My Non-Profit Organization (NPO) Is Applying for a Grant: Can Assurance Services Help

Is your Non-Profit Organization (NPO) applying for a grant? The Canadian government offers significant grants at the federal and provincial levels. The government runs various programs for different causes, each with its own set of rules and reporting requirements. Securing these grants is competitive, and a well-written application can increase your chance of securing a grant. The real deal-maker or deal-breaker could be the audit report, as it gives credibility to your financials.

A Grant involves raising significant funds, and in money matters, the grantor wants assurance that the funds will be used efficiently for the stated cause. And when the grantor is the government, the level of assurance needs to be at the highest level. While a certified accountant offers various degrees of assurance services, from compilation to review, the only thing that can assure the government that your NPO is using sound financial management and accountability practices is a full-fledged financial audit.

It is a prerequisite of the Canada Revenue Agency (CRA) for charities and NPOs applying for government grants.

How Government Grants Work for Non-Profits

Type of Grants: The government offers different types of grants for different uses. There are project grants for specific programs, like arts and cultural projects or environmental initiatives. Then there are grants to help NPOs fund their operating expenses (rent, utilities, staff salaries) and capital expenditures (building renovation, equipment purchases, technology upgrades).

Type of NPO: However, the government does not view all NPOs through the same lens. Registered charities that can issue tax receipts for donations and face strict CRA reporting requirements are preferred by government funders. Incorporated NPOs that are not registered under the Income Tax Act and face less CRA scrutiny may need to partner with a registered charity for programs.

Grant Eligibility Requirement: Most government grants are made available to incorporated organizations with a non-profit or charitable status that have demonstrated capacity to deliver programs. Next, government grantors see if the grant request aligns with the program’s funding goals. Lastly, they ensure the organization has good standing with regulatory bodies and strong financial accountability, which is proven by audited statements.

Before Applying for a Grant: To increase your chances of getting a grant, you must choose the right program that aligns with your goals and funding requirements. Next, you must meet the application and reporting deadlines as per their funding cycles.

Writing a Grant Application: Once you have chosen the program and set the deadlines in your calendar, it’s time to write an appealing grant application. The application should tell your story in the words a grantor understands. Ensure you include:

• What problem are you addressing with details of the target population
• How you will address the problem with realistic activities and timelines
• Why your NPO is right for the cause, with the success of past programs
• What change will the program bring with measurable outcomes

In your application, give realistic budgets. Avoid being too ambitious with the capacity, as grantors observe the capacity you have demonstrated in the past to deliver programs. Hence, they require audited financial statements.

The Importance of Financial Audit in Securing a Grant

Financial audits assure grantors that your NPO has the necessary internal controls and financial stability to manage funds efficiently. This assurance comes from the way an audit is conducted.

• Firstly, the auditor should be independent, which means they cannot be a board member, employee, or have any financial interest in the NPO.
• Secondly, the auditor must be a Chartered Professional Accountant (CPA) with a valid public accounting license in the province.
• Lastly, some provinces require auditors to have specific experience with NPOs.

How an Audit is Conducted: An independent CPA defines the scope of the audit and collects necessary documents. They examine financial records, accounting practices, interview staff, and assess internal controls. They compile their findings in the audit report, mentioning in detail any discrepancies and issues, with recommendations to improve financial practices.

Although the audit process is demanding and expensive, it gives lenders and grantors assurance of the NPO’s credibility and increases its chances of getting bigger grants. Hence, the CRA mandates a full audit of charities with over $1 million in revenue.

While a clean audit report increases the chances of getting the grant, one that reveals major discrepancies can reduce grant opportunities. Hence, NPOs should take audit recommendations seriously.

Charities Receiving Government Funding: Once you have received government grants, you are required to perform frequent audits regardless of your revenue.

Some common government funding requirements include:

• Annual audited financial statements
• Separate audits of specific programs or grants
• Compliance audits verifying proper use of funds
• Enhanced reporting on outcomes and deliverables

Preparing For an Audit

If your organization is applying for a government grant, you can increase your chances by conducting a financial audit. You can smooth the audit process by preparing for it.

Maintain organized records: Instead of cleaning up your records before the audit, you can set up a process to organize records throughout the year.

• At the end of every month, reconcile bank accounts with accounting records, ensure they are categorized in the right account, and file supporting receipts for every transaction. Create a backup of everything.
• At the end of every quarter, review the accuracy of financial statements, verify payroll and tax remittances, and update fund accounting and donation receipts.
• At the end of every year, conduct board-approved budget reviews, review insurance coverage, update accounting policies, and prepare preliminary financial statements.

Book the auditor early and appoint a dedicated person from your finance team to attend to the auditor’s request for financial documents, test internal controls, interview staff, and more.

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