Grant Expense Tracking: Setting Up Efficient Systems for 2024

As part of the grant lifecycle, your nonprofit needs to be able to accurately account for how it uses grant money. This process is called grant expense tracking, and it’s all that stands between your organization and prematurely running out of funding.

In this article, you’ll learn all you need to know about tracking grant expenditures, including how to understand the different types of costs, best practices for establishing your own grants reporting and tracking system, and how to review and monitor it to ensure you’re staying on track.

Let’s get started!

Grant expense tracking may not seem like the most exciting part of securing funding, but it enables you to make the biggest difference with the resources you have.

What Is Grant Expense Tracking?

Grant expense tracking is the process of keeping detailed records of how you’re spending grant money you’ve received.

For example, if you’ve received funding for a specific program or project, it must be used to further that purpose, and you’ll need to prove it during your reporting processes. Funders require grant reports so that they can see the impact of their funding and ensure that it is used responsibly.

Importance of Accurate Expense Tracking in Grant-funded Projects

During the grant proposal process, nonprofits put together budgets that outline how they plan to use the funds if awarded.
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Grant expense tracking ensures that your nonprofit stays on target with its budget. It helps prevent nonprofits from overspending on things that aren’t related to advancing the projects and initiatives outlined in their original grant proposal.

Grant expense tracking also holds nonprofits accountable to their own plans.

For most grants, you will need to prove to the funder that you have spent their money as intended. When you do this well, you can cultivate trust and potentially foster long-term relationships with those funders.

How It Aligns With the Larger Financial Tracking System

Grant expense tracking plays a big part of your overall budgeting for the year, as well as your financials in general.

As a nonprofit organization, your expenses should be less than the money you bring in. You have to keep track of both your expenses and revenue for your organization’s health and well-being, including how much grant funding you win and how you allocate it.

As you balance the books, you can discover areas for improvement to help you run your nonprofit more efficiently, including overspending and funding gaps.

Your grant expense tracking is one small part of the bigger picture, but it all ties together for your organization’s overall health and impact.

The U.S. Office of Management and Budget classifies grant expenses into either direct or indirect costs, and it’s important to understand these different types of grant expenses for accurate tracking.

There are also additional matching or cost-sharing requirements you may have to meet, which we’ll break down below.

Direct Costs

Simply put, direct costs are what it costs to run the project, program, or initiative outlined in your grant proposal. These are expenses that are directly related to project or program implementation.

Here are some examples grant expenses that would typically be categorized as direct costs:

• Program supplies
• Salaries of those directly associated with the program administration
• Any specialty care that’s needed
• Travel related to the program

You’ll want to check the latest OMB guidance to ensure no changes have been made to the criteria of direct or indirect costs. For example, select salaries were recently included in the direct cost category.

Indirect Costs

Indirect costs are everything else. They are the costs of doing business that can’t really be tied to a specific grant, but are essential to daily operations.

Examples of these types of expenses could be:

• Rent
• Water and utility bills
• Maintenance
• Administration salaries for those indirectly associated with the program

Indirect costs can be a little more tricky to identify. However, they should still factor into your grant expense tracking to get the full picture of the cost, even if they are split amongst other programs.

Matching or Cost-sharing Requirements

If you get federal funding, there may be some requirements about cost-sharing or matching.
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Cost-sharing is when a portion of your project costs are not covered by federal funds, and you need additional funding through another grant or other source of funding.

Depending on the grant, you may need to account for the expenses related to the federal grant as well as those associated with the program in general. If you put any matching or cost-sharing plans in your proposal, you will be required to follow through with them, so make sure that you are clear on your funding needs.
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Most grants will have requirements you have to meet in order to be compliant with the terms. The Office of Justice Programs Territories Financial Support Center provides a great guide to help nonprofits through this process, but if you have any additional questions, you should contact your funder or a financial professional.

Now that you know about the importance of nonprofit expense tracking, it’s time to dig into how best to set up a grants reporting and tracking system.

This step-by-step guide can serve as your blueprint to create a system that works for your organization.

Setting Clear Financial Goals and Milestones

Whenever applying for grant money, you should have a clear idea of how you plan to allocate it and what milestones you will use to help you spend it responsibly.

For example, if you’re applying for a $10,000 grant, maybe you’ve decided you want to spend $5,000 on program space and the remaining $5,000 on program supplies.

That’s a great start! But you should break it down even further. That $5,000 in program space can go toward rent, utilities, and other bills. The $5,000 in program supplies can be broken down into technology needs, books, paper products, and so on depending on the project.

Some of this may be outlined in your grant proposal, so make sure that you reference it to ensure you are executing your project inline with your commitments.

Designing a User-friendly Expense Template or Form

Now that you know what your goals are, you want to make sure that you have a form for tracking grant expenditures.

You can make a quick form yourself, use the many available on Instrumentl, or download free resources available online.
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The University of Louisville School of Medicine has one available for download that you can adapt. It includes spaces for salaries, fringe benefits, care costs, supplies, and more. You can add or take out any areas that don’t apply to you, but make sure your expense tracking is exhaustive for your nonprofit’s needs.

Implementing an Efficient Workflow for Expense Reporting

You need a structured workflow to promote efficient grant expense tracking, so make sure you are clear on how and when your expenses will be tracked.

• Is it on a weekly, monthly, or quarterly basis?
• Where are you going to keep all your documentation?

Make sure that you have a team that is responsible for tracking expenses, and that they understand the reporting and approval processes.

Documented processes and workflows will ensure you’re being efficient in your grant expense tracking.

Choosing the Right Tools and Software

As you go through the process, there are many grants reporting and tracking system tools available that can help you. Many nonprofits are often juggling more than one grant at a time, which is why it may be helpful to use grant management software like Instrumentl.
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‍Instrumentl can help you track all your grants in the same place so that you can stay organized as you manage various requirements at once.

Picking the right tools and software can streamline your nonprofit expense tracking, and here are some key features you should look out for.

Real-time Tracking and Reporting Capabilities

You want to be able to pull your data and reporting in real time. This will help you manage your expenses and make adjustments to your spending as needed.

You can actually create grant reports in Instrumentl, further allowing you to centralize all your grant management needs in one place.

Access Controls and Permissions

The best grant tracking tools allow you to collaborate with your team so that you can all stay on the same page.

You want different members to have access to all the features available, allowing you to input data and easily pull reports when needed. This centralized location makes it easier to track your grant expenses in one spot that everyone has access to.

Automated Alerts and Reminders

Your expense tracking system should send you alerts and reminders to help you stay on top of different reporting requirements.

On Instrumentl, you can add reminders of key deadlines, tasks, and more to help you stay on track. Instrumentl even has a comprehensive grant calendar so you never miss an important date again.

Comprehensive Reporting Features

Your grant expense tracking software should have comprehensive reporting features, including how you want to get your data. Data visualization is an important feature that can save time.

For example, you can see what areas you’re getting funding in, how much you are spending in different categories, and more.

Robust data analytics can also help you identify patterns to improve your nonprofit operations, including how you’re allocating your funding.

Grant expense tracking software is just one way that you’ll keep an eye on your spending. You also need to train your staff to oversee the systems.

Importance of Training in Accurate Expense Logging

The grants reporting and tracking system is only as good as the people who are inputting the data, so it’s important that you take the time to train your staff on how to accurately input the data. If not, you’ll have to go back and fix it.

Regular Workshops and Refresher Courses

You should regularly check in with your staff, providing workshops and refresher courses to make sure they are aware of the current needs of the nonprofit and how grant expense tracking should be done.

Regulations are updated annually, so these are great opportunities to ensure your team is aware of the latest that can impact your reporting.

Instrumentl’s blog offers great resources like guides, templates, courses, and more on grant management best practices, helping nonprofits stay up to date on all they need to know.

Creating an Expense Tracking Handbook or Guide

A great way to equip your staff to be self-sufficient is to develop an expense handbook.

This can provide a quick reference guide on grant expense tracking, as well as some commonly asked questions. Include where to go with questions should the guide not be of assistance.

Lastly, you want to regularly monitor and review the grant expense tracking system. This will help you catch problems before it’s too late.

Periodic Internal Audits

Conduct periodic internal audits to ensure spending is on track and your reporting capabilities are accurate. These can be scheduled, but don’t be afraid to do a surprise audit to ensure compliance.

Feedback Mechanism for Continuous Improvement

Provide an outlet for your employees to provide feedback on your systems, including what’s working well, what could be improved, and what should be stopped.. This could be an email, anonymous survey, or something else. As long as you’re receptive to feedback, you can continue to improve and become more efficient.

Adapting to Changes and Updates in Grant Requirements

It is common for updates to roll out in grant requirements, so make sure you stay up to date. Set up alerts for your funders or flag their emails as important. Set up regular check-ins with the funders as well.

Do whatever you need to do to make sure you stay aware of changes that could impact your funding.

Grant expense tracking is critical to ensure your organization accurately spends its funding as intended and maintains the records to back it up. As you think about setting up your own grants reporting and tracking system, you want to keep the following in mind.

• Set goals
• Use the right tools to achieve them
• Implement a workflow to execute
• Provide oversight and resources to your team

There are different tools and features that can make tracking grant expenditures easier, and Instrumentl is one place where you can discover, research, and track grants in one place. Ready to check it out? Sign up for your free 14-day trial today!