Grants are vital to nonprofits . The funding provides financial stability to support missiondriven initiatives , enhance infrastructure and meet critical community needs .

However , managing grant funds properly is just as important for an organization ’ s financial health as receiving the grant itself .

Without proper management of grant funds , you risk losing the awarded funding , endangering future grant opportunities and damaging your organization ’ s reputation with stakeholders .

Strong financial management is key to grant success . But with complex requirements and limited resources , mistakes can be easy to make . Below are three common pitfalls organizations face after securing grants — and how your organization can avoid them .

MISTAKE 1 : Failing to Budget Carefully A grant budget is typically required as part of the grant application process . But if your organization doesn ’ t incorporate the budget into your accounting system ( or if your budget isn ’ t detailed enough ), you could see significant problems .

Without looking at expenses at an organization-wide level and properly allocating them , it ’ s easier to overspend or underspend in various categories . Even worse , you might accidently get reimbursed for the same expense by two different grants ! To ensure proper accounting and allocation across grants and programs , the grant budget should be incorporated into the organization-wide budget .

If your accounting system is capable , code budgets to the program and grant level . If your system lacks this capability , consider preparing a budget in Excel to combine multiple grants and operating budgets .

MISTAKE 2 : Inadequate Tracking of Spending If you don ’ t track expenses month by month , you may use funds too quickly , which can result in the need to use operational funds to continue a program . On the other hand , the grant period could end with unspent funding . Scrambling to spend funds at the end of a grant period can lead to mistakes and unnecessary spending .

If your system allows , review budget-to-actual reports by grant and across the organization

every month . If it doesn ’ t , prepare a budget-to-actual spreadsheet for each grant outside of the accounting software . Analyze year-to-date spending and compare it to known activity and the percentage of the time period completed versus the percentage of the budget spent .

MISTAKE 3 : Neglecting Proper Recordkeeping Most grants cover payroll costs for employees running the program , and most organizations budget those employees based on an estimated percentage of time . Be sure to keep records that support the time and effort spent by all employees whose time is paid for by the grant . Additionally , your timekeeping system should include grants so employees can charge out their time across all grants and administrative tasks . If you can ’ t provide evidence of the actual hours and pay rate charged to the grant during an agency site visit or during your annual audit , it may result in findings or even the requirement to return grant funds . Proper management of grants is crucial for maintaining financial stability . By avoiding these common pitfalls , organizations can ensure the successful use of grant funds while advancing their missions .

Jeri Groce is a Member in Warren Averett ’ s Audit Division and is a part of its Public Sector Industry Group and provides auditing , attestation and consulting services in the public sector industry . Jeri has more than 18 years of experience in public accounting . She specializes in planning and conducting audits for nonprofit , higher education and governmental entities .