Sections of this topic
Before you apply for a federal grant, you should determine whether your organization has the financial capability to use federal funds properly.
A Financial Checklist…
…to help you determine whether or not you are ready to apply for a federal grant.
□ Has the IRS classified your organization as a tax-exempt entity? To apply for many federal grants, you must be an IRS tax-exempt organization. Most NPOs are 501(c)(3) organizations under the IRS tax code, but other kinds of NPOs can apply for grants too.
□ Are your organization’s financial records audited annually by an independent outside public accountant? A federal agency may require your NPO to produce a “non-qualified” audit report to receive a grant award. This means that there were no financial issues and that all accounting standards were properly observed.
□ Can you meet the financial requirements? Before you apply, you should carefully study the grant guidelines to determine that your NPO can meet all financial requirements. For example, one typical grant requirement is the periodic submission of detailed financial reports.
□ Do you have the organizational financial policies, procedures, and practices in place to use grant funds properly? Once you receive a grant, you will be expected to (1) disperse grant funds according to your application budget; and (2) account for them according to accepted accounting procedures. For example, one important financial practice would be the ability of your NPO to identify and track all grant expenditures.
□ Is your nonprofit ready to be audited by a federal agency? As a condition of the award, a government agency may decide to do a pre-award audit to determine whether your NPO can manage a grant … while adhering to accepted accounting standards.
You also may be audited at the conclusion of your federal government grants to determine whether your organization has spent its grant funds properly – i.e., only on those items/activities that were in the budget you submitted with your application, or were approved subsequent to that submission by the granting agency.
Determine your Financial Capability Now
If you can answer all these questions positively, you are financially ready to apply for a federal grant. If any of your answers are negative, address your problems before you apply for a federal grant.
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Dr. Jayme Sokolow, founder and president of The Development Source, Inc. helps nonprofit organizations develop proposals to government agencies, foundations, and corporations. He can be contacted at Jayme Sokolow.
