Most nonprofits know that grants are one of the major pillars of their organization. It funds everything from their research initiatives to their community outreach (and many things in between). Grants also come with a set of rules, reporting requirements, and precise bookkeeping. For this reason, it should be recommended that you’ll want to contact advisors who can assist you with nonprofit bookkeeping so you can be able to know what to do without running into any additional complexities.
Grant tracking for nonprofits needs proper systems in place so that you don’t risk noncompliance. In addition, you want to prevent the loss of trust between those who donate to your organization. Even worse, not complying with the grant restrictions can lead to repayment of funds and even possible legal action.
Why Grant Tracking Is Critical for Nonprofits
Grants are not simple deposits you put in the bank; they are contractual agreements that have specific expectations. More importantly, the funders want assurance that their funds are being used as intended. Plus, regulatory authorities also require your organization to have proof of proper allocation. Failure to do so can lead to the following:
- Loss of funding opportunities (current and future)
- Loss of credibility with stakeholders
- Audit findings that can hurt the reputation of your organization
- Financial penalties and possible required repayment
Tracking restricted grants can prevent these issues from happening. You can not only be compliant, but it can also help you become more trustworthy in the eyes of those willing to give you future grants. Not to mention, your donors can also see you as trustworthy.
Understanding Nonprofit Grant Compliance
Nonprofit grant compliance is defined as being able to meet all conditions that were set by the funder while also complying with the applicable regulations and laws. Specifically, compliance applies to the following:
- Spending funds only for the intended purposes
- Follow procurement rules for those specific purchases
- Meet project deliverables and timelines
- Submit accurate reports in a timely manner
- Retain documentation for a specific number of years
The requirements could vary depending on the grant and where it may come from. For example, a private foundation may have different requirements compared to a corporate donor.
What Is The Role Of Bookkeeping in Grant Reporting
Bookkeeping for grant reporting is crucial as it pertains to a handful of things that need to be done. These include, but are not limited to:
- Tracking expenditures against grant budgets
- Create detailed reports for funders and auditors
- Help you distinguish between restricted and unrestricted funds
- Show your board and donors that you are accountable for the responsibility
Bookkeeping that is in sync with grant requirements can be excellent for complying with the necessary rules in law. Think about it from that perspective, as opposed to labeling bookkeeping as some kind of administrative task that seems like a chore. The Quantify Group offers the necessary services that can help make grant tracking a lot easier if you seem to be stuck with it.
Common Grant Tracking Challenges
It’s no secret that nonprofits tend to struggle with numerous things related to grant tracking. Whether they are unintentional most of the time, it’s always important to overcome these challenges as quickly and easily as possible. Such solutions to use include the following:
- Mixing grant funds: If you pool restricted grant funds with general operating funds, this can lead to reporting errors and noncompliance.
- Inconsistent expense coding: If the expenses are not coded to the proper grant, it can lead to tracking how the money is spent becoming more difficult.
- Missed deadlines: If the reports to funders are late, it can lead to damage to your funding relationship and potentially withheld future payments.
- Inadequate documentation: You’ll need the receipts, invoices, and time logs that prove that the grant funds were used as directed. Otherwise, this can lead to problems where you won’t be able to provide such proof during audits, reports, etc.
Use The Best Practices for Tracking Restricted Grants
Utilizing the best practices for tracking restricted grants can be helpful in the long term. If you want to make every grant tracking effort a success, be sure to follow these steps and don’t skip any steps. Here are the best practices that you ought to follow:
- Separate accounts or classes: Use accounting software that allows you to tag transactions by grant or funding sources. This way, you can make that easy distinction between what is what.
- Detailed budgets: Create budgets that are specifically for grants and compare the actual spending against planned allocations.
- Regular reconciliations: Make sure that the internal records and funder statements are the same as the grant income and expenses.
- Support documentation: Put together and maintain an archive of receipts, contracts, and correspondence so that you have enough proof that you have complied and used the funds properly.
- Grant calendar: Be sure to track deadlines for reporting, renewals, and deliverables accordingly. Make sure it’s all in one centralized place so you know where they are.
Need Grant Tracking & Compliance Assistance? Contact Us Today
Tracking grants for your nonprofit can be a challenging task if you don’t have the right guidance or best practices to follow. If you need advice, The Quantify Group can assist you to ensure that you are complying with the necessary regulations and laws about grant usage and tracking them properly. You can breathe easy knowing that you’ll have the proper documentation ready, proving that you have indeed tracked those grants for your organization, especially when it comes time for an audit.
