My favorite thing about foundations is that they exist to give money away.
Program officers are paid to answer questions from potential grantees and share information about funding priorities.
And when you receive a grant, the award letter stipulates the reporting schedule. Foundations are donors who tell you what they’re interested in, their process for considering a gift, and how they like to be stewarded.
How great is that?
Less great is media focus on the largest grants given by the largest foundations. I’m always thrilled to see philanthropy in the news, but covering only the upper echelon of grant funding is misleading. Here are 3 foundation myths of which to be aware as you plan your grants strategy.
Myth #1: Foundations are the best source of charitable support because they give away the most money.
Board members and other stakeholders (your CEO perhaps?) may believe you can raise your entire annual fundraising goal from foundations alone.
Reality: If you step back and look at the big philanthropic picture, foundations are responsible for only a small sliver (between 10% and 15%) of total charitable donations in the U.S. each year. The vast majority of charitable giving (usually over 80%) comes from individuals. In fact, an additional portion of foundation giving is attributed to individuals since many foundations are family foundations—funded and guided by the interests of a single donor or family.
Giving USA releases an annual state of philanthropy report in early summer each year, so keep an eye on their website for the latest figures. Also, here’s a good article on the 2012 figures from the Nonprofit Times.
Myth #2: Foundations are good sources of ongoing and unrestricted support.
Reality: There may have been a time when foundations gave out large, multi-year general operating support grants, but if so, those days are gone. More and more, foundations target support toward specific programs and/or help new projects get off the ground. Planning grants are another opportunity.
Regarding ongoing support, foundations often prohibit organizations from receiving grants for more than three years in a row and sometimes less. Additionally, grant applications increasingly ask nonprofits to provide a sustainability plan for continuing a program after the grant period has ended.
Myth #3: Foundation grants are the quickest, easiest way to raise money.
A lot of people seem to know a little something about foundations. You might run into the view that a foundation is like an ATM machine—you feed in your proposal and out comes a check.
Reality: It’s seldom, if ever, this easy! Many many organizations are applying for the same grant money for which you are applying. To be successful with grants, consider these major gifts tactics:
As the foundation’s board (decision makers) may only meet four times per year, the process takes time. The entire cycle may take as little as 1-2 months. More common is 3-6 months, sometimes close to a year. Once your grant program is up and running and you have multiple proposals in the pipeline, you’ll get answers from different funders more often. But it takes time and elbow grease to build the pipeline.
Also keep in mind the significant amount of staff time required on the back end to manage grants. Grant money arrives on your doorstep with strings attached. If it’s a restricted grant, your finance staff must have the capability to track spending of grant funds so you can report back to the foundation on how funds were used. Your progress report’s narrative component will require program and development staff to gather data and prepare an analysis and conclusions about your work over the grant period.
Grants are certainly a viable funding stream but they are not a fix-all for your entire budget. For inspiration, check out Unlock Your Grant Writing Talent.
Today’s article was written by Kathie Kramer Ryan, who has 15 years of frontline fundraising experience. A former development director, Kathie enjoys sharing her knowledge of nonprofit management and development with other fundraising professionals. You can learn more and find fundraising tips from Kathie at ArroyoFundraising.com.
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