The governing body of a nonprofit organization has a range of different funding options to consider. The most popular sources of income are are grants and donations. However each income stream comes with its unique processes.

Below is a holistic view of what’s involved.

Grant Funding

Grants are typically doled out by the public sector or charitable foundations or trusts. The grant need not be repaid and is normally tax-exempt. However, most grant providers only fund organizations of charitable nature. Several grant makers also do not fund organizations that have significant resources or cash in hand. This can be disadvantageous for those organizations with a business-like functioning.

In addition, grants generally come with conditions, like:

  • Specific objectives or results

  • Particular milestones

  • Reporting on use of the money or the progress of the project.

  • Unutilized amount to be returned to the provider

Before opting for grant funding, nonprofits should consider the following:-

Does the funding aid the present aims and strategy – or divert from the mission?

Is it feasible to adhere to the grant conditions?

Will the cost of obtaining the grant outweigh the benefits?

Can the activity be sustained in the absence of grant funding?

Gifts and Donations

Gifts and donations are a very important source of income for charities and can also benefit from tax relief. Donations are generally received from individuals, companies, or other charitable trusts and foundations. You generally have considerable freedom in choosing how to apply them unless the donations have been made in response to a particular appeal.

Fundraising however can be a costly and time-consuming process – with even the risk of losing money. With this in mind, these are a few key aspects to be aware of:-

  • You will need to comply with data protection, accounting rules and legal requirements with regard to professional fundraisers, for house-to-house collections and lotteries. The rules regarding fundraising can be complex and it’s best for you to seek professional advice.

  • Is your fundraising economic and effective? Do you have a ROI model for your fundraising activity and are you adhering to it?

  • More importantly you should have a concrete plan in place to ensure that the funds are spent effectively for the purpose it has been raised for.

  • You have to ensure clarity and transparency in the specific objective(s) of the fund raiser, and also have plans to deal with any surplus or shortfall of your target.

  • Ensure that your fundraising activities are above the board and unlikely to tarnish your reputation in any manner. For example, you should have solid policies on corporate donations.

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