How financial documents contribute to your grant application

Foundations typically request financial documents as part of a nonprofit’s application for grant funding. These materials provide a bigger picture of your organization’s financial planning and health. But how are these documents actually used when assessing your application? I was happy to interview Celeste Arista Glover, who has many years of experience as a philanthropy officer at a community foundation, to gain insights into how certain financial documents are evaluated.

4 financial documents for nonprofit grant applications

Form 990

An organization’s Form 990 serves as a screening tool that helps confirm an organization is in compliance with the IRS. The 990 also adds context to a request. 990s can reveal patterns such as deficits and limited revenue diversity over multiple years.  These patterns aren’t necessarily deal breakers. But, they may guide a foundation towards asking follow-up questions about financial planning.

Annual operating budget

An annual operating budget provides a sense of the organization’s scope and its capacity for pivoting. And, it offers a general sense of whether the organization can realistically accomplish their plans. The budget helps foundations understand if the organization is the right fit for the grant opportunity. It also helps them gauge if the funding request is proportionate to the organization’s work.

Project budget

Your project budget needs to demonstrate that you can implement the project or program for which you’re requesting funding. Many funders read this first, so Celeste recommends submitting a project budget with a detailed expense list and a list of revenues that notes what funds the organization has secured for the project versus what funds remain pending. Even if the revenue list includes pending/unsecured dollars, it should add up to meet the expenses. This is important because it shows that the organization has a plan to meet the need.

Budget narrative

A budget narrative gives the applicant the opportunity to explain any aspects of the budget that aren’t obvious to reviewers who don’t live in the day-to-day of the organization’s finances. But don’t just re-state the numbers from your budget. Your budget narrative should explain any unusual circumstances, why line items are necessary, how figures are calculated, and what other funding is committed or pending.

For example, the project budget of a performing arts organization may include a sizable line item for renting a performance venue. In the budget narrative, you can explain that you evaluated three different venues and selected this one because it’s the only one that can accommodate your expected audience and that is accessible via public transportation. This gives funders insight into your planning process. And when your budget narrative reinforces your program narrative, it further demonstrates how your request aligns with your mission.

Celeste emphasizes that nonprofits should use budget narratives to help remove uncertainty before the reviewer has to ask. By giving a peek into the minute details required to implement a program/project, it gives a reviewer more confidence and the information they need to advocate internally. And, because budget narratives are often optional, you’ll set yourself apart from many other applicants. In Celeste’s experience, a detailed budget narrative helps build a sense of trust and elevates your application.

Conclusion

Your organization’s financial documents provide funders with important context for your request. Note that if you’re applying for general operating support instead of project support, you may need to submit additional materials like multiple years’ worth of 990s, audited financials, or a current strategic plan. But don’t be deterred even if your organization is new or young; whatever financials you have can strengthen your applications. Your goal is to submit financials that demonstrate the steadiness of your organization and its ability to fulfill its plans.

About Celeste Arista Glover: Celeste is a former Community Philanthrophy Director for a community foundation. She had guided nonprofit organizations through countless grant cycles and is eager to share her expertise with organizations of all sizes.