Knowing that many nonprofit organizations desperately need funding – and community need for services is usually quite high – why would an organization ever turn away money or donations?
Unfortunately, sometimes a donation or grant is:
- Too time-consuming to apply for or report on;
- Highly competitive, with a low likelihood of being awarded’
- Associated with additional costs that are not covered by the funding; or
- Simply not a good fit for the organization’s mission, staffing, community needs, or other priorities.
Occasionally it does pay to “look a gift horse in the mouth.” One example that comes to mind is a very generous donation we received from a grantor: household supplies for foster youth transitioning to independent living. We received so much wonderful stuff – kitchen utensils, cleaning supplies, and other essentials – that our first challenge was fitting it all into just one storage unit! Can you spot the issue? The storage unit costs $170 per month, creating an ongoing expense for our organization just to hold the items until they can be distributed. It’s a reminder that even well-intentioned, thoughtful, and valuable donations can have expenses attached to them, and nonprofits need to consider the full picture when accepting them.
Like for-profit businesses, nonprofits need to consider opportunity costs, the potential benefits lost when choosing one option over another. Nonprofits like the one I work for can find themselves juggling a dozen or more grants at a time, each with their own specific requirements. This Grants.com article gives a great rundown of when turning down grant funding is a good idea, especially if the grant is not a good fit. And even if a grant is a great fit for an organization’s programs, it may not be worth pursuing if the application process is lengthy and the ongoing reporting requirements are burdensome. The time spent applying for and managing that grant could instead be invested in fundraising, building donor and grantor relationships, or pursuing other funding opportunities that require fewer staff hours and resources. And of course, we should maximize staff time on providing the actual services to clients in need!
Sometimes the better financial (and ethical) decision is not simply to bring in more money, but to consider where to direct time, effort, and resources. Even when the funding is a direct donation, with no lengthy reporting requirements, there are times when it is best to turn the donation down if it is not something the organization can or should manage. This NOLO article gives some great advice on how to handle these cases of specific donor restrictions that the organization is unable to fulfill. Nonprofit sustainability isn’t just about how much funding an organization receives; it’s also about making strategic decisions that allow staff to focus on their mission and serve their communities effectively.
If you work or volunteer for a nonprofit, what do you consider when deciding whether to pursue a funding opportunity? Is there another factor I missed? Comment below!
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