Were you recently awarded a grant? Do you have any idea how to manage it? Do you know how to reconcile your grant? Do you even know what a grant reconciliation is?
What to do when you are awarded a grant?
Congratulations! A funder just saw fit to entrust you with money to further your mission. Take a moment to congratulate yourself and those who helped develop the winning grant proposal. Also, depending on the funding source (private foundation vs. a federal award), thank the funder for the opportunity and resources. After taking a moment for a little dance party, it is time to get down to business.
How do you manage a grant?
Do you remember the saying: Location, Location, Location!? Well, in the beautiful world of accounting, the saying goes: Document, Document, Document!
Grant management involves all the steps and processes an organization must take to satisfy the grant funding requirements. This consists of keeping organized documentation, tracking the finances, managing the objectives of the grant, plus more. In order to successfully manage a grant, you want to…
- Review all documents
- It may have been a while since you applied for the grant until it was awarded. Do you remember all of the requirements? Maybe not. This is a great time to review your proposal, verify all of the conditions in the Notice of Award or funding agreement, and ensure that your needs are still the same (maybe a former employee was included in the proposal). Not holding up your end of the agreement can be detrimental to your grant and organization, so you want to know what you can and cannot do.
- Review all documents
- Assign responsibilities
- Who is involved in managing this grant, and who, if anyone, is being charged to the grant? All individuals working on a grant should be informed of their duties in order to carry out the terms of the agreement. Will the project manager also be responsible for tracking the finance, or does your organization have a dedicated accounting team to handle the finance piece? These questions need to be answered before you ever spend a penny.
- Assign responsibilities
- Create the things you need to succeed
- Ensure that your policies and procedures are up to date and include language regarding managing grant funds.
- If people are being allocated to the grant, you usually need to have timesheets for those employees. If you have never had to use timesheets before, it’s time to create one!
- Create a calendar with all the essential dates like project update submissions, financial reporting, grantor-grantee calls, grant ending date, and final close-out date. You want these dates to be easy to find. You can also add them to your electronic calendar with reminders to ensure you never miss a deadline.
- Create the things you need to succeed
- Get your arms around the money
- Ensure that you have a system that allows you to track transactions by funding source and set up new coding in your general ledger for the new grant. You don’t want to double dip, so you must keep your chips separate.
- Understand if your grant is a firm-fixed-price grant or a cost reimbursement grant.
- Firm Fixed Price- if you were awarded $10,000, you get that amount regardless of spending $8,000 or $13,000.
- Cost reimbursement- if you were awarded $10,000, you only receive back what you expended (plus any indirect costs if allowable) after spending it.
- Understand if your grant is a firm-fixed-price grant or a cost reimbursement grant.
- Use a grant reconciliation sheet to track expenses outside of the accounting software. Why, you may ask? Because it’s a best practice. More on this to come; just keep reading, please.
- Get your arms around the money
- Comply with any programmatic or financial reporting requirements
- Remember that calendar of dates you set up; now stick to them and be in compliance with your funder
- Comply with any programmatic or financial reporting requirements
- Close out your grant
- DOUBLE CHECK EVERYTHING! No, seriously, everything!
- Even when you comply with all reporting deadlines and reconcile the finances on a monthly basis, you still want to reconcile everything again at grant year-end. This ensures that no allowable expense is left behind.
- Close out your grant
What is a grant reconciliation?
A grant reconciliation is a way to track all of your grant expenses by line item, assists you with compiling your cost reimbursement invoice(s) or electronic payment request(s), tracks payments received, and allows you to see the remaining funds available to spend.
Performing a grant reconciliation allows you to review your transactions for accuracy, compare them with source documents, and verify that they are recorded correctly to the correct cost center in your accounting system. Ideally, a grant reconciliation should be performed monthly to ensure accuracy. This will allow you to ensure that all expenses were allowable, allocable, and reasonable, to catch any errors or discrepancies, and to ensure expenditures do not exceed the award amount if unallowable.
According to the Code of Federal Regulations, a cost is:
- Allowable if the direct cost is necessary for the performance of the sponsored project and agreed upon by the funder.
- Allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received.
- Reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.
How do you reconcile your grant?
Well, it is pretty simple but truly important. You more than likely have been recording your expenses all month way, now we will use an external document to track those expenditures outside of the accounting system.
- Review your funding agreement and put all of your budget categories on the sheet so that you can track the expenditures
- After the end of every month, record all the actual expenses from your accounting software onto the spreadsheet
- Use this reconciliation to ensure that all expenses were accurately recorded and that nothing was miscoded to another funding source
- Repeat this process every month and use this document for your reporting and reimbursement processes
Do you still need help?
Here at Grade Bookkeeping Services, we have years of experience helping nonprofits with their grant management needs. Contact us today to schedule an appointment.