Charitable giving in the US dropped 10.5% in 2022 compared to 2021.
The reduction further limits the resources available for nonprofits to fulfill their mission, as they already struggle to secure consistent funding to run their operations and execute impactful projects.
As a nonprofit, when you eventually receive funding, making sure you're allocating and using the funding appropriately adds yet another layer of complexity.
To improve your chances of getting funding and making the most of it, it’s important to understand the grant management process and how it works.
In this guide, we break down everything you need to know about grant management, how you can improve the process and how complete planning software can help.
Grant management is the process nonprofits follow to secure and effectively use the funds they receive from sources such as government agencies, foundations, corporations and individual donors.
The process covers the entire lifespan of a grant, from identifying funding opportunities to grant closure.
The goal of this process is to ensure that the funds awarded are used effectively and in accordance with the goals and guidelines the grantmaker set beforehand. And elements like budgeting and forecasting help you plan for the future and align your goals across the entire organization.
The grant management process involves two major players: the grantmaker and the grantseeker.
A grantmaker provides funds to support projects that align with their mission and goals. They:
Some examples of grantmakers are private foundations, government agencies and individual philanthropists.
A grantseeker, on the other hand, is a not-for-profit (or for-profit) organization actively looking to secure funding and strategic partnerships for specific projects. They:
Examples of the kinds of projects grantseekers seek funding for include:
Grantmakers and grantseekers differ in other ways too, including:
| Grantmaker | Grantseeker | |
| Decision Making | Decides which projects to fund based on their priorities, available budget and the merits of the grant applications | Presents a compelling grant proposal, showing grantmakers how it aligns with the grantmaker's goals |
| Associated Risks | The potential failure of funded projects, misallocation of funds and the challenge of ensuring the desired impact is achieved | The possibility of not securing funding and challenges in meeting grant requirements |
| Reporting | Ensures transparency in the grantmaking process and evaluates the effectiveness of funded projects | Provides detailed reports to grantmakers to show how they’re using funds to achieve project goals |
The grant management process typically consists of three phases: pre-award, award and post-award.
These phases help you navigate the complexities of the grant lifecycle, ensuring you plan, execute and close grant-funded projects successfully.
Let’s go over what each phase entails.
The pre-award phase encompasses all the activities that happen before the grant awardee is selected. As a grantseeker, this includes everything from assessing your organization’s needs to the actual submission of the application.
The goal of this phase is to present a competitive application that aligns with the grantor's priorities and increases your chances of being selected for funding.
The phase is split into three key stages:
Conduct a SWOT analysis of your organization's current programs, projects and overall operations to identify areas that need attention.
Also, consider running internal surveys to assess what staff determine as the organization’s most pressing needs.
Prioritize identified needs based on urgency, impact and how well they align with your mission and goals.
Next, look for grant programs related to your goals.
For example, if you want to run a program focused on digital literacy, check for Corporate Social Responsibility (CSR) programs from tech companies.
Then, develop a detailed grant proposal that:
Also, ensure your budget aligns with the proposed activities and provides a clear financial plan for the project.
Prepare and submit the grant application by the specified deadline, adhering to the submission guidelines provided by the grantor.
To make this process go more smoothly, create a checklist of all required documents you’ll need, including the completed budget. Ensure your budget follows the formatting requirements specified in the application guidelines.
To improve your chances of success, conduct a comprehensive internal review of the entire grant application and apply relevant feedback.
The award phase starts right after the submission of the grant application.
Grant applications undergo a thorough review by a panel of reviewers. They’ll assess the applications based on predefined criteria, such as alignment with grantor priorities, feasibility, impact and overall quality.
Grantors also conduct due diligence to verify the accuracy of the information provided in the applications.
This often includes site visits, interviews, or additional documentation to ensure the selected organizations are capable of implementing the proposed projects.
Then grantmakers then decide which organizations will receive funding.
If your nonprofit is selected, you (and other awardees) will be notified. Unsuccessful applicants sometimes receive constructive feedback on their applications to help them improve for future opportunities.
After selection, awardees enter into a formal grant agreement with the grantor.
The grant agreement includes details such as terms and conditions of the funding, reporting requirements, project milestones and financial accountability.
As an awardee, you must comply with the terms of the grant agreement throughout the project implementation.
Carefully review all terms and conditions outlined in the grant agreement.
Be sure to highlight and make special note of key sections such as financial requirements, reporting obligations, project milestones and any other stipulations. This will make it easier to reference this important information later on.
If any terms are unclear, don't hesitate to seek clarification from the grantor. It's better to address uncertainties early than risk misunderstanding later.
For example, some grantors restrict how you can use their contributions (known as restricted funds) and have specific reporting requirements you must adhere to as part of the grant agreement.
To ensure your nonprofit is well-prepared to meet these requirements, use FP&A software to:
The post-award phase involves the actual kicking off and management of the project. It’s focused on ensuring you achieve the actual goals and objectives outlined in your grant application.
This phase includes several stages:
Pro tip: To help ensure you’re allocating received funds appropriately, use our free grant budget template for Excel complete with a dashboard to plan operating expenses and compare expenses across different execution periods.
Effective grant management makes nonprofits more likely to secure funding and make the most of it.
Here are six reasons why you should establish strong processes for grant management from the get-go:
Nonprofits need to plan their activities to address the needs of their beneficiaries. Actively measuring the impact of grants lets you gather valuable data on the most successful funded projects.
When measuring the impact of received grants, consider:
This information can inform your future planning, helping you allocate resources more efficiently and design programs that have a greater likelihood of success in the future.
Plus, grantors want to see tangible results from their contributions. Providing clear evidence of the impact of received grants can help strengthen the relationship between grantseekers and grantmakers.
Pro Tip: Use financial reporting software to drill down into how the grants were used and their impact. With software that’s optimized for your unique needs like Vena for Nonprofits, you can automatically track and categorize expenses related to specific grants, so you can understand where the grant funds were allocated and stay compliant with grant guidelines.
A view of Vena’s grant allocation report template.
Accurate financial records and reporting is essential for making sure the organization is using awarded funds in accordance with the grant agreement.
Any mismanagement or misuse of federal funds could also result in debarment from receiving future funding, administrative recoveries of funds, civil law suits and criminal prosecution. (Yikes!)
Plus, many grants require regular and timely reporting on the progress of funded projects. An effective process and tools that minimize the amount of manual data manipulation your team is doing will help ensure reporting deadlines are met.
Grant management involves meticulous tracking of financial transactions related to the grant. This includes budgeting, expense tracking, and financial reporting.
It also involves maintaining comprehensive documentation related to the grant application, approval, implementation and reporting. This documentation serves as an audit trail, which lets teams know where funds have been allocated.
Citizens Advice used Vena to make it easier for those who weren’t on the finance team to contribute to the budget themselves. As a result, their finance team now has more time to collaborate with each budget owner to determine what their headcount numbers should actually look like—and why.
The audit trails and data validation rules within Vena also lets the finance team track changes and enforce rules to ensure the accuracy and integrity of the entered information. This way, grantors can verify activities and expenditures.
Relying on a single funding source exposes your organization to financial vulnerability, particularly if that source is diminished or withdrawn.
But when you have a process in place to effectively source and manage grants from multiple sources, you reduce dependency on a single funding stream and increase financial stability.
Seeking funding from a variety of sources, including government agencies, private foundations, corporations, and individual donors, helps you to
Part of grant management involves creating budgets for funded projects. This includes estimating expenses and allocating resources according to the project's needs.
For example, when dealing with restricted funds, you’ll need to adhere strictly to the guidelines outlined by the grantor to avoid any misuse or diversion of funds.
On the flip side, you can allocate non-restricted funds more freely to address emerging needs or unforeseen challenges. Tracking expenses and comparing them to budgeted amounts ensures you use resources efficiently and spend in line with the grant agreement.
Many organizations and individuals apply for grants to secure funding for various projects. However, the availability of those grant funds is far smaller than the number of applicants.
The limited pool of funds often results in a highly competitive environment where only a fraction of applicants receive the funding.
You need to develop well-thought-out and compelling grant proposals.
To do this, thoroughly research the grantor's guidelines, previous grants awarded, and any specific preferences or requirements they have. Then highlight the expected outcomes and impact of your project.
Next, craft a compelling narrative: describe the problem or need, explain how your project addresses it, and convey why it matters. Provide data, statistics, or real-life examples to illustrate the problem, then explain why your project is a viable and necessary solution.
Other ways to make your grant proposal compelling include:
Grantors often impose strict compliance requirements to ensure funds are used appropriately and in accordance with their objectives. This results in nonprofit finance teams creating extensive documentation to show adherence to these requirements, as stakeholders often have varying expectations.
Develop standardized templates for common documents such as budgets, progress reports, and project plans. This not only saves time for both applicants and grantors but also ensures consistency in the information provided.
Or you can save more time using premade financial Excel templates.
Young Life mapped its existing Excel templates back to its Vena database to create budgets collaboratively. This also allows for forecasts to be updated automatically based on any new inputs or funding changes.
Grant cycles often have irregular schedules for the disbursement of funds. In most cases, you get some of the funds upfront and the rest later. This irregularity can create financial uncertainty for organizations as they may not have a consistent and predictable inflow of funds to support their activities.
Many grants provide funding for specific projects or periods, leading to short-term financial support. Once a project is completed or a grant term expires, you risk facing financial gaps until new funding is secured.
Reduce reliance on a single grant or funding source.
Diversifying funding sources, such as seeking private donations, engaging in fundraising activities or exploring partnerships can help provide much-needed financial stability.
Also, maintain a robust grant pipeline by consistently seeking and applying for grants. This involves strategic planning, continuous monitoring of grant opportunities, and developing relationships with potential funders.
The compliance process often involves significant administrative work, such as preparing and submitting documentation, conducting audits and ensuring that all aspects of a project align with the grant agreement. All this can be resource-intensive, especially for nonprofits operating with a lean staff.
Use financial planning and analysis software to keep all relevant data in one central location. This way, you:
For example, WWF Canada used Vena to create a single source of truth for all finance-led processes (budgeting, forecasting, reporting and month-end close). As a result, the team can now complete its financial reporting process in a few seconds instead of two long hours.
Grantors sometimes set stringent eligibility requirements to ensure funds are allocated to organizations with the capacity to carry out the proposed projects.
For example, some federal grants require the recipient organization to contribute a certain percentage of the project's total cost. Meeting these strict criteria can be challenging for nonprofits with limited resources.
Reducing reliance on a single grant by diversifying funding sources can help soften the impact of unsuccessful grant applications. Exploring different types of grants and funding opportunities can provide alternatives if certain eligibility criteria cannot be met.
Also, before applying for a grant, conduct a thorough assessment of your organization's readiness. This includes evaluating whether the nonprofit meets the eligibility criteria and has the necessary capacity to fulfill the requirements.
Many funders prefer to see a higher percentage of their funds allocated directly to programmatic activities rather than administrative or overhead costs. As a result, organizations likely face pressure to minimize overhead costs in their budget proposals.
Clearly communicate the importance of overhead costs in sustaining the organization. Provide funders with a transparent breakdown of how overhead costs contribute to the overall success and impact of the funded project.
Keeping detailed reporting on your operational expenses, like the above report created with Vena can help you show grantors exactly where funds are going.
A complete planning software like Vena can help you create detailed and accurate budgets aligned with grant requirements.
Vena lets you develop comprehensive budgets that incorporate all project costs and forecast your financial needs over the grant period. This ensures that your budget aligns with grantors’ expectations.
By taking the manual work out of budget creation, you’ll also move much faster. For instance, Partners in Health used Vena to create budgets 93% faster.
"Distinguishing between core costs and non-core costs in the budget (tagging each budget line as either a core cost or not) helps you gain a higher-level view of projected core costs over time. Automating this process helps you forecast and plan better, particularly in terms of unrestricted funding and grant opportunities. And seeing the full picture, including when grants are set to expire and when new ones may come in, lets you have informed conversations with fundraising teams. As a result, you can target revenue opportunities to support core programs and align financial planning with your mission."
Brendan Eger, Director of Business Information Systems, Partners in Health
Beyond budget planning and forecasting, you can also monitor spending against the budget to keep you within the approved financial limits.
This way, you can spot any potential overspending or underspending early and make strategic decisions that move you closer to project success.