Grant Revenue for Nonprofits

For many nonprofits, grants play a significant role in funding the organization’s mission and projects. 

The reason grants are so important is that they seldom require repayment. As you can imagine, this causes grants to be highly sought after.  

In most cases, securing a grant requires your nonprofit to meet certain criteria, keep detailed financial statements, and be able to break down where the money will be allocated within the organization, among other responsibilities.  

In this article, we will take a deeper look at the types of grants your nonprofit can apply for as well as ways to secure these grants and how to manage grants on the financial side. 

Understanding Grants 

For nonprofits, applying for and acquiring grants can be a daunting task. You need to know where to look as well as the governing bodies that issue the types of grants your organization qualifies for. 

As stated above, grants do not typically need to be reimbursed. They are most often offered by government organizations, foundations, and corporations and will have stipulations on where and how the money is to be spent. 

Three Types of Grants

For our purposes, we will be taking a look at three main types of grants that your nonprofit can apply for: unconditional, conditional, and reimbursable grants. 

• Unconditional Grants
• As the name implies, unconditional grants come with no conditions on how the money is to be spent within your organization. This makes them a great option to apply for when applicable.

• Conditional Grants
• This type of grant requires certain conditions to be met in order to receive funding from the grantor. This can be a stipulation that money will be granted once other criteria are met. For example, proving that full funding will be secured via a combination of other sources or specific directions detailing where money must be spent within your organization.

• Reimbursable Grants
  • These grants will require you to make all payments upfront but will reimburse the funds once the project is completed. This requires detailed accounting and documentation throughout the work process. 

How to Find Grants

Knowing the types of grants your nonprofit can apply for is only the beginning. The next step is having the knowledge to seek out and find the grants that are available to you. Luckily, there are several ways to do this.  

1. Board members play a critical role in your nonprofit in many ways. They may have knowledge of potential grant sources as well. They can be a key point of contact in this case between you and the grantor, making your organization stand out and helping to secure funding. 
2. Online searches are another method to consider when looking for available grants. Websites make it easy to sort by organization type and can be an efficient method to find grants nationwide. 
3. Grant management firms are another option that encompasses many facets of the search, application, and oversight processes that a nonprofit must oversee. A firm can help alleviate some of the pressures that a smaller nonprofit team may face by taking on most of the responsibilities for managing the grant’s terms and conditions.
4. Social media and other organizations that support a similar mission are also valuable for seeking out grant opportunities for your nonprofit. 

Where Do Grants Come From?

Grants come from various sources and knowing which ones to be on the lookout for is very important. Oftentimes, grant funds come from the:

• The government
• Charities
• Community foundations
• Family foundations
• Private foundations 

The source of the grant will dictate what you include in your proposal. For example, when applying for a charity-funded grant, the charity will typically be looking for ways that your mission or project is aligned with their values.  

Similarly, government grants can come from the national, state, or local level and your grant proposal should reflect which level of government you are dealing with and outline how your organization can use the grant to further the community. 

Accounting for Grants

Tracking

Most grants require a full breakdown of spending to be reported to the grantor. A tracking system will need to be in place in order to fulfill this requirement. 

Begin by making a budget for how your organization plans to spend the granted money. Be as specific as possible during this process. During the project phase, keep track of each expenditure; what you bought and what it was used for. 

Good tracking practices show that your organization is financially responsible and that you are taking the grant seriously. 

Recording Grants

For your financial purposes, you must record grants accurately based on the type of grant. This means that grant funds will need to be included and reported as part of your organization’s income.

• Unconditional grants allow you to begin recording as soon as you have been awarded the grant. If you receive a letter stating that you have been awarded the grant, the date you receive the letter should be what is recorded.
• Conditional grants are often paid in installments and should be documented as such. Once you receive a letter, you will only record the initial installment. Each additional installment will be recorded separately as they are received.  
• Reimbursable grants require you to keep track of expenditures throughout the project. Once the project is completed and funds have been received, then you will record the funds.

It is important to be aware of these grant types and their unique recording requirements.

Managing Grant Revenue for Nonprofits  

Grants are a great way for your nonprofit to acquire funds for projects. However, accounting, tracking, and recording procedures can be a daunting undertaking for any nonprofit team.  

Luckily, here at Morris Verdonk Accounting, we specialize in taking that burden off of your shoulders by ensuring all proper procedures are followed and the process is as easy as possible for your organization. 

Contact us today to learn more!