How much do you request for each grant application? That is the real question. We have experienced many clients who think they should always ask for the maximum amount that the foundation offers. We do our best to try and help them understand how this works, but today we will discuss in more detail the process involved for a foundation to consider your request and how appropriate your request amount actually is in the larger scheme of things.
First of all, foundation staff are not going to give you a suggestion. Unless you have an already established giving relationship, no one will answer this for you. The reasons for this behavior are varied, but may include issues such as power dynamics within the foundation staff, concerns that they might overpay for your program efforts when costs look a bit off, and the most common is that they want you to have multiple sources of support. You should never assume that any foundation will pay for your entire program alone. (It would also be a risky decision on your part to rely so heavily on one source). Other issues may include the foundation’s internal negotiations. Staff simply do not know the answer to your question.
Factors that impact grant amount decisions on the foundation side also involve the other players also requesting funding. If another organization looks more in alignment or needy than your organization, they may offer them more and you less. It may not even be as simple as that. It could just be that there is a longer standing relationship with that organization and you may be new to them.
So, it feels like throwing darts blindly, doesn’t it? Well, in a way, yes. There is much that we do on our end here at Zelenz Consulting to try and address this issue with the grant requests we submit and with the request recommendation amounts we suggest to clients.
The obvious merit of the work is one factor, foundation strategy alignment another. Actual costs have a large impact. However, foundation circumstances may impact the award amount (or declination of a request), which has no bearing on the organization who applied. This is something that no one outside of the foundation can control, including your grant writer.
Questions the foundation will ask themselves when reviewing a request include:
- The nonprofit’s current financial issues may impact whether the foundation can effectively use the grant funding.
- What kind of sustainability will be gained from this contribution?
- How long has this organization been in operation?
- What kind of community support do they have?
- Do they have outside funding from other sources?
- Are they actively holding fundraising events to address immediate issues?
- Will the grant result in a boom-bust cycle that will ultimately destroy the sustainability of the organization? (Rapid organizational growth can backfire). Has the organization considered these factors?
- If a nonprofit receives too much funding from one funder, it can appear to the IRS as tipping. This can jeopardize the foundation’s nonprofit status.
- Does the nonprofit understand the need for diversification of funding? Do they understand the risks associated with relying upon one source? Is the organization interested in asking the foundation for introductions to other funders to help mitigate this risk?
- Foundations often keep contribution amounts to organizations that offer similar programs at a consistent level. This is why we always pour through each foundation’s 990 filings to see who they have contributed to and how much.
- Many foundations limit the contributions to organizational overhead to 10-20% of the total grant award. Research into each foundation’s preferences in this realm is critical to setting your request budget appropriately.
Additional considerations foundations include are their own resources, grant cycles, and priorities:
- Foundations are heavily invested in financial markets. This also means that stock market shifts impact their grantmaking capacity each year.
- Foundations often change priorities in what they wish to fund. This can shift annually for some. Others change due to leadership changes. The foundation board sets the priorities and make the final decision on what types of programs they are interested in funding each year. However, there are exceptions to this rule. Those would be contributions written in the foundation charter or donor directives at the establishment of the foundation. These are locked in place regardless of leadership changes or board interests.
- Foundation strategies often renew in predictable cycles of 5-7 years. This is an adjustment to their personal foundation direction and who they seek to make grants to. This may also include an updating of their screening process. Many times this also means they have chosen those they wish to contribute to and they may no longer accept unsolicited requests. Some will offer a pre-screening option in order to invite new candidates they seem hold potential to fit their current focus. Submitting a letter of intent does not guarantee an invitation to submit a proposal. Submitting a proposal after being invited, does not guarantee a grant award.
- Foundation accounting practices may include the manner in which they consider multi-year grants against their current grant budget. Some do it one year at a time, just as the nonprofit recipient has to. This multi-year decision can impact how many other grants they can fund that year.
- Foundations who end the year with a surplus can offer larger grants than what they deemed possible at the start of the year. The foundation has a duty to hold funding in control throughout the year to ensure their own fiscal responsibility, but surplus fiscal year ending opens the door to additional giving that may have been put on hold or limited earlier in the year. Foundation grantmaking years are not necessarily calendar years, so this is not something you can strategize. They may also be out of funding by the end of their grantmaking year, so requests should not be adjusted to play the “maybe” of this kind of opportunity. It is more important to pay attention to their board meeting dates.
Current grantees who are eligible for grant renewals may find that the foundation has already penciled in a flat amount they are already willing to contribute. If your organization is in need of a larger amount, it is important to address justification for such an increase. This can include cost of living increases, impact opportunities if larger investment were made, or how they can offset another funder’s influence on the organization. The last one is more important if a nonprofit feels that another foundation is starting to become too influential in their organization’s goals and they fear imbalance could jeopardize the long-term goals of the organization. Foundations who have already pre-determined that they would like to continue to fund your organization are going to consider how their investment impacts the success of your organization. This may result in a one time increase or perhaps an extension of terms in order to ensure financial security.
What we do at Zelenz Consulting is follow what the foundation behaviors demonstrate over the years. We work with numerous nonprofit clients and so we are constantly researching the current behaviors of foundations and can easily identify shifts in their priorities and financial activity. We also follow the trends in the economy and the financial markets. Reviewing foundation 990s also gives us insight into their investment portfolios and what types of stocks they rely upon to maintain their giving capacity.
If your organization isn’t currently on one of our ongoing monthly or annual plans, you may be interested in purchasing a grant research report to enable you to submit your grant requests with confidence. These research reports include all critical data you need to know in order to submit your application, and they also include the request amount recommendation we deem suitable given your organization’s needs and the foundation’s current activity and circumstances. We can’t guarantee funding, but we can give you the best possible shot at winning that grant award.
Other things you can consider are preparing modular budgets. These types of budgets demonstrate different amounts for different scenarios and timeframes of a given project. Be careful to not propose to complete work that is below any rational funding capacity. Foundations want to see success and they are aware of how much many things can cost due to their constant exposure to budgets from numerous organizations every year. Unrealistic budgets can destroy your chances of grant funding success. Additionally, do not ask for unsubstantiated amounts. We have had many clients come to us saying they need $2 million in funding for repairs, but they had no budget. After requesting a budget from them over several months, the actual need was closer to $100,000. You can’t throw pie in the sky requests at foundations if you want to be taken seriously. Do the numbers and get the answers from contractors, realtors, or whatever expert is required to do what you need to do. This is not the time to make up numbers.