A grant is a monetary donation that supports an entity such as a person, organization, project, or program. The donation can be given by a foundation or corporation, as well as by the government. Government grants, specifically, are issued for a variety of reasons, usually to non-profit organizations to support the public work they do.
For individuals or non-profit organizations that have received grants from the government, meeting all of the conditions dictated in the grant while maintaining financial health can be overwhelming, but there’s no need to worry. Cook CPA can help you.
How Does the IRS Define a Government Grant?
Government grants that are given to people, organizations, projects, or programs can be given in the form of scholarships, fellowships, prizes, awards, loans, and program-related investments; grants typically do not include salaries or compensation to employees or payments to persons for personal services. They can be given to either pay for the acquisition of an asset or to cover the reimbursement of costs.
Grants are typically given to individuals or organizations that exist for a specific purpose, which means that they focus their efforts on a specific population or a particular type of support. There are a few types of grants that the government may issue:
- Categorical grants – These are issued for specific purposes, and entities that receive them may have to match a portion of the funds that they’re given. These grants are intended to help improve the well-being of residents. There are two types of categorical grants: project grants, which provide funding for specific projects, and formula grants, which provide funding as determined by the law. The former is competitive, while the latter is not.
- Block grants – Block grants are given to state and local governments by the federal government to be used for a general purpose.
There are also earmark grants, which are specified by the appropriations of Congress. However, they are becoming less common.
There are 20 different categories that government grants can fall into. These categories are Agriculture, Arts, Business and Commerce, Community Development, Consumer Protection, Disaster Prevention and Relief, Education Regional Development, Employment/Labor/Training, Energy, Environmental Quality, Food and Nutrition, Health, Housing, Humanities, Information and Statistics, Law/Justice/Legal Services, Natural Resources, Science and Technology, Social and Technology, Social Services/Income Security, and Transportation.
An organization that seeks to receive a government grant basically has to prove that their function and purpose is to do a public service. In order to get a grant, a non-profit has to have an understanding of the needs of the community they serve, knowledge of the available resources their organization provides, the ability to match their services with other organizations, and enough money to run their organization in the interim periods between grants.
Difference Between a Government Grant and a Foundation Grant
There are many similarities between a grant from the government and a grant from a foundation; however, there are important differences that should be noted. One difference between government grants and foundation grants is that government grants take longer to go through the process of requesting and accepting applications from applicants.
Another major difference between the two types of grant is that the government requires regular financial reporting and recordkeeping and has the right to audit federally-funded programs at their discretion. Furthermore, federal programs sometimes require cost sharing or cost matching.
Using a CPA For Your Government Grant
There is a lot involved in maintaining a grant and the money that comes along with it. An accountant from Cook CPA Group can help keep your files in order and aid in reporting to the necessary parties. A CPA can also help you navigate through the actions that need to be taken regarding your organization’s government grant.
The first way that a CPA can help is through an expenditure analysis. They can help you keep track of how much money gets spent, where it gets spent, how often it gets spent, plus all of the implications of those expenditures.
A CPA can also help you with financial reporting. Recipients of a government grant must disclose their accounting policy, which includes their method of balance sheet presentation. They must also disclose the extent of unfulfilled conditions and contingencies attached to the recognized grant.
Finally, a CPA can help you or your organization with auditing. Most recipients of grants are subject to an audit once per year; if a program has received more than $300,000 in federal funding they
must be audited.
Call Our Sacramento and Roseville CPAs for Your Government Grants Today
Managing the finances connected to a government grant doesn’t have to be overwhelming or difficult. Consult a licensed CPA from the accounting team at Cook CPA Group for help with financial reporting, expenditure analysis, and everything else associated with your grant.
