Doing More, with Less: How Your Nonprofit Can Benefit Using Automated Allocation Management

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Eric Oliver

December 15, 2021

    For nonprofits, using a fund accounting software program that doesn’t feature a powerful fund allocation tool can lead to misallocated manhours, and could create potential auditable scenarios. As nonprofits continue to see labor shortages, nonprofits must find ways to stay nimble and get the most utilization out of their existing workforce.  

    Fund allocation is essential for nonprofits to ensure their investments can meet their long-term goals. Improperly allocated funds and investments ultimately lead to operational deficiencies and can create troublesome issues for an organization during a financial audit. 

    The MIP Fund Accounting© system allows for faster fund allocation processes through a dedicated Allocations Management module. The module performs complicated allocations with the click of a button. MIP’s fund allocation module simplifies the process and completes the allocation process in around eight steps, compared to lengthier methods present in other tools. 

    The module can help nonprofits and government organizations allocate indirect costs or pooled investment revenue between general funding sources, departments, and programs without relying on external spreadsheets. The integrated module also eliminates the need for multiple spreadsheets, reducing human capital resources and improving an organization’s workload and workflow. 

    Through the Allocations Management module, nonprofit organizations can calculate, review, and generate allocation entries through a flexible and straightforward tool sheet integrated into MIP’s accounting system. The module also has tracking tools that ensure a complete audit trail exists to eliminate the risk of spreadsheet errors and mitigate dangers during an audit. 

    Digging deeper into allocations 

    The module’s robust tools allow for allocations or distributions to be automatically managed with dynamic calculations considering:  

    • Direct and indirect cost rate 
    • Relative account balances 
    • Weight average daily balances 
    • Employee headcount 
    • Labor hours 
    • Transaction count 
    • User-defined field 
    • Fixed percentages 
    • Monetary amounts 

    Having the power to simultaneously perform multileveled allocations at the program, department, grant, and across multiple segments can improve your workflow with less time spent manually inputting each allocation. 

    Once an allocation is defined, the module generates General Ledger entries the nonprofit can use to update accounts. The module distributes interest income across a weighted balance to specific accounts. This feature is essential for foundations or other industries that use grant interest income for consolidated holdings.  

    With the module, accountants can create custom allocations using budget amounts instead of the actual cost. Once you set an allocation, you can use it as often as needed. 

    When it comes to reporting, the Allocations Management module has a robust suite of reports, including reports around pre-posting allocated financial statements. These reports allow nonprofits to review calculated results before they’re reported and enables unlimited what-if scenarios for budget planning. The module also retains all source balances to accommodate future report generation easily. This reduces the time needed for staff to manually input these data each time during creation of reports for grantors, donors, and board members. It also aids in preparing transparent and concise data-driven reports for auditors during auditing season.  

    Ready to automate your allocations? Want to learn more? Visit our solution page and find out what this can do your organization!  

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