What You Should Know Before Applying for Government Grants

Posted on Wednesday, February 01, 2023

Is your organization thinking about applying for a government grant?  Here are some items to be aware of before you accept your first government grant.

Each government grant has its own criteria so before applying make sure your organization meets the eligibility requirements.  To search for federal grants, you can visit grants.gov or SAM.gov to find out which grants apply to your organization.  

Each of the federal grants that are available are given an Assistance Listing Number.  This number is a unique number that identifies what department (Department of Housing and Urban Development (HUD), Department of Health and Human Services (HHS), etc.) the grant is provided through and the specific grant.  The Office of Management and Budget issues a Compliance Supplement each year that lists federal grants by Assistance Listing Number.  The Supplement includes details and requirements about each specific grant.  It is important that your organization be aware of the requirements related to any grants you receive, as the Compliance Supplement is used by the auditor to audit your program.

Most government grants are restricted for a specific purpose.  You will need to make sure that you have proper controls in place to track the spending of the funds to ensure you meet the requirements.  This may mean setting up an additional class or fund within your accounting system. 

Your organization needs to understand all the reporting requirements that come with the grant.  Reporting may be required during the grant cycle and at the end of the grant.  You will need to make sure that you have dedicated staff that understand the grant requirements and reporting that needs to be done.  This may include financial data, information on the population served with the grant, and other compliance information. 

If your Indiana nonprofit receives government funding (federal, state, or local), you will need to file and Entity Annual Report, E-1 with the Indiana State Board of Accounts within 60 days after year-end.  This report provides general information about the organization and discloses public funds received and disbursed during the year.  Based on the information provided, the State Board of Accounts will decide if the organization needs to have an audit done.  Sometimes the audit requirement may be waived and in some instances submission of the organization’s Form 990 is required. 

If you spend $750,000 or more of federal funds in one year, you will likely need to have a Single Audit done.  There are some specific requirements as to what is included and not include in the $750,000 Single Audit requirement, but in general, you will be required to have this type of audit performed.  A Single Audit includes both a financial statement audit and a compliance audit.  As part of the compliance audit, the auditor will test controls over government program(s) and determine if the funds were spent properly.  A Single Audit requires much more work than a normal financial audit which is why it also costs more.  Also, not all CPAs are qualified to perform a Single Audit.  Only those that have specific continuing professional education related to government programming can do so. 

Government funding can be very beneficial to nonprofits.  Grants can range from a few hundred dollars to millions of dollars and can help diversify funding sources; however, your organization needs to be prepared for the additional time and work it takes to apply, track, and report on these grants. 

Contributed by: Carrie Minnich, MAcct, CPA | Partner | DWD CPAs & Advisors

Posted in Mission Minded Nonprofits

Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.