A State of Michigan grant can help a not-for-profit expand services, support staff, or fund a specific project. Before accepting an award, however, leadership needs to understand what the organization must spend, document, and report to receive and retain the funding.
The amount awarded does not tell the whole financial story. Reimbursement timing, matching requirements, and costs the grant will not cover can affect whether the organization has the resources to carry out the work.
As you review funding and budgets this fall, consider the obligations that come with each award.
Identify the funding source and applicable rules
A grant administered by a Michigan department may contain state funds, federal funds passed through the state, or a combination. That distinction matters because federal awards can carry requirements under the Uniform Guidance, including rules for financial management, allowable costs, procurement, and audits.
Read the award agreement and incorporated guidance before committing funds. Confirm the funding source, award period, approved activities, reporting schedule, and any conditions that must be satisfied before payment.
Ask the awarding agency to explain anything that is unclear. Do not assume the requirements match another grant simply because both awards come from the same department.
Determine what the grant will actually cover
Compare the approved grant budget with the full cost of delivering the program. Include staff time, benefits, supplies, supervision, and administrative support.
A grant may cover direct program expenses while limiting reimbursement for other necessary costs. If the award requires matching funds, determine which contributions qualify and how the organization will document them. Confirm whether donated services or other in-kind contributions are eligible before counting them toward the match.
For federal awards, costs generally must be necessary, reasonable, properly allocated to the award, adequately documented, and consistent with applicable restrictions. An expense that benefits the organization is not automatically chargeable to a particular grant.
Have finance and program staff review the budget together. If the grant leaves a funding gap, identify how the organization will cover it before adding staff or signing contracts.
Plan for the timing of payments
Confirm whether the award provides an advance, reimburses eligible expenses, or pays after specified milestones.
With reimbursement-based funding, the organization may need to pay employees and vendors before submitting a request and waiting for payment. A grant can therefore support a balanced annual budget while still creating a short-term cash shortage.
Prepare a cash-flow forecast using the expected spending and reimbursement schedule. Include time for internal review, agency processing, and possible corrections to a payment request.
Confirm which grant and payment systems the award requires. Michigan’s SIGMA Vendor Self-Service system supports state vendor information and payment activity, while individual programs may use additional application or reporting systems. Keep account access and payment details current so administrative issues do not delay funding.
Build documentation into everyday work
Set up a separate accounting code or other reliable method to track each award’s revenue and expenses. This does not necessarily require a separate bank account unless the agreement calls for one.
Keep invoices, payroll support, allocation calculations, purchasing approvals, and reimbursement submissions together. When employees work across multiple programs, maintain records that support how their compensation is assigned.
Program reporting deserves the same attention as financial reporting. Assign responsibility for collecting service counts, participant information, and other required results. Financial records and program reports should describe the same activities and reporting periods.
Before changing the budget, extending the project, or redirecting funds, determine whether written approval is required. A discussion with a program contact should not be treated as an approved amendment unless it satisfies the award’s requirements.
Review audit requirements before the year closes
For fiscal years beginning on or after October 1, 2024, an organization that expends $1 million or more in federal awards generally must obtain a Single Audit, unless it qualifies for a permitted program-specific audit. The threshold concerns federal expenditures during the organization’s fiscal year, not the amount of one grant or the cash received. Include applicable federal funding received through Michigan agencies and other pass-through entities.
Falling below that threshold does not eliminate every audit or reporting obligation. An award agreement or state requirement may impose additional conditions. For example, Michigan Department of Health and Human Services guidance requires certain subrecipients exempt from its audit requirements to submit an Audit Exemption Notice.
Discuss the requirements with your accountant early enough to budget for the work and prepare the necessary schedules.
Keep organizational filings separate from grant reports
Submitting a grant report does not replace the organization’s other filings.
Michigan not-for-profit corporations generally must file an annual report with the Department of Licensing and Regulatory Affairs by October 1, beginning the year after incorporation or qualification. An October review should confirm that the applicable filing has been completed.
Charitable solicitation registration is a separate obligation. Organizations soliciting or receiving contributions in Michigan generally must register with the Attorney General unless an exemption applies.
Maintain one calendar showing grant reports, renewal dates, required filings, and the person responsible for each.
DBC can help evaluate a grant’s financial requirements, strengthen expense tracking, and prepare for applicable audit and reporting obligations. Reviewing those responsibilities before accepting or renewing funding can help the organization avoid commitments its budget cannot support.
This article provides general tax and accounting insights and is not intended as advice specific to your organization or a substitute for personal consultation. We do not provide legal advice. Because every organization’s circumstances are unique, we encourage you to consult with your legal, tax, or accounting advisor regarding your specific situation.