# Grant Management: End to End ## Session Layout *Readiness Roadmap & Takeaways from Sessions 1 to 3, then Grant Management end-to-end.* 1. **Readiness Roadmap.** A recap of Sessions 1 to 3 takeaways on readiness for donor due-diligence. 2. **Grant, Grant Management & Lifecycle.** What a grant is and the five-stage lifecycle that governs it end-to-end. 3. **Fund Accounting and Fund Types.** How NPOs record and report restricted vs. unrestricted resources. 4. **Cost, Cost Types & Common Cost Allocation.** Direct vs. shared costs, and the methods used to allocate them fairly. ## Part 1: Readiness Roadmap (Recap of Sessions 1 to 3) ### Readiness Roadmap - Understand donor funding landscape: background, status and future direction. - Strengthen institutional, financial and internal controls pillars learnt in previous sessions, in a phased manner per a defined plan. - Understand donor category, credentials and applicable regulatory framework. - Continuous education of key staff and governance members on statutory/regulatory changes and actions required. - Risk management policy and operational framework. - Be proactive and manage/mitigate adverse proceedings: organisation, staff and office bearers. - Use a generic checklist for the due-diligence folder/binder, divided into sections and updated when statutory and regulatory provisions change, to avoid last-minute scrambling. - Periodic self-assessment: run an internal readiness audit and assign a score/rating. - Use technology that is scalable and cost-effective. - Spread your work through social-media platforms: low cost, high impact and reach. Demonstrate your competitive edge. - Be progressive, innovative and forward-looking as the funding environment and donor expectations keep evolving. - Internal controls and key policies & procedures: practised and demonstrable. - Chief functionary/key staff should have clarity on vision, mission and values. - Reduce undue reliance on the auditor (referring the donor to the auditor, the auditor conveying a message). Ensure proper briefing and dialogue with the statutory auditor. - Be careful in your working style. Donors need you, but you need to respond to them on time and to their expectations. Build this understanding among key staff who facilitate due-diligence. - Build an RM team as your organisation grows; until then, keep dedicated staff as the focal point for donor due-diligence. ### Key Takeaways 1. **Due diligence is a two-way trust exercise.** Strong documentation doesn't just satisfy donors; it strengthens the NGO's own governance and financial discipline. 2. **Institutional and financial readiness go hand in hand.** A legally sound structure without financial controls (or vice versa) will not pass most donor assessments. 3. **Preparation should be continuous, not reactive.** Keeping registrations, audits and policies current avoids last-minute scrambles when an opportunity arises. 4. **Transparency builds long-term funding relationships.** NGOs that handle due-diligence well are more likely to secure renewed and larger grants over time. ## Part 2: Grant, Grant Management & Lifecycle ### What is a Grant - Funds given by an entity to another (usually a charitable entity/NPO) for a public benefit or charitable purpose. - Not an automatic entitlement. It is given to fulfil an obligation, with time and purpose restrictions. - Grant is trust money: the grantee holds fiduciary responsibility (trusteeship) for the funds. - The grantor does not get a direct benefit, and the grantee is not required to repay it if utilised for the intended purpose. - Reporting is linked to it: both financial and narrative reporting obligations apply. - Grantors include government (grant-in-aid), retail, corporate, foundation and foreign donors, each governed by different laws. *Grant types: project, program, institutional (core), endowment and emergency. Awarded directly or through a competitive (discretionary) process.* ### Exchange Transaction vs. Grant #### Exchange Transaction (per GST Act) - Involves supply of goods and services. - Involves consideration. - Takes place in course of furtherance of business. #### Grant: Not an Exchange Transaction - There are no specific beneficiaries. - Nothing is received in return from beneficiaries, or benefit derived from the grant. - Not for furtherance of business. *This distinction is crucial. Mistaking a grant for an exchange transaction risks GST/TDS exposure and can jeopardise charitable status.* ### Grant Management Grant management is the systematic administration and implementation of a grant through its lifecycle: identifying the opportunity, applying for it, securing it, adhering to grant conditions, and evaluating outcomes to ensure funds are used effectively (impact) and accountably. 1. **Grantmakers:** The grantor / donor, creating and awarding grants. 2. **Grantseekers:** The grantee / donee, seeking and applying for grants. *A Grant Management System (GMS) automates and centralises the grant lifecycle for both sides.* ### Why It Matters So Much for NGOs in India *Strong grant management turns donor funding into lasting, credible impact, and keeps an NGO legally and financially able to operate and sustain.* 1. **Regulatory Compliance:** IT, FCRA and CSR rules demand precise fund tracking. Mismanagement risks cancellation and funding freezes. 2. **Funder Trust & Renewal:** Timely, accurate reporting is the single biggest driver of repeat grants from institutional and CSR donors. 3. **Multi-Donor Complexity:** Indian NGOs often juggle government, CSR, foreign, institutional and individual funding, each with different rules and reporting cycles. 4. **Proof of Impact:** Good systems link every rupee spent to an outcome, giving NGOs evidence to scale and attract new funding. ### Grant Management Lifecycle 1. **Pre-Award:** Identify, assess, design 2. **Award:** Contract & set up compliance 3. **Implementation:** Deliver, spend, track 4. **Compliance & Reporting:** Monitor, file, report 5. **Closure:** Close, evaluate, learn *A grant is not managed at disbursement or at reporting alone. It is managed continuously, across every stage.* ### Stage 1: Pre-Award #### Identifying & Assessing the Right Opportunity 1. **Donor & Opportunity Mapping:** Track CSR calendars, foundation RFPs, multilateral windows and government schemes aligned to your mission and geography. 2. **Eligibility & Registration Check:** Objects, active 12A/12AB and 80G status, FCRA registration/prior permission (for foreign funds), and CSR-1 filing (for CSR funds). 3. **Strategic Fit Assessment:** Screen every opportunity against mission alignment, organisational capacity, and existing grant concentration risk. Run a SWOT analysis. **Pre-award due-diligence checklist** - Registration certificate & PAN/TAN in order - 12A/12AB and 80G validity dates, CSR-1 - FCRA registration / prior permission valid - Board resolution to accept the grant - Conflict-of-interest screen on the donor - Capacity to meet donor's reporting cadence #### Designing the Proposal & Budget 1. **Theory of Change:** Articulate the problem, intervention logic, building a story and expected outcomes in a clear causal chain. 2. **Logframe / Results Matrix:** Define outputs, outcomes, indicators, baselines and targets that donors can verify. 3. **Realistic Budgeting:** Cost programme and admin lines completely; build in statutory costs (PF, ESI, TDS) and a reasonable indirect-cost rate if permitted. 4. **Risk & Assumptions:** Flag implementation, financial and compliance risks upfront, with mitigation built into the design. ### Stage 2: Award #### Contracting & Compliance Set-Up *The award stage is where compliance obligations get locked in. Get the paperwork and internal set-up right before the first rupee is spent.* 1. **Review the Grant Agreement:** Reporting frequency, permitted variances, IP and data ownership, termination and audit clauses. Negotiate before signing, not after. 2. **Confirm the Funding Route:** Foreign funds: designated FCRA bank account and utilisation account. Domestic/CSR funds: dedicated project bank account. 3. **Set Up Cost Centre:** Create a project-wise cost centre or fund code in the accounting system so every transaction is traceable to its grant from day one. 4. **Brief the Team:** Walk programme and finance teams through donor-specific rules: procurement thresholds, branding, and prior-approval requirements. ### Stage 3: Implementation #### Fund Flow & Financial Management **Fund flow:** Donor Disbursement → Designated Bank Account → Project Cost Centre → Field / Programme Spend → Utilisation Certificate *Every rupee should be traceable from donor disbursement to final utilisation report, with no gaps in the trail.* 1. **Segregation of Funds:** Keep restricted grant funds separate from unrestricted/general funds. Never co-mingle across projects. 2. **Budget vs. Actual Tracking:** Review variance monthly; flag and explain deviations beyond the donor's approved re-allocation threshold. 3. **Advance & TDS Management:** Track staff and vendor advances to closure; deduct and deposit TDS on time to avoid disallowance. #### Programmatic Monitoring & Field Tracking - **Build M&E Framework:** Translate logframe indicators into simple field data-collection tools before the project starts. - **Track Outputs & Outcomes Separately:** Outputs show activity happened; outcomes show it mattered. Donors ask for both. - **Use a Simple MIS:** Well-structured spreadsheet or low-cost MIS for consolidating multi-site data. - **Schedule Field Verification:** Plan periodic site visits and spot checks: internal, and where required, joint visits with the donor. **Sample indicator dashboard**
IndicatorValue
Beneficiaries reached92
Trainings held78
Health camps105
Livelihoods supported64
### Stage 4: Compliance & Reporting #### Donor Reporting & Communication *Good reporting is not a compliance task. It is a relationship tool.* **Narrative reports** - Progress against each logframe indicator. - Delays, deviations and course-correction. - Human stories that illustrate the numbers. **Financial reports** - Budget vs. actual by line item, with variance notes. - Supporting documentation for audit sampling. - Bank reconciliation attached where required. **Good practice** - Match the donor's required frequency & platform: monthly, quarterly, annual. - Proactive flagging of risks: never a surprise at year-end. - One named point of contact for donor queries and post-award amendments. - Share statutory reporting compliances from time to time. ### Stage 5: Closure #### Grant Closure 1. **Final Utilisation Certificate:** Reconcile total spend against the sanctioned budget and submit the final UC with supporting vouchers. 2. **Asset Disposal / Transfer:** Follow the donor agreement on equipment and asset ownership: transfer, retain, or dispose as specified. 3. **Final Narrative & Evaluation:** Document outcomes achieved, deviations from plan, and an honest assessment against original objectives. 4. **Lessons-Learned Review:** Run an internal debrief with programme and finance teams; capture what should change for the next grant. 5. **Document Archiving & NOC:** Retain agreements, financial records and reports for the statutory/donor-specified period. Obtain NOC for the grant if feasible. ## Part 3: Fund Accounting and Fund Types ### Fund Accounting *NGOs follow Fund Accounting for grant management.* Fund accounting is an accounting system for recording and tracking project resources (a "fund") whose use is limited or restricted by specific conditions set by the donor in a grant contract. It emphasizes accountability and productivity over profitability, which is the basis for-profits use. #### Key Features - Separate funds (buckets / compartments) - Restriction on use - Separate budget established for each fund / project: income credited and expenses debited from the fund - Transparency - Accounting software for recording and tracking - Monitoring and reporting mechanisms ensure fund accounting - Ensures internal controls ### Fund Accounting vs. Commercial Accounting
Fund Accounting (Grants)Commercial Accounting
Primary focusAccountability & stewardship of restricted resourcesProfitability & shareholder value
What's trackedSeparate funds: restricted, temporarily restricted, unrestrictedOne consolidated set of accounts
Core reportsStatement of Activities & fund/program-level statementsIncome statement & balance sheet at org level
Success measured byCompliance, mission impact, and proper fund useNet profit and return on investment
### Type of Funds for NPOs #### Income of NPO as per ITA 2025 - Receipts from charitable or religious activity for which registered. - Capital/revenue receipts from property/investment held. - Voluntary contribution. - Gains of permitted commercial activity in the tax year. *The word "grant" is not comprehensively defined in Indian law. It is referred to as Voluntary Contribution/donation (VC) under Income Tax law, FC under FCRA, and CSR fund under CSR law.* #### ICAI Classification of Funds for NPOs (Technical Guide on Accounting for NPOs) **A. Unrestricted Funds:** funds with no specific restriction on use, purpose or time. - **a. Corpus** (acknowledged in IT law): non-refundable, non-reducible, reinvestment obligation. Treated as corpus only when: (a) donor specifically directs it be treated as corpus; (b) not income but capital per IT Act; (c) invested in Section 350 modes of investment; (d) considered application when replenished; (e) not application if given to another charity. Corpus income is shown in the I&E. - **b. Donations:** no obligations attached; a gift. - **c. Designated / earmarked funds:** appropriated and set aside for a specific purpose/future, self-imposed by management, not binding by law. - **d. General funds:** surplus/deficit transferred from the I&E which are not designated. Free reserves. **B. Restricted Funds:** funds with conditions, restrictions or obligations. - **Project / program grants:** to be utilized as per the terms and conditions of the award. Restricted by purpose, time and budget; may carry other conditions such as reporting or refund if unutilized. This is the principle of fund-based accounting. - **Endowment:** the fund amount itself cannot be utilized; only the income is used for a general/specific purpose per donor stipulation. The recipient owns it but does not control it. An endowment may carry: - Permanent restriction - Temporary restriction: restricts use for a certain period or until objectives are met, after which it becomes unrestricted. ### NPO Financial Statements #### Format Prescribed by ICAI: Balance Sheet
Sources of Funds (Liabilities)ScheduleCurrent YearPrevious Year
Unrestricted Funds: Corpus Fund / General Fund / Designated Funds
Restricted Funds: Unutilised Grants (Deferred Revenue), Endowment
Loans / Borrowings: Secured / Unsecured
Current Liabilities & Provisions
**Total**
Application of Funds (Assets)ScheduleCurrent YearPrevious Year
Fixed Assets: Tangible / Intangible / Capital Work-in-Progress
Investments: Long Term / Short Term
Current Assets, Loans, Advances & Deposits: Grant Receivable
**Total**
*Plus: Significant Accounting Policies and Notes on Accounts.* #### Net Assets **Net Assets = Total Assets minus Total Liabilities** - In NPOs, net assets is like the net worth (share capital + reserves & surplus) of for-profit entities. - Net assets means owner funds (capital), although there are generally no owners in charitable institutions. - In an NPO, net assets mainly include corpus and general funds. #### Format Prescribed by ICAI: Income & Expenditure
IncomeScheduleCurrent YearPrevious Year
Grants & Donations
Other Income: rent, interest, incidental business income, fee & subscription
**Total (A)**
ExpenditureScheduleCurrent YearPrevious Year
Program Expenses
Administrative and General Expenses, Finance Costs
Depreciation & Amortisation Expenses
**Total (B)**
**Excess of Income over Expenditure (Surplus) / Excess of Expenditure over Income (Deficit) (A minus B)**
*Balance being Surplus/(Deficit) is carried to the Balance Sheet: General Fund, Transfer to Designated Fund, Building Fund/Others (specify). Plus Significant Accounting Policies and Notes on Accounts.* ### Accounting for Grant Recognition by NGOs in India *Practice followed as per convention. There is no legal directive.* 1. **Option 1:** Gross grant treated as income. 2. **Option 2:** Gross grant routed through the Balance Sheet only; asset and liability side settled. 3. **Option 3:** Grant treated as income to the extent of expenditure, while unutilised grant is a liability. This is the hybrid/matching method. *AS 9 mentions income recognition to the extent of expenditure for grants, applicable where there is business/commerce. Follow the principle of prudence in selecting the option for recognition.* ### Recipient, Sub-Recipient and Vendor 1. **Recipient / Prime Recipient:** The organization receiving the grant with full responsibility for the grant funds. The document evidencing this arrangement is the grant contract. 2. **Sub-Recipient / Sub-Awardee:** A nonprofit organization involved in substantive project activities. The recipient passes on some or all of its duties to the sub-recipient; terms and conditions flow down through a sub-grant contract. 3. **Vendor / Service Provider:** Provides goods/services to the recipient so it can accomplish the project's purposes, per specified terms performed by the vendor. The document evidencing this is a goods/service contract. ## Part 4: Cost, Cost Types & Common Cost Allocation ### Cost: Key Concepts - **Cost:** amount spent to acquire an asset. - **Expense:** amount spent on regular operations: staff, materials. #### Natural Expense Head: WHAT - The type of expense the funds are being spent on: salary, rent, hotel accommodation, etc. - Grouped into heads like HR cost, Travel, Capital cost, Office costs, Legal & professional. - e.g. Travel group: conveyance, airfare, meals, accommodation. - e.g. HR group: salary, HRA, PF, gratuity. #### Functional Expense Head: WHY - The purpose the funds are being spent for. - Program cost: program implementation, MEL. - Support cost: accounting, admin, fund raising. *NPOs present reports using the functional expense head, the basis for their constitution and work. Broadly, the two functional heads are Program/Service Delivery and Support/Admin & General.* #### Direct Costs - 100% direct traceability to a program/support function, to directly service beneficiary as per project design. - No cost incurred if there is no project. #### Common / Shared Costs - Benefit multiple projects. - Apportioned based on time, space, number of employees/beneficiaries or number of project locations. *Understanding and computing direct and shared cost is crucial for correct, realistic budget formulation and recovering the true/full cost.* ### Direct vs. Common Costs *Every allocation exercise starts by classifying two types of cost.* #### Direct Costs Traceable 100% to one specific project or funder; no splitting needed. - Field staff salaries working on a single project. - Project-specific travel & field visits. - Training materials for one program. - Beneficiary transfers / grants-in-aid in a project. - Equipment bought for one project. #### Common (Shared) Costs Benefit multiple projects at once; must be allocated using a fair basis. - Office rent, utilities, maintenance, security, housekeeping & internet. - Finance, HR, RM & leadership (admin) salaries. - Audit & legal fees, insurance, bank charges. - Travel, conveyance, shared vehicle costs. - Office supplies, general communication, capacity building, depreciation. ### Total Project Cost Common cost is allocated as per the organisation's Common Cost Allocation Policy, and should be reviewed every year within the purview of that policy. **Total Cost for a Project = Direct Cost + Common Direct Cost + Common/Shared Cost Apportioned** *Institutional/Management cost, overhead or indirect cost (negotiated indirect cost recovery: NICRA), if permitted, is added per the donor's grant management policy to address contingency or create a reserve.* ### Other Types of Cost 1. **Project/Program-Based:** Program vs. non-program (admin, fund raising). 2. **Nature of Expense:** Personnel vs. non-personnel. 3. **Time Horizon:** Capital vs. Revenue (recurring) cost. #### Capital Costs - One-time fixed-asset purchase costs used for revenue generation over a long period, more than one year. #### Revenue Costs - Operating expenses that are short-term, used in running the daily business operations. *Fixed vs Variable Cost: Fixed cost does not change in total amount over a reasonable activity range, but the fixed cost per unit decreases as volume increases (and vice versa). Variable cost changes in proportion to changes in volume/activity.* #### More Cost Concepts 1. **Historical Cost:** The original cost of an asset when it was purchased. 2. **Sunk Cost:** Money already spent that cannot be recovered. 3. **Marginal Cost:** The change (usually a decrease) in the cost of producing one more unit or serving one more customer. 4. **Opportunity Cost:** The value of the next-best alternative when taking a decision, given the resource constraint. ### Common (Shared) Cost Allocation *The process of dividing a shared cost among the programs, funders or departments that benefit from it.* - **Accurate project accounting:** Funders see the true cost of running the program they funded, not just direct spend. - **Compliance:** FCRA rules cap or scrutinise how much can sit in "administrative" cost. - **Fair cost recovery:** Shared resources (staff, office, IT) get charged to the projects that actually use them. - **Donor trust:** Transparent, defensible allocation keeps audits and donor due-diligence smooth. #### A One-Line Example An NGO's accountant, Priya, spends 40% of her time on a WASH project and 60% on an education project. Her ₹60,000 monthly salary is a SHARED cost. Cost allocation is the rule that splits it: - ₹24,000 (40%) to the WASH Project - ₹36,000 (60%) to the Education Project ### 3 Pieces in Shared (Common) Costs **1. Common Cost Pool / Category:** Program staff, Support/Admin staff, Facilities, Leadership & Governance. **2. Allocation Method / Driver / Base** - Direct Allocation Method (percentage of direct costs): simple and easy to implement. - Time allocated/spent: Program, HR, Finance & Compliance staff (backbone). - Headcount: Resource Mobilization, IT, Capacity Building, General Comms, Office supplies. - Square footage: rent, utilities, maintenance. - Usage: vehicle. **3. Full Cost Recovery:** such that Income = Expenditure.