Updated: Mar 17
Maybe not as obvious as it seems.
The question "what is a grant" may seem pretty obvious, right? But there is a 30- minute lesson on “The Grant,” offered by The Grants House, precisely because it is not always as straight forward as we think. So right out of the gate, I am going to address a common misunderstanding when it comes to Grants Acquisition (or finding and winning your next grant).
Often, organizations are well into their policy development or even a grant proposal, when the executive management team is suddenly stumped by this single word, Grants! And they ask their operational team - How do we define it? Who is responsible for it? How will it fit within our various funding streams? Are all grants going to be the same? Should we divide them up and give them to different departments to manage? On at least a couple of occasions, it was my board or an individual donor who asked me this question: “what exactly do you mean by a Grant? Is that a different source of revenue from our regular fundraising streams of gifts and donations?”
One of the common reasons for misunderstanding is that it may come down to who you ask. For example - if someone has had a lot of experience with the US or Canadian Governments, then their bias and description is likely to be more heavily on institutional frameworks for grants. If someone is a Foundation expert – of which there are many such experts (see our lesson on Types of Grantors), it’s possible they have less experience in the Government Grants sector and may be more grounded in that community of donors. If someone has been used to receiving fairly unrestricted sources of grants from various donors, they may be stumped by the word “restricted’ which often precedes the word “grant.” I'll explain that term later on in this blog.
If you’re asking this important question “What is a Grant?” – do not be embarrassed. I’m willing to bet that even the experts have to pause at times to figure out what type of donor funding source they’re talking about.
The Mystery of Grants
So where to start? Well - first off – we don’t want to make the word “Grants” more complicated than it is. It can have many daunting connotations for those people regularly tasked with fundraising. Here is a simple explanation, with which to start: A grant is usually non-repayable. This automatically distinguishes a Grant from a Loan. A loan requires that you pay it back at a later and agreed upon time (to the lender), and it may have an interest payable component as well. Great - that's clear - but donations, gifts, givings, legacies, etc. are also not loans. Are they grants?
A Grant or a Gift?
Some may argue that a grant is more closely associated with a ‘gift.’ And of course that is a term that charities are quite used to. Myself - I don’t like to use that term ‘gifts’ because a grant usually will come with numerous terms and conditions that apply and tie the donation to a specific set of tasks or activities – most often within the context of a project.
If we use the term ‘gift’ – it can have very misleading connotations. In fact, the terms in a grant agreement are normally set to align themselves with universally acceptable project management stages and pre-requisites. As such, if you are a project manager, then your grant fund won’t pose a great deal of challenge to you. But keep in mind that there are grants that have more stringent conditions than others – and it is those that you need to watch for and definitely negotiate with the donor. They also frequently come with eligibility requirements and usually require a Grant Proposal or a formal application of some sort. Our training lessons, above, also goes into what those different applications look like and what the eligibility criteria might be. Make sure you never take the funds for granted! (pun intended).
Now – life wouldn’t be interesting if there weren’t exceptions to everything! No less so with grants. There are grants which are called Partial Contribution Grants, and Conditionally Repayable Grants. The former grant would normally have two components – including the part that is non-repayable and the part that is (re)payable. Grants can be ‘unconditional transfers’ of funds to recipient individuals or agencies – or they may be ‘contributions.’
A contribution is typically subject to some sort of performance conditions, and these would be articulated in the agreement. If you want more information on these, check out our 30 minute training lesson on What is a Grant? The Grants House also explains how the Contribution Agreement is supposed to work, with institutional donors. For example, did you know that the Global Affairs Canada (GAC) contribution agreement is NOT an institutional grant that requires a match from a recipient agency (typically from 5 - 20%). It is the other way around. GAC expects that the recipient agency has raised a sufficient amount of funds to implement a project and then they provide 95% (or whatever the difference is) to fund and expand the whole project. Quite a different perspective, right? It's more like a deposit on a house. If you have the 25% downpayment, the bank will fund you the mortgage. When you look at it that way, it puts a whole different spin on the governance of that project funding and on the fiduciary risk of the organization. Not to mention how you fundraise for the percentage that your agency has to put down. Don't worry - we have a lot of helpful hints in our lessons at The Grants House.
The most important thing to remember is to read the terms of your agreement and ensure you have interpreted the payment conditions correctly.
Type of Grants
When you are considering what a grant is, also keep in mind that there are a lot of different kinds of grant funding out there.
Fortunately, that means that there is almost certainly going to be something perfectly suited to your organization. Unbelievably, over the years, I have accessed every type of grant that is on the following list of potential grant funding.
There are grants for research, technology, innovation, staffing, capacity building, sectoral programs, emergency response, reconstruction and rehabilitation, pilots and scale-up initiatives, proofs of concept, sports, arts, music, construction or capital grants, food commodities, non-food commodities, endowments, internships, enterprise formation (for-profit), democracy building, peace & conflict, advocacy, and even grants to help support the overheads of organizations.
If I’ve missed any here, please leave a comment or send me an e-mail and I’d love to hear what type of funding you’ve received.
To Solicit or Not to Solicit – that is the question!
In a perfect charity world, wouldn’t it be great if our thousands of individual public ‘gift-givers’ published that they’re looking to give their money to a worthy organization?
For most larger donors that offer Grants, that is exactly what they do – and for that we are grateful. The downside, though, is that we are forced to compete with many other applicants to get those funds.
If we are competing for a Call for Proposals, it is referred to as a Solicited Proposal. It is a procurement process, in a sense. If there is no competition it is referred to as an Unsolicited Proposal. That just means that the grantor hasn’t asked – publicly - to submit a proposal but you’ve identified something that you think they’ll be interested in – and then you approach them as an unsolicited applicant.
Obviously, there are all sorts of advantages and disadvantages to solicited or unsolicited proposals. They also require that you take a different approach in terms of how you identify donors, how you research them, how you communicate with them and of course, how you get ready to write your proposal. The Grants House provides a lot of information on how both of these processes work, how to prepare your strategy to approach both situations with ease (and position yourself to win) and what to watch out for!
I personally like the unsolicited grant opportunities better. There are a lot of reasons why and I talk about those in The Grants House lessons. One of my favourite reasons is the opportunity to ‘co-create’ your program as opposed to putting ‘the skin’ around a pre-developed grant-funded program.
Restricted and Unrestricted Grants
One of the more popular and well-known terms in Grants is Restricted and Unrestricted funding. If you’re like me, you prefer the unrestricted variety – no strings and no stringent reporting requirements. It is more closely akin to a donation or even a gift and can often be used for your administration, overheads or any specific program that you designate it to. These funds usually don’t have legal contractual agreements attached to them and your agency is at liberty to use those funds in the best way possible to achieve the objective of the donation. They are often from estates and private, high net worth individuals.
The principal differences between restricted and unrestricted funding is liability, risk and regulation (or governance). A restricted grant will also usually require a contract of some kind – an agreement. That agreement will invariably spell out conditions attached to it. Unless otherwise specified in your contract, you cannot use those funds as you please. You negotiate the budget and the eligible expenses, and then you have to implement the project according to that agreement. In other words, the grant is regulated and the funds are restricted to the purpose that was laid out in the grant agreement – and according to the eligible costs and conditions that were stipulated in that agreement.
By the way, I’ve heard some marketers refer to this as ‘designated giving’ but this is not the same as restricted grants. Firstly, designated gifts are usually restricted by the recipient agency (internally) for their particular purposes. Restricted grants are restricted by the donor (externally). The latter also has the additional catch of a more arduous framework of eligibility, governance and reporting.
What a Grant is Not!
Interestingly, we talk a lot about what grants are – but we often don't consider ‘what they are not!’
If we examine the terms we’ve used above, it all sounds like “Money!” Money to do programs, money to cover overheads (salary, utilities, etc.), money for agency growth, etc. This emphasis and expectation puts a lot of pressure on staff and on the company executives to get more grants by any means, to diversify and grow their revenue streams.
However, grants should not be considered as your silver bullet to resolve fiscal challenges. In fact, grants are usually cyclical in nature and you may observe ‘feast and famine’ periods where you will be plush with funds and then have none at all. On the other hand, agencies that have done very well usually are using grants to pursue a clear and consistent organizational growth model that expands their reach, strengthens their sectoral expertise and helps improve their influence in the sector. Grants, therefore, becomes a means to an end – not the end in itself.
For agencies that are looking to Grants to solve their difficult financial challenges, as an end in itself, it may be important to look deeper at those systemic issues and re-evaluate the role that grants will play in resolving those issues and growing the agency - long term. I’ve seen some organizations win some grants to delay some inevitable systemic challenges - only to see significant ‘scope-creep’ and inevitably a return to those same challenges several years later, or worse.
Each donor-funded project follows the basic project management cycle: conception and initiation, planning, implementation, performance monitoring, and project close. This means that, like any project, your grant-funded project is finite. It has to be replenished.
Your project staff need to transition out, the project assets handed over and, your project offices closed and your project partner agreements completed. Unless it’s agreed to at the beginning or sometime during the project life cycle, there’s no guarantee of continued funding beyond the close-out of a project. A grant is 1-time win-fall that requires extensive planning by an agency to ensure continuity following closure. I am frequently surprised by how many organizations think that a Phase II will be awarded based on the good performance in Phase I. While it can happen, there is no guarantee due to the vagaries of the economy, donor priorities, etc. New grants often need a runway of 3 - 18 months, requiring a Grants Strategy well in advance of the close of a project. At The Grants House, our Course #3 goes into the details of developing a robust Grants Strategy, which will help your organization position itself to build that grants sustainability model.
Follow the money!
In The Grants House lesson on the international aid framework (lesson 4), we seek to understand how various funds flow from donors to different agencies. This is important because donor’s often make funding announcements but have already designated a large percentage of those funds to multi-laterals, bilateral aid (government to government) or other designated recipients. Those announcements rarely mean that the total funding (or even most of it) are available for upcoming applications by implementing agencies. In some cases, a donor may be interested in targeting small & medium organizations (SMOs) to be able to access grant funding more easily, strengthen staff capacity perhaps, support small enterprise initiatives or do innovation testing. In other cases, donors do not want to fund multiple organizations because they do not have the management capacity to oversee many projects. In that case, they may direct their fund allocation to a third party to manage it for them or they may simply reduce the number of projects that they fund.
Happy Grants Hunting!
I hope that these definitions and explanations will help you as you start to move your organization towards a more concrete policy on grants and, setting up your internal procedures and controls to create a transparent and well governed grants portfolio. If you’re interested in these types of discussions, join us at The Grants House for in-depth discussions that dive into the nuts and bolts of developing your grants policy, procedures and processes and Grants Strategy, to help your organization succeed in Grants Acquisition! If you are interested in more discussion on What a Grant is? you might also like to check out The Types of Grants (that are available), on our Course 1 Page, Lesson #6.
I'm Dr. Phil Tanner, founder of The Grants House. I've been working in international development and humanitarian relief work for over 30 years and now I'm excited to pass along my experience to you in The Grants House proprietary training courses!
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@The Grants House, 2023