You’ve been awarded a grant, you’ve celebrated! Now what?
You’ve already done the hard work of putting together the grant application, submitting it and you’ve officially been awarded. You get your grant letter or your contract, and now comes the part of sending the funds and making sure that you’re monitoring those dollars. Right?
Melanie Kirton from MK Accounting joins Donor Love Digital in discussing how to properly track your financial reporting so in the years coming, your grant funder will continue to invest in your nonprofit’s mission.
Setting Your Grant Budget
A grant budget is essential to have just as you would for your normal operating budget for your organization. Every grant should have its own budget. Typically this is set during the application process as funders want to see a grant budget within the application. This should be a realistic budget based on your program. If you know you aren’t going to be able to spend the money, don’t ask for it just because it is there.
This budget is going to be essential for helping you track your allowable expenses. Allowable expenses are also set within the application process and draw the line as to where you can spend money. Some funders want the money to go specifically to physical items that support your program and not to administration costs. Some funders are more open and realize that administration is an expense within the program.
At the end of the grant cycle, funders will want to see the actual budget comparison. Even if it’s not a very strict grant and they just award you the money – you get $50,000 for a program and they didn’t require that you set a detailed budget – they want to see how you spent that $50,000 at the end of the grant cycle.
Tracking Your Grant Cycle
Have very clear policies and procedures on how you are going to track your grant activity. This should be set up in the finance department or whoever does your financials but also with key staff. Key staff needs to understand how grants are tracked and how to monitor expenses as an organization.
Within your accounting software, be sure to set it to track your grant and it’s expenses separately from your normal nonprofit expenses. Set a new unique grant & expenses code. This will allow you to pull reports out of accounting software specifically for your grant’s financial records. Once the grant is over, do not reuse the code. You create a new for every grant you receive so you always have the historical data.
Tracking Payroll and Timekeeping for Grants
If your grant allows expense for personnel, you will also need to track payroll and timekeeping with unique codes. If your payroll system does not allow codes you can track this on a simple spreadsheet.
The hours tracked need to be broken up into how the employee spent their time and what grant was being utilized. The employee and the supervisor both need to sign whatever tracking mechanism you use, typically if you’re using a payroll and timekeeping system this is done electronically.
Unallowable Expense Within Your Grant
Emphasis: Know and train your staff on what the grant funding can be used for.
Federal grants tend to have more restrictions than private funding. Submitting an unallowable expense 1-2 times will be forgiven. But if it becomes a recurring habit of submitting costs that are unallowable on that grant, then it jeopardizes your funding for future years.
Here are some common unallowable expenses:
- Entertainment Expense: Taking a client out to dinner.
- Fines on Past Due Water or Electric Bills
- Certain Extravagant Travel Costs
Grant Requests for Reimbursement
Most federal grants are reimbursable grants, meaning that you incur the cost upfront and then you submit an invoice to the funder for them to reimburse you. Private grants tend to give the money upfront. Reimbursements are directly tied to your cash flow, so submit requests in a timely manner to get cash flow back in the door. If you have any grants that you have to incur the cost upfront it’s best to submit for reimbursement on a monthly basis. How often they want to see your RFR will be defined in your agreement and contract.
Reporting For Grants
For grants, you will need to submit your reports, monthly, quarterly, and annually – not only on your financials but also your program outcomes. This is the granter’s way of keeping track of how the program’s going, making sure you’re tracking your goals and on the financial side, making sure that you’re spending funds appropriately and in a timely manner.
Grant Financial Statements and Audits
When do you need a single audit? If you spend $750,000 or more in federal awards in a given fiscal year, you’re required to obtain a single audit through an independent auditor. The single audit came about so that everybody is tested on the same information and it is presented on your audited financials.
Keeping track of financials is a crucial part of accepting grants. The easier you make it for funders to work with you, the more likely they will be willing to say “Yes” and invest in your organization in future years. El Refugio, in its second year of applying for grants, started off at 100k in awarded grants. Read their story on how they went from a 99K operating budget to 470k in two years here.
Thank you to Melanie from MK Accounting for joining us at Donor Love. Melanie has 10 plus years of experience with nonprofits, including working with Safe Haven of Tarrant County, Mother Against Drunk Driving, Girls Inc of Metro Dallas, and more. She has managed 6M+ in federal and state funds. If you have any questions, feel free to reach out to her by clicking here.