It makes sense. Money you don’t have to pay back sounds great! But don't be fooled by the prevalent myth that there is lots of free money just waiting to be given away. Yes, there are countless grant opportunities available from 26 federal grant-making agencies, 32 Texas agencies, and almost 19,000 foundations and grant making organizations giving to Texas-based nonprofits.
Yep, that’s definitely lots of money, but getting a piece of that free money pie is not easy. So how do you know if your organization is ready to pursue grant funding?
There are several things that need to be in place before you apply for grants. We have developed a checklist to help you determine if you are grant ready. Can you answer "yes" to all of the following questions?
Is your organization a 501(c)(3) tax-exempt charitable organization? If your answer is "no", you're not ready. In most cases, to be eligible to apply for grant funding, your nonprofit organization must be a 501(c)(3) tax-exempt charitable organization. Our recommendation is to consult with an attorney and certified public accountant to guide you in the nonprofit formation process. Visit the IRS Charitable Organizations page to learn more.
Does your organization have an established board and bylaws to guide governance? If your answer is "no", you're not ready. Your organization lacks established governance. Good governance provides the framework needed for the board to make good decisions, be effective ambassadors for the nonprofit, and set goals that further the mission. Visit the National Council of Nonprofits for more information about nonprofit governance.
Does your organization have policies and procedures to guide operations? These are the rules and guidelines that govern how a nonprofit organization operates. If your answer is "no", you're not ready. This also relates to nonprofit governance, which your organization is lacking. Good governance provides the framework needed for the board to make good decisions, be effective ambassadors for the nonprofit, and set goals that further the mission. Visit the National Council of Nonprofits for more information about nonprofit governance.
Has your organization been actively operating for at least 3 years? For example, you have been providing services, generating revenues and expenses, etc. If your answer is "no", you're not ready. Most grant makers do not provide funding for starting a nonprofit organization or those that are still in the start-up phase. Our recommendation is to consult with an attorney and certified public accountant to guide you in the nonprofit formation process. Visit the IRS Charitable Organizations page to learn more.
Does your organization serve a clearly defined geographic region and target population? If your answer is "no", you're not ready. Your nonprofit organization needs to have a clearly defined area (i.e., counties, cities, or neighborhoods) and population (i.e., adults with serious mental illness) to serve. Every single grant maker will ask you to provide this information.
Does your organization address identifiable and data-validated needs or gaps? If your answer is "no", you're not ready. The desire to make the world better is commendable, which is why people form charitable organizations. But it is critically important that the nonprofit is addressing needs and gaps are documented to exist and affect a significant amount of the population in your service region. Examples of documented evidence include community needs assessment, community surveys, state and federal databases, etc.
Does your organization provide structured programs/services that utilize evidence-based practices and have defined expected outcomes? If your answer is "no", you're not ready. Your organization lacks structured programs/services, which are required to help carry out your mission and achieve your vision. It’s essential to implement programs/services that are well researched and have documented evidence that they accomplish the expected outcomes as designed. Visit this page for an overview of nonprofit program planning.
Does your organization have established evaluation methodologies to measure the reach and effectiveness of your program/services? If your answer is "no", you're not ready. Your organization lacks a standardized evaluation methodology to help keep your organization focused on its goals and objectives and prove the effectiveness of your programs and services. For example, the outputs (tangible results: ex., # of program participants) and outcomes (changes in behaviors: ex., X% decrease of depressive episodes) are tracked and can be reported. Our recommendation is to determine what you need to measure (i.e., number of clients served) and how you plan to measure it (i.e., 3-month assessment). Visit this page to learn more about evaluation.
Does your organization have established financial management practices? If your answer is "no", you're not ready. Here is another area that needs governance. Your organization lacks established generally accepted accounting practices. Some examples include having a board-approved annual operating budget, accounting and bookkeeping system (i.e., QuickBooks), dedicated bank account, and filing annual tax returns. Visit Foundant Technologies, to learn more about nonprofit accounting.
Does your organization undergo (or plan to undergo) an annual independent financial audit or certified review of financial statements to ensure that internal financial management controls are adequate? If your answer is "no", you're not ready. Most grant makers require that you submit a copy of your nonprofit organization's independent financial audit or financial statements. While audits are rarely required, it demonstrates an effort to detect and prevent internal financial fraud. There are some exceptions, though. Visit Foundant Technologies to learn more about audits.
Our top recommendation is to consult with an attorney with an area of expertise in nonprofits and certified public accountant to form a nonprofit organization and help formulate bylaw and other governing documents. You can also visit the following pages on our website: FAQ, Nonprofit Formation, and Resources for some helpful information, which is not meant to substitute the professional advice of an attorney or accountant.