Knowhow-Now Article

How To Handle Nonprofit Business Grants Safely

By Andrew Wilson

Andrew Wilson

Handling nonprofit business grants is a challenge in itself, but when an organization applies for and is given restricted grants, things can easily take a turn for the worse. Competition is fierce and trying to get funding from outside sources is extremely difficult at times. No wonder many agencies resort to making promises that they know will be impossible for them to deliver. They risk the possibility of bad publicity, litigation, and criminal prosecution. In the end, the grant will be revoked.


No matter how tempting it is, heads of agencies must avoid these kinds of promises at all cost when granted restricted funds. There are ways to prevent these kinds of mistakes if everything is carefully controlled and monitored from the very beginning. Nonprofit business grants restricted in nature can be carefully managed when managers apply caution and know and understand what their donors expect and require from them. Careful planning and organization with the key persons involved are also important so expectations are made known and met. Most importantly, you need to keep the communication lines open so problems can be resolved immediately before they get out of hand.

Putting Agency Risk At A Minimum

Bear in mind that all projects are temporary and time-bound, so hire additional staff only when extremely necessary and make it clear to them that their services will only be needed for the duration of the said project.

Understand and monitor all strings attached to the grant. Make sure you have read every agreement, funding documents and letters from your donors. It is assumed that you already know what you are going to do and how you are going to do it given the limited time that you have. The funding agreement at hand must co-inside with the proposal to avoid conflict. Monitor the grant conditions all throughout the project period to make sure everything is in compliance. Necessary changes must be dealt with by personally discussing matters with the donor or funding agency and have all these changes documented.

Continued assessment must be made to ensure best practices are performed and strategically aligned with your agency’s goals. Remember that you are accepting these grants in order to further your purpose and solidify public trust.

be flexible when necessary

On Acquiring Insurance

Right from the start, you are aware of the possible consequences if you fail to meet the expectations of your funding agency. Know that no insurance policy exists that will cover all of these which includes your need to return the funds, losing future funding and foul publicity. However, D&O liability policies must at least be able to provide reimbursement for the organization’s defense costs and final award in a third party claim of the alleged grant mismanagement. Safeguards must also be put in place from the beginning so you can be protected in case a staff steals from the funds that came from the grant.

On Transactions With Independent Contractors

There are times when it is necessary to seek services from independent contractors in order to fulfill your obligations. It is vital, therefore, that grant agreements have mutually binding agreements with these contractors that hold them responsible if in case they fail to deliver such services. If this is not done, the agency will be held accountable for the contractor’s failure of performance.

So how do you minimize such risk? Get external services only when necessary and make sure that they can deliver on time. You also have to make sure that your nonprofit organization will receive compensation if your contractor does not perform. Everything must be negotiated between you and the contractor regarding damages that can result from possible negligence on their part. These independent contractors must also have sufficient funding and insurance coverage to ensure the protection of the nonprofit organization. By safely handling these nonprofit business grants, you can rest assured that everything will go smoothly and according to plan.


Managers need to apply caution and know and understand what their donors expect and require from them.

the manager has to be on top of things

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