Grants are essential sources of revenue for most nonprofits. They’re critical for your mission but carry with them a high burden of monitoring and accountability. If you’re wondering how to manage grants for your nonprofit, remember that proper allocation, tracking, and reporting are essential to ensure your organization receives ongoing funding.

Maybe you can manage your funding via spreadsheets if you have just a few grants, but trying to keep track as you grow and add new donations isn’t sustainable. You will eventually be caught up in complex rules or stringent compliance requirements, which could put your future funding at risk. No one wants to lose funding or find themselves in a position to have to return money! So what’s the best way to manage grants? Here are a few key things to keep in mind.

For audits and compliance, you need to make sure:

  • Every dollar of grant expenditure is fully traceable in the event of an audit
  • You maintain ongoing internal monitoring to ensure no surprises later
  • You’re optimizing the funds allocated to each program with budget-to-actual reporting

Multi-year grant rules mean you need to:

  • Use specific ledger codes for each grant, including layers of codes to track nuances of the requirements
  • Create segments to allocate grant dollars across multiple fiscal years, reflecting the way money is spent
  • Report on funding according to your unique general ledger structure, avoiding risky manual processes outside your accounting system

Government grants and their unique challenges mean:

  • Audits are virtually guaranteed for accounting for government grants, especially large grants that automatically trigger separate audits
  • Government grants carry additional risk because they’re typically reimbursed rather than paid in advance, so any compliance issue is found after the fact, but the expenditure is not repaid
  • 100 percent compliance with the terms of the grant and accuracy in reporting is critical to safeguarding your funds

Compounded with this, a segmented account structure is the best way to track grants and customize reports to meet the requirements of each grantor.

Don’t worry if this sounds like a lot of work! We provide nonprofit accounting software that can help your organization manage grants and funding more effectively. Contact us today to talk with a sales representative about how to manage your donations.