The Nonprofit FAQ

Is grantwriting a fundraising expense

Tom Pollak of the Center on Nonprofits and Philanthropy and The National Center for Charitable Statistics at The Urban Institute (http://nccs.urban.org) posted this note to Cyber-Accountability on July 25, 2003: Urban Institute's Center on Nonprofits and Philanthropy and the Center on Philanthropy at Indiana University are working jointly on a project looking at fundraising and administrative costs in the nonprofit sector. Mark Hager, one of my CNP colleagues who is not a member of this list, forwarded this response to your question: "Is Grant Proposal Writing a Fundraising Expense?" is the title of my article in the Spring 2003 issue of Nonprofit Quarterly, so interested folks may want to look there (free to subscribers and $2.99 for non-subscribers at http://www.nonprofitquarterly.org/index.php?option=com_jcs&view=jcs&layout=form&Itemid=0">this link). In short, the published guidelines are pretty clear on this question, although OMB A-122 isn't particularly helpful. The reporting rules located in a couple of different places (e.g. Form 990 Instructions, AICPA Audit and Accounting Guide for Nonprofit Organizations) are fairly consistent on how grantwriting expenses should be reported. All of them take the position that the proceeds from grantwriting can be either a contribution or fees-for-service (program service revenues) depending on the nature of the grant and the relationship between grantor and grantee. If the grant is accounted for as a contribution, associated expenses are fundraising. If the grant is accounted for as service revenue, associated expenses are generally administrative. In Dan Prives's example (see below), the grants are likely of the "fees for service" variety (he even uses the word 'contract' at one point). Consequently, these technical grants probably (hard to say without knowing more) should be accounted for as program revenues, and associated grantwriting fees should be accounted for as administrative, not fundraising. I think that the overall GAAP philosophy on accounting for functional costs encourages allocation of some relevant pieces to programs, but (despite the fact that many organizations do this...) there's no basis for accounting for the bulk of these costs as program just because the people doing the grantwriting are "program people". >b>This note was written in response to this question from Dan Prives (posted earlier): When is the cost of grant writing considered a fund raising cost? I'm referring to technical grants in the health field or community development. I have heard the opinion that preparing these grants should be considered a fund raising cost. In the situation I am thinking about, the people writing the grant proposals have a background in the technical specialty. When they are not writing grants they are doing the work in their specialty. They are not fund raisers. Other than technical government contracts, they couldn't raise a dime. Does that matter? Does it matter whether the context is Form 990 program reporting or indirect cost recovery under OMB A-122? (In other words, might it be a program cost in the case of OMB A-122 and a Fund Raising cost for Form 990?) Are there any published guidelines, cases, published ethical standards, etc.? References would be most appreciated. Posted July 25, 2003 -- PB