Nonprofit Grant Accounting Guide to Managing & Reporting Grants

In contrast, capital grants, usually allocated for the purchase of assets or infrastructure development, may not be recognized as revenue in the traditional sense. Instead, they might be deferred and recognized over the useful life of the asset purchased. Accounting for a grant correctly is essential for accurately reflecting your business’s financial position and ensuring compliance with accounting standards such as US GAAP. Proper grant accounting involves understanding the nature of the grant, the applicable accounting standards, and the steps to record and report the grant in financial statements.

What are the key components of grant accounting?

When considering various accounting software options, looking for features that specifically facilitate grant management is crucial. Additionally, thorough financial tracking ensures compliance with the often stringent grant requirements, reducing the risk of misuse of funds and potential legal consequences. BILL’s integrated and automated financial operations solution helps nonprofits streamline accounts payable, stay on top of accounts receivable, and simplify spend management and grant accounting. Our platform integrates seamlessly with existing systems to provide real-time visibility, automated reporting, and powerful analytics for NIH and Horizon Europe grants.

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• Limiting the grant management function to only one individual can put a nonprofit and its programs at risk for noncompliance and, potentially, the loss of current and future funding.
• A specialized system accommodates detailed recording of each transaction, specifically attributing it to the corresponding grant and budget line.
• Let’s explore what reimbursable grants are, their advantages and disadvantages, and how nonprofit organizations can determine if this type of grant aligns with their financial needs, goals, and operations.
• Look for tools with fund tracking, grant tagging, budgeting, time capture, indirect cost allocation, and audit-friendly exports.
• Through our consistent audit methodology and state of the art audit tools, we provide our clients with a high-quality audit preparation that provides  compliance with laws and regulations.
• We operate programs that achieve their objectives; and provide services in a efficient, effective, economical and ethical manner.

The origin and purpose of grants also play an important role in determining the appropriate accounting procedures. Similarly, as you use data-driven decision-making to refine your implementation, your stronger results will draw in new funds. This can also come as you build your profile as an organization through effective financial leadership. Nonprofits have a lot of highly interested stakeholders, such as board members and funders. This means, for instance, receiving grant from Payroll Taxes the Department of Health and Human Services will bring a unique set of regulator demands compared to the requirements from Bank of America Charitable Foundation. Grants can come in many forms, such as government, research, foundation and corporate grants.

Using Grant Management Software

• Alongside setting up clear record-keeping protocols, monitoring and tracking grant funds separately is important.
• Research online, ask for recommendations, and book demos of your favorite platforms to make an informed decision.
• Bookkeeping on a daily, weekly or monthly basis, General Ledger set-up, and all financial reporting.
• Nonprofit organizations often receive funding from various sources, such as federal, state, and private grants.
• These audits can also help identify opportunities, such as potential areas of cost savings.

Kirsten is a Principal with SVA Certified Public Accountants and her expertise includes the nonprofit and real estate industries. In addition to providing audit, accounting, and tax services, Kirsten also provides review, compilation, and management advisory services. Nonprofits must carefully track every dollar of restricted funds to ensure it is spent on the specified project or activity. Failure to properly distinguish between these two types of funds can lead to accounting errors, misallocated spending, and noncompliance with grant terms.

Grants vs loans

In the case of a conditional grant, income is typically deferred until those conditions are satisfied. Thorough, accurate, and accessible documentation is critical for both internal controls and for external audits. Every single grant-related transaction, whether it’s an invoice, payroll allocation, or subcontract agreement, should be documented and stored and a well-organized and accessible system. Modern accounting software with robust grant-specific accounting features can help reduce manual errors and streamline spending monitoring. Bookkeeping on a daily, weekly or monthly basis, General Ledger set-up, and all financial reporting.

Restricted and unrestricted funds

Besides, proper accounting gives you a clear picture of your organization’s fiscal health and helps you to make informed decisions on how to allocate resources. Effective grant management involves many moving parts and takes a team to complete successfully, especially if you’re dealing with multiple grants with different requirements simultaneously. Effectively managing grants will help nonprofit organization meet their financial obligations and also strengthen relationships with grantors, positioning themselves for future funding opportunities. Many grant management systems offer tools to help you track and report on restricted and unrestricted funds separately. Strong grant accounting practices help you stay compliant, meet deadlines, and show funders that their money is making the intended impact. Done right, compliance becomes more than a requirement; it becomes your competitive advantage in securing future grants.

What You Need to Keep Track of

• Many grant management systems offer tools to help you track and report on restricted and unrestricted funds separately.
• Establish regular internal audit processes to identify and address issues before external reviews.
• In addition, we have wealth management advisors in our office to assist with your long-term financial planning and investment decisions.
• Unlike private donors who often accept narrative updates, government grants require precise data collection on predetermined outcomes.
• Some of the consequences of non-compliance for a grant can result in payment withholding, suspension of award performance, or even the termination of a grant.

The workspace is designed for focus and efficiency, often quiet to facilitate concentration on detailed financial analysis and reporting. But with fewer opportunities coming from federal and state programs, your organization needs to have all your financial ducks in a row if you want to earn—and keep—government funding. When it comes to tracking nonprofit grants, it is much easier to use nonprofit accounting software. These regulations, such as the IRS’s annual filing rules, can online bookkeeping include reporting deadlines, levels of expenditure, and standardized documentation around grant revenue recognition.