At What Point Do You Have to Say ‘NO’ to a Grant?

There is nothing like the excitement of hearing that you are being awarded a generous grant. 

As a mission-driven organization, your goal is to provide a valuable service to your community. Grant money can feel like the essential “blood” that courses through the work you do and brings “oxygen” to a variety of programs and constituents. How can there be anything bad about accepting a grant?

If I have learned anything during my 30+ years of business, it is that not every grant is an acceptable grant. Some grants, far from helping an organization fulfill their mission, can actually create problems for the organization. Knowing when to say yes, and when to graciously decline, is every bit as essential as winning grants in the first place. 

So, when should your organization consider declining a grant? 

The grant is restricted for a program that isn’t fully funded.

A grant can be a great way to fund a program that will help your constituency. But before moving forward, ask yourself, “if the grant was awarded for less than requested, can we still run this program efficiently?” If the answer is yes, that is great! Move on. If the answer is no, then the follow up question is “where will the additional funding come from?” Do you have donors that you can tap to fill in the gap? Will that dilute other fundraising efforts? What level of certainty do you have about your ability to find the money you need before committing to this grant? Bottom line, does this grant create problems for you and your organization around this program?

The grant doesn’t cover the overhead it creates.

The question of overhead is a fraught topic in the world of nonprofit organizations. Every well meaning nonprofit seeks to minimize its overhead costs while maximizing money spent on mission projects. But, the secret we all know is that overhead is an essential component of providing well run and delivered solutions. Let’s be blunt, as an accountant that provides strategic solutions and guidance to nonprofits, I am a huge asset to the work they provide. And, I am overhead. 

Administering grants is not just handing out food, delivering water (or whatever your mission might be), it is tracking that work, paying the people that do the work, paying rent for offices, warehouses, etc. etc. Overhead isn’t sexy, but if it isn’t covered as part of a grant, it can stress your organization and even kill your ability to do your work. 

The conditions listed in the grant are not reasonable.

When a grant is for enough money, it sometimes can cloud our eyes and make it harder to really assess the work being requested properly.  After all, it may be the chance you’ve been hoping for to take your organization to the next level.   A number of years ago, I worked with a client who accepted a multi-million dollar federal grant. The numbers were, quite literally, enormous. But, when we broke down the numbers, we realized that the conditions of the grant stipulated that the organization would receive a mere $5 per person they touched. In other words, while the full value or the grant was quite large, it wasn’t feasible to do the work they were expected to accomplish for that money. The client didn’t follow our advice and accepted the grant. Unsurprisingly, they are no longer providing services.  

The reporting requirements are unreasonable or overly burdensome.

If you accept grants, you know just how onerous it can be to fulfill grant reporting requirements. Your organization is likely already structured to be able to provide grant reporting on a variety of metrics. But, some grants require information that is above and beyond what an organization might typically provide. Or they may require information on an unreasonable deadline.  I have seen grants that require financial reports to be delivered before the end of the period of reporting.  In those cases, a grant can create work that actually degradates your organization’s ability to deliver services. After all, if you are expending additional resources to provide reporting about grant performance, you aren’t using that money on your mission. 

The purpose of this post isn’t to scare you off of grants. Indeed, at Lumix CPAs and Advisors, we have seen some of our clients grow and flourish after being awarded grants that expanded their ability to provide services and indeed help take them to the next level. A good grant can be a game changer. The key is that you want to make sure it is just that, a good grant. If you aren’t sure, or, if you just want a strategic financial partner that can help you make these kinds of mission critical decisions, we can be that great partner. Let’s set up a time to discuss your needs.