For charities, community groups and third-sector organisations, securing grant funding can make an enormous difference. It can help fund staff, equipment, community projects, training and essential services.
But receiving a grant is only the beginning.
Grant management is the process of budgeting, recording, monitoring and reporting grant funding to make sure the money is used for its agreed purpose and in line with the funder’s conditions.
Good grant management starts before an application is submitted and continues until the final report has been completed and the project finances have been reconciled.
For smaller organisations, particularly those with limited staff or volunteer committees, that can sound daunting. Having straightforward financial systems in place from the beginning makes it much easier.
What Is Grant Management?
Grant management covers the financial and administrative processes used to manage a grant throughout its lifecycle, from application and budgeting through to spending, monitoring and final reporting.
Depending on the grant, this may include:
- preparing a realistic project budget
- understanding the conditions attached to the funding
- recording grant income and expenditure
- managing restricted funds
- retaining invoices, receipts and other evidence
- comparing actual spending with the agreed budget
- monitoring deadlines and reporting requirements
- preparing financial information for progress and final reports
Good grant management isn’t simply about bookkeeping. Your organisation should be able to demonstrate where the money went, what it was spent on and whether it was used in accordance with the funding agreement.
Start Grant Management Before You Apply
One of the best times to think about grant management is before you submit the application.
A grant application will often require a project budget explaining how much the project will cost and how the funding will be used.
The figures need to be realistic.
Depending on the project and the funder’s rules, your grant budget might include:
- staff costs, including on-costs and, for multi-year projects, anticipated wage increases
- equipment
- materials
- travel
- venue costs
- professional fees
- marketing
- project administration
- a contribution towards organisational overheads
Check carefully which costs are eligible before submitting the application.
If your application is successful, the budget you’ve submitted may become the basis against which the funder expects you to monitor and report your spending.
What Is a Grant Budget?
A grant budget is a financial plan showing the expected income and expenditure associated with a grant-funded project.
Once funding has been awarded, the budget should become a working document rather than something that disappears into the original application.
A simple approach is to regularly compare:
Budgeted expenditure → Actual expenditure → Remaining budget
This helps you identify overspending or underspending before it becomes a bigger problem.
For organisations managing several grants at the same time, your financial system should also make it possible to identify which income and expenditure belongs to each project.
Both Xero and QuickBooks can help you track grant income and expenditure using features such as projects, classes or tags. A simple spreadsheet can work too. The important thing is to be consistent in how you record and track each grant.
What Are Restricted Funds?
Restricted funds are funds that have been provided for a specific purpose and must be used in accordance with that restriction.
For example, if a funder awards £10,000 specifically to deliver a community training programme, the organisation cannot simply use the money to cover an unrelated expense because funds are tight elsewhere.
Your accounting and record-keeping systems therefore need to make it possible to identify income and expenditure associated with restricted funding.
Everyone involved in authorising or spending the grant should understand any restrictions attached to it.
If you’re unsure whether expenditure is permitted, check the funding agreement before committing the money.
What Records Should You Keep for Grant Funding?
The exact records required will depend on the funder and the terms of your grant, but you’ll commonly need evidence showing how the money has been spent, including:
- invoices and receipts
- bank records
- payroll information
- timesheets
- mileage and travel claims
- contracts
- evidence of match funding
- records linking expenditure to the funded project
You should also check how long supporting documentation needs to be retained.
Don’t wait until a reporting deadline to organise this information. Recording expenditure and filing the evidence as you go can save considerable time later.
How Often Should You Review a Grant Budget?
Grant expenditure should be reviewed regularly throughout the project rather than only when a report is due.
How often depends on the size and duration of the project, but regular reviews let you compare actual spending against the original budget and catch problems early, whether that’s overspend in one area or a project quietly underspending, which can be just as much of an issue.
Keeping funders in the loop matters too. Most don’t mind things changing, as long as you tell them what’s happening and you’ve got a plan.
I’ve worked with a project that ran well-attended sessions for years, then had to pause when there was a gap in funding. Restarting turned out to be harder than expected: engagement had dropped and the old format simply wasn’t landing anymore.
After discussions with the funder and the young people involved, the sessions were reworked around something completely different, and interest picked back up. Sometimes the answer isn’t more marketing; it’s being willing to recognise when something needs to change.
Don’t automatically move money between budget headings, though. Some funders allow a degree of flexibility, others need approval before changes are made. Check the grant conditions and contact the funder if necessary.
What Are Grant Reporting Requirements?
Grant reporting requirements are the financial and project information a funder needs to demonstrate how its money has been used and what the funded activity achieved.
Requirements vary considerably.
A small grant may just need a straightforward final report. Larger or longer-term grants can mean regular financial reports, progress updates, evidence of outcomes and a detailed final submission.
Your funding agreement should tell you:
- what needs to be reported
- which financial evidence is required
- when reports are due
- whether there are specific reporting templates
- what happens if the project or budget changes
Keeping financial records up to date throughout the project makes this much easier than trying to reconstruct several months of expenditure shortly before a deadline. It’s also worth planning your admin time around this.
It’s also worth allowing for reporting and administration time when you prepare the original project budget. A single end-of-project report may only require a relatively small allocation of staff time, whereas quarterly reporting can add considerably more administration across the life of the project. Think about those requirements at the application stage rather than absorbing the additional workload later.
What Happens When a Grant-Funded Project Ends?
At the end of the project, reconcile the grant finances and make sure all relevant income and expenditure has been recorded.
You should also establish whether any grant money remains unspent.
Don’t assume an underspend can automatically be retained or transferred to another project. Depending on the funding agreement, the money may need to be returned or you may need permission from the funder to use it differently. If you do get this permission, attach it to your records, so your evidence trail stays complete.
If you do get permission to use an underspend differently, keep a copy of that approval with your project records so the evidence trail remains complete. Six months later, you may not remember exactly what was agreed, and if someone else has to pick up the project, a clear evidence trail makes the handover far smoother. Once the final reporting requirements have been completed, retain the financial records and supporting evidence for the required period.
Grant Management Checklist
Before and during a grant-funded project, check that you can answer the following questions:
- What can the grant be spent on?
- Are any of the funds restricted? Even if the grant is for core costs, and unrestricted spend, separating it out from normal core funding means you’ll have those records ready when it comes to reporting. Working it out after the fact takes a lot longer.
- Who is responsible for authorising expenditure?
- How will grant income and expenditure be recorded?
- Where will invoices and receipts be stored?
- How often will the budget be reviewed, this should be a part of every board meeting?
- What evidence does the funder require?
- When are progress and final reports due?
- What should happen if the project or budget changes?
- What happens to any money left at the end?
If those answers are clear from the outset, managing the funding becomes considerably easier.
Common Grant Management Mistakes
Many grant management problems come down to clear processes never being established when the funding began.
Common issues include missing receipts, mixing grant expenditure with general organisational spending, misunderstanding restricted funds, failing to monitor the budget and leaving financial reporting until the last minute.
Another mistake is assuming that receiving a grant means complete freedom over how the money is spent.
The funding agreement matters. Read it carefully, make sure the relevant people understand it and ask the funder if something isn’t clear.
Grant Management for Community Organisations in the Scottish Highlands
Grant funding plays an important role for many third sector organisations and community groups across the Scottish Highlands.
However, most don’t have a dedicated finance department. Responsibility for budgets, bookkeeping, funding claims and reporting often falls to a small staff team, trustees or volunteers who are already managing plenty else.
Straightforward financial systems can make that workload much more manageable.
As founder of Cassley Office Solutions, I have more than 13 years’ experience in operations and finance management, including working with community development organisations in the Scottish Highlands.
That includes managing complicated finances alongside grant conditions, reporting requirements, project management and the practical day-to-day realities of running third-sector organisations.
If your organisation needs practical support with grant management, financial systems, budgeting or reporting, get in touch with Cassley Office Solutions.
