Is your not-for-profit organization looking to expand its funding sources? Grants can provide amazing opportunities to strengthen existing programs or launch exciting new initiatives. But as anyone who’s ventured into the grant world knows, securing the funding is just the beginning.
At Rea, we work with not-for-profits every day who are navigating the sometimes complex world of grant compliance. The good news? With some planning and the right systems in place, you can maximize these valuable funding sources while avoiding compliance headaches.
Is This Grant Right for Your Organization?
Before diving into any grant application, take a moment to ask yourself these important questions:
Does the grant align with your mission? The funding should support work you’re already passionate about or want to develop, not pull your organization in an entirely new direction just for the money.
Can you handle the administrative requirements? Grant funding comes with strings attached. Consider whether the reporting burden and compliance requirements are manageable with your current team.
Do you have the right systems in place? Your existing financial management and documentation procedures might need adjustments to track grant funds properly.
Is your leadership on board? Having your Board’s support is crucial, as they’ll need to understand both the opportunities and obligations that come with grant funding.
Taking time to create a detailed, realistic budget during the application process can save countless headaches down the road. Keep in mind, every budget revision requires additional time and approval.
Federal Grants: What You Need to Know
Federal grants, whether they come directly from federal agencies, are passed through state or local governments, or are passed through other entities, come with specific compliance requirements outlined in what’s called “Uniform Guidance” (The Code of Federal Regulations Title 2, Part 200).
While that might sound intimidating, it essentially covers five key areas:
- Financial management: How you track and account for grant funds
- Procurement: Guidelines for purchasing goods and services
- Audit requirements: What financial reviews you’ll need
- Cost principles: Which expenses can be charged to the grant
- Reporting: What information you need to provide and when
Here’s some good news for smaller organizations: Starting October 1, 2024, you won’t need a single audit unless you spend $1,000,000 or more in federal funds (up from the previous $750,000 threshold) for organizations with fiscal years beginning on or after October 1, 2024. This change helps reduce the burden on organizations with smaller federal awards.
Other recent updates that might benefit your organization include:
- An increase in the indirect cost rate from 10 percent to 15 percent, meaning you can recover more administrative overhead
- A higher equipment capitalization threshold of $10,000, simplifying your accounting for purchases under that amount
- More flexibility in subawards, allowing you to partner with other organizations more easily
What About Non-Federal Grants?
Grants from state agencies, local governments, or private foundations typically have less stringent requirements than federal funding, but they still require careful management.
How can you tell if your grant is federal or non-federal? Look for:
- References to an ‘ALN’ (Assistance Listing Number, formerly referred to as CFDA number – Catalogue of Federal Domestic Assistance)—a five-digit number like 17.801
- Mentions of “CFR Title 2, Part 200” or “Uniform Guidance”
When in doubt, just ask your contact at the funding agency. They’ll be happy to clarify what type of funding you’re receiving and what requirements apply.
Five Practical Steps for Grant Success
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Plan Ahead
Don’t wait until after you receive funding to figure out how you’ll manage it. Review all compliance requirements during the application phase to ensure you’re ready to hit the ground running when the funds arrive.
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Create Clear Tracking Systems
Your ability to show exactly how you spent grant funds is crucial. Depending on your accounting system, you might:
- Set up dedicated account codes or program fields
- Create reliable spreadsheets for tracking if your system has limitations
- Establish regular review procedures to catch issues early
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Build Strong Internal Controls
Protect your organization by implementing clear approval processes for grant expenditures. Document who has authority to make spending decisions and ensure proper separation of duties for financial transactions.
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Invest in Staff Training
Everyone involved in your grant-funded programs should understand:
- The purpose of the funding
- What activities and expenses are allowable
- Their role in maintaining compliance
Remember, your program staff are on the front lines of compliance—make sure they have the knowledge they need!
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Schedule Regular Check-ins
You don’t need a formal “internal audit” to stay on track. Simply schedule regular reviews to ensure your processes are working:
- Are expenditures being properly approved?
- Is documentation complete?
- Are you on track with program goals and spending timelines?
Catching small issues early prevents them from becoming major problems during an external audit or review.
Why Grant Compliance Matters
Strong grant management isn’t just about avoiding audit findings but building trust with grantors that can lead to additional opportunities. When you demonstrate that you’re a reliable steward of grant funds, you position your organization as a desirable partner for future funding.
The most successful not-for-profits we work with view compliance not as a burden but as an opportunity to strengthen their overall financial management practices. The systems you build for grants often benefit your entire organization!
How Rea Can Help
At Rea, our not-for-profit team has extensive experience helping not-for-profits like yours maximize their grant opportunities while maintaining compliance. Whether you’re considering your first major grant or looking to improve your existing processes, we can provide the guidance you need.
Our not-for-profit and government specialists can help you:
- Assess your readiness for specific grant opportunities
- Design effective tracking and reporting systems
- Prepare for single audits and other compliance reviews
- Train your staff on best practices
Contact us today to discuss how we can support your grant management needs and help your organization make the most of every funding opportunity.
