7 min read
April 16th, 2024
Every nonprofit organization undergoes a full grant lifecycle that includes identifying grant opportunities, building relationships with funders, applying for grants, accepting grant awards, managing and tracking the grant, reporting your progress, and repeating.
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Key Takeaways
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This entire process is complex and work-intensive. It requires time and attention to detail, but attempting to operate as a nonprofit without grant funding would be nearly impossible. Across the United States, nonprofits source about 30% of their funding from government grants, and their second-largest source of funding comes from grants awarded by private foundations, which accounted for more than $105 billion in funds in 2023.
Every step in the nonprofit grant lifecycle is vital to nonprofit success, but this article will focus, in detail, on grant fund management, its importance, and how to effectively navigate this stage of the grant lifecycle.
Grant funds are not awarded without strings attached; they come with lengthy, complicated requirements with respect to how and when the funds are used, when they are distributed, and how their use must be documented.
Also called grant tracking, grant management refers to the processes and steps your organization must follow in order to satisfy all the requirements of the grant contracts that accompany the grant funds you are awarded to maintain grant compliance. Additionally, grant management serves the internal purpose of ensuring the responsible and best possible use of your funds to maximize ROI.
Grant management typically involves responsibilities related to documentation and financial reporting, financial tracking, project management, compliance, time management, grant disbursement, and grant budgeting.
Read More: Bookkeepers vs. Accountants: What Nonprofit Leaders Need to Know
When it comes to grant management, nonprofits have a lot at stake including the grant funds, your nonprofit's reputation, and your mission.
This step requires a thorough assessment of your organization's available accounting software and technology. The specific set of tools you will need depends on your grant's requirements. Generally, however, you should have a system in place that facilitates and automates data collection, time tracking, expenses, expense categorization, and financial reporting.
Do you have the tools that you will need for tracking and executing your grant? Do you and your team understand how to use these tools effectively?
Next, you need to assemble a committee that will be responsible for managing the grant. (Depending on your nonprofit's size and needs, you can assign one team per grant or have a committee that takes on the management of all your organization's grants.) Choose committee members who offer a diverse range of skills and expertise so that there will be perspectives and resources from leadership, finance, human resources, programming, fundraising, and other relevant departments.
The members of your grant management committee should have clearly defined roles and responsibilities. They should understand the needs and requirements of the grant, know who they will report to, what they need to do, and when to take action.
Your grant contract and requirements should be readily accessible to your grant committee and all relevant personnel. Take the time to review the requirements and make sure you understand every aspect of the grant, how it works, your timeline, and the requirements. You don't want to risk losing your funding as a result of an avoidable oversight.
Yes, your organization should have a budget and each of your programs needs to have a budget. You should also create a budget for individual grants. The process of grant budgeting forces you to define a concrete plan for how you will use the grant's money. Once you have a grant budget in place, grant management becomes a simple matter of execution, record-keeping, and reporting.
To ensure work is completed on time and grant requirements are met on schedule, you will need to build a complex calendar that accounts for your team's plans, your grant's requirements, and your organization's relevant programming schedule. This will help you keep your organization and the working parts of your grant's requirements working on time and in harmony like conducting a hundred musicians in a beautiful symphony.
Recording and recognizing grant funds is a unique accounting challenge because grant funding is usually fairly complex. The way you recognize grant revenue in your bookkeeping depends on the type of funds you are awarded, how they are received and disbursed, whether or not they are restricted, and whether or not the awards extend over multiple fiscal years.
Be sure you meet with your finance team and provide them with a copy of your grant contract and requirements. They will need this information to ensure your financial grant reporting is compliant and accurate. Additionally, they can take steps to help ensure that, despite multi-year funds that can muddy the financial reporting waters, your financial reports are clear and easy to understand.
Read More: A Quick Guide to Nonprofit Surpluses and Deficits
As you begin using your grant funds, be sure you are monitoring and keeping a thorough record of all of your expenses and spending activities. You will need these documents for your grant reporting and internal records. Additionally, if you will be allocating any overhead expenses to grant-related programming, then you must also maintain a thorough and accurate record of these costs. Expense allocation usually requires you to keep detailed time-tracking records.
Whether or not your grant requires you to submit progress reports, you should require internal progress reporting. Include progress report dates in your official grant tracking calendar, and use them internally to ensure you are staying on track, on budget, and on time with respect to your goals.
When nears the time to finalize your grant (i.e. the end of your grant period or the end of your grant-related work or funds), you need to have a plan for finalizing all of your paperwork and required documents. Create a checklist of grant requirements, and begin working to gather everything while you still have plenty of time.
The most effective and efficient grant management requires the combination of an experienced team and powerful back-office tools.
Several key individuals should be involved in the grant tracking process including leadership and the board, fundraising personnel, program and project managers, and your finance team. The management of grant funds, however, can impact just about every aspect of your organization, so you might also need to involve additional members of your team in various aspects of data collecting, reporting, and expense tracking.
Your nonprofit should implement and leverage technology such as accounting software and integrated applications designed to facilitate and automate data collection, expense categorization, account reconciliation, project management, time tracking, collaboration, and reporting. Using these technology tools saves time, improves the integrity of your data, and streamlines grant financial reporting. In addition to having the ability to easily satisfy your contract's reporting requirements, you'll also have a database of documentation ready to draw from when it comes time to begin your next grant application cycle.
Having a solid, smoothly operating back office is vital to nonprofit grant management. Without the kind of support provided by a robust back office, keeping track of a single grant can quickly become more than a full-time job.
Thankfully, outsourced back-office services like those provided by GrowthForce provide an affordable option for nonprofits looking to strengthen their financial health, improve their reputations, expand their missions, and maximize their ROI from grant funds. When choosing an outsourced accounting partner, nonprofit leaders should look for providers with extensive experience working in the nonprofit sector, as nonprofit organizations have a very different set of goals and challenges than those of for-profit businesses.
Armed with well-vetted, nonprofit-specific technology, an experienced outsourced accounting team can help you implement a variety of financial management tools and grant-tracking best practices while working with you to overcome the many challenges of nonprofit grant tracking.