Jeff Anderson, of Oregon Community Foundation, says, “Don’t apply for a foundation grant unless you’re truly ready for the scrutiny of outsiders, regarding everything from your office’s appearance to the documentation of your organization’s impact to the accuracy of your accounting.”
Financial management is the weak link in many grassroots groups. Planning and budgeting combine all the money taboos with that common ailment, “math phobia.” Put a spreadsheet in front of most activists and they will run screaming from the room. Financial management trainer Terry Miller writes in Managing for Change, “For people driven to work in the nonprofit sector…there is often the sense that managing money is tantamount to making a deal with the devil.”
Many successful groups have folded because they did not take the necessary steps to put their books in order. Having good bookkeeping skills increases your ability to raise money and to do your program work. “If you try to avoid financial management,” Miller says, “you may spend more of your time on it than you would have otherwise.” “Like any good discipline, good financial management systems make life more systematic, easier to get the work done.”
Managing for Change provides detailed information on accounting systems and on evaluating which is appropriate for your organization. According to Miller, there is no magic or secret to financial management. However, I’d like to make a few broad suggestions to start you thinking about better managing your organization’s grant money and to reinforce your better instincts.
1. If you need help, hire a professional. Hiring a bookkeeping service provides you a breadth of experience and does not cost much. Select a bookkeeper with nonprofit experience, or find someone who supports your mission and who may donate the service or offer a discount. Ask other groups in your community for recommendations.
2. Set up your books to track income and expenses by department or program. Do not track expenses or open a separate account for individual grants. It creates unnecessary work, and most funders do not want that level of detail. Instead, track expenses by program; it allows you to seek grant support based on your own priorities and initiatives, rather than the grantmaker’s. All successful fundraising strategies address the interests of both funder and recipient to some degree. But if you want your group to be successful over the long run, stick to your mission and do not get sidetracked in the pursuit of money.
3. Spend grant money on relevant program expenses only. Most grants are restricted to the activities outlined in your proposal’s project budget. Unless you receive money for general support, do not treat your grant as an emergency slush fund. If your project budget needs significant adjustments, negotiate the alterations with the funder.
4. Review project expenses each month. Track your cash flow. Be careful not to spend all your grant funds before the project ends, unless you finish the work early. If you receive multiple grants for a project, you may be able to exhaust the first grant before the work is complete and still have money in the bank from other grants. In this situation – depending upon your relationship with the funder – you could submit an early final report and perhaps even apply for a follow-up grant while the project continues. If you are not clear how to proceed, check with foundation staff. In many cases, they will ask you to stick with the original reporting schedule.
5. Keep receipts for all expenses. You will not need to submit receipts with your grant report, but it’s useful to have them on hand in case the foundation staff has questions. More importantly, receipts and appropriate documentation help to maintain an “audit trail” and demonstrate your stewardship of community funds. Good internal control has a big impact on your effectiveness and credibility; saving documentation for all expenditures is the most important part of good control.
6. Keep it simple. When reporting expenses, keep it simple. For most grants, 10 to 15 line items are sufficient for a grant report budget.
Excerpted with permission of the publisher John Wiley & Sons, Inc., from Grassroots Grants: An Activist’s Guide to Grantseeking, 2nd Edition. Copyright © 2004 by Andy Robinson. This book is available at all bookstores, online booksellers and from the Wiley website at www.wiley.com, or call 1-800-CALL-WILEY.