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How to Find Grants for Your Nonprofit Organization

Maybe you’ve heard the news about a local hospital or museum winning a $100,000 grant, and you’re wondering what grants are all about. Or you are seeking grant funding to improve the quality of life in your community. If so, the Grants Collection (a part of the Social Science and History Department in Pratt Library) can recommend numerous books, Web sites, and databases to help. This guide answers many basic questions about grant funding, and points you to other resources that can help:

• Is This Guide the Right Resource for Me?Â
• What Is a Grant?Â
• How Do I Prepare My Organization for Success?Â
• What Is 501(c)3 Status, and Why Is It So Important?Â
• How Do I Learn about the Grantseeking Process?Â
• How Do I Find Grant Opportunities?
  • Foundation and Corporate Funding
    • Resources Especially for MarylandÂ
  • U.S. Government FundingÂ
  • State (Maryland) FundingÂ
• How Do I Write Letters of Inquiry and Grant Proposals?Â
• What Are Some Other Funding Options?Â
• What Do I Do If I Need More Help?  Â

Is This Guide the Right Resource for You?Â

This online guide is intended for nonprofit organizations in the United States. If you don’t make any money at what you’re doing, that doesn’t necessarily mean that you’re a “nonprofit.” For the purposes of this guide, a nonprofit organization is a specific type of corporation that:Â

• is registered with the state government to do business within its state
• is recognized by the Internal Revenue Service as exempt from federal income tax
• does charitable work in the community

Many hospitals, schools, homeless shelters, museums, and other organizations are nonprofits.

What Is a Grant?Â

Using the words of the Association of Fundraising Professionals, a grant is “a financial donation given to support a person, organization, project, or program.” It is typically awarded to a nonprofit organization from a foundation, corporation, or government agency.
 

Grants are typically awarded to a nonprofit organization for a distinct program or purpose. A grantmaker generally focuses its giving on:

• A specific population (such as children or organizations in Maryland)
• Certain types of nonprofits (such as churches or environmental groups)
• Particular types of support (such as seed money or funding for equipment).

Many people think that grants are an easy way of getting funded, because grant money is free. In reality, even though you do not have to pay a grant back, you do have to invest a considerable amount of thought, effort, time, and money.

In addition to “doing what you do really well,” you need:

• An in-depth understanding of the needs of your community in order to develop an effective solution (program) to meet the problem.
• Knowledge of the available resources of your organization, so that you can ask for the right type and amount of assistance.
• The ability to match your program and needs to another organization’s priorities and criteria for giving. This can involve a lot of research!
• Language skills for writing an effective proposal.
• Enough cash flow to run your organization and its programs until the grant funding comes in. Since some grantors distribute funding by reimbursing for expenses you have already paid – or simply may not “cut the check” exactly when you need it – how will you keep your doors open?
• After winning a grant, you will have to monitor income and expenses, measure the successes and failures of your program, and report back to the funder.

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So, before you look for grant funding, you need to get your house in order. Make sure that you have the capability (knowledge and expertise) to carry out a program, before you ask for support for it. If you’d like to read about what it takes to implement a grant-funded project, one excellent guide is:

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Grant Winner’s Toolkit: Project Management and Evaluation by James Quick. New York: John Wiley, 2000. SSH GRANTS COLL HV41.2Q54 2000Q.Â

How to Prepare Your Organization for SuccessÂ

Many people think that finding money is the first step in starting a nonprofit. But there’s a lot more to raising money than just having a good idea. Most importantly, since nonprofits and foundations exist in order to benefit the public, there must be a need for your organization and its work in the community. Before you look for funding for a new program, a key question to ask is whether any other organization in your area is already addressing the problem (and if they are, whether they are doing it adequately). After you’ve established that there is a need for your project, you also have to convince donors that your organization has the ability to carry out what it says it wants to do! Here are some of the most important things to consider:

• Clear mission and vision, goals, and objectives
• Committed board members
• Capable management, staff, and volunteers
• Legal standing to do business in your community
• Appropriate tax status
• Accounting systems
• Programs that are vital to the well-being of the community
• Fundraising plan, which seeks support from many different sources
• Facilities, equipment, and maintenance

A helpful resource for seeing things from the grantmaker’s perspective is the Council on Foundations’ Web site.

If you think your organization might be missing one of the pieces to this puzzle, there are many books, Web sites, and organizations that can assist you. For starters, take a look at The Foundation Center’s Establishing a Nonprofit Organization and Carter McNamara’s Free Management Library for nonprofits. These sites will link you to a variety of other helpful Web pages.

If your nonprofit is in Maryland, also read How to Start a Nonprofit Organization in Maryland from the Charitable Organizations Division of the Maryland Secretary of State’s office.

The Enoch Pratt Free Library State Library Resource Center’s Grants Collection also has books that cover nonprofit boards, financial management, legal issues, and other start-up topics.

Four of our best general books are:

• How to Form a Nonprofit Corporation by Anthony Mancuso. Berkeley, CA: Nolo. SSH GRANTS COLL HD2769.2.U6M35QÂ
• Mission-Based Management by Peter Brinckerhoff. New York: Wiley, 2001 SSH GRANTS COLL HD62.6.B743 2001QÂ
• Starting a Nonprofit Organization. Baltimore: The Community Law Center. SSH GRANTS COLL HD2806.5.M3S73QÂ
• Starting and Managing a Nonprofit Organization: A Legal Guide by Bruce Hopkin. New York: Wiley, 2001. SSH GRANTS COLL HD62.6.H66 2001Â
• If you need more advice on what to read, just e-mail us!

What Is 501(c) 3 Status, and Why Is It So Important?Â

When you are researching grant opportunities, you’ll see that many foundations only give to “501(c) 3” organizations, or require a copy of your organization’s “IRS determination letter.” In a similar vein, you will find many foundations that do not give grants to individuals. To put it simply:

Like a charity, a foundation is also a type of nonprofit, a legal entity that is exempt from federal income tax. In return for this tax-exempt status, the United States government regulates how foundations can give away their money.

By law, a foundation can only give funds for charitable purposes – to support:

• religious, charitable, scientific, literary, education, and amateur sports organizations
• organizations that prevent cruelty to children or animals
• government entities and agencies
• operating foundations that provide charitable services to the community

See section 170 (c)(2)(B) of the Internal Revenue Code (also known as Title 26 of the United States Code). Section 170 (c)(2)(B) will in turn refer you to section 501 (c) 3 of the Internal Revenue Code, which lists types of charitable organizations to which foundations can safely make contributions to. This is why, in conversation, charities are often called “501 (c) 3 organizations” and foundations tend to fund only 501 (c) 3 organizations.

In order to be officially recognized as a tax-exempt charity, nonprofit organizations must take numerous steps, including filing paperwork with the IRS

• Form 1023 (PDF File) (pdf) “Application for Recognition of Exemption”
• Publication 557 (PDF File) (pdf) “Tax Exempt Status for Your Organization”
• Publication 4221 (PDF File) (pdf) “Compliance Guide for 501 (c) 3 Public Charities”

After reviewing the documentation, and determining the nonprofit’s status, the IRS informs the nonprofit by letter. This is the determination letter you’ve heard about. To ensure that a foundation is giving donations to qualified charities, it usually requests a copy of each charity’s IRS determination letter for the foundation’s files before it will give a grant to that organization. This is because foundations must report their gifts and activities to the IRS each year.

What this means is that if your organization isn’t 501 (c) 3, you are bound to encounter a great deal of difficulty finding foundations that will fund your organization.

Foundations can only donate to individuals in particular circumstances, such as grants for students, artists, or researchers. There may be other possibilities for funding your project, including raising money from individual donors or partnering with an existing 501 (c) 3 organization.

 

How To Learn About the Grantseeking ProcessÂ

Going to workshops and professional meetings is a useful way of learning about grantseeking and fundraising. The Pratt Library's Grants Collection offers free workshops in the Fall and Spring. If you contact us, be sure to ask us to put you on our mailing list. Other organizations in the Baltimore-Washington region offer free or low-cost training for nonprofits, including:

• Associated Black CharitiesÂ
• Anne Arundel Community College and the Community College of Baltimore County. Sometimes these course listings are hard to find on the colleges’ Web sites. When you call, ask them to send you a printed course catalog, especially for continuing education courses.
• The Foundation Center’s Washington, DC locationÂ
• Maryland NonprofitsÂ
• Center for Nonprofit AdvancementÂ
• Social Action and Leadership School for Activists (SALSA)Â
• If you are interested in a specific funder, ask whether it offers orientations, workshops, or other technical assistance for grantees. You’d be surprised how many of them do!

How To Find Grant Opportunities for Your Nonprofit

Once you’ve established your nonprofit organization, you’ve figured out your project’s goals and funding needs, and you’ve read up on the world of philanthropy, you may feel ready to look for grant opportunities. There are two major sectors to research: grants from foundations and corporations, and grants from federal, state, and local government agencies.

Foundation and Corporate Funding

A foundation is a type of nonprofit organization that exists in order to give money away for charitable purposes. There are several types of foundations, including ones that are run by family members, members of the community, and corporations.

By law, tax-exempt foundations must file a yearly information return with the IRS (IRS form 990-PF (PDF File)), and this information must be made available to the public. So, unless you are a large organization that does a lot of grant fundraising, you probably do not need to purchase directories or databases. Instead, use the Internet, or – even better – visit your public library!

You can find a limited amount of information about foundations for free on the Internet. The Foundation Center’s Guide to Grantseeking on the Web (New York: 2003. SSH GRANTS COLL HV41.2F68Q) is a handy directory of online resources that you may want to start with.

If you know the name of a particular foundation, you can use the Foundation Center’s Grantmaker Web Sites page and Foundation Finder page to find the foundation’s Web site, current contact information, a brief description, and a link to a recent 990-PF form (the information return that foundations file with the IRS). Another helpful resource is GuideStar, a directory of more than 850,000 nonprofit organizations in the United States (registration is free).

The problem is, you may not know the names of foundations and corporations that fund projects or issues like yours. How do you find out?

If you live in the Baltimore area, come to the Enoch Pratt Free Library’s Central Library/State Library Resource Center (400 Cathedral Street, Baltimore) and start with the Foundation Center’s Foundation Directory Online.

Foundation Directory Online:Â

• Covers approximately 80,000 foundations and corporate giving programs in the United States.
• Allows you to search by:
  • grantmaker’s name and location
  • geographic focus (where the foundation gives its money)
  • type of support (the kind of help the grantmaker provides, such as seed money or funding for buildings and equipment)
  • subjects

More than 250 libraries throughout the United States offer free public access to Foundation Directory Online, FC Search, and other Foundation Center products. To find a library near you, use the Foundation Center’s directory of Cooperating Collections.Â

If you would like to learn how to use Foundation Directory Online, take a look at The Foundation Center’s tutorial, the Foundation Directory Online Guided Tour. Also, the Cooperating Collections (including the Pratt Library) and the Foundation Center’s headquarters and four field offices give free workshops on how to find funding with the Foundation Center’s databases and tools.

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Another option is to find out whether there is a grantmakers’ association, or an association for nonprofit organizations, for your region or subject interest. Sometimes, these organizations publish directories and other information about their members or about grantmakers who fund them. Another option is to figure out whether a government agency in your state is responsible for keeping records on foundations.

For instance, Maryland has:

• The Association of Baltimore Area Grantmakers (ABAG) and Washington Grantmakers – both are organizations of funders.
• The Maryland Association of Nonprofit Organizations (MANO) for all nonprofits in Maryland. Both ABAG and MANO publish directories of foundations in Maryland.
• The Maryland Attorney General’s Office, which publishes an annual Index of Private Foundation Reports (MDX and SSH GRANTS COLL XAS911.A23M3Q).

There are also funder organizations for specific types of issues, such as Grantmakers in the Arts and Funders Concerned about AIDS.

If you are interested in organizations in other states, you can use the print Encyclopedia of Associations, (SSH XHS17.G36Q) to find information on some nonprofits’ and funders’ groups. You can also try the National Council of Nonprofit Organizations, which offers links to state associations of nonprofits, or GuideStar, a database of more than 850,000 nonprofit organizations in the United States.

Another thing to be aware of: some companies have “corporate giving programs” rather than “corporate foundations.” A corporate giving program, unlike a corporate foundation, is not a separate organization from the business that funds it – instead, it may be run by the company’s advertising, marketing, or public affairs department. Also, corporate giving programs (unlike foundations) are not required to make contributions to nonprofits, or report their activities to the IRS through the 990-PF form. So, they are not often listed in directories that are based on 990 filings.

There are sources available to assist you if you are searching for funding from a particular business:

• Corporate Giving Directory. Rockville, MD: Taft Group.
• National Directory of Corporate Giving. New York: The Foundation Center.
• Successful Corporate Fundraising. New York: Wiley, 2000.
• The business’s corporate Web site (as opposed to a site that’s trying to sell you their product). Look for links like “community affairs,” “community involvement,” or “corporate citizenship.”

When you are looking at the foundation’s record in these sources, compare your organization and its programs to the funder’s priorities. While you are researching, you might want to keep track of your prospects with worksheets.

Pay special attention to the funders’

• Purpose and activities
• Limitations (which types of nonprofits or projects the foundation DOES NOT fund)
• Application information (including deadlines and preferred method of contacting the funder)

Once you have identified some foundations that might help, it’s important to see if they really give to organizations or programs like yours. Do they have a history of giving to your cause and to organizations like yours? To find out more details:

• Check the foundation’s record in GuideStar . Specifically, take a look at its most recent 990-PF form, which should list all the organizations that have received a grant from the foundation in the past year. A key question to ask is whether the foundation tends to give
  • to organizations like yours (start-ups or established organizations)
  • for projects like yours (small or large-scale projects)
  • for the type of assistance you need (operating funds, program development, or something else)
• Visit the foundation’s Web site. If the foundation has a site, it will often include application forms, news, reports, and other information.
• Read the foundation’s annual reports, newsletters, and publications. Pratt’s Grants Collection is on the mailing list of more than 20 major foundations that give in the Baltimore area, and we keep the information in the Grants Collection vertical file. The Foundation Center’s Washington, DC library also maintains Grantmaker Files that you can read and photocopy. Don’t hesitate to get on the foundation’s mailing list yourself, though!

Since funders’ interests and priorities can change, it’s a good idea to keep tabs on grantmakers in your regions. You may also want to follow the news, to find out about new foundations and funding programs.

If you’d like to find out the latest funding opportunities, two of the best free resources online are The Foundation Center’s Philanthropy News Digest/RFP Bulletin, and PNN, the Philanthropy News Network.

Another way to keep up is through reading trade magazines and journals for fundraisers. Although some magazines have online versions, allowing you to read some articles for free, you usually have to visit a library in order to read a magazine from cover-to-cover.

Pratt’s Periodicals Department subscribes to:Â

• Chronicle of Philanthropy (you can also search a database of grants published in the Chronicle, if you have your own subscription).
• Grassroots Fundraising JournalÂ
• Nonprofit TimesÂ

But these are only some of many useful magazines for nonprofit management and fundraising. The Foundation Center’s Washington, DC Library offers a larger selection of magazines and newsletters, which you can read for free if you visit their location.

U.S. Government Funding

If you are looking for government funding for your organization or project, you need to research opportunities on the federal (U.S.), state (e.g., Maryland), and local (e.g., Baltimore) level. Although some federal agencies award funding directly to nonprofits – these are sometimes called “discretionary grants” – most federal money is distributed to state, county, or city governments, who then decide which local charities get funding.

Although some parts of the process are similar, there are some key differences between foundations and government funders.

• Tracking a new federal funding opportunity can be a long journey. Typically, once the legislation has been signed into law by the President, the agency implementing the program publicizes a “notice of funding availability” (NOFA), which offers nonprofits a chance to compete for funding to provide the services Congress has mandated. To get to the point – you will probably hear about a new government grant program long before you can actually apply for it!
• How well your program addresses the legislative intent of the law is very important and is often one of the criteria that your proposal will be evaluated upon. It also goes without saying that your program will need to comply with all federal laws and regulations, too. You can research relevant U.S. bills, laws, and regulations on the Internet, or at a federal depository library near you.
• If you are a faith-based organization, the U.S. government can offer funding, but there are numerous guidelines they must follow because of the separation of church and state.
• Some federal programs require cost sharing or matching. This means that your organization may be required to put up cash, in-kind donations, or staff time needed for the project without being reimbursed with federal funds.
• The U.S. government requires financial reports and recordkeeping on a regular basis and has the right to audit federally-funded operations at any time. Programs that receive more than $300,000 in federal funding must be audited.

Another key difference between foundation and government grantseeking: it’s usually much easier to find information about federal grants for free on the Internet. The federal government uses several different Web sites and publications to notify the public about funding opportunities:

• Federal Register. When a new grant opportunity is available, it’s usually published here first – particularly, in the “Notices” sections. If you are searching the online version, be sure to limit your search to the most current volume, and the “Notices” section.
• Catalog of Federal Domestic Assistance. This is a listing of all the U.S. Government’s grants, loans, and benefits programs, including opportunities for nonprofits, businesses, state and local governments, individuals, and families. You can use it online or in print (Washington: Government Printing Office, Annual. SSH GRANTS COLL XHC110.P63.A554Q).
• Grants.gov is a Web site that has become a one-stop shopping center for grantees. Two helpful features are its list of grants that have been posted in the last 7 days, and the ability to sign up to receive funding notices through e-mail.
• Some federal agencies have set up their own Web sites for grantseekers. For instance, each of the following agencies have centers with information for community groups:
  • Department of EducationÂ
  • Department of Health and Human ServicesÂ
  • Department of Housing and Urban DevelopmentÂ
  • Department of JusticeÂ

There are also Web sites that coach or guide nonprofits through the process of applying for federal resources, filing required paperwork, and implementing a federally funded program.

• USA.gov for Nonprofits, by the U.S. General Services Administration. This provides links to relevant information for nonprofits from the IRS, U.S. Postal Service, and many other federal departments and agencies.