You've Received an Unrestricted Grant! Now What?

You've Received an Unrestricted Grant! Now What?

This guide covers three essential steps for nonprofit organizations to navigate the complexities of managing large grants with confidence and integrity.

A grant or gift that provides unrestricted funding allows organizations to allocate resources according to their most pressing needs and priorities rather than being restricted to funding specific programs or projects. 

Receiving a grant can be a transformative moment for a nonprofit organization, necessitating careful planning to ensure effective utilization and maximum impact. This paper outlines three essential steps for nonprofit organizations to navigate the complexities of managing large grants with confidence and integrity.

STEP 1 - Determine Allocation of Funds

Determining how much of an unrestricted grant should be used for operations versus how much should be invested for long-term support of the organization depends on the nonprofit's specific financial needs and strategic priorities. Here are some factors to consider when making this decision:

  1. Current financial situation: Assess the organization's current financial health, including its operating expenses, cash reserves, and any existing funding commitments. This will help determine how much of the unrestricted grant should be allocated to immediate operational needs versus longer-term investments.

  2. Operational expenses: Calculate the organization's operating expenses, including costs associated with programs and services, administrative overhead, and fundraising activities. Determine if a portion of the unrestricted grant is needed to cover these ongoing expenses.

  3. Strategic priorities: Consider the organization's strategic priorities and long-term goals. Determine if any specific initiatives or investments align with these priorities and would benefit from funding provided by the unrestricted grant. This could include expanding programs, investing in staff development, upgrading technology infrastructure, or launching new initiatives.

  4. Financial sustainability: Evaluate the organization's financial sustainability and capacity to generate revenue in the future. Consider setting aside a portion of the unrestricted grant as reserves or investing in capacity-building initiatives to enhance the organization's ability to generate income and support its mission over the long term.

STEP 2 - Seek Out Trusted and Experienced Advisors

An investment advisor can provide valuable guidance and support to a nonprofit organization in deciding what to do with a large gift by offering expertise in financial planning, investment management, and strategic decision-making. Here's how an investment advisor can assist a nonprofit in this process:

  1. Assessment of financial needs: The investment advisor can work with the nonprofit to assess its current financial situation, including existing assets, liabilities, cash flow, and financial goals. By understanding the organization's financial needs and objectives, the advisor can help determine the appropriate allocation of the large gift between short-term and long-term investments.

  2. Development of investment strategy: Based on the nonprofit's financial goals, risk tolerance, and time horizon, the investment advisor can develop an investment strategy that aligns with the organization's objectives. This may involve diversifying the investment portfolio across various asset classes, such as stocks, bonds,  and alternative investments, to balance risk and return.

  3. Fiduciary responsibility: Many investment advisors operate as fiduciaries, meaning they are legally and ethically obligated to act in the best interests of their clients. By hiring a fiduciary investment advisor, nonprofits can ensure that their investment decisions are made with the organization's long-term financial health and mission in mind, minimizing conflicts of interest and prioritizing prudent stewardship of donor funds.

STEP 3 - Establish an Oversight Group

Creating an oversight group when a nonprofit receives a large gift is essential for ensuring responsible stewardship, managing risks, promoting transparency and accountability, and making strategic decisions that support the organization's mission and sustainability over the long term. An oversight group, such as an investment committee, can provide several important benefits:

  1. Fiduciary responsibility: Establishing an oversight group demonstrates the nonprofit's commitment to responsible stewardship of donor funds and adherence to fiduciary duties. The oversight group can ensure that decisions regarding the use and investment of the gift are made in the organization's best interests and aligned with its mission and values.

  2. Transparency and accountability: Creating an oversight group promotes transparency and accountability in the decision-making process regarding the large gift. The group can establish clear policies, procedures, and governance structures to ensure that decisions are made openly, ethically, and in accordance with established standards and best practices. This helps build trust and confidence among donors, stakeholders, and the broader community.
  3. Strategic decision-making: The oversight group can provide guidance and direction on how best to utilize the gift to advance the nonprofit's mission and priorities. By conducting a thorough analysis and evaluating potential uses and investment opportunities, the group can help the organization make informed decisions that maximize the gift's impact and align with its long-term goals and objectives.

Read a guide for how to establish an oversight group by downloading, "How to Create a Committee Charter for your Nonprofit Organization."

Manage Your Significant Gift Confidently!

When a nonprofit organization receives a large grant or gift, it marks a significant moment that can shape its future trajectory. To ensure the effective utilization of the funds and maximize their impact, this paper lays out specific steps a nonprofit organization can take to ensure prudent stewardship of the funds.  

By taking these steps, nonprofit organizations can confidently navigate the complexities of managing large gifts with integrity, ultimately advancing their mission and making a lasting impact in their communities.

Download a PDF version of this paper that can be shared with your team.


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Download a PDF version of this paper that can be shared with your team.

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