Grants and restricted funds.

What to track for every grant.

• Award amount and period of performance
• Restriction type (program, time, purpose)
• Indirect cost rate approved by the funder
• Cash timing (advance, reimbursement, milestone)
• Reporting requirements and audit triggers
• Match requirements if any
• Spend-down rate against the period

Grant-dependence risk.

A nonprofit that gets 50% of revenue from one funder is one funding decision away from a crisis. Healthy organizations work toward diverse revenue and a strong unrestricted base — not because grants are bad, but because concentration is.

Indirect cost recovery.

If your federal indirect rate is 18% and you accept grants at 10%, you’re subsidizing the funder — usually with unrestricted dollars that should be funding core operations. Negotiate the rate or budget the gap explicitly.

Grants are not free money.

Every grant comes with costs: application time, reporting burden, restricted spending rules, audit exposure, and sometimes program design constraints. The good grants are worth it because they fund work that aligns with mission. The bad grants distort the organization. Treating all grants as wins without analyzing the full cost is a common nonprofit mistake.

What grant management actually requires.

• Compliance. Every restricted grant has rules: allowable costs, time frames, reporting deadlines, audit provisions. Tracking these in a calendar is not optional.
• Spend tracking. Each grant’s expenses should be tagged in the accounting system. Reconstruction at report time is a sign of weak infrastructure.
• Drawdown management. Government grants often reimburse in arrears. The organization fronts cash, sometimes for months. Working capital is not optional.
• Reporting. Different funders, different formats, different cycles. A grant calendar with assigned owners avoids missed deadlines.

The full cost question.

Most grants don’t pay their true cost. A program funded at $200K may cost $230K to run when fully loaded with overhead, indirect costs, and the management time required. Sophisticated grantmakers know this and increasingly fund overhead. Less sophisticated grantmakers cap overhead at 10–15%, which forces the organization to subsidize the program from unrestricted dollars. Knowing the full cost — and being honest about subsidy — is fundamental to a sustainable grants strategy.

Questions EDs and grant managers ask.

Should we take every grant we’re offered? No. Grants outside the mission, grants with onerous terms, and grants that subsidize less than 70–80% of true cost should be declined or renegotiated. Saying no to a poor-fit grant is a sign of organizational health.

How do we negotiate indirect cost rates? Some funders have published rates and won’t move. Others will negotiate, especially if the organization can document its actual indirect cost rate. Federal grants allow a negotiated indirect cost rate (NICRA) or the 10% de minimis option — many organizations don’t realize they qualify.

What if a funder asks us to do work that isn’t mission-aligned? Walk away. The grant isn’t worth the strategic distortion. The discipline of doing this builds a stronger organization over time.