Grant Accounting Series – Pre-Award

This is the part I am historically less involved in, since we don’t usually record anything on the books, but I can give you some insights you may not be able to get elsewhere. In other words, this is meant to supplement, not supplant, information you might be able to get from other nooks and crannies of the internet.

With recurring grants, the budget (check out this excellent free ANAFP article on Best Practices in Nonprofit Budgeting) definitely spans both the pre-award and post award period. The budget in the pre-award period must be followed in the post-award period, but in the best run organizations, the lessons of the life of that budget should be integrated into the next grant cycle, which means having someone involved throughout the whole process with the objectivity to apply what was learned from those lessons. A grant accountant may be involved with this process, but usually this is the responsibility of the Executive Director, “Principle Investigator” (PI) or Program Manager.

Another part a grant accountant may be called on to help with in this stage is any documentation requested by the would-be grantor over internal controls, especially if this is not formally documented by the organization. An important note if any of your grants are federal in origin. You are now required to “(a) Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award” (italics are mine), per the most recent Uniform Guidance update at 2 CFR § 200.303. MCA can help with those.

Another complication is that time and effort have to be managed across the staff – again, this isn’t usually the job of the grant accountant, but a good grant accountant must at least have some awareness of this process.. Someone must find some way to track and manage the capacity of your staff to perform the work, without leaving them idle or pushing them into overtime, all on a razor-thin margin.

Here’s the thing about this part of the grant- it’s all the risk of the would-be grantee. All this work setting up a budget, filling out a mountain of forms – it’s all at the nonprofit’s expense and subject to risk that they will not receive the award. And if it does receive the grant, the expenses incurred are only allowable expenses under the grant so far as they would have been allowable as an expense during the grant.

Which, when you add it all up, it means a grant-dependent nonprofit not only walks on a razor’s edge, but indeed does acrobatics on that razor’s edge. Think about it – somehow the overhead allocation of 15% or so (using the de minimus rate) must cover overhead such as occupancy, technology, administration, grant writing, all this compliance and tracking, unused staff capacity or overtime, and the organization’s professional services. If this sounds crazy, then it is: without some kind of unrestricted funding or a great deal of cheating, it is nearly impossible even when ongoing grants are renewed regularly and everything goes according to plan!