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Your Funding Reports Could Get You Audited

Posted by Kit Dickinson on Oct 26, 2017 10:09:00 AM
Kit Dickinson
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Your funding reports aren’t as safe as they used to be.

Not long ago, government and private funding sources were more lenient when reviewing nonprofits’ funding reports to see how their grants were being spent. You could give a quarterly report that was full of estimated time percentages, and that was fine.


But a game-changer was introduced with time-and-effort reporting and the Digital Accountability and Transparency Act (DATA). The government began applying a new standard for reporting on Federal grants. Among other requirements, reports must now be based on actual allocation of earnings, not estimates.

Soon other funding agencies—including private sources—began requiring the same standard of reporting. They wanted to see how the grants were actually being used, rather than seeing feel-good estimates.

As a result, your current reporting practices could be setting you up for additional audits.

Are Your Funding Reports Raising Red Flags?

If you’re supplying estimates—or numbers that look like estimates—you’re at greater risk of being audited. If it appears that you can’t substantiate the actuals of your spending on a given grant, and across your grants, that raises an audit flag.

If you get flagged, you’ll have to substantiate the information you supplied. If you don’t have the data to back it up, you’ll fail the audit and face the risk of losing that funding and possible future funding. It could tarnish your organization’s reputation with funding agencies and impact your ability to fulfill your mission.

Time Reporting Best Practices

Want to avoid more audits? You’ll need a way to capture actual time, in a time system, in a timely manner. Follow these best practices to ensure your funding reports don’t raise any red flags.

Use an automated system to capture time across the entire organization

Don’t use paper timesheets or spreadsheets. Whether it’s a time-and-attendance system or online time entry software, you need a system that can consistently capture time spent on grant and non-grant activities. This gives you an audit trail and a structured process to reliably capture your employee’s time information.

With an automated system like this, you’ve got a repository and standards that the grants can be tracked against. Automated systems also eliminate the possibility of fat-fingering the data entry or other human errors, and it doesn’t allow data to be mistakenly deleted or replaced. Spreadsheets don’t offer that kind of stability.

Be disciplined with a process

Make sure you have a process that forces employees to use the automated system and charge their time to grant and non-grant activities throughout the week. If you’ve been running a loose ship, it will require some change management. But if you don’t have a process that ensures you get good data on the front end, your reports will be inaccurate on the back end.

Process discipline also extends to timeliness. You don’t want someone to show up at the last minute with timecards for the past three weeks. Suddenly you discover your numbers have been off because not everything was reported, and it turns out you didn’t have the budget for the project manager you just assigned to help finish the grant. Most time-and-attendance systems highlight any employees who have missed time in the pay period and can be configured to require manager approval of timecards prior to closing a pay cycle.

Allocate earnings proportionately

One of your biggest considerations will be finding a reliable way to allocate employee earnings in proportion to time spent on grants. Chances are, you’ll have salaried employees who sometimes charge more or less than 40 hours in a given week to a mix of grants and non-worked time (e.g., vacation days). Although they’re paid the same each pay period, allocation across the various grants can fluctuate dramatically from week to week.

Your funding sources will expect you to give an accurate representation of what was spent on a given grant. You can do that manually, with spreadsheets, or through an automated system. Because time-and-attendance systems typically can’t perform those calculations, many nonprofits turn to GrantAlytics.

GrantAlytics grant management solution for nonprofits delivers detailed dashboards that give you precise information about how your grants are performing—and why. You’ll see actual data based on information extracted from your time system, not estimates.



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Topics: Nonprofit Industry Solutions