Grant Reporting for Nonprofits: How to Track Restricted Funds
October 9, 2026 · 6 min read · C3CPA
Funders want to see that their money did what you said it would. Good grant reporting starts long before the report is due — it starts with how you set up your books.
Track every grant from day one
Create a class, fund or project code for each grant as soon as the award letter arrives. Tag every related expense — including payroll — to that code. When reporting time comes, the numbers are already sorted.
Match your categories to the funder's budget
Most funders approve a budget with specific lines: personnel, supplies, travel, contractors. Map your chart of accounts to those lines so a budget-to-actual report comes straight out of the system instead of a spreadsheet rebuild.
Release restrictions correctly
Under nonprofit accounting standards, restricted gifts sit in net assets with donor restrictions until you meet the restriction — by spending on the purpose or reaching the time period. Recording those releases monthly keeps your statement of activities accurate and makes year-end much easier.
Allocate shared costs with a documented method
Rent, utilities and shared staff often support several programs. Choose a reasonable basis — time records, square footage or headcount — write it down, and apply it consistently. Funders and auditors will ask.
Keep the paper trail
Federal awards carry extra rules under the Uniform Guidance, including documentation standards and possible Single Audit requirements.
- Award letters and grant agreements
- Approved budgets and any amendments
- Timesheets for staff charged to grants
- Receipts and invoices for direct costs
- Copies of every report you submit
General information, not tax or legal advice for your situation. IRS rules change — confirm current requirements or ask us. See also our Nonprofit Guide and nonprofit accounting services.