How are non-profits funded?

If you’re a nonprofit organization your funding may be associated with a grant, a contract, or a program requiring reporting to track employee labor and non-labor expenses.  When funds are awarded to you by another entity, whether a government agency or a private entity (such as a foundation), then you are subject to accountability to that funding source.  

A grant is an award of financial resources that does not have to be paid back, but there are usually spending and reporting guidelines that the grantee must abide by.  (E.g, a hurricane relief organization applies for and receives grant funding to rebuild homes for hurricane victims.)

A contract is an award of the opportunity to provide goods or services and typically contain more rigorous terms and conditions than grants as well as carry more financial and legal risk. (E.g., a counseling services group is allowed to provide a government subsidized service to low-income families.)

Programs define a non-profit's organizational structure and how resources are focused to achieve desired outcomes of clients served.  (E.g., an organization divides a grant's funds between their Early Childhood Center and their Afterschool Program.)

Funds awarded can be either restricted or unrestricted.

When the funding source provides restricted funds, there is an agreement that those funds will be used for a particular purpose or project (e.g., funds to support counseling services for at-risk kids).

When the funding source provides unrestricted funds, the non-profit is able to use those funds as they see fit (e.g., operating expenses, or to a program of their choosing).  These might be referred to as an Operating Support Grant, or a General Support Grant.

For government contracts and restricted funds, non-profits must carefully track how those funds are being used in compliance with the agreement.

Funding sources may require the submission of regular reports to prove compliance with their requirements.  A government entity may also perform scheduled or unscheduled audits to ensure compliance.

In order to prove compliance to funders and be ready for an audit, you may need to keep track of employees' time spent across funds, whether grants, programs, or contracts.

Although you may already have a Time and Attendance system to keep track of employees' hours worked, they are not designed to allocate salaried employees' actual time to specific grants, programs, or contracts.  Instead they allow for a guesstimate through fixed allocations, leaving you to rely on spreadsheets or manual calculations for accurate time and effort reporting, which can be unreliable and time-consuming to manage.

Example of a salary allocation scenario:

  • Employee charges 84 program hours and 16 vacation hours in the semi-monthly pay period:
    • 20 hours Program 11111
    • 40 hours Program 22222
    • 24 hours Program 33333
  • Employee’s pay period salary is $2000

How can IDI help?

IDI can automate your time-consuming processes and help prevent audit anxiety!  

Our Time Bank™ Salary Allocation solution is designed for salary exempt employees that work over or under standard pay period hours and need to have their earnings allocated proportionally across different labor codes worked (e.g. department, program, project, grant, fund).   This Time Bank solution also has the flexibility to allocate the exempt employee’s PTO earnings proportionate to the worked time labor distribution or to a fixed account.  

The solution can be tailored to reallocate employee hours instead of earnings and also accommodate different allocations for non-worked time (e.g. allocate PTO in same proportions to grants as worked time).

When Time Bank is run at the end of the pay period, it retrieves the time and labor information from the time system and then determines worked vs. non-worked earnings, determines percentage worked by fund in the pay period, calculates worked earnings by fund, calculates non-worked (PTO) earnings by fund, and creates a file with the results for import into payroll.

With the click of a button, Time Bank reads the earnings from the time and attendance system, performs the allocations, and the results are passed to payroll with the accurate details needed for reports to government and other funding sources.

Time Bank can be further enhanced with solutions to meet the following need:

OT / PTO Redistribution, or allocating non-exempt/hourly overtime or paid time off by percentages worked -- reassigning employee overtime or PTO hours by labor codes worked (instead of to the fund when 41st hour occurs in the week).

Fund budgeting and management tool -- add on GrantAlytics, the only budgeting and management solution fully integrated with your time and payroll modules with dashboards, reporting, and other tools so you can quickly gain clarity on how each grant, contract, or program is performing and why with actual data from your time and payroll systems, not estimates, so you can take corrective action as well as justify through reports to your funding sources that they are performing as expected.  Features include non-labor expense import capability and milestone and outcomes tracking.

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ADDITIONAL RESOURCES:

IDI Non-Profit Solutions Video

IDI Non-Profit Solutions Blogs

GrantAlytics Overview

GrantAlytics Video