When a nonprofit receives grants, either from government entities or foundations, management needs to keep records well organized for questions or reviews. This can be tricky in the case of multiple funders with their own reporting and compliance issues. Even smaller funders may want to know what happened to their money and require some reporting, even if informal. Showing disorganization and lack of controls may discourage donors to keep on giving, spelling disaster to nonprofits.
Below are some ideas that are likely to help you in this process.
- Set up a summary sheet for each grant with reporting dates and other crucial information, such as education requirement of staff covered on each grant that is updated for each new grant and is reviewed every week to make sure nothing falls through the cracks. This could be done on paper or online, but make sure others within the organization have access to this information easily in case people go on vacations or leave the nonprofit. A template could be created so that all summary sheets look alike, making it easy to find information.
- Make sure the accounting system captures revenues and expenses on each grant. You could identify grants through the chart of accounts by reserving a couple of digits towards specific grants or through “classes” or another method specific to your software. You may also need to train your accounts receivable and payable staff to recognize grant funds coming in and out, so they can code them properly. If not, you will have a nightmarish time providing reports to grantors and other interested parties.
- Develop a good filing system. Be sure to download and print all OMB Circulars and other documentation relevant to grant control, including notes on meetings and phone conversations. Keep them filed and accessible at all times. You can make a summary listing of all non-allowable costs that you are likely to have and keep it handy.
- Establish a budget for the organization based on grant budgets. Every grant-funded project should have its own budget numbers entered in your accounting system.
- Review reports on each project monthly to identify errors and monitor financial compliance. The Board and upper management usually receive summary reports, but other managers should review financial reports by grant source.
- Review documentation on journal entries, accounting entries, associated with grants. Each expense and revenue should be justified with proper documentation. If you see a number that doesn’t make sense, ask to see the backup paperwork related to the number.
Check out the book “Nonprofit Finance: A Practical Guide” –– Nominated for the 2016 McAdam Book Award