Grant Management

Accountability & Transparency

• With respect to utilisation of grant funds

• Efficient & Effective use of the grant funds

• Compliance with applicable laws of the land

• Adherence with terms and conditions of Grant Agreement

• Internal controls i.e. financial and accounting systems, budgetary control, funds management

• Timely submission of narrative and financial reports as required under the grant

Principals 

Stages of Grant Management: Grant Lifecycle

Grant Management Lifecycle

• Pre-award

  • Identify the need

  • Planning

  • Opportunity

  • Apply for grant

• Awarded

  • Receive grant

  • Share additional information as needed

  • Documentation

• Post-award

  • Develop current year projection

  • Execute all activities

  • Manage and monitor the project

  • Share program and finance report

  • Documentation/Reporting

  • Close out

  • Close grant

Pre-requisites for robust grant management system:

• Policies & Procedures (Finance & HR) - ensuring strong internal control environment

• Accounting - ICAI Technical Guide for accounting of NPOs

  • Fund based accounting for presentation of financial statements

  • Accrual basis of accounting

  • Maintenance of prescribed books of accounts

  • Accounting Standards as framework for recording and reporting

• Statutory laws of land - understanding and compliance

• Donor contacts - expectations and reporting fully understood

• Segregation of duties - checks and balances, dedicated finance staff

• Encourage audit and assurance - risk mitigation

Income of charitable institutions - Types of Funds

• Aggregate Income from property held in trust (Schedule AI)

• Voluntary contribution (Schedule VC)

• Capital Gains

Types of funds (ICAI):

A. Unrestricted funds:

• Corpus: non-refundable, non-reducible, reinvestment obligation

• Designated/earmarked funds: for specific purpose/future, not legally binding

• General funds: neither designated nor restricted, includes I&E surplus/deficit

Income of Trust and Types of Funds 2/1: Corpus:

• Comply with Income Tax provisions - Section 11(5), Section 11(1)(d)

• Donation to another registered entity not considered application

• Application to be considered in year of replenishment

• Should be shown as Capital; income earned shown in I&E

B. Restricted funds:

• Project/program grants: to be used as per terms of award

• Endowment funds: only income used as per terms

Format of financial statements as per ICAI: BALANCE SHEET:

• Sources of Funds:

  • UNRESTRICTED FUNDS: Corpus/General/Designated

  • RESTRICTED FUNDS

  • LOANS/BORROWINGS

  • CURRENT LIABILITIES & PROVISIONS

• Application of Funds:

  • FIXED ASSETS

  • INVESTMENTS

  • CURRENT ASSETS, LOANS, ADVANCES & DEPOSITS

Income and Expenditure Account:

• INCOME: Operations, Grants & Donations, Other

• EXPENDITURE: Materials, Employee Benefits, Admin, Finance Costs, Depreciation, Other

• Surplus/Deficit transfer and carry forward

Cost Principles in grant budgeting:

• Allowable cost

• Allocable cost

• Reasonable cost

• Consistent

• Unallowable cost

Budgeting & Budgetary Control:

• Budget is estimation tool and framework

• Segregates costs: direct, common, indirect

• Supports co-financing/multi-donor grants

• Budgetary control:

  • Track income and expenses

  • Deviation analysis

  • Timely approvals for overspend

Terms and Condition of Grant:

• Understand full contract

• Common clauses:

  • Separate accounts

  • Cash expense limits

  • Interest treatment

  • Procurement rules

  • Fixed assets treatment

  • Reporting timelines

• Compliance Calendar post signing

Robust Grant Monitoring System:

• Performance tracking

• Progress review (physical & financial)

• Risk management

• Key tools:

  • Budget, LFA understanding

  • Variance analysis

  • Course correction

  • Timely narrative and financial reports

Accounting treatment for grants to NGOs:

• Grant is trust money

• Options:

  1. Grant as income

  2. Grant as liability

  3. Hybrid (income = expenditure)

• Follow principle of prudence

General Conditions of a Grant:

• Terms definitions

• Commitments (funder & grantee)

• Rights, reports, assets, termination

• Force majeure, dispute resolution, confidentiality, interest, employment, IP

Interest apportionment:

• With multiple projects in one account: use defined method

• Not applicable for dedicated accounts

• Interest treatment as per grant agreement

Common/Core Cost:

• Shared costs: HR, travel, office, etc.

• Prorated to donor projects

• Must have common cost policy

• Allocation examples: space, staff time, units

Salary Allocation for multiple projects:

• Allocate as per grant and annual budget

• Monthly salary register with allocation, deductions, variances

• Needed for audits

• FC/local funds booking compliance

• Timesheet compliance if required

Recipient, Sub-recipient and Vendor:

• Recipient = Prime = main grant holder

• Sub-recipient = does substantive project work

• Vendor = contractor for goods/services

What is a Contract:

• Binding agreement for goods/services

• Specific outcomes

• Payment based on deliverables

What is a Grant:

• Assistance to achieve result

• No legal requirement to achieve result

• Flexible scope and payments

Closure of Grant:

• Ensure all closure provisions met

• Submit final program & finance reports

• Closure report + fund reconciliation

• Final donor acknowledgment of NO DUES

Tips for effective Grant Management:

• Build trust

• Meet targets without under/overspend

• Spend capital budget early

• Timely donor reports

• Maintain files

• Avoid surprises

Please note: Information is for reference only. Read our disclaimer here.