Are you ready to present your financials to your board of directors at your upcoming end-of-fiscal-year board meeting? The meeting agenda will likely include reviewing your nonprofit financial statements and grant reports, approving next year’s KPIs and signing off on next fiscal’s budget.
It's your board’s legal responsibility to ensure that grant funding has been spent appropriately and effectively. They’ll ask questions about your grant management such as: “How much from the Development Grant did we spend on employee salaries? On how many grants are we awaiting a decision? What percentage of our projected cash inflow do grants account for in next quarter?” The question you might ask yourself is, how am I going to answer those questions? The answer is in how you approach your grant management.
What is Grant Management?
Grant management is the process in which organizations oversee and track their grants to review how they’re allocated and spent. To make strategic decisions, your board needs visibility into that process. And as a strategic advisor to your business, you should provide your board with the answers they need to create a stronger relationship between you and your board of directors. This will better position your organization toward fulfilling its mission.
In this post, you’ll discover three important questions your nonprofit board of directors will ask about your grant management and how to get those answers.
1. How Much From the Development Grant Did We Spend on Employee Salaries?
Your board will want to protect against misspending and confirm that spending has complied with the budgets originally proposed to provide accountability to funders. If your organization budgeted employee salaries at 4% in its original proposal for the $1.1 million awarded, you should know if spending has complied with that budget. While your Statement of Functional Expenses reports the expense allocation by function—such as by program, management or fundraising—break this down further by reporting post-allocation spending by project, account, entity and department.
2. How Much Revenue Did the Community Outreach Fund Generate?
Evaluating spending effectiveness to maximize program impact—and profitability—is another point of interest for your board. They’ll want to know each grant’s profitability to determine if spending reallocation is necessary so you’ll want to break down revenue figures by grant. If the Community Outreach Fund generated 187% revenue from its original amount but the Development Grant earned only 109%, you’ll gain insight on which spending model is more effective—and profitable.
Read how WWF-Canada turned two hours of reporting into two seconds with Vena and were able to report funding allocation—dollar for dollar—to individual grants and donors.
3. What Percentage of Our Projected Cash Inflow Do Grants Account For in Next Quarter?
Your board will want to know the statuses of your nonprofit’s current funding and funding opportunities to more accurately forecast cash inflow and cash outflow. Nonprofit organizations rely heavily on grants—it’s reported that 80% of nonprofit revenue in the United States comes from government grants or contracts and fees for services. As cash remains the largest portion of a nonprofit’s total assets, your board of directors will want to know how much funding is entering and exiting—especially in the short term. This means you should know how many grants and total funding are scheduled to finish, on how many proposals the organization is awaiting a decision and out of those, the likelihood of winning each one.
If your nonprofit expects 26 donors that total $3.1 million to exit, you should have a strong forecast of how much is entering. If you have a 40% chance of winning the $825,000 Settlement Grant—one of the nine pending proposals—what are the projected values of the others? For your board to approve next fiscal’s budget, you’ll need to reconcile that budget with your grant timing. By having grant tracking reports you can quickly retrieve—that monitor restricted and unrestricted remaining grant balances—you’ll be able to more accurately forecast cash inflow and cash outflow.
Transforming Your Approach to Grant Management
Your nonprofit financial reports and grant reports need to clearly answer questions on compliance, revenue and cash inflow and outflow. By having the answers to these questions at your fingertips, you can give your board—and grantors—confidence that spending has complied, been maximized for profitability and that there are enough funds coming in. In an unpredictable and volatile economic climate, it’s important to implement agile planning to prepare for every scenario.
Vena’s Complete Planning Software specially priced for Not For Profits—which includes pre-built grant report templates, data models and a grant tracker—can help you get those answers to empower your board toward making strategic, data-driven decisions—and sign off on next fiscal’s budget.