Quiz — Chapter 28: Grant Writing for Nonprofits
Answer from memory, then check. These test the nonprofit funding ecosystem, diversification, the overhead reality, development capacity, the capacity question, and competing small.
1. Which best captures the threshold concept of this chapter? a) Grants should be a nonprofit's primary funding source. b) Grants are one leg of a diversified funding stool, not the whole stool. c) A nonprofit that wins enough grants is financially healthy. d) Individual donors are unreliable and best avoided.
Answer
(b). A healthy nonprofit funds its mission from multiple sources so no single source — including grants — can sink it; grant dependence is fragility.
2. Which funding source is the largest across the nonprofit sector?
Answer
Individual donors — ordinary people giving to causes — provide the largest share of charitable revenue (commonly two-thirds or more), far exceeding foundation grants. Strategically, a nonprofit that neglects individual donors for grants is chasing the smaller pool.
3. Name four legs of the diversified funding stool.
Answer
Any four: individual donors, foundation grants, government grants/contracts, earned revenue, events, corporate sponsorships. Diversification is stability — a stool with several legs stands even if one weakens.
4. Distinguish general operating support from program support.
Answer
General operating (unrestricted) support funds the organization's core — salaries, rent, administration, infrastructure — and is the most valuable money because it's flexible. Program (restricted) support funds a specific program. Most grants are restricted, leaving the core chronically under-resourced.
5. What is the overhead-myth/starvation cycle?
Answer
The damaging assumption that low overhead equals efficiency, which led nonprofits to starve their infrastructure (underpay staff, skimp on systems, neglect fundraising capacity) to look lean — leaving them too under-resourced to grow, retain talent, or manage grants well. Leading funders have repudiated it.
6. Why is diversification also about mission integrity, not just stability?
Answer
Over-reliance on grants can distort mission — chasing funders' priorities, taking off-mission work because it's funded, letting funders reshape the organization (mission drift). Diversified unrestricted income (donors, earned revenue) gives the freedom to pursue the mission rather than bending to whatever's fundable.
7. What is the small-shop reality, and the key insight for managing it?
Answer
Most nonprofits are small, with the ED (or one overworked person) doing grant-writing alongside running everything — grant-writing competes with program delivery and survival. The key insight: invest in development capacity (escape the starvation cycle), because an organization too starved to fundraise can't raise the money to stop being starved.
8. What is the board's fundraising role?
Answer
Give/get — board members are expected to give personally and to "get" by opening doors to funders and donors. An engaged board is a funding asset: connections open relationships, members lend credibility, and board giving signals commitment to funders.
9. What is the capacity question, and why does it matter for a small nonprofit?
Answer
Whether the organization can manage the grant — deliver, handle the money, meet reporting and compliance. A small nonprofit can manage a \$50K foundation grant but might not yet manage a large, compliance-heavy federal grant; taking a grant you can't administer is a serious risk (compliance failures, audit problems), not a windfall.
10. What is a fiscal sponsor, and when is it useful?
Answer
An established 501(c)(3) that serves as the legal/financial home for a project or young organization without its own status or capacity, letting it receive grants through the sponsor's infrastructure. Useful for brand-new initiatives, projects without nonprofit status, or organizations not yet able to manage grants directly — a common on-ramp.
11. How can a small nonprofit beat a large institution for a grant?
Answer
By leaning into its real advantages — authenticity and community connection (legitimacy and relationships the large institution can't replicate — the localization/lived-experience value), focus, nimbleness, and a compelling, vivid story — rather than competing on scale. For funders pursuing equity or community impact, these are exactly what they value.
12. What are grants uniquely good for, and not good for?
Answer
Good for: funding programs at scale, lending credibility, building capacity, seeding new initiatives. Not good for: flexible core funding (mostly restricted), reliable long-term stability (competitive, time-limited), or being the sole source. Use grants for what they're good for; use other legs for the flexible core and stability.
13. (Synthesis) Two nonprofits run comparable programs; one is stable and growing, one lurches from crisis despite winning grants. Give one strategic reason.
Answer
Diversification (the stable one built multiple funding legs with unrestricted core dollars; the other over-relied on grants), or investing in development capacity / escaping the starvation cycle (the stable one resourced its fundraising and infrastructure; the other starved its core to perform low overhead). Both reflect the threshold and its corollary: build a funded organization (diversified, capable), not just a funded project.