�Grant Management in Your Nonprofit�

What are the important parts of Grant Management

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• Different types of grants and their accounting treatment

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• Grant applications and why budgets are so important

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• Setting up the accounting system for success

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• Allocation of expenses

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• Making grant reporting easier

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• Other compliance that should be considered

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Different Types of Grants

• Foundation Grants (Traditional Grants)
• Money upfront for a specific period of time and/or a specific project
• Grant is restricted by timing and/or purpose by grantee
• Can sometimes support general operations or expanding operations
• State and local governments can issue these types of grants, but on rare occasions (OHA being one of them)

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• Governmental, State, or Local Municipality Grants
• Fee for Service Arrangement
• Very much like a business offering, NPO provides goods and services for an agreed upon price that is billed upon completion or as milestones are met

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• Reimbursement Grants
• NPO delivers program services or deliverables incurring the costs up front and then bills for reimbursement, usually monthly

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Accounting Treatment of Revenue and Expenses for the Different Types of Grants under GAAP

• Foundation Grants (Traditional Grants)
• Recognize revenue in the accounting system for the FULL amount of the grant award.
• Unless there is a condition that would prevent a future payment. Then recognition of the revenue until the condition(s) have been met

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• Governmental, State, or Local Municipality Grants
• Fee for Service Arrangement
• Recognize revenue once services have been completed or on the schedule for payment

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• Reimbursement Grants
• Recognize revenue once a period has passed and expenditures have been made.

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• Expenses are always recognized when incurred

Grant Applications

• Grant procurement is a lot like cultivating donations and relationships with grantors are just as important
• A good relationship is likely to increase the opportunity to get a grant
• Essentially grants are issued by people and a relationship can help
• This can be a very time consuming and difficult process
• The process can involve months of planning, accumulating info, and completing an application
• The process needs to include Program Directors, Accounting Department, and sometimes the Executive Director to create a concise application
• Essentially everyone that will be involved with delivery of the grant
• The application should encapsulate the who, what, when, and funding source(s)

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Grant �Budgets

• A grant budget will dictate how grant funds are intended to be spent
• Should match the accounting general ledger
• If asked for a Summary Budget, make sure the “long” budget matches�
• This process should include Program Directors
• This will reduce the risk of essential expenses being left out of the project
• It will also engage the program staff to feel included in the creation of the project

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• The budget should also include the administrative overhead the Grantor will allow.
• Generally, 10% of expenses, but never hurts to ask for more

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Example of Budget Summary

• Note the proposal may request a summary budget, but a more detailed budget may exist to support the summary budget and may be helpful when drafting the narrative

Example of Expanded Budget

• Note the proposal may request a summary budget, but a more detailed budget may exist to support the summary budget and may be helpful when reporting or evaluating progress of grant

Setting up the Accounting System to Manage Grants Easier

• The accounting system needs to be able to report amount of revenue and expense for a given grant over a period of time

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• This can be accomplished in a couple of methods�
• Classes or Departments can be established that represent a grant �
• By assigning GL Account Coding to identify grants/programs�
• The customer function in accounting systems can also accomplish this. We won’t review this method today, as it requires a bit more oversight to run correctly.�

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Example of Class or Department Approach

Example of General Ledger Account Approach

Allocation of Expenses

• Expenses need to be allocated or earmarked for the programs or grant that they benefit

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• Three different types of expenses�
• Direct Expenses
• Expenses that benefit a program or grant only
• Program supplies or direct care staff wages�
• Administrative or Overhead Expenses
• Expenses that are necessary for the operations of the Organization that are not program related.
• Marketing, HR, or Accounting expenses�
• Shared Expenses
• Direct expense but benefits more than one program
• Participant data software (Peerlink), Program insurance, Continuing education of staff �

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Methods of Allocating Expenses

• Many ways to allocate shared expenses
• Square footage
• Time and effort
• Estimation of usage

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• Should choose method that is the easiest and meets compliance
• Do you have (or want to have) Federal Grants
• Suggest allocating based on hours worked

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• Make sure your allocation methods for expenses are written down in your fiscal manual!

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Dealing With Restricted Grants

• Under GAAP Grants with Donor Restriction are to be recorded at total grant amount on the date of award (unless a condition that prevents future payments)

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• If an unconditional grant is issued that supports a program for 3 years at $10,000 per year, then all $30,000 is recognized in the first year of the grant and the remainder is restricted on the balance sheet for future use

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• This can cause a program to seem as if it is profitable in year one and then operate at a loss for the following two years

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Using Supplemental Schedules and the Balance Sheet to Manage Restricted Grants

• Restricted Grants work very much like deferred revenue�
• Using a deferred revenue account makes managing restricted grants easier by recognizing revenue when restrictions are satisfied (passage of time or purpose is fulfilled)�
• This is a departure from GAAP but can be adjusted at year end if records have to be audited or submitted to an agency that requires GAAP reporting

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• Tracking using an Excel release schedule should be utilized regardless if using the deferred revenue method or following GAAP

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Example of Deferred Revenue Tracking for Restricted Grants

Example of Restricted Grant Tracking Sheet

Budget vs Actuals

• The grant may require them to be done monthly, quarterly, or annually

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• Even if the grant doesn’t require them, it is important to review budget to actuals regularly to:
• Ensure that you are on track with grant expenditures
• Determine if there needs to be a change in course
• Determine if the grantee needs to preemptively meet with the grantor to discuss any issues, changes, or request for additional funds
• Allow Program Directors to financially manage the grants they are executing

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• Very easy to accomplish when your budgets match your accounting system

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Example of Budget to Actual Reporting

Grant Disbursements

• Grant and contract disbursements can happen in a few ways:
• Lump sum given at time of award, or in lump sum increments for multi-year or multi-step grants
• Monthly or quarterly invoicing for funds
• A drawdown from a federal or state funding source
• At the conclusion of milestones or completion of a contract requirement
• It is important to factor in the payment schedule to ensure free cash flow is available to pay for the grant or program services
• Be aware of the specific requirements for payment like meeting matching funds or specific invoice templates required by funder

Reporting

• Grantors will monitor the progress of the program (including the expenditures against the program)
• This can be done through various program reporting, metrics, and financial reporting procedures
• The purpose of reporting is for transparency as well as to prevent fraud or abuse
• Most agencies will have a designated person assigned to specific grants (often called the grant manager, grant management officer, or program manager)
• They will be responsible for reviewing the reports and possibly conduct site visits
• It is recommended to build a strong communication and working relationship with this person to ensure expectations are being met and to address any questions or issues

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Types & Frequency of Reporting

• Grant milestone reports
• Usually narrative (might include financial data)
• Required by both direct federal funders and private foundations / grantors
• Federal Funding Reports
• Submitted quarterly, yearly, and at grant close out
• Required by direct federal funders
• Tested during single audits for timely submission
• Other grant specific requirements
• Usually tied to a specific grant requirement that needs data or further explanation outside of a milestone report

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Common Mistakes Nonprofits Make

• During the proposal process
• Not clearly stating the need for what the grant will support
• Not including other departments in drafting proposal
• Not linking how the program is linked to the grantor (mission, values, objective, etc)
• Rushing to complete the application, proposal, and / or budget
• During the management process
• Not fully understanding the grant documents
• Not following the directions, terms, or conditions
• Not building a relationship with the grant manager
• Not maintaining the proper documentation

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Other Considerations

• Think about the rules and requirements of a grant on a grant by grant basis
• Don’t assume a contract or grant (even if from the same funding source) have the same accounting treatments or requirements as previous grants or contracts
• Make sure everyone involved in the delivery of a grant and contract is aware of what is allowable and unallowable under the grant or contract
• Ensure there is a process to monitor all aspects of grant adherence
• Milestones, budget to actual review for budgets that are over or under, matching funds or services.

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Questions