Five grantmaking principles and practices to protect your donor intent

Grant compliance is an important concern for all donors. It’s particularly so for givers with well-defined values and mission statements. If that describes you, this article covers five principles and practices that will guide you, your board, and your staff in grant oversight. 

1. Know your grant recipients

Investigate each potential grant recipient. Familiarize yourself with its mission, leadership, financials, and programs. Make site visits. Depending on your level of commitment to the organization, get involved in its life by attending programs and functions. Trust your instincts. Answer these three questions: 

  • Do you feel comfortable placing your charitable dollars with this organization?
  • Is it the one that will make the best use of your money?
  • Is there a similar organization accomplishing its mission more effectively?

“Grant compliance happens best when you’ve done the work up front to make sure you’re partnering with an organization that really believes in what you’re trying to do and isn’t just trying to game your system in order to get money,” says Keith Whitaker of Wise Counsel Research. “The best compliance is the investigatory work, the due diligence, the time commitment needed to get to know a grantee.”

2. Make short-term commitments (or long-term ones in short segments)

All nonprofits experience change over time. People come and go. Mission statements shift and drift. Organizations might even shutter altogether. That’s why making shorter-term commitments—rather than long-term endowments—in your grantmaking is one of the best steps you can take. Making a long-term commitment to an organization while restricting your gift to annual or bi-annual grants based on performance gives you maximum leverage in grant compliance.

3. Create a suitably detailed grant agreement

Depending on the nature of your gift, put a gift contract or grant agreement in place. There are many examples of gift contracts, some more complicated than others. Avoid micro-managing, but ensure that both parties have a clear understanding of expectations, restrictions, and reporting requirements. Grant agreements can also outline in advance a means of resolving disputes.

4. Consider an intermediary organization

You may consider making your gift through an intermediary organization that will serve to enforce your intentions over time. A third-party organization can ensure compliance standards in your absence prior to disbursing funds. Likewise, you may consider establishing contingent beneficiary organizations that act as backup grantees if the grant recipient fails to live up to the terms of the original gift agreement. 

5. Realize the limitations of grant compliance

Even with a grant agreement in place, once you make the gift, the money is no longer yours. It’s far easier to create a good working relationship with an organization before making a gift than to try, after the fact, to force them to comply with your wishes. 

It can take time, even years, to understand what you can realistically achieve through your grantmaking within a given field or with a particular organization or group of organizations. Many donors make large gifts early on that they later come to regret. Take time to learn about the field in which you are working, the people and institutions doing the work, and try to formulate realistic expectations grounded in experience rather than responding to slick marketing brochures, attractive websites, or utopian ideas about what your gift can accomplish.