In order to provide effective grants management, we need to make sure that we are performing bookkeeping at the grant level. Our grant accounting needs to properly allocate costs to the grants while maximizing our grant reimbursement and avoiding any cost disallowance.
There are several things that lead towards effective grants management which includes financial policies and procedures, adequate supporting documentation, ability to produce Schedule of Expenditures of Federal Awards (SEFA), and proper base to apply indirect cost rate.
Our board members and related governance should be knowledgeable and informed about grant budgets and compliance requirements. The board should stay knowledgeable of grant administration trends, developments, and regulations. The board should understand what the organization is committed to and are Its programs delivering what is required.
The program staff needs to be involved in the data collection and reporting responsibilities including the proper reporting to the correct grant budget categories. We need to establish and schedule future grant deadlines to insure timely grant report submission. We would suggest sharing the grant agreement with the program staff to insure all grant requirements and deadlines are met.
If Subrecipient Monitoring is required, you need to perform risk assessment and insure contract requirements are passed along to subrecipients. You need to understand the appropriateness of monitoring procedures performed.
Federal grants are governed by the super circular which is also referred to as the uniform grant guidance. Auditors audit based on these requirements with the assumption that the nonprofit is knowledgeable and informed about this grant guidance. Federal grants and awards are specifically identified and require a financial management system that identifies the source and application of federal funded activities. Federal grants typically require written procedures around payment requirements, allowability of costs, procurement procedures, and standards of conduct. For example, procurement procedures need to be written with good procurement records and follow the guidelines.
The grant audit requirements include the ability for management to prepare the Schedule of Federal Awards (SEFA) and it should be reconciled to the accounting records. If the SEFA is a required part of the audited financial statements, the auditor will issue an opinion if the SEFA is fairly stated as a part of the audited financial statements.
The Financial Management System needs to identify all federal awards received and expended to include the Catalogue of Federal Domestic Assistance (CFDA) information and complete financial results of each federal award. It sound include comparison of expenditures with budget amounts and identify the source and application of funds form federally funded activities. The financial policies and procedures should include payment requirements, allowability of costs, procurement procedure, and standards of conduct. The Internal Controls need to provide reasonable assurance that Federal Award is in compliance with federal statutes and regulations.
Cost allocations are an integral part of effective grants management. Effective cost allocations will allow to report and recover the fully loaded program costs to facilities and administrative costs. Some organizations could benefit from documenting their cost allocation and federal programs may require a formal cost allocation plan. Some acceptable methods of cost allocation would include hours worked for variable costs, and square footage for fixed costs like facilities.
Grant advance would be for grants that provide advanced funding. It is important that you don’t spend these restricted funds on other activities and you can keep track of restricted expenditures and restricted grant cash balance. You may want to track these advances by grant and as deferred revenue to show how much of the cash or accounts receivable balance is restricted.
Cost reimbursement for grants require you to submit reimbursement request timely to minimize cash flow delays. Your grantors typically believe you have already paid these costs when you submit your reimbursement request. You may want to obtain a line of credit for reimbursement delays and disclose the possible longer payment terms with your contractors and vendors.
The grant reporting needs include grant budgets which match grant budget line items with financial reporting. Grant reporting should be able to report total grant spending including direct and indirect cost allocation. Proper grant reporting requires a grant reconciliation to insure internal and external reports agree and that you are maximizing the reimbursement along with minimizing over and under grant spending. You should be knowledgeable of the Federal Funding Accountability and Transparency Act (FFATA) and Data Collection Form filing.
Grant reconciliations needs to occur on a regular basis and insure internal reporting and external reporting match. You goal is to insure you maximize reimbursement and minimize any over or under spending. Some of the reconciling items to consider include matching requirements, program income, and disallowed costs.
Grant close out requires you met the compliance requirements and make any final grant budget revisions. You will want to make sure you make any budget revisions in a timely manner to make sure you have time for any grant budget revision approval that is required.
Your accounting system should be able to meet your grantor reporting needs including their budget line items. This typically requires segment tracking to track your grant as a separate fund including tracking by program.
Some examples of lack of effective grants management would include grant findings, monitoring visit finding, spending issues, and lack of a grant budget and related projections. Have you had a loss of funding, suspension, or termination of any of your grants. Have you had to submit a corrective action plan for your grant? Have you properly performed the grant closeout procedures?
It is important that you continue to strive for effective grants management within your organization. Our firm is here to help your organization perform more effective grants management so please let us know if we can be of assistance.