9 Steps to Smoothly Manage the Life of Your Grant
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law and brought with it a host of economic relief and stimulus efforts for individuals, businesses and nonprofit organizations. Many for-profit businesses found themselves struggling through the applications and process to acquire the funds, but this was one time that nonprofits believed they were at an advantage. Many nonprofits are accustomed to the hoops associated with grant applications, as well as the accompanying compliance measures and ultimate grant audit that will ensue.
Here are some guidelines organizations can adopt to smoothly manage a grant from initial award of funds through the eventual grant audit:
- Identify the team. Assign internal responsibility for grant compliance and interim reporting throughout the life of the grant. Large nonprofits often have an entire grants department, but even small nonprofits should identify a grants specialist who is responsible for the compliance, interim reporting and management of the grant audit. Ensure that the terms of the grant are understood by key staff members. Allowable uses of funds and interim reporting requirements are two areas that are crucial.
- Track the funds. Utilize grant management software, a general ledger module or even an Excel spreadsheet to track the ins and outs of funds. Sometimes setting up a separate bank account can help in segregating disbursement of the grant funds. If possible, utilize a segment of the general ledger accounts to track receipts and disbursements associated with the grant.
- Establish periodic internal audits. These audits should be conducted by someone who is independent of daily management of the grant. A larger organization may have internal audit staff but, if not, a board committee can be assigned the task or an outside consultant can be engaged. This step should not be overlooked. It is far better to discover noncompliance issues early when corrections can still be made rather than when the grant auditors come in after the fact, possibly resulting in a giveback of funds.
- Close and reconcile the books. When it comes time for the actual grant audit, make sure your books and records are closed and reconciled prior to the arrival of the auditors. Produce financial statements for the period for the grant and have the CFO, treasurer or finance committee carefully review the financial records.
- Be prepared for the audit. Obtain a list of requested documents from the auditors prior to their arrival. Be sure to run all requested reports and pull out journal entries, invoices, payroll journals and contracts. Have all the documents in a secure electronic drop box prior to the auditors’ first day of field work.
- Communicate with the auditors. Carve out time each day that the auditors are onsite to check in with them. Discuss any issues that they are finding to be sticking points. Direct the accounting team to prioritize requests from the auditors.
- Be flexible. If the auditors are asking for something that can’t be found or doesn’t exist, don’t panic. Talk with the auditors to see if there is another document that may suffice. There is usually more than one way to show substantiation.
- Remain professional and cooperative. Unfortunately, it’s not uncommon to see an adversarial or defensive attitude taken against the auditors. This is unnecessary, unprofessional and not in the best interest of the organization or the audit.
- Wrap things up. Meet with the auditors upon completion of their field work. Go over items outstanding and offer a plan and timeframe for getting those items wrapped up. Then follow up with those items as soon as possible.
When it comes to grant funding, winning the award is just the beginning. The grant needs to be carefully and methodically managed throughout its life, including through the audit. Having a thoughtful process in place can make administration of the grant straightforward and possibly avoid any required giveback of funds in the end.
This article appeared in the November/December 2020 issue of New Jersey CPA magazine. Read the full issue.