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Jun 2nd

Taking Responsibility for Your (Grant) Money

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iStock_000010210670XSmallJun 2, 2011 

Oh, the responsibility! Yes, there is a lot of responsibility when you start a business. Most people understand this when they open a for-profit business. But somehow, this concept gets lost to some degree when a person starts a nonprofit. Perhaps it is because the motivation for a nonprofit is to serve a social need whereas the motivation for a for-profit business is to make money! Many people do not realize, that although the motives are different the needs are far more alike than dissimilar. I could write a book on the similarities! They include recruiting, hiring, training, supervising and managing employees, paying employment taxes and filing returns, making purchases from vendors which requires a cash disbursement process, invoicing grantors, donors, and clients for contributions or services rendered that encompasses a cash receipts system, tracking and recording activity that ultimately produces financial reporting information, and maintaining operating facilities as a tenant or building owner. The common thread in all these functions is that they represent “systems”. Many systems are necessary for running a successful organization, regardless of its tax-exempt status.

          Far too often, well intentioned, good-hearted, passionate individuals start nonprofit organizations for all the right reasons, but fail to recognize the business side of the “corporation” albeit “nonprofit corporation”. They soon find themselves in a mess of stress, frustration, and confusion as they attempt to run the organization. This leads them to scramble for funding to be able to acquire the goods, services, and human capital necessary to keep them afloat as they navigate the rough waters of grant procurement. Many organizations have become quite adept at securing funding from government entities, foundations, corporations, and individuals. Many in turn use those funds prudently on program services and agreed upon deliverables. However, in my service to clients I find very few of them account for the entire grant process in its totality from prospecting the revenue to securing renewed funding. In the middle of these bookends are a host of policies and procedures that should be in place to assist the organization in managing the funds so they can be easily tracked, allocated, and reported as requested by constituents.  

          As an individual who manages the grant “process” at your organization, or one who plays some kind of role in the procurement, use, or reporting of grant funds, can you (unfortunately) answer yes to any of these questions:

  1. At the end of the fiscal year do you scramble to identify whether your organization has any “temporarily restricted” funds to carry over into the next fiscal year because the auditors asked you the question?
  2. To answer this question, does your organization have to go back through invoices from the entire year to identify how much was expended and on which grants as compared to how much was awarded and/or received?
  3. Have you kept a time study of how employees spend their time to be able to justify the allocation of expenses between fundraising, administration (management & general), and programs?
  4. Do you use a timekeeping mechanism to facilitate allocating time among specific programs or specific grant sources? Do you have a central location for all grants and contracts in force during the fiscal year?
  5.  Do you compare the budget for a contract to the actual expenses incurred on a monthly basis to know whether you’re spending down funds as originally planned?
  6. Has your organization arrived at the end of a grant period and realized there was a significant amount of unspent funds for which no one was aware during the year?
  7. Does your organization have periodic program and/or financial reporting requirements that have not been filed and wasn’t realized until a notice came from the grantor?
  8. Has such non-compliance prevented your organization from drawing funds?
  9. When preparing a grant application, do you find your staff loosing valuable time searching the agency for the same documents that are regularly requested in every proposal submitted?
  10. Are you sure you haven’t received funding for a given position at more than 100% of salary cost?

          For a nonprofit organization to successfully manage the grant process, it must have a grants management system that encompasses collaboration among departments and individuals. This will create an environment that promotes proper accounting, reporting, compliance, and transparency that instills confidence in your organization that will compel governments, foundations, corporations, and individuals to give and give again.

          Though there is a presumption that for-profit companies will have sales every day and will always have income because that’s just what they do (notwithstanding the efforts necessary to convince consumers to buy their product or service), nonprofit organizations must start at zero every year and raise their revenue all over again from grantors and donors. The best way to do that is to show the public you know how to manage the funds and account for their use and application in a manner that yields timely information about clients served, financial prudence and ultimately, mission accomplished!

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