Grant Accounting Basics: Tracking, Reporting, and Compliance

August 25, 2025

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Grant accounting helps track, manage, and report funds provided by government agencies, foundations, or other grantors, ensuring that grant money is used as per the grantors’ requirements. This is essential, as non-compliance may lead to a decline in future funding opportunities, termination of grants, or even fines and penalties.

In this article, we will explore what needs to be tracked, the key reporting requirements, and staying compliant with grantor requirements and expectations.

What You Need to Keep Track of

When it comes to grant accounting, the organization must demonstrate to its funders that every dollar was used exactly as promised. To do so, it must:

Keep awards and budgets: Keep all award documents, approved budgets, and any modifications made to the grant. Be like a hawk and monitor budget versus actual spending.
Use separate accounting codes: Use unique codes for each grant to record and match all receipts, obligations, and expenditures to the right award.
Maintain accurate time/effort reports: Accurate timesheets or effort reports are the basis for charging payroll to grants
Document procurements: Maintain a record of all bids/quotes, purchase orders, contracts, and reasons for purchases made.
Monitor any awards made to subrecipients: If the organization passes funds to others, records of subaward agreements, risk assessments, and monitoring reports must be maintained.
Log any income generated by the program: All revenue generated by the project must be recorded and documented in accordance with the award terms.
Maintain detailed records of equipment and property: The organization must maintain records of all equipment purchased under the grant and conduct a complete inventory at least every two years.
Document matching contributions: All matching contributions must be documented to ensure they are not used for other awards.
Submit financial reports on time: All financial reports must be filed on time and reconciled to the organization’s accounting records.
Maintain records: Organizations must maintain records for a period of at least 7 years, for most documents, indefinitely for others.

Why Tracking Your Grant Spending Matters

There are several reasons why financial tracking is essential when it comes to operating a grant, such as:

Offers transparency and accountability to grantors, ensuring grantors that their grants are being used as intended.
Ensures compliance with grant requirements, minimizing the risk of funds misuse and potential legal and regulatory consequences.
Helps track the performance of grant-funded projects to make informed decisions for future budgets and long-term planning.

Your Must-Know Grant Reporting Requirements

With grant reporting, the intention is to keep the funders informed and confident that their money is being used precisely as required. The key reporting requirements include:

Present financial reports (SF-425): The organization must present a clear picture of funds received, spent, leftover balances, and matching contributions.
Submit performance reports: Share progress toward goals, milestones achieved, completed deliverables, and challenges faced.
Produce cash/drawdown reports: Report and reconcile advances or reimbursements, ensuring the funds were spent promptly and adequately.
Single audit reports: These reports must be submitted to the Federal Audit Clearinghouse if you meet the federal audit threshold.
Closeout reports: The final financial, performance, and property reports must be submitted within 120 days of the award end date.
Subaward reports: Any subawards of $30,000 or more must be reported to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS) to ensure transparency.

Grant funding is a lifeline for many organizations, but managing it isn’t simple.

Strong grant accounting practices help you stay compliant, meet deadlines, and show funders that their money is making the intended impact. Done right, compliance becomes more than a requirement; it becomes your competitive advantage in securing future grants.

Every dollar must be tracked, reported, and used exactly as promised, or you risk losing future funding, facing penalties, or damaging trust with grantors.

Show funders you’re accountable. Strengthen your grant management while ensuring compliance to protect your funding. Take control of your grants now!

Staying Compliant with Grant Rules

When it comes to grant accounting, organizations are required to follow all rules set by grantors and regulators. These include:

Adhere to the grant agreement: Funds must be tracked and used strictly in accordance with the grant’s terms and conditions.
Maintain clear demarcation of funds: Grant funds must be kept in dedicated accounts to prevent misuse and ensure that they are not commingled with other funds.
Know what expenses are allowed: Ensure that only eligible, reasonable, and properly documented expenses are charged to the grant.
Document everything: Maintain detailed records of expenses, timesheets, invoices, and activity records for audits.
Stick to reporting deadlines: Submit financial and progress reports on time in the format approved by the grantor.
Comply with federal/state regulations and guidelines: The organization must follow and adhere to the required rules and regulations. For example, if the organization has received a federal grant, it must comply with the Uniform Guidance (2 CFR Part 200). This regulation governs the administration of federal funds in the United States.
Adopt and implement strong internal controls: Implement an internal system to prevent fraud, waste, and abuse of resources.
Be audit ready: Keep financial records, receipts, and supporting documentation organized so you can clearly show where the money was spent.
Review your budget regularly: Keep track of the grant budget to avoid overspending or leaving money unused.

Turning Compliance into Confidence

Grant accounting is not just about crunching numbers. It is about proving to grantors that every dollar has been spent as intended. Organizations must diligently track expenses, meet reporting deadlines, and comply with grant terms to build trust, avoid penalties, and secure future funding. Doing so can turn compliance into a strategic advantage and determine your organization’s ability to secure future grants.