Restricted grants must be used for the purposes agreed with the funder. To show that funds supported eligible activities, nonprofits need records that connect each grant receipt to the spending it financed. A consistent process also helps staff check available balances, prepare reports, and spot costs that may need review. The right system can be simple: identify each restriction, record income and expenses consistently, and reconcile the records against bank and accounting activity.
Define Each Grant’s Restrictions
Start with the signed grant agreement and any approved budget or amendments. Record the grant’s purpose, eligible costs, time period, reporting deadlines, and any limits on indirect or administrative expenses. Note whether the funder allows budget changes and who must approve them. Keep the agreement and related correspondence together so staff can check the source terms before committing or coding a cost.
Create a separate tracking record for each award, even when two grants support similar work. Give it a clear, consistent name or code, such as the funder and project name. Summarize the restriction in your accounting system or tracking file, and identify the staff member responsible for monitoring it. Avoid relying on memory or a grant manager’s inbox as the only record.
Record Income and Spending
When grant money arrives, record the receipt against the correct grant code and follow your accounting policy for recognizing grant income. If the payment covers a future period or depends on conditions that have not yet been met, ask your accountant how to record it. Keep the remittance advice, deposit record, and relevant agreement together so the amount and grant purpose can be verified.
Code each eligible expense to both its natural account and the grant or project it supports. For example, a staff cost might be recorded as salaries and assigned to a specific funded program. Keep invoices, receipts, payroll records, and allocation calculations with the transaction. If a cost benefits more than one activity, use a reasonable, documented allocation method and apply it consistently.
Monitor Balances and Eligibility
Review a grant-level report regularly that compares the approved budget with actual income and spending. Include the remaining balance and the grant period so staff can see whether costs are on pace and fall within the permitted dates. Investigate unexpected variances promptly. A report is most useful when someone who understands the project reviews it and follows up on unclear or unusual transactions.
Before charging a cost, check that it supports the funded activity, falls within the grant period, and meets the agreement’s rules. Watch for shared costs, purchases near a project end date, and expenses that may be excluded or capped. If a planned expense does not clearly fit the terms, seek written clarification or approval from the funder before committing the funds.
Reconcile and Prepare Reports
Reconcile grant activity to the accounting records and bank activity on a regular schedule. Confirm that receipts were assigned to the right award, expenses have supporting documentation, and any adjustments have an explanation. Have someone other than the person entering transactions review the reconciliation when your staffing allows. Record the review and retain the working papers with the grant file.
Use the funder’s reporting format and definitions rather than assuming they match your internal categories. Tie reported totals back to the ledger, explain material differences from the approved budget, and check that reported spending falls within the grant period. Retain submitted reports and supporting schedules so your nonprofit can answer follow-up questions and support an audit or grant closeout.
A dependable grant-tracking process links every award to its terms, every expense to evidence, and every report to the ledger. Assign clear responsibility, review balances routinely, and resolve uncertain costs before charging them. Civic Ledger can help Manchester nonprofits organize grant records and bookkeeping processes; contact the team to discuss your needs.