Grant Dictionary

Starting a nonprofit means learning a new language fast! Here are terms every new USA nonprofit founder should know cold - the ones you'll encounter in your first IRS filing, your first board meeting, and (of course) your first grant application.

  • Your tax-exempt status under Section 501(c)(3) of the Internal Revenue Code. This is what makes donations to your organization tax-deductible for donors and exempts you from federal income tax.

  • The governing body legally responsible for your nonprofit's strategy, finances, and oversight. The board hires and oversees the executive director, approves the budget, and ensures the organization fulfills its mission.

    Every state has different Board of Directors laws, but generally, you should have at least a Board Chair, Secretary, and Treasurer.

  • A financial plan that projects your revenues, expenses, and goals for a specific period. Boards typically approve an annual budget, and funders will almost always ask to see it.

    At FSCOLLAB, we can help you create an organizational budget and program/project budgets based on your 990 documents, financial statements, and growth goals.

  • The legally binding rules that govern how your nonprofit operates: how board members are elected, how meetings are run, how decisions get made. Essentially, your nonprofit operating manual.

  • Adhering to the federal, state, and local laws that govern nonprofit operations. Staying compliant protects your tax-exempt status and your reputation.

  • The written acknowledgment you provide to donors for their contributions. The IRS requires written acknowledgment for any gift of $250 or more, and donors need it to claim a tax deduction.

  • The percentage of last year's donors who give again this year. Retention matters because acquiring a new donor is far more expensive than keeping an existing one.

  • A unique nine-digit identifier from the IRS - think of it as your organization's social security number. You'll need it before you can open a bank account, hire anyone, or file taxes.

  • A nonprofit that provides legal and financial umbrella coverage to projects that aren't yet (or won't ever be) 501(c)(3) organizations. A good option if you want to start fundraising before your own tax-exempt status is approved, or if you are a mission-driven for-profit missing out on grant or sponsorship opportunities.

  • The 12-month period your organization operates on financially. Most nonprofits use either the calendar year (January–December) or a July–June fiscal year.

  • The annual information return that nonprofits file with the IRS. Critical detail: if you fail to file for three consecutive years, the IRS automatically revokes your tax-exempt status.

    Nonprofits under $50,000 can file a 990-N (postcard).

  • A financial contribution from a government agency, foundation, or corporation to support a specific purpose, project, or program aligned with the funder's priorities.

  • The ongoing process of building relationships with grantmakers — not just at application time, but year-round. Cultivation looks like sharing program updates, inviting program officers to see your work, thanking funders even when you're not asking for money, and treating them as partners rather than ATMs. Strong cultivation dramatically improves your odds of renewal and multi-year support.

  • The grantmaker is the funder providing the money; the grantee is the organization receiving it.

    You'll see these terms throughout the funding and grant world.

  • The formal document submitted to a funder requesting financial support, including your project description, budget, outcomes, and organizational background.

  • The process of identifying funders whose priorities, geography, and giving history align with your mission.

    Good grant research saves enormous amounts of time by helping you focus on funders likely to say yes, rather than spraying applications at every foundation in sight!

    Common tools include Candid's Foundation Directory, Instrumentl, GrantStation, and free resources like Grants.gov for federal opportunities.

  • A non-cash contribution: goods, services, pro bono work, donated space, or equipment. These count as support, should be tracked and acknowledged, and often need to be reported on Form 990.

  • Expenses that are not tied to a specific program but keep the organization running: administrative salaries, rent, utilities, insurance, accounting. Funders treat these very differently than direct program costs.

    From our experience at FSCOLLAB, funders typically want to see less than 20% of your nonprofit budget (e.g. expenses) going to overhead costs.

  • A short letter - typically 1-3 pages - that introduces your organization and project to a potential funder before submitting a full proposal.

    Many foundations require an LOI first and only invite full proposals from a subset of applicants.

  • The largest gifts your organization receives in a given year. For most nonprofits, a small number of major donors provide the majority of annual revenue.

  • A concise declaration of your organization's purpose - why you exist and the impact you seek to make. Every grant application and strategic decision should flow from this.

  • An abridged, investor-style document - typically one page - that tells your organization's story to major donors and funders the way a for-profit prospectus pitches investors. It usually covers your mission, the problem you're solving, your model, evidence of impact, leadership, budget, and what a gift will fund. Increasingly popular as the sector shifts from a donor mindset to an investor mindset, the prospectus is a fast, high-impact tool for major-gift conversations.

  • A program is an ongoing, strategic effort to address a specific issue (often comprising multiple projects over years).

    A project is a focused, time-limited initiative with a defined scope, timeline, and deliverables. Funders use these terms precisely - pay attention to which they're asking about!

  • Restricted grants can only be used for a specific purpose, delineated in the grant application and the subsequent grant agreement.

    Unrestricted grants/gifts can be used for anything the organization decides - making them arguably the most valuable kind of donation.

  • A formal document issued by a government agency or funder announcing that they're accepting proposals for specific services, programs, or projects. RFPs spell out exactly what the funder wants, the eligibility requirements, and the deadline.

  • Any individual or group with an interest in your organization: beneficiaries, donors, staff, volunteers, board members, partners, and the broader community.

  • The nonprofit equivalent of an income statement, showing revenue and expenses over a period of time.

  • The nonprofit equivalent of a balance sheet, showing your assets (what you own), liabilities (what you owe), and net assets at a point in time (such as December 31st).

  • A formal document outlining your long-term goals (typically 3–5 years) and the strategies you'll use to achieve them. Most serious funders will ask to see your strategic plan.