Grant Compliance 101: How to Ensure Proper Fund Usage

How to track and report grant funds properly to meet compliance rules.

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Grants can be a great way to fund projects, programs, and research. But with great funding comes great responsibility. If you get a grant, you have to follow rules on how to use the money. That’s called grant compliance—making sure you use the funds properly and report them correctly. If you don’t, you might have to pay the money back or lose future funding.

Why Grant Compliance Matters

When you get a grant, you agree to certain terms. These terms tell you:

  • How the money can be spent (like salaries, supplies, or travel)
  • How to track spending (keeping receipts, and logging transactions)
  • When and how to report expenses (monthly, quarterly, or yearly reports)

Not following these rules can lead to serious problems! You could lose funding, face penalties, or even be banned from getting future grants.

How to Stay Compliant

Following grant rules doesn’t have to be overwhelming. If you stay organized and keep good records, you can make compliance easy. Here’s how:

1. Read the Grant Agreement Carefully

Before you spend any money, read the agreement from start to finish. Pay attention to:

  • Allowed and unallowed expenses – Some grants won’t cover things like entertainment or gifts.
  • Reporting deadlines – Missing a report deadline can put you at risk.
  • Audit requirements – Some grants require a financial review to ensure everything is in order.

2. Set Up a Tracking System

You need a way to track every dollar. Good tracking prevents mistakes and makes reporting easier.

  • Use accounting software (like QuickBooks or Excel spreadsheets)
  • Keep detailed receipts for every purchase
  • Track employee time if salaries are paid with grant money

3. Separate Grant Funds From Other Money

Never mix grant money with other funds. Open a separate bank account if needed. This makes it easier to prove how the money was used.

4. Report on Time

Late or incomplete reports can cause trouble. Make sure to:

  • Mark deadlines on a calendar
  • Assign reporting tasks to a team member
  • Review reports for accuracy before submitting

5. Prepare for Audits

An audit is a financial review to check if funds were used correctly. To be ready:

  • Keep all financial records organized
  • Have a clear budget breakdown
  • Make sure reports match actual spending

Common Mistakes to Avoid

Even experienced grant recipients make mistakes. Here are some of the most common ones:

  • Spending on unapproved items – Always double-check before making a purchase.
  • Not keeping receipts – If you can’t prove how you spent the money, it’s a problem.
  • Missing deadlines – Late reports can cost you funding.
  • Mixing funds – This makes tracking impossible and can lead to compliance issues.

Final Thoughts

Grant compliance is all about staying organized, following the rules, and keeping good records. It may seem like extra work, but it protects your funding and reputation. If you put a solid system in place, managing grants can be stress-free.

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