Grant Management: A Nonprofits Complete Guide

grant revenue accounting

Finally, as we stated before, one of the important reasons to track your grant funding is because it’s usually required by the funder. We recommend adding a reminder in your calendar at least a week ahead of time so that you can make sure all documentation is pulled together and complete by the deadline agreed upon between you and the funding organization. For example, if your nonprofit needs to purchase a new security system for a local orphanage, this is a very specific, fixed cost that will make it an easy project to implement when you have the funds. You should look up the security system that will best suit your needs, determine the cost, and look for grants that will help you fund that need. In some cases, a government may provide a loan that will be forgiven if certain conditions are met. A forgivable loan is treated as a government grant only when there is reasonable assurance that the company will meet the terms for forgiveness of the loan.

  • Look for key terms that align your own mission with that of the funding organization to highlight your similarities.
  • Therefore, you can create events for installments, which are billable but not active.
  • As a nonprofit, there are no tax consequences to receiving a grant, if it is provided to further its mission.
  • Keep an eye out for the type of grant that will best suit your nonprofit’s needs.
  • When a Grant Fund is reported to the sponsor and there is a fund balance remaining, PBIL gets reduced to ensure Revenue Recognition is limited to the Reported Amount.

When you receive a grant from a governmental agency, it will typically include a program budget. Grant and contract revenue is earned and recognized when expenses have been incurred, except as otherwise provided in the terms and conditions of the award. Higher education institutions that received funding through the Higher Education Emergency Relief Fund III have the opportunity to extend the deadline for up to twelve months to spend down funds. Here are the requirements for requesting the no-cost extension by the June 20 deadline. To qualify as income, the grant must be used for the purpose for which it was awarded. IAS 20 does not stipulate whether the conditions of the grant must be met for an entity to recognize the grant.

Exchange Transactions

A caveat to this statement is the fact that the grant may be given with specific conditions attached. If these conditions create barriers or stipulations requiring action of the grantee, it can be considered a conditional grant. If this is the case, these donor-imposed conditions must be met before the organization recognizes the revenue. Grants often require an itemized invoice and proof from an independent auditor that there is no performance-related barrier. Grants can have a profound impact on your nonprofit’s financial statements if most of your revenue comes from grants. Barriers should be outlined in the funding agreement or another document referenced in the agreement.

  • For help with specific facts and circumstances, reach out to a trusted CPA adviser or the AICPA Technical Hotline.
  • The first thing that you’ll need to do when you start tracking grants is to set up a budget.
  • If an entity does not meet the conditions of a grant, it may be required to return the grant money.
  • At some point during a not-for-profit organization’s audit, the auditor will likely ask for information pertaining to any known related party transactions.
  • GASB Statement 84, Fiduciary Activities – the Statement is effective for reporting periods beginning after December 15, 2018; however we incorporated the required changes in this version of manual.

For exchange transactions, follow FASB ASC Topic 606 on revenue from contracts with customers. Most small to mid-sized organizations operate on a rather tight budget, meaning that every penny of revenue counts and can make a rippling impact on various projects at the nonprofit. In a recent BDO webinar, my colleagues and I discuss that classifying grants as either a contribution or exchange transaction is the first step in implementing revenue recognition. The clarified guidance aims to help nonprofits complete that first step in a consistent way across the sector. In general, once a funder has informed you that you will receive a grant, the revenue is immediately recognized in the same fiscal year – whether or not you’ve actually received the money yet. This complies with an accounting principle referred to as the “matching principle.” This principle states that revenue is recognized in the period that reasonable assurance exists that it will be received.

How do you account for different forms of government assistance?

To fund projects with an installment but prevent billing against that installment, you must deselect the Billable check box. This deactivates the installment from being used for generating revenue and invoices. This depends on a number of things, including the timing of the contribution and the language of the grant letter. It is important for grant recipients to follow deadlines and requirements when accounting for grants in order to avoid penalties or delays.

However, when you put in the right amount of research and hard work, you’ll find the whole process much more manageable. Because you or other nonprofit leadership may have spent hours writing a fabulous grant proposal, you may be too close to the project to take an objective look after the writing process is complete. If possible, allow someone completely outside of your organization or industry to review your work and look for areas that lack specificity, clarity, and necessary detail. Because awarding organizations receive so many grant applications, it’s imperative that you make yours stand out. You can do this in a few different ways, but one of the most effective is to establish a personal connection by laying the foundation for a relationship with the funder.

Are Grants Subject to Revenue Recognition?

State governments should report food stamp balances held by them or by their agents at the balance sheet date as an asset offset by deferred revenue. Select export typeThe Excel option provides a spreadsheet which you can format.The PDF is formatted to highlight the different categories of account codes and for printing. These above prescribed codes are not valid for reporting, however they provide detailed information on the category of the codes.

Government grants must be matched with corresponding costs in a reporting period. Most costs and expenses related to government grants are easily determinable and recognized over a number of periods. Capital grants are funds that are provided to assist in the acquisition, construction, renovation, repair of capital assets, or fixed assets. Capital grant revenue can be recorded as deferred revenue on the Statement of Financial position and revenue can be recognized as the capital assets are depreciated. As a nonprofit, there are no tax consequences to receiving a grant, if it is provided to further its mission. But correctly determining whether your nonprofit organization’s revenues are contributions or exchange transactions, and which conditions may apply, can be complex.


Keep an eye out for the type of grant that will best suit your nonprofit’s needs. For instance, if you need to fund your organization’s operating expenses, you should consider a government grant. Meanwhile, if you’re looking for a potentially smaller grant for a very specific project, you could search for a family or community foundation to build a relationship with. Operating budget – Presents the estimated expenditures and available resources necessary to provide the services for which the government was created. The main distinction between grant and contract revenue and contribution (gift) revenue lies in the benefit provided to the resource provider. Entities such as foundations typically intend, and indeed may require the recipient to consider the support a gift.

grant revenue accounting

If the resource provider does not anticipate anything in return, or if the benefit provided by the university is primarily a public benefit rather than a proprietary one, then the transaction is a contribution. The Revenue Matrix provides the recommended, detailed criteria used to evaluate if a transaction constitutes grant and contract, contribution, or educational and other revenue. For more effective grant reporting, make sure your grant management for nonprofits accounting software for grant management has the ability to segregate the grant activity and the purpose of the grant. Your accounting system must be able to track a grant’s budget and actual activity to ensure compliance and proper grant management. An accounting system that is not designed for grant management will create extra work and may not provide proper transparency and stewardship of funds. For accurate management of grants for nonprofits, grants must be treated as income and matched with related costs in the same period.

Modified Total Direct Cost Base

The grant specifies that the hospital has to incur certain qualifying expenses or costs. These costs must be in line with the Office of Management and Budget requirements and the federal awarding agency. The grant is paid on what is grant accounting a cost-reimbursement basis by the nonprofit initiating drawdowns on the grant assets, indicating that it has incurred the qualifying expenses. If your organization depends on grants, grant accounting should be on your radar.






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