In the past few weeks, I’ve been spending time during my work day helping program managers figure out how to spend out grant budgets, and time at home coaxing my daughters to work on their term papers. It strikes me that there are significant similarities in approaching the two tasks:
- I want to say (and sometimes do) “you really should have started long before now!”
- When you decide to go in a direction different from your original plan, you really need to discuss the shift with your teacher or funder – ahead of time.
- If you try to follow a pretty straightforward step-by-step approach, you can avoid that feeling of complete chaos, overwhelmed by all sorts of numbers or note cards and not knowing how to fit them together into a coherent report.
With the benefit of hindsight, here are some suggestions for taking the grant-spending tasks one step at a time:
- Understand the constraints, restrictions and requirements attached to your funding. How much flexibility do you have to deviate from the budget? How much detail do the funder’s reports require? Government contracts tend to be very specific about how much you can deviate from your approved budget; for example, an agency may allow you to under- or over-spend by up to 10 percent of the value of the individual line item without needing a budget amendment.
Does the funder want to see spending on personnel for each person in the budget, or can you shift funding for salaries from one staff person to another? If your funder does not explicitly state the permissible variance, it’s best to ask what the tolerance is regarding spending shifts.
- Make sure you have accurate, up-to-date reports on your expenses, and review them carefully. There’s no point in comparing actual expenditures to the approved budget if your actuals are incomplete or incorrect. Otherwise, you may put considerable effort into figuring out how to re-allocate costs between several funders, or within one grant budget, only to find out that you have to recalculate everything because your reports don’t include significant expenses which hadn’t been entered in the accounting system yet.
- Find out what additional work needs to be done to fulfill the terms of the grant or contract. It’s pretty easy to use the money and lose sight of the fact that you are obligated to deliver a service, product or activity. A typical scenario is that a grant comes in, and you start charging x% of a staffperson’s time to that grant. Maybe the work is delayed because you’re waiting for something else, and in the meantime those staff hours are still being billed to the grant.
This is often the case when the program manager and accountant are in different places – by geography or mindset. Be sure you talk to each other, and get the information you need about program expenses along the way.
- Now you can compare what is left in your budget with your projected expenses to complete the work, by budgeted line item. You may find that you have enough money in the right budget line items to complete the work during the grant period. If so, congratulations!
More likely, you will be challenged by at least one of these conditions:
- In almost all cases, the total amount of the grant or contract is fixed or there is a ceiling. If you are going to exceed that ceiling, you need to think about whether you can draw on other sources of funding to support the work, or find ways to reduce your planned cost of completing the work.
- Perhaps you’re going to have trouble completing the work by the end date of the grant. Some agencies and funders will grant no-cost extensions if their authorization allows it and if you make a good case for the delay.
- If the work has been delayed or you haven’t used all the budgeted money by the end date, you may be tempted to go on a shopping spree. Don’t. Instead, be guided by your nonprofit's mission and the [hopefully] long-term relationship with the funder. Communicate about why you couldn’t follow the work plan and the barriers you may be facing. Together you may be able to agree on an alternative approach, or a way to extend the program you began.
Work With Your Funders
Most commonly, grant recipients will find that how they spent the money has changed in some way since they first wrote the proposal. In my experience, funders are as flexible as they can possibly be as long as you can explain the reason you needed to change your plan. They are funding you because you have a shared objective, and they want to see the problem addressed or the service provided in the best possible way. Keeping them informed throughout the grant is your best course; they can let you know at what point you need to file a budget amendment.
Be sure you document any conversations and agreements to change the work in writing, even if it’s not a formal amendment – program administrators and grant managers do change, and the person responsible for compliance is often different from the person overseeing the work.