Recording Cash Receipts from Grants – Cash/Accrual Basis

Nonprofit organizations may solicit and receive grants from a variety of sources, including federal, state and local governments, corporations and foundations.

The term cash receipts includes currency, checks, etc. received by mail or in person. Good cash-receipt handling contributes to good cash-flow management and the task is most manageable when receipts are posted promptly in the accounting system. Over time, you will begin to see patterns in your organization so that accurate predictions of cash-flow needs can occur.

Keeping detailed records of grant receipts will assist you in the separation of business income from other income, which is crucial when answering questions from the IRS and is beneficial during audits. Further, to facilitate a smooth audit process it is recommended that the original supporting documentation related to grants and their receipts should be maintained at a central office rather than at many different locations within the organization. Read the rest of this entry »