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Red Flags in
Proposal Budgets |
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Grants from private, corporate and government funders provide
a substantial source of income for many non-profit agencies and yet the current
economic downturn has significantly reduced the availability of these grants.
Some foundations have ceased grantmaking completely, while others have reduced
the number and size of their grants, resulting in increased competition for
available funding. Now, more than ever, non-profits need to be certain that
their proposal presents their agency in the best possible manner.
Grant writers typically focus on the proposal narrative and only
hastily prepare budget information, mistakenly believing that the financial
section of a proposal is nothing more than a restatement of the need expressed
in the narrative. In fact, the financials reveal more about an agency than may
be initially apparent. Most funders scan a budget and financial statements for
"red flags" - items that could result in a denial of the funding request,
unless sufficiently explained in the proposal document. The following are suggestions
for identifying red flags in your financials.
- Appeals for Emergency Funding To Keep The Agency
In Business Grant makers review financial
statements to ensure that the non-profit agency is reasonably solvent and
not just surviving month-to-month. Grantmakers want their grant dollars to
have a positive impact in the community and so they tend to support winning
projects. Insolvent agencies are too risky an investment for most funders
and so grantmakers typically avoid non-profits that seem desperately in need
of financial support. If your agency needs emergency funds just to survive,
consider approaching individual donors first - try a direct mail appeal or
small community event. Postpone the submission of a proposal to foundations
until your agency is more financially stable. If you are determined to submit
a request to a foundation, read their guidelines or call to be certain the
foundation will consider requests for emergency funding. Financial statements
that reflect large liabilities, loans, payroll taxes payable or pending lawsuits
are also a concern to foundations. If your financials indicate a large liability
that will come due in a few years, add an explanation of your plans to retire
this debt.
- Large Unexplained Reserves or Endowments Large
reserves may cause a foundation to question the need to fund a non-profit
- believing that their grant is not needed by the agency. Some foundations
feel their grant dollars will have more impact if given to a smaller agency
with strong financials, but without a large budget surplus. If your agency
has large reserves indicated in the financials, include a statement explaining
the current need for additional foundation funding. The planned use for any
endowment should also be explained.
- Irregularities In The Auditors' Notes Funders
search auditors' notes for any indication of irregularity. Any anomalous factor
should be clearly explained in the notes to the budget. Don't ignore the issue,
hoping the funder will overlook it. Explaining irregularities will demonstrate
your agency's awareness and mastery of its financials. If the financials have
not been audited, funders typically look for some indication that accounting
controls are in place, and here also, irregularities should be explained.
- Math Errors Incorrect
calculations are also a cause for concern among foundations. While
the inaccuracy may be nothing more than a simple math error, it could be interpreted
as carelessness about finances. When creating a budget, double-check your
math. Even if you use an Excel spreadsheet, recheck your work. An incorrect
formula can inadvertently cause budget errors. Also, check your proposal to
be certain that any figures noted in the narrative match those in the budget.
Author Linda Zukowski owns and operates EarthWrites (www.earthwrites.com),
a grantwriting and fund raising consulting firm specializing in environmental
and Native American issues. Its goal is to increase the overall capability of
non-profit organizations and help them to bring about a positive change in society.
Ms. Zukowski is a former business executive who decided to leave a successful
corporate career and instead use her skills and experiences to assist charitable
organizations. Her book on corporate funding, Fistfuls of Dollars, has become
a standard for grantseekers across the nation.
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