Grant money is awarded for a specific purpose. Because it is federal money, every penny must be well accounted for and tracked. It also must be kept separate from for any other income and expenses of the non-profit organization.
When grant money is received, along with it is sent a budget specific to these grant funds. At the time of applying for a grant, the non-profit’s preferential budget was submitted.
The budget received may be very similar or very different from the non-profit’s preferences. Regardless, the federal government has the authority to dictate how the money is spent. Keeping track of how money is spent demonstrates to the auditor and the awarding agency good stewardship.
It is crucial to avoid commingling funds. Mixing grant money with other sources of income can result in an eventual loss of funding. To prevent this, include the grant programs in the chart of accounts by assigning each program a different control number.
In addition, physically establishing a separate bank account for the grant money can also assure that funds remain distinct. Depending on the size of the grant and the undertaking of various programs, it may be beneficial to hire someone just to manage the grant funds.
There is so much at stake in the use of grant funds. It is worth going the extra mile to ensure that grant funding is managed properly. It is absolutely necessary to file reports on time as well as maintain detailed documentation.