Grantee Financials - It's Not Just About the Numbers
By: Vanessa Rivera, Grants and Operations Associate Director, Solon E. Summerfield Foundation and Associate Director at Intentional Philanthropy
New to the philanthropy field, I was encouraged to sign up for the Philanthropy New York Core: Financial Series during the winter of 2021. By the first webinar, I had been in my role for four months after previously working in the nonprofit sector. While I understood grantmaking principles and program development, I had much to learn about how we use financial documents in the application and evaluation process. I did not have any experience analyzing financial statements, tax returns, or audits to inform my understanding of an organization and its work.
Through the financial series, I gained knowledge that I have incorporated into my work, from the basic terminology to making applications less onerous for grantees. The series impacted how I think about collecting information from grant partners in applications and reports and how I show up as a grant partner.
After completing the series, I was left with these major themes:
- Make the application less onerous: As funders, we can make applications too long and time-consuming for grantees. Instead, for starters, we can avoid asking the same question twice. There is financial information, such as annual expenses and revenue, that we can pull from the 990 form or audit instead of asking grantees to fill in this data on the application. While often helpful for funders, we should also avoid asking grantees to fill out foundation-specific budget sheets when they can easily send over an internal or external budget report. I can find the information we need from the 990 and audit, along with the current fiscal year budget vs. actuals. Remember to only ask for financial information that will actually be used and analyzed.
- Be a better grant partner: Although the financial series could get technical, the hosts were intentional about their approach to analyzing nonprofit organizations in an equitable manner. While we were informed of the red flags to look for when reviewing financial statements and 990s, the series emphasized not penalizing grantees or using the financial information against them. Instead, we were encouraged to follow up with questions and dig deeper for clarity. More importantly, if any nonprofit, especially a small organization or an organization led by a person of color, had red flags in their statements, it could indicate that they were missing fundamental accounting support. A funder may want to consider awarding a capacity-building grant that could support the internal and external financial processes. For example, a grant could help cover the training of staff, the subscription to quality accounting software, or a more experienced auditor.
- Each financial statement tells a story, but not the whole story: Before the series, I did not fully grasp that the financial statements and 990s are connected to the organization’s mission. Through these documents, we can understand if the nonprofit is accomplishing its mission and is financially stable, and where its values and priorities lay. Financial statements are a tool to help paint a fuller picture of an organization when combined with other application materials and knowledge gained from site visits and check-ins.
As a newcomer in philanthropy, I felt better equipped to go into my first grant cycle after the series. While reviewing audits and 990 forms, I felt more comfortable navigating the information and analyzing the data we needed. With a little over a year of experience under my belt now, I look forward to building upon my previous knowledge in the Applied Financial Analysis for Program Officer series!
If you missed our 2022 Financial Series, explore the programming and watch the recordings here!