4 Tips to Help Nonprofits Avoid a Federal Grant Headache

4 Tips to Help Nonprofits Avoid a Federal Grant Headache

03/10/2020 Tags: Announcements, In the News

If you’ve ever been part of a nonprofit that’s applied for a grant, you know how much research, time, staff hours, and overall effort is involved.

So, it would be easy to think that if you actually receive the grant, your job is pretty much over.

But the reality is there might be more work you have to do after you get the money than there was to get it in the first place.

Under Uniform Guidance — the part of the tax code that governs federal grants — nonprofits that receive a grant have to have an annual audit performed. So, once your nonprofit’s spent more than $750,000 of federal money in a fiscal year, your organization needs a single audit, in addition to a financial audit.

But that’s not the only rule the Uniform Guidance requires. From the time you spend that first dollar of grant money, you also have to track time. Plus, you’ll need to implement a wide variety of internal controls.

Those processes and procedures will help you make sure you’re complying with the grant’s fine print. That way, when it comes time for that audit, you’ll be in compliance and won’t run afoul of the government.

Here are some tips to help you get a handle on all of the rules and regulations:

  • Make sure you know what’s required of your organization once you receive the grant. Sure, that sounds like a no-brainer. But lots of grants have very specific rules about what you can and can’t apply the money to and how you have to report your spending. To that end, make sure to train your entire team about those rules, not just those who handle the finances.
  • Watch your indirect rate. This can be a common trap that nonprofits fall into. Although there are a lot of ways your nonprofit can charge an indirect rate for your expenses — whether it’s for overhead, travel, employee salaries, or some other cost — you have to monitor what your actual rate is. If an audit reveals that you overcharged for your indirect rate, you’ll likely have to pay back the government the amount you overspent.
  • $750k is just the beginning. You might not need an audit until your nonprofit’s spent $750,000. But once you hit that ceiling, the single audit can go all the way back to the day you spent the first grant dollar. Make sure you have complete, accurate records for every cent you spent.
  • Track time in a way that complies with Uniform Guidance’s rules. As part of that process, make sure there’s an audit trail, which should include timestamps and lockable timesheets.

Federal grant money is often an essential way that nonprofits fulfill their mission and provide much-need services to the people they help. Just make sure you know what your grant requires ahead of time so you don’t get overwhelmed by a grant’s requirements.

If you have questions about grants or any other financial issue that affects nonprofits, contact our Nonprofit Team. We’re always happy to help!


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