Grant Basics for Board Members: Addressing Myths About the Grants Profession
One of the biggest challenges faced in the grants profession is the disconnect between how most people think grants work and how they actually function. Sadly, sales pitches by late night informercials dating back to the 1980s touting “free grants” have misinformed the public-at-large and have created unreasonable expectations and confusion about grants for nearly everyone. This also means that grant professionals have to work to combat a variety of myths about grants as one of their regular job duties. Additionally, recent political rhetoric about combatting “fraud, waste, and abuse” in grants have reinforced the illusions that grant monies are like fruit on a tree just waiting to be plucked – and spent – and that we simply need to make sure the wrong organizations don’t pluck from the grant tree…
For that reason, today’s blog is intended as a basic primer about how grants in America generally work today – with the focus for this particular blog on grants at nonprofit organizations. So share this blog with your coworkers, supervisors, Development Directors, Executive Directors, and Board Members! In today’s blog, we will address three common myths that grant professionals frequently face.
Myth #1: “Grants are free money!”
As Nobel Prize-winning economist Milton Friedman voiced in his 1975 book by the same title, “There’s no such thing as a free lunch.” Not only do nearly all grants come with a “Grant Agreement” and a set of “Terms & Conditions” (both of which are legally binding instruments like contracts), but nonprofits are expected to implement or scale a program, service, campaign, or other initiative (in part or in whole) in exchange for these grant funds. Usually grants are exclusively available to Internal Revenue Service (IRS) designated 501(c)(3) tax exempt public charities – or other public benefit organizations and agencies such as state and municipal governments; K–12 schools; universities and research institutions; and indigenous tribes, pueblos, and nations. Occasionally, a grant might be available to an individual or a for-profit corporation; however, these are rare exceptions and are usually tied to some kind of “deliverable” that benefits the public (e.g., research grants, artist grants) or strengthens a community’s economic health and wellbeing (e.g., business development, technical assistance).
Most people do not realize that private foundations are also IRS designated 501(c)(3) tax exempt organizations; however, if they have the designation of “private foundation” rather than “public charity,” they function differently. According to the IRS website, “Private foundations typically have a single major source of funding (usually gifts from one family or corporation rather than funding from many sources) and most have as their primary activity the making of grants to other charitable organizations and to individuals, rather than the direct operation of charitable programs.” Per IRS rules, private foundations are required to distribute income for charitable purposes, with the Tax Reform Act of 1969 requiring private foundations to distribute 5% annually of the fair market value of their assets for charitable purposes and must file a 990-PF tax return each year to disclose their giving. Since private foundations have to demonstrate to the IRS that they have been giving their monies away for charitable purposes, the foundations typically require grantees to submit a report detailing the activities funded by the grant. What does this mean? You can’t just “pluck” a grant from the grant tree and never answer questions about the funds again. Grantees are accountable to their funders and private foundations are accountable to the IRS. Grants are not free money; your organization is expected to “deliver” something in exchange for those grant funds.
Myth #2: “Grants are free to submit, so we should apply for everything! Have you applied to the Gates Foundation or MacKenzie Scott? I read something in the paper about them giving away a bunch of money. It can’t hurt to try, right?”
First, THANK YOU for suggesting a potential funder for us to explore. That’s exactly part of what we need you to be doing. Help us identify others whose interests align with the work we’re doing! However, the likelihood of most nonprofit organizations getting a grant from major national or international foundations and donors is extremely low without a significant alignment or connection to that foundation. While the Bill & Melinda Gates Foundation does not disclose the number of grant applications they get each year as the United State’s largest foundation by assets (and the world’s third largest foundation with more than $70 billion in assets), the Ford Foundation (the United States’ fifth largest foundation with approximately $16 billion in assets) has reported receiving anywhere between 30,000 and 40,000 applications per year – only funding an average of between 1,400 and 2,000 or so annually.
While there is still technically a chance that your nonprofit organization could strike gold and get an award from a major national foundation – there is an “opportunity cost” each and every time you invest your organization’s resources, time, and talent to write and submit a grant. As a ballpark from our personal experience, a typical family or private foundation grant could take anywhere between 5 and 25 hours to write, while more sophisticated foundation grants could take upwards of 50 hours or more of research, relationship cultivation, attending workshops, developing the program, writing the grant, and following up with the funder, if necessary – that’s more than a week’s salary for at least one person writing the grant! As far as federal grants, those could easily take upwards of 100 to 120 hours to write and assemble (almost three weeks of salaries). Consider how that time could better be invested in grant writing and/or other fund development activities that have a stronger likelihood of earning an award. We’re not saying that you should never pursue a grant from a large private foundation or a federal grant (we do all of the time!), but you should not make the decision to “apply for everything” without considering the best use of your limited resources and which funding opportunities you’re most competitive for.
Myth #3: “Oooof, we’re in a pickle and need money fast! Can’t you just apply for a grant and have them help us out?”
We empathize with your situation… many of The Grant Plant’s staff have worked for smaller nonprofit organizations that have felt that budget pinch at one point or another. However, grants are not the answer in those situations for two reasons: First, the grant process could take upwards of a year from submission to award and execution, with most private foundation grants ranging in the two to six-month timeline and most state and federal grants taking a minimum of six to nine months to conclude – and that doesn’t even include the timeline to develop and write the grant with your team, which could take one to two months! For that reason, applying for a grant is not generally going to give you immediate access to funds. The second reason is that most foundations prohibit nonprofit organizations from using grant funds to address other debts or budget shortfalls. There are certainly exceptions to the rule, but those instances usually apply to extraordinary circumstances in which a nonprofit may have faced a completely unanticipated situation that was entirely out of their control. One past example we have seen was when a flood destroyed nearly all of a nonprofit organization’s equipment, supplies, furniture, and other assets – so an emergency grant was given by their local community foundation. Other examples of emergency grants include COVID-era grants and some grants during the 2025 federal funding freeze and grant termination spree. That being said, emergency grants are exceptional anomalies and nonprofits should not expect them to be available. Instead, grants should be included in any fund development plan as a process which requires long-term efforts and cultivation.
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These are just a few examples of myths or misunderstandings about how grants work, although we have heard many more, including the idea that anyone on staff can write a grant, that there are volunteers out there who will write you a grant for free, that once you get a the grant the hard work is over, and that we can count on the same grants year-after-year. Unfortunately, a lack of understanding about grants significantly hampers a nonprofit organization’s ability to effectively fundraise. In a 2024 publication entitled, “Importance of Nonprofit Board Training on One Organization’s Efforts to Raise Funding Through Foundations,” the author shared that “Several studies supported the power of training. Maqbool et al. (2019) asserted that systematic training aimed at developing fundraising skills and teaching effective techniques [to Board Members] positively influenced the organization’s ability to meet its financial goals.” This blog is only the beginning of the conversation! Join us on Thursday, May 14 from 12:00 to 1:30 pm MT for our session “Grant Basics for Board Members” where we have even more insight and information about grants and fundraising with them. In addition to general education about how grants function, we will have several actionable tips for how Board Members can help support their grants staff and their nonprofit organization’s development strategy.
Contact: Tonia Brown-Kinzel, Grant Compliance Manager
This post was filed under: Federal Grants, Grant Writing, Training