If you’ve ever applied for a grant, you know there’s a lot of paperwork involved. There’s a reason for that: for each new grant awarded and every payment processed, administrative and financial staff must carefully consider pertinent laws, IRS requirements, and the changing landscape of the nonprofit sector, all while protecting the funds their respective founders set aside for philanthropy.
After the collapse of Enron and the passing of the Sarbanes-Oxley Act in 2002, ripples of change unexpectedly ebbed outward to the nonprofit and philanthropic sectors of America.
While the law was generally aimed at publicly traded companies, nonprofits and foundations quickly realized that the issues it addressed, including the destruction of documents, the manipulation of reporting, the governance of boards, the protection of whistleblowers, and the execution of audits, would need to be reviewed and implemented. As one assessment noted:
The law requires that publicly traded companies adhere to significant new governance standards that increase board members' roles in overseeing financial transactions and auditing procedures.”
In tandem, technology was evolving, transparency was becoming a shared value, and the scope and pace of grantmaking were increasing exponentially. To give you a sense of scale, since the law’s enactment, Knight Foundation has awarded more than 6,000 grants and processed more than 11,000 individual grant payments. Knight Foundation’s Director of Grants Administration and Impact, Dan Schoenfeld told me.
“As charitable and philanthropic giving continues its upward trend, it’s important for our systems and processes to grow as well,” he said. “A more nimble due diligence process allows Knight Foundation to give money quickly. The surge of rapid-response grantmaking isn’t expected to slow down anytime soon, nor the urgency in redefining our grantmaking processes, which are often criticized for moving too slowly and cautiously.”
At Knight Foundation, we are committed to automating the diligence process, thus reducing the burden on grantees while allowing administrative staff more time to review and analyze rather than collect and file. That’s why we’re recommending that every grantseeking organization do two things:
1. Post the following documents on your website:
- IRS Letter of Determination
- Board of Directors list for the current year
- Audited financial statements
- Most recent 990
- Organizational budget
2. Make updating your GuideStar Nonprofit Profile a priority.
It’s worth the effort, because GuideStar is the first place a foundation will check to collect diligence materials, and the platform automatically syncs with many nonprofit management systems to provide data.
At Knight, we’ve updated our GuideStar profile to the Platinum level. The process of updating was relatively easy and helps increase our transparency as an organization.
My grantmaking colleagues and I are also discussing what we can do to reduce the paperwork burden on grantseekers. I’ll be writing about that topic in the GuideStar Blog later this year.
Kris LeCorgne is a grants administration officer with John S. and James L. Knight Foundation.