How Grant Budgets Make or Break You

We have great respect for a large nonprofit conglomerate. One of their executive directors revealed that they no longer even consider federal grants. He confessed that they lost money in their federal grants because the administration of the grant stressed their internal processes beyond their capacity.

ITMH hates to hear stories like this, but it is no surprise to us anymore. It is commonplace that organizations are destroyed by winning a grant. What irony…

So why are budgets so important? The budget is most often your commitment to the grantor. The components you list in the grant submission have a cost. It is your responsibility to project those costs correctly. You must fulfill your promises in the grant submission. The budget is the overall projection of expenses that will be applied against the revenue you receive for the grant.

Do not forget the cost of tracking and detailing the components of the grant. If the internal records do not match both the budget and the written details, you can be charged back the full amount of the grant. You may be charged back less or you may also receive a penalty.

When considering a grant, know that it will require a completely separate set of financial documents. One of them is a separate budget. The budget is the plan or roadmap for the grant you seek. You must carefully study the actual tasks in the budget to know that you can do the work required at that cost. Do not depend on volunteers to handle these tasks. We all know that volunteers come and go.

Spending the time to study the grant within the context of your organization requires a lot of time and skill. That has a cost in itself.

Co-mingling funds is taboo in grant utilization. You need to understand that grant provisions have zero margin for error. You cannot fund another area of your nonprofit from a government grant. To do so will jeopardize your entire organization. The government can wield immense power against you if they choose. They will fight you with taxpayer funding. What will you use?

The organization we are discussing here did not have detailed databases, and they were forced to manually track and detail the grant provisions. ITMH does have databases that we can offer you to handle this otherwise immense task. Just contact us if you are in need of our help. We will do everything possible to help make grants workable in your organization.

Virtually every grant is specific. While we are discussing federal grants here, the same principles most always apply to state grants, local government grants and corporate grants, too.

Essentially, this is not a big problem, as long as you stick like glue to the budget with expenses within that budget. Each element of the grant project needs to be broken down by revenue and expense. Again, those projections must be realistic, and you must not let the dollars disappear. Careful monitoring is essential, every step of the way.

In Excel, you can use a separate sheet for a grant budget, or it can be done on the same worksheet with your organization operations. In simple grants, it may only mean another column. That is my preference personally (not simple grants, but simple accounting for them).

This is not to say that the government audits every organization on every single grant. So, if you hear stories to the contrary of this article, then I am not surprised.

As we always stress, every grant is unique, so the needs of the donor must be met with no exceptions. If you cannot live with the terms and conditions (every single term and condition that is), then please do not apply.

You may just win. Then what? Perhaps you will find the horror story that our highly respected nonprofit organization experienced happens to you.

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