How to Use Government Grant Money Without Breaking the Rules

Adhere to the agreement rules and regulations to avoid legal consequences when using grant money. Government grants are not loans or gifts. They are offered to fund projects, education, and innovation. Government grants support economic growth and the community. Grants.gov offers 1,000 federal grant programs for people in the USA, and around $500 billion is secured annually. Grantees have to use the grants for the mentioned purpose only. Funding organizations verify the project, case, and assets of the bidder before granting the money. There are different types of grants depending on the scenarios. It includes educational, emergency and hardship, research, arts, and creative grants. The organization grants money to support people, and they pay the same amount back to funders. 

Grantee receives the payment in two ways, including reimbursement and project milestones. The grantee has to follow the rules to get the upcoming installments. The organization also conducts audits to check if the money is used for the right purpose. Tracking and auditing the funding helps to avoid penalties in official review.

Why Is Proper Grant Fund Management Important?

Proper grant fund management is important for five reasons:

1. Legal Consequences: Proper grant management saves the grantee from legal consequences. Misusing the grants for irrelevant projects leads to penalties and is considered a crime. It can lead to termination of the grant, and grantees are imprisoned. Frauds in audits affect the reputation of companies and businesses.
2. Funder Trust: Gaining the funder trust is important to get grants in the future, and even for the next installments. Make sure to report on time and submit the documents in detail. Clear and detailed audits build trust, whereas missed deadlines and meetings leave a negative impact on the funder. 
3. Project Success: The success of the project depends on how well the grant is managed. Set clear goals and objectives for the execution. Conduct monthly or weekly audits to check where the money is going to avoid overspending. Hire a manager to oversee everything and make sure to save the records for official review. 
4. Grant Agreement: Read the grant agreement and verify the cost, project deadlines, and reporting times. The grant agreement is the most important document. Ignoring the rules leads to grant cancellation and even prison.
5. Organization’s Reputation: Proper grant management saves the company’s reputation. People do not trust the businesses that try to conduct fraudulent activities even with teh government. Such acts also leave a bad impact on stakeholders.

What Expenses Are Typically Allowed?

Here are the five expenses that are typically allowed with grant money:

1. Project Costs: Grant money funds projects that are mentioned in the agreement. The grantee can use it to clear invoices, buy equipment, and materials. Make sure to document everything to make it easy to verify during audits.
2. Training & Capacity Building: There are grants specifically for supporting education. Grant money is used for certification, workshops, and skill development, depending on the type of grant. Grantees have to mention the cause, reason, and future perspectives of this project in detail to the funding organizations.
3. Travel Related to the Project: Use the grant money for travel purposes related to the project. Spending on stakeholder visits, visiting the site of the project, and conference meetings is allowed with grant money.
4. Consulting & Professional Services: Grant money can be used to hire the candidates for the project. Pay for the external auditors, consultants, and contractors. It is also used to pay the legal fees for licenses, patents, and permits.
5. Administrative Costs (if allowed): Using the grant money to pay for the office bills, accounting services, and invoices depends on the funding organization. Many organizations approve such demands, but they provide a detailed guide with certain limitations. Make sure to read teh agreements thoroughly or ask the funder to clear the doubts.

What Expenses Are Usually Not Allowed?

Here are the five expenses that are usually not allowed:

1. Personal Use Purchases: Don’t use the grant money to buy personal items like a car or home. These grants are strictly to support the projects and education platforms. Read the agreement and instructions carefully to avoid penalties.
2. Unapproved Capital Investments: Buy within the budget, even for the projects. Avoid overspending on a large purchase that is not going to benefit. The grantee has to pay back to the government, so invest wisely.
3. Political or Lobbying Activities: Grant money is not allowed to promote political intentions. Avoid using it for policy advocacy or voting purposes.
4. Entertainment & Non-Work Travel: Using the grant money for entertainment purposes has strict consequences. It can lead to the grantee being imprisoned for years. Don’t use it for parties, vacations, and trips in the name of conference meetings. 
5. Unbudgeted Projects: Organizations audit the project status and site monthly to see the progress. Don’t use the grant money for unauthorized projects. Many people get grants to sponsor their projects, but they utilize them for administrative tasks or to invest. It can have serious legal outcomes.

How Can You Track and Document Grant Spending?

Here are the five tips to track and document the grant money to avoid breaking the rules:

1. Maintain Detailed Expense Records: Record the expense details for official audits whenever spending money. Write the product, service, or material that was bought, along with the date and time.
2. Dedicated Bank Account: Don’t transfer the grant money into the main bank account. Keep it separate and check the receipts the see when it was withdrawn. It’s also easy to submit the email statements to the finder for verification.
3. Implement Accounting Software: Integrate the accounting software to track the grant money. This software automatically tracks and customizes the reporting tools.
4. Require Internal Approvals: Set clear budget limits and discuss them with the team. Hire a separate person to review the transactions and to reconcile accounts.  These practices maintain a check and balance within the project.
5. Schedule Regular Financial Reviews: Make sure to conduct the internal audits to understand compliance with the budget. Look at the project progress and make changes where needed.

How Do You Prepare for a Financial Audit?

Here are five ways to prepare for a financial audit:

1. Organize Financial Records: Create a master folder and then subfolders to neatly organize the records. Make sure to save the invoices, statements, and permits separately for easy official audit. Document the payroll sheets, timesheets, and progress of the project in those folders.
2. Prepare Expenditure Reports: Prepare a detailed expenditure report with how much is spent. Mention the remaining amount, project timeline, and the profit.
3. Ensure Timely Submissions: One of the most important things in a grant is timely submissions. Don’t ghost the officials for months, as it leads to penalties.
4. Assign an Audit Coordinator: Hire an audit coordinator who communicates from teh behalf of the company with the funder. Make sure they know everything about the project, funds, and expenditure. It helps the grantee to focus on other important tasks and reduces the people who need to break down everything.
5. Conduct an Internal Audit: An internal audit saves the grantee from legal issues. Create a checklist and make sure to cross-check if the documentation aligns with it. It helps them to find and mitigate the red flags themselves. 

How Can You Avoid Common Misuse Mistakes?

Here are the five tips to minimize misuse mistakes with grant money:

1. Review Grant Agreement: Read the grant permissions when submitting documents and everything. Review it once before spending the first installment. Stick and don’t try to break rules.
2. Train Team on Compliance: Train the staff to work on the budget. Set clear budget limits and goals for the projects for predetermined results.
3. Written Approvals for Changes: Ask for permission from the funder when making changes in the project. Submit a detailed document with a reason and what’s the plan.
4. Monitor Subrecipients & Partners: Monitor the subrecipients, as the grantee is responsible for the outcomes. Make sure they are complying with rules.
5. Report Issues Early: Talk to the funder proactively to avoid potential harm. Clarify the situation whether the project is a loss or not going to make any profits.