Are You Ready to Apply for a Federal Grant? First Get Your Finances in Order!

Before you apply for a federal grant, you should determine whether or not your organization has the financial capability to use federal funds properly.  This is a very important topic, especially for first-time applicants.

This financial checklist will help you determine whether or not you are ready to apply for a federal grant.

Has the IRS classified your organization as a tax-exempt entity?  To apply for most federal grants, you must be an IRS tax-exempt organization.   Most nonprofit organizations are 501(c)(3) organizations under the IRS tax code, but other kinds can apply for grants too.

Are your organization’s financial records audited annually by an independent outside public accountant?   A federal agency may require your organization to produce a “non-qualified” audit report to receive a grant award.  This means that there were no financial issues and that all accounting standards were properly observed.

Can you meet the financial requirements?  Before you apply, you should carefully study the grant guidelines to determine that your nonprofit organization can meet all financial requirements.   For example, one typical grant requirement is the periodic submission of detailed financial reports.

Do you have the organizational financial policies, procedures, and practices in place to use government grant funds legally and ethically?  Once you receive a grant, you will be expected to (1) disperse grant funds according to your application budget; and (2) account for them according to accepting accounting procedures.   For example, one important financial practice would be the ability of your organization to identify and track all grant expenditures.

Is your organization prepared to be audited by a federal agency?   As a condition of award, a government agency may decide to do a pre-award audit, which will determine whether or not your organization can manage a grant by adhering to accepted accounting standards.  You also may be audited at the conclusion of your grant.  The purpose of a post-award audit is to determine whether or not your organization has spent its grant funds properly.

If you can answer all these questions positively, you are financially ready to apply for a federal grant.  If any of your answers are negative, address your problems before you apply for a federal grant.

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