Grants have long been the lifeblood of many nonprofits, and more organizations are wading into grant waters amidst continuing economic uncertainty. Establishing or revamping your grant management process doesn’t happen overnight, but the long-term payoffs (and potential payouts) make the investment well worth it. Here are some steps for improving your grant management.
1. Take a cross-functional approach
The receipt of a grant doesn’t affect only one department — it has implications across the organization. That’s why the development, program and finance departments all should be involved throughout the life cycle of a grant, from proposal writing to final reporting.
At the proposal stage, for example, development needs input from the program people about the relevant activities and expected outcomes. The finance department can provide valuable guidance when developing the budget. And everyone needs to agree on realistic deliverables, timelines and reporting deadlines before they’re incorporated in a proposal.
Communication among the different functions should continue after the grant is awarded. Ongoing communication regarding the programming work and expenses can help the team identify problems following the terms of the grant on a timely basis, when they can still be addressed without adverse consequences.
2. Keep your systems in mind from the beginning
You’ll find it much easier to manage grants when you think about your existing systems from the outset. This is just one more reason to be cross-functional in your approach to grants.
For example, you’ll preempt headaches down the road if you consider your accounting system as you develop the budget for a grant proposal. If you plan to use your chart of accounts to track costs, the budget format should match up with those existing accounts. If you don’t, you may end up needing to produce reports manually. Manual reporting eats up staff time and can lead to human errors with multiple repercussions.
3. Develop formal policies and procedures for key areas
No part of grant management should be handled on an ad hoc basis — it’s a recipe for disaster. Implement policies and procedures to ensure you cover all the bases.
For example, administrative processes should coordinate resources throughout the grant’s life. They also can help your organization build up a “grant repository” so you aren’t re-inventing the wheel with each application and awarded grant. The repository can include documentation commonly required by grantors, templates and FAQs. This information must, of course, be kept up to date.
A comprehensive calendar, visible to all internal stakeholders, is the foundation for reliable grant management.
Financial processes should focus on compliance with funder requirements. Compliance is top of mind for grantors and can enhance or undermine your reputation, affecting your ability to land future grants. Proper processes are needed to facilitate the timely collection of the requisite data.
Operationally, policies and procedures should center on gathering data to build your case for program effectiveness and outcomes. You also can use this information for marketing your organization to other audiences, such as individual donors.
4. Maintain — and abide by — a grant calendar
A comprehensive calendar, visible to all internal stakeholders, is the foundation for reliable grant management. The calendar should include all important dates, from application to reporting deadlines, with time built in to secure necessary reviews and sign-offs.
It also should reflect staff vacations and other leave so you plan for the necessary coverage to stay on track. Similarly, include the dates — and build in preparation time — of your annual audit, board meetings, and other activities and events that consume a significant amount of your organizational resources. Unexpected occurrences will arise, but the more you can anticipate, the better your odds of satisfying grantors’ expectations.
The lack of a solid grant management system will only increase the complexity and burden of grant-related tasks as your organization grows. Making the effort to improve your system now could open the door to greater funding, financial stability and, ultimately, mission-oriented work.
GRANT ACCOUNTING IS COMPLEX
In addition to properly managing grants, it’s important to understand how to recognize such awards under the Financial Accounting Standards Board’s (FASB’s) rules.
The first step is to determine whether an award is a contribution or an “exchange transaction” subject to FASB’s five-step revenue recognition rules. It’s probably an exchange transaction if the grantor receives commensurate value for the assets it transfers to your organization (for example, a research and development grant where the grantor retains intellectual property rights in the results).
If an award is a contribution, you also must determine whether it’s conditional. A conditional contribution generally includes 1) a barrier your organization must overcome to receive the contribution (for example, a matching requirement or restrictions on allowable expenses), and 2) either a right of return of the transferred assets or a right of release of the promisor’s obligation to transfer assets. Under FASB’s rules, you recognize unconditional contributions, including promises to give, when you receive them. Conditional contributions aren’t recognized until you overcome the barriers.