Grant Management: How to Secure and Track Nonprofit Funding

Friday, January 19, 2024

Nonprofits typically bring in revenue from a variety of sources, including individual donations, earned income from membership fees or merchandise sales, investments, and grants. This last source, while competitive to secure, can make a significant difference in your organization’s ability to launch new initiatives and complete projects.

When you apply for a grant, your job is to convince the grantmaker that of all the organizations applying for funding, your nonprofit is the most deserving. A major part of this is effective grant management.

In this guide, you’ll learn all you need to know about grant management, including:

• What is Grant Management?
• Benefits and Challenges of Grant Management
• The Grant Management Cycle for Nonprofits

Grant management can quickly become complicated, which is why it’s important to work with financial professionals to make the process as smooth as possible. At Jitasa, our accountants use their experience working with nonprofits to help you make grants a seamless part of your organization’s funding model. Let’s get started with an overview of what exactly grant management entails.

What is Grant Management?

Grant management is the process of securing, tracking, and reporting grant funding awarded to a nonprofit by a government agency, private or public foundation, or corporation. Its goal is to ensure that these funds are used efficiently and in accordance with the grantmaker’s requirements for awarding them.

Grantmakers (or “funders,” as they’re sometimes called) see awarding grant funding as an investment in a nonprofit whose mission and planned initiatives align with their values and vision for future change. This is why it’s critical not only to pursue the right grant opportunities, but to demonstrate to the funder through proper management funds that they made a good investment by choosing your organization to receive their grant.

Benefits and Challenges of Grant Management

Although grant management can become complicated, especially if your nonprofit is trying to manage multiple grants at the same time, it’s also extremely beneficial when done properly. Here are a few of the main advantages and challenges associated with grant management.

Grant Management Benefits

If your nonprofit manages its grants well, you can experience:

• An increased ability to make a difference. This benefit comes not only from ensuring that you get to keep the grant funding awarded to you, but also from allocating that funding effectively as you push initiatives forward.
• A higher capacity for innovation. Well-managed grant funding can give you additional flexibility in your project and program budgets to experiment with new approaches to problem-solving as you deliver services in your community.
• Stronger external relationships. By regularly communicating with funders and thoroughly reporting on your grant progress, you can build trust with them that can lead to securing more funding in the future.
• A boost to your nonprofit’s reputation. Having complete records of how you used your grant funding can help establish you as a reliable organization that fulfills its mission and commitments, which can catch the attention of other funders.

Grant Management Challenges

The main difficulties that can get in the way of effective nonprofit grant management include:

• Compliance complications. Some grantmakers have stringent requirements for how their funding is used and reported, which your organization has to put a lot of time and effort into navigating.
• Inconsistent reporting demands. If your nonprofit is managing multiple grants at once, each funder may ask you to record and report your progress differently, meaning you’ll need to keep all of your information extremely organized.
• Resource constraints. One grant often won’t cover the full cost of an initiative, so you’ll need to secure several grants and/or allocate revenue from other sources toward the project as well—all of which needs to be budgeted and reported.
• Uncertainty. Because grants are competitive, you might do all of the work to apply for one and start preparing a management system only to lose out to another organization. (If your nonprofit has the capacity to apply for multiple grants, do so as it’ll increase your chances of securing funding.)

However, the biggest issue with grant management is if you fall short in any area of compliance, you run the risk of financial penalties, funds being withheld, or even legal consequences depending on the grantmaker’s agreement. Before you apply for a grant, make sure your nonprofit is equipped to manage it correctly if you win it.

The Grant Management Cycle for Nonprofits

Grant management is an ongoing process that begins even before you secure funding. Let’s dive deeper into each of the five steps of the nonprofit grant management cycle.

Step 1: Identify Grant Opportunities

Grants are usually intended for a specific purpose, meaning that the best grant opportunities for your nonprofit are the ones that align with your mission and upcoming initiatives. Take some time to define your goals and funding needs before you start looking for grants that will align with your analysis. Fortunately, there are plenty of resources available to help you find the right grants to apply for:

• Online grant research tools. Sites such as Candid’s Foundation Directory and GrantStation can help you filter down grant opportunities to the ones your nonprofit could feasibly win.
• Localized online searches. Community foundations and state or local governments provide grants almost exclusively to nonprofits in a specific city or region. Type “Grant opportunities in [your organization’s city]” into your favorite search engine to help locate these offerings.
• Your organization’s board. Board members often have connections in the community and may know of potential grant opportunities. If so, they can introduce you to the funder and help you build a relationship with them.
• Grant consultants. If your organization has the resources to outsource some of your grant-seeking work, grant consultants can assess your goals and capabilities, find grants that match your needs, and help you write proposals.

An outsourced nonprofit accountant can also be a good external resource for evaluating grants and determining whether you’re in the right financial position to win them. Although not every opportunity will be right for your organization, sometimes reaching out now will create a connection that you can leverage in the future when your goals or financial position have changed.

Step 2: Apply for Grants

In order to secure the grants you’ve identified as being right for your nonprofit, you’ll need to write a standout proposal for each one. The goal is to make it easy for grantmakers to see why your organization is the most deserving one out there to receive funding.

When writing grant proposals, follow these tips:

• Build relationships. Take the time to get to know the funder, whether through an introduction from a board member or donor, a one-on-one meeting, or an invitation to an event at your organization. Then, use what you’ve learned about what they’re looking for in a grant recipient to inform your proposal.
• Tell your nonprofit’s story. Include plenty of information about your mission and how the grant will help you make even more of a difference in your community. Incorporate both emotional appeals such as stories from beneficiaries and concrete data about your organization’s accomplishments to make your proposal more persuasive.
• Be specific. Describe the exact initiative you need funding for and lay out how you plan to use the grant to push that initiative forward within a certain timeframe. Many funders ask for a sample budget to help with this—double-check your calculations and include information about the other revenue you’ll use to supplement the grant funding.
• Ask for feedback. After you’ve drafted your grant proposal, ask several people at your organization to read over it and offer suggestions for improvement. Try to find someone outside of your organization to provide feedback as well for a more objective perspective.

Before you submit your proposal, make sure you’ve followed all of the funder’s rules to the letter and that you’re sending it off before the deadline. Most grantmakers won’t accept late submissions, and obvious deviations from the requirements or mistakes can get your proposal rejected before they even dig into it.

Stay on top of grant deadlines with our Month Close Calendar Template.

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Step 3: Track Your Grant’s Progress

So, you’ve crafted a well-written proposal and sent it off on time, and it convinced the funder that they should award the funding to your nonprofit. Congratulations!

However, your work is far from finished. Accurately tracking your grant’s progress is critical to show the funder that your organization is financially responsible and takes the grant management process seriously.

Use the budget you submitted along with your grant proposal as a guide (or create one in the unlikely event you weren’t required to do so in advance). From there, you can set up a documentation system using spreadsheets if it’s your first time managing a grant. However, if you’re planning to track multiple grants in the near future, you’ll likely need to invest in grant management software or use the grant management capabilities of your accounting system.

In this documentation system, keep track of the date, amount, and purpose of every expenditure of grant funding, as well as the other revenue you spend on the program or project the grant is being used for. Additionally, note how the initiative itself is going in case you need to expand on your financial report in that way when you report back to the funder.

Step 4: Record Grant Funding

In addition to tracking the progress of your grant for the funder, you also need to accurately record the grant funds that you receive for internal accounting purposes. There are specific guidelines that you should follow based on the type of grant you receive, of which there are three possibilities:

• Unconditional grants are just what they sound like: funds provided with no restrictions. Since these funds are provided upfront and can be used at your nonprofit’s discretion, you should record them as soon as you’re notified that you’ve won the grant, even if the funding takes slightly longer to arrive. For instance, if you receive the award letter for an unconditional grant on February 1 but don’t get the actual check from the grantmaker until March 1, you should record the grant on February 1.
• Grants with contingencies require that your organization fulfill certain conditions as designed by the funder. Then the money comes in installments as you show that you’ve met those requirements. For these grants, record the first installment when you receive the award letter and each of the subsequent installments as the funding comes.
• Reimbursable grants are paid out only after your organization has spent the money for an initiative up front (i.e., the funder reimburses you for costs you’ve already incurred). In these situations, you’ll record the expenses as you incur them, both for internal purposes and to be able to give an itemized list of payments to the funder. Then, you’ll record the grant funding when you receive it.

When you apply for a grant, take note of the type so that you’ll know exactly when to record the funds. If any difficulties arise, ask your accountant or bookkeeper.

Step 5: Report Back to the Grantmaker

Finally, you’ll submit all of your required documentation to the grantmaker to show that you’ve upheld the conditions of the grant or are eligible to be reimbursed. Even for unconditional grants, it can be beneficial to update the grantmaker on your progress to prove your nonprofit’s trustworthiness and open the door to potentially securing additional funding from them in the future.

While you’ll at least need to report the financial information from the tracking step (or the recording step for a reimbursable grant), you’ll likely also include information on how the initiative funded by the grant is going. Some grant funding is contingent upon your nonprofit’s progress with the initiative—for example, a funder may only agree to support your program as long as it has a certain number of participants. Or, they may just want reassurance that you’re using their funding to make the intended impact on the community.

Especially for grants with contingencies, you’ll likely have to report your progress multiple times during the grant management process. Mark every reporting deadline on your calendar, and plan ahead to make sure you can compile the necessary data, catch and fix any mistakes, and format it according to the funder’s requirements well in advance of those dates.

After your nonprofit goes through the grant management process once, it’s time to go back to the beginning and start looking for more grant opportunities! As your organization grows, you’ll likely have several grants at different stages of the cycle at any given time. But by that point, you’ll have formed connections that you can leverage to secure more funding, know how to write a strong proposal, and already have your tracking and recording systems set up to make reporting much easier.

The grant management process may seem overwhelming, especially if you’re just getting started. However, when you put in the right amount of research and effort, you’ll find the whole process much more manageable. Plus, you can always turn to grant consultants or financial management experts (like the team at Jitasa!) for help along the way.

For more information on grants and how they fit into your nonprofit’s funding model, check out these resources:

• Restricted Funds: What Are They? And Why Do They Matter? Grants are a common type of restricted funding for nonprofits. Dive deeper into why restricted funds are important and how to manage them.
• Nonprofit Audits: A Complete Guide to Financial Auditing. Some grantmakers may require your organization to conduct a financial audit at the application stage. Discover what this process involves and how to prepare for it.
• Fractional Nonprofit CFO Services. Setting up your grant management system is a core aspect of our fractional nonprofit CFO services. Learn more about this offering and everything else the Jitasa Strategic Advisory Team can do for your nonprofit.

Partner with Jitasa to seamlessly navigate grant management at your nonprofit.

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