First of all, applying for a grant itself is a detailed process and is a skill to develop. Once a nonprofit is awarded grant money, it must be very careful how it is managed. To ensure clarity, the federal government’s Office of Management and Budget (OMB) monitors the universal administrative procedures drafted by 26 federal agencies on the use of grant money.
The OMB has three circulars or rule books for the accounting, administration and auditing of grants. Thankfully, when a nonprofit is awarded a grant, the many details of these circulars is included. In addition, most federal agencies also offer specific training on grant management.
The purpose of this circular is to define the administrative requirements of all nonprofit organizations, institutions of higher education, and hospitals. These standards for the administration of grant money are to help establish that all nonprofits are treated equally.
The intent of this circular is to determine the cost of work performed or purchases made by nonprofit organizations. The nonprofit’s auditor will verify whether all its costs are in compliance with generally accepted accounting principles (GAAP) and the cost prinicples outlined in this circular. Costs are classified as:
The purpose of this circular is to address the government’s audit requirements for grant money. The nonprofit is required to keep copies of all grant documents. Not following the rules could lead to loss of grant money or loss of the right to serve the community as an organization.