Budget vs actual on restricted grants

Almost every nonprofit runs budget-versus-actual at the organisation level, monthly, and considers financial oversight handled. For unrestricted money that is broadly true. For restricted grants it is close to useless, because the thing that gets you in trouble is invisible at that altitude.

The organisation-wide blind spot

Organisation-wide reporting nets things off. A programme underspending offsets another overspending, and the consolidated line looks fine. But grant funds are restricted individually: an overspend on one award is not cured by an underspend on another, and the two never offset in the eyes of the funder or the auditor.

The same masking happens inside a single grant. An award can be at 70% spent overall, exactly on track for month eight, while its equipment line is at 98% and its personnel line has barely moved. The total tells you nothing about either. Grant budgets are enforced by line, so that is the level at which they have to be watched.

What a per-award view shows

A view that actually protects an award needs four things.

Spend by budget line, not just in total. Against the approved budget, in the same categories the funder approved — not your internal chart of accounts, if they differ. Reporting against categories the funder does not recognise means doing the mapping again under deadline pressure.

Time elapsed alongside money spent. 60% spent is meaningless without knowing whether you are 30% or 90% through the period of performance. The pairing is the signal; either number alone is noise.

Committed as well as actual. A signed contract or raised purchase order is money gone, even before the invoice arrives. Tracking only booked actuals systematically understates position and produces overspends that were locked in weeks earlier.

Indirect cost treated explicitly. Indirect recovery is calculated against a base, and if direct costs shift the recoverable indirect shifts with them. Organisations that budget indirect as a flat figure and never revisit it routinely over- or under-recover.

Thresholds worth alerting on

Alerts should fire while there is still time to act, which means they cannot be pegged to 100%. Three that earn their keep:

• A line passing ~90% of budget with meaningful time left in the period. Early enough to reallocate, request approval, or slow spending.
• Burn rate diverging materially from elapsed time, in either direction. Underspend is a genuine risk too — unspent restricted funds get returned, and a pattern of underspending damages your case at renewal.
• Any line moving beyond the award’s reallocation tolerance, which brings us to approvals.

When a variance needs approval

Most awards permit some movement between budget lines without asking, and require written approval beyond it. The tolerance is stated in the award or in the terms it incorporates — commonly expressed as a percentage of the total award or of the affected line.

Two things make this go wrong. First, the tolerance is recorded as “prior approval required” without the actual number, making it impossible to check against. Second, nobody checks at the moment of the decision — the reallocation happens, and the approval question surfaces months later when the report is written, by which point the unapproved spend has already occurred and may be unallowable.

The fix is to record the tolerance as a number attached to the award, and to check variance against it continuously rather than at reporting time. That is the difference between “we need to request approval for this” and “we needed to request approval for this.”

For a fuller treatment of where these rules live in your award documents, see how to read an award letter for obligations.

This guide is general information about how grant compliance work is commonly organised, not legal, audit or accounting advice. Grant rules change, and terms vary by funder and award — always check your own award documents and the current regulation, and talk to your auditor about your specific circumstances.