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We recently held a webinar on challenges facing the not-for-profit and charity sector, in which grant-related issues emerged as one of the key issues facing not-for-profits and charities.
Most not-for-profits and charities rely heavily on government funding, and any changes to that funding can have serious consequences – from disrupting the delivery of programs to jeopardising the financial security of the entire organisation.
As the three tiers of government (local, state and federal) grapple with their own budgetary pressures, the flow on effect for not-for-profits and charities is being felt in more ways than one.
Using grant acquittals to claw back funds
Cost pressures across government have been rising since the end of the pandemic, which was a period marked by unprecedented spending to support the economy and cushion its impact.
As a result of this and other recent developments, almost all states and territories now sit in deficit. Victoria especially continues to attract scrutiny as it struggles with fast-rising debt, high deficits, record taxes, and a downgraded credit rating.
Government funding still exists of course, but tighter purse strings have made the acquittal process far more detailed and onerous. This is now showing up in several ways:
1. Requests for funds to be returned
We are seeing more organisations required to return significant amounts of funding, and this can have serious effects on cashflow, service delivery and operations. This often occurs when a grant acquittal is amended, even when non-profits and charities believe they have met all of the requirements.
During the acquittal process, funders may dispute certain claimed expenses or activities and then seek to recover this part of the grant funding.
2. Refusing to roll over unspent funds
While funders have traditionally been more flexible with rolling over unexpended funds, refusals are now more common.
For example, an organisation might receive funding in January to deliver a program. They hire a team and set up operations, but by the time they’re ready the funding period ends and not all the money has been spent. When they request a rollover of the unexpended funds, the department may refuse and then seek to reclaim what is unspent.
3. Less support for operational costs
Historically, government funders would often allow unspent grant monies to be directed towards other activities or capital purchases, or to support unfunded areas such as management and operations. Some grants even included an administrative fee to cover these costs. However, funders are increasingly stating that this is now inappropriate or excessive.
Often, funding will only cover direct expenses such as wages, superannuation, utilities, and vehicle costs. It rarely covers the wider organisation, which may run 20 programs and require roles such as a CEO, accountant, and HR manager. With these positions unfunded, organisations are seeking alternate funding to keep themselves running. Yet in periods of economic pressure when donations drop or the ability to create self-generated income becomes more difficult, this creates major challenges. Programs may be funded, but critical operational components remain underfunded which threatens the organisation’s viability.
Strengthening your grant acquittal process
A robust grant acquittal process is vital for maintaining trust, transparency, and ongoing support from donors, funders, and regulatory bodies. Conversely, a poor acquittal process can lead to a loss of funding and make it easier for funders to request grant repayments.
Here are some steps your organisation can take to mitigate the risks:
- Complete acquittals early – finishing reports ahead of time gives funders visibility and reduces the risk of disputes later.
- Track income and expenses closely – keep accurate, current records to show how the funding was used. This will also help you spot gaps early.
- Budget throughout the project – checking the budget as you go helps prevent overspend or underspend at the end.
- Report costs regularly – sharing clear cost updates builds trust and makes the final acquittal smoother.
- Engage with funders early – maintain open communication, especially if there is a major change such as a key staff member leaves or the program is disrupted in any way.
Partnering with experts who understand the grant acquittal process is another practical way to help reduce risk.
At RSM, we work with many not-for-profits and charities to assist with the full scope of budgeting, tracking, and reporting on funding expenditure. We are highly skilled in the grant acquittal process – from mapping out program costs to preparing clear, defensible reports.
Stricter acquittals for government funding may feel daunting and do present a significant risk to not-for-profits and charities. However, with the right processes and support in place, your organisation will be better placed to navigate this tougher funding climate with more clarity and confidence.
To learn more about strengthening your grant acquittals process, please contact your local RSM office.
