.
• Fees (e.g., Membership): Charges established by the nonprofit which represents unrestricted revenue for the organization. Members may receive summary or detailed reporting.
• AGLC Casino Disbursements: In Alberta, the Alberta Gaming and Liquour Commission (AGLC) manages the disbursement of casino proceeds nonprofits volunteer for. Although these funds are a grant, they are unique enough to warrant their own consideration and are not part of this post.

The IPOOG Grant Management Lifecycle

IPOOG stands for Inputs, Processes, Outputs, Outcomes, and Governance. Although any organization can use IPOOG, it was developed to help nonprofits. Grants are an example of an Input that enable Outputs and Outcomes while relying on Processes. Governance is ever-present.

A survey of the grant management software industry typically breaks the Grant Lifecycle into the Pre/Post and Award phases [2]. The IPOOG Model is based on these phases but purposely calls out two other phases: program delivery and governance. These phases are implicit and secondary in the other models.

1. Pre-award Phase (20%): planning, researching, inquiring about, and applying for grants. Non-award notification from the funder.
2. Award Phase (<1%): notification of an award. Terms and conditions, key deadlines, and programmatic targets.
3. Program Delivery (>60%): delivering on the contract signed in the Award Phase through operations, projects, procurement, re-distribution of the funds, etc.
4. Post-Award Phase (15%): interim and final reports and compliance requirements. Agreed close of the contract and debrief of what went (not) well.
5. Grant Governance (5%): A catch-all for all other grant activities. Governance activities related to how grants fit into the organization’s strategy. Also, practical considerations such as changes to the terms of the grant, returning money, requesting extensions, etc.

See the next post, Granting Definitions and Details found in the above graphic.

What is This Money Going to Cost Us?

As the above steps suggest, a grant is not free money. The percentages after each step are the relative effort spent on each. These are illustrative and the actual amounts will vary widely. For example, a festival applying for a grant already has the program delivery in place and thus the relative proportion would change to the pre and post award phases.

The point is that winning the grant is cause for celebration but an interim one. If the Program Delivery phase represents new work and anticipated volunteers fail to materialize, winning the grant maybe a Pyrrhic Victory.

Most granters include a provision that they can audit the financial and business records at their discretion to ensure compliance with the grant. The following graphic is from a vendor [3] and is pretty good noting that it is missing the question: “did you do what you said you were going to do?“. If you received a grant to build a bridge, where is the bridge, is it still standing, and does it meet any relevant engineering standards?

Start with the End in Mind

Steve Covey’s second habit (of seven) is about creating a mental blueprint for your life [4]. Coming down back to earth and grants, start planning for the final reporting before you apply for the grant. The granter will want to know where the money went. You will need financial, volunteer, human resources, procurement, and asset management systems in place to track the disbursements. For example, many grants allow you to allocate volunteer hours as an in-kind contribution. How will the volunteers track their time and activities? Guessing or fudging these numbers is not the right answer!

What Could Possibly Go Wrong?

A grant is a contractual relationship between the granter and grantee. Typically, an officer of the nonprofit will need to sign the agreement. Often the grant will list other officers such as the Secretary and Treasurer.

Noncompliance with the grant agreement will involve lots of meetings and emails. At the very least, an unnecessary distraction for board. A failed grant and unreturned money may prevent future grants. There is a reputation risk for both the nonprofit and the board members. Finally, a grant may represent a substantial amount of money.

There are many cases of a person in a position of trust making off with nonprofit funds. The top three causes of internal fraud within organizations all relate to internal controls.

Internal Controls and the Grant

What is internal control? It is a fancy name for processes and procedures to ensure the integrity of financial information, compliance with laws, and operational efficiency. Having two signatures on a cheque is an example. Separating the role of entering payments into a financial system from approving the payment is an example of segregation of duties [5].

Many small nonprofits override these controls because there are not enough volunteers to go around. Add into this mix a large grant and a trusted volunteer with a gambling addiction and you have a tragic situation in the making.

Less dramatic examples of noncompliance may involve taking more time to complete a project than expected. Most granters understand the volunteer situation and will be accommodating prospectively but less so retrospectively. Communicate often, honestly, and clearly.

A Scalable Tool in the IPOOG Belt

For those familiar with grants or has read even a fraction of the thousands of excellent references on the internet or in your library, there is nothing new in this model. Still, the steps need to be followed – within reason. For a tiny grant, many of the details in the model are over kill. Scaling the steps to your situation requires common sense, experience, and judgement. The next post, Granting Definitions and Details, defines the steps in more detail.

Grants, as well as donations, are a tool in a nonprofit’s IPOOG tool belt. The grant is about securing resources for the organization’s objectives. It can buy capacity and complete projects, but they are not free money. Thinking about grants from a lifecycle perspective will reduce the effort to apply, comply, delivery, and report. Good luck and happy grant hunting!

References

1. Grant Management 101 for Grantseekers and Grantmakers
2. An internet search will yield many results on ‘Grant Management Lifecycle.’ Many are from vendors and many of these resources are excellent if not duplicative. The US Government has a comprehensive lifecycle model: The Grant Lifecycle | Grants.gov. Like many such resources, the inherent bias is toward the granter with little mention of the work delivering the result. Still, a good overview.
3. This reference has a strong US flavour: Mastering Grant Compliance: An Ultimate How-To Guide – Funding Frontline Blog – Thompson Grants.
4. The classic book, The 7 Habits of Highly Effective People (Wikipedia), provides lots of great life advice and is generally unreadable. Covey is a bit long winded so looked for an abridged version.
5. Where can you get a list of internal controls? Well, I just happened to have written A List of Internal Controls | Organizational Biology.

Annex – Definitions

• Grantmakers (funders) are organizations that are structured for and have the financial means to provide money in support of other organizations or individuals to support programs, projects, or operational costs. The grant maker oversees the grant process from start to finish, managing applications, tracking goal-driven objectives, and assessing the progress and impact of their grant. Common examples of grant makers are government agencies, community foundations, private or family foundations, and corporate foundations. [1]
• Grant recipients (grantees/grant seekers/awardees) are the applicant and (hopeful) recipient of the grant generally operating as a nonprofit under provincial and federal jurisdiction. The grant recipient applies for, plans, and implements their proposed goals for the grant funds. [adapted from 1]
• Grant managers/administrators play essential roles within the grant process on both sides of the equation. This individual (usually) or team oversees the entire grant workflow: they must create the application or grant proposal, maintain consistent communication between all stakeholders in the grant process, provide financial reporting, present reports to stakeholders, report the impact of the grant, and ensure compliance. [1]
• Community or beneficiaries are the community or geographic area that, based on need, directly benefits from the allocation of grant money. The beneficiaries will typically benefit from the grant project and will be part of the “communities served” as defined by the grant proposal’s expected outcomes. [1]
• Advisory boards or review committees provide necessary oversight for their organization and participate in the process during the application review stage. They hold the organization accountable for the public good, maintain transparency and inclusivity, set policies, and ultimately serve the mission. [1]