Nonprofit Grant Management: How to Optimize Labor-to-Grant GL Allocation With Criterion

Securing a new grant for your nonprofit is a momentous achievement. Then, the real challenge starts: using the funds with precision and purpose.

Labor is often the biggest cost for nonprofits. The people running your organization deserve fair compensation, which requires a significant amount of grant funding. But in pursuit of efficiency, many nonprofits overlook proper accounting and financial software — which causes trouble for the people managing the books.

With for-profit organizations, payroll and labor allocation can be straightforward. But with nonprofits, they demand a more nuanced approach. Without a robust system in place, you risk misallocation, inefficiency, and compliance issues. You may even lose out on funds to drive your core mission.

To maximize the effect of grants on your organization and remain efficient, you need specialized software for payroll that communicates with your accounting platforms. Criterion HCM was built with nonprofits in mind, along with other complex industries. Like construction companies and government agencies, nonprofits often have complex payroll and labor allocation processes. By configuring the needs of your organization and integrating with leading ERPs like Sage Intacct, our platform streamlines your labor allocation and grant tracking process. That way, you can extract every ounce of value from your grants with less burden on your HR and financial teams.

Let’s take a closer look at challenges nonprofits face around grants and how Criterion presents the perfect solution.

Types of Grants and Requirements

Grants are the financial engine for nonprofit organizations. They can come from multiple channels: the federal government, private institutions, individual donors, public charities, and more. While there are many different types of grants available, three categories primarily impact your accounting processes.

Unrestricted Grants

These grants offer complete flexibility. Often, they may stipulate, “Use for the core mission of your organization,” which covers almost anything you do (including labor). These grants are easy to fold into your accounting process, since they don’t have many restrictions (if any at all). However, they still require effort to use properly.

Use-Restricted Grants

Most grants come with strings attached, and you can only use them for certain purposes. Whether it's for labor, supplies, a particular department, or a designated percentage of an individual's salary, these use-restricted grants provide a roadmap for expenditure. To manage these effectively, you need to track exactly where the money goes. For instance, you can’t allocate grant funds to labor if the award is restricted to “supplies only.”

Time-Restricted Grants

Some time-restricted grants mandate using funds during a certain period of time. Some might state that you can only use the funds before or after a specific date. Others have multiple restrictions based on time and use. Syncing your labor allocation with these grants can be tricky, as you’ll need to configure your system to account for them at specific times.

Challenges of Nonprofit Grant Labor Allocation

Since labor is the biggest cost for many nonprofits, it's also the primary challenge when allocating grant funds. Labor can be difficult to track anyway, but with all of the restrictions grants impose, the accounting team must handle complexities at multiple levels.

Tracking Labor Against Grants

For proper accounting, you can’t just wait until the end of each pay period to allocate labor. You need a way to track labor against grants directly without imposing too much of a burden on your employees. There are two methods nonprofits typically use to do so:

• Real-Time Allocation: Here, your team punches time directly into grants and allocates that labor by the minute. This method promises accuracy but may sacrifice efficiency.
• Percentage-Based Allocation: In this method, your team tracks labor as a blanket percentage across multiple grants at once, with all of the allocations adding up to 100%. For instance, you might allocate labor with 50% of Grant A and 50% of Grant B. This can be effective with grants that specify a certain percentage of funds for labor use only or with unrestricted grants. However, it introduces complexities, especially when using multiple types of restricted grants or government grants (which often require real-time allocation).

Beyond the allocation methods, consider the process of how employees track their time. Just because it works for accounting doesn’t mean it works for employees. Are your employees manually selecting grants to track time against, or does the accounting department need to wrangle the timesheets and allocate funds manually? To prevent errors and inefficiency you’ll need a time tracking solution that integrates seamlessly with your ERP.

Reporting on Grant-Labor Tracking

Tracking labor against grants is only half the battle. Once you have the data, you need to generate clean, intuitive reports to send to grantors. This is necessary for both proper general ledger keeping and legal compliance. For instance, federal award recipients, in particular, are obligated to provide very specific data in grant reporting, including project information, employee wages, and other financial data. What’s more, some restricted grants may recoup or deny your organization funding for anything that is misallocated or doesn’t meet the requirements outlined in the grant.

For nonprofits, manually generating these reports can be virtually impossible. For accurate reports, you’ll need more than just an Excel sheet and a few formulas. To satisfy any inquiries from the government, specific grantors, or any other relevant stakeholders, you need a way to report on the labor you’ve tracked against these grants. You need a robust reporting solution that allows you to both automate and customize your reports, pulling data from payroll, accounting, and your grant list, while ensuring 100% accuracy.

Complications for Multiple Locations and Entities

This can get even more complicated for companies with multiple locations or multiple entities. Managing manual tracking of labor to grants in these scenarios can be a nightmare for the accounting team, especially with employees working across multiple locations. Some grants may only be viable for specific locations or branches, which makes tracking labor for such employees that much more difficult.

Navigating Outdated Payroll/Accounting Processes

If you’re using spreadsheets to run payroll and allocate grant funds, your process may be fraught with inefficiencies and errors. Even if you have an integration with your payroll system and your ERP, how reliable is the data? Many solutions like this are plagued with synchronization issues, poor functionality, and subpar support from vendors. A bi-directional integration with your ERP and HCM/Payroll system will ensure proper allocation of grants to labor and generate reports that track the funding.

How Criterion Streamlines Nonprofit Labor Allocation

Criterion addresses all of the challenges nonprofits face around labor allocation and much more. We communicate with your ERP to provide bi-directional data sharing, a shared database for payroll and time tracking, endless reporting options, and several other features. If you’re tired of fighting with your current grant tracking and accounting system, here’s how Criterion can help:

Stage 1: Integrating With Best-in-Class ERP Systems

It all begins with seamless API integration. We designed Criterion to harmonize with best-in-class ERP systems like Sage Intacct, Acumatica, Unanet, Microsoft Dynamics, and more. This bi-directional data sharing provides a fluid exchange between the ERP and Criterion HCM, allowing for real-time insights into incoming grants and those reaching their max thresholds.

A bi-directional integration ensures that the financial and labor aspects are tracked in real time (or on a percentage basis) against grants. When a new grant is introduced in your ERP, our system automatically moves into the time tracking system (Criterion), allowing for visibility and tracking against labor. Similarly, when grant funding is depleted, the system ensures no further time can be allocated to that grant.

Stage 2: Time Tracking Logs Directly Against Labor and Grants

Once the integration is set up and configured, you only need to proceed with your regular operations. Employees can clock in and clock out in a user-friendly interface, without worrying about tracking against the right grant. The system allocates their time automatically on the back end, but offers self-allocation capabilities too, if preferred. Either way, the time-tracking process is streamlined to your liking. Whether you track time via a PC, mobile app, or kiosk, Criterion offers complete configurability to work with your organizational needs.

Stage 3: Reporting

Its single database foundation allows Criterion to generate reports about virtually anything. New custom reports on labor, grants, funds, and more can be based on any field in the system. All of the relevant financial and payroll information is already connected, so grant-labor allocation reports can be generated with just a click of a button. You can even create custom fields to track and generate reports on any kind of information. When integrated with your ERP and other platforms, the reporting possibilities are endless. This capability is indispensable when communicating with grantors, accounting teams, and other stakeholders.

Criterion Can Work With Nonprofits and Businesses of All Kinds

Criterion isn't just a niche solution for nonprofit grant allocation. We also solve challenges for organizations across industries. Government-funded head start programs, churches, construction companies, tribal and first-nation governments, and retail service providers are just a few of our customers. In addition to grant management, we specialize in complex payroll processing, talent engagement, recruiting, and comprehensive HR data management.

Here are some of the benefits you gain when you start using Criterion HCM:

A Complete HR and Payroll System All in One Place

Criterion takes a holistic approach to HR and payroll. Operating both modules on a singular, interconnected database facilitates seamless collaboration between departments. When giving someone a raise, that information is easily updated and automatically accounted for in your payroll process. Simply update the wage rate and the system calculates payroll for you. You can add new benefits packages, update an employee’s tax status, provide access to their W-2, and more — all from the same interface, with minimal manual effort.

Manage Employees From Beginning to End

Criterion makes it easy to hire, onboard, train, and engage your employees at every stage of their career. When you onboard a new employee in our system, you can nurture each new employee from day one:

• The hiring features allows you to track interviews and send automated texts to new applicants to set up meetings, initiate preboarding, and more.
• You can achieve complete digital transformation with Criterion. All forms are tracked digitally, alleviating the burden of paperwork entirely.
• Immersive onboarding experiences set the tone for a positive employer-employee relationship, fostering confidence and leaving a lasting impression.
• Training modules (sexual harassment training, basic company introductions, etc.) are seamlessly integrated, adapted to employee location.
• An employee’s deductions are automatically calculated on the payroll side after onboarding.
• Regular performance reviews are scheduled automatically according to custom sequences.
• You can easily schedule other requirements like background checks and drug tests in the same system.

Multi-Location Management

Criterion takes multi-location management to the next level with geofencing. By enforcing location-specific time tracking, the system ensures that employees can only punch in at designated locations for validity.

You can customize this setting, allowing more flexibility for some positions than others. If an employee works at multiple locations throughout the week, our HCM can track hours worked at each location, plus commute time to allocate grant funds based on location if necessary. This feature is particularly powerful for larger nonprofits, allowing managers to oversee location-specific entries and manage positions at multiple locations with a single-sign on.

Empowering Employees With Connectivity

In Criterion, workflows can be set up to immediately connect individuals with mentors. You can even communicate with specific people or departments within the application itself. This comprehensive approach enhances the employee experience and contributes to a more connected organizational culture.

Criterion also doesn't force organizations into a one-size-fits-all mold. Complete configurability empowers you to tailor every aspect of the system to your unique needs. Whether you’re generating reports within the application or exporting data to other platforms, Criterion can accommodate the intricacies of your nonprofit operation.

Final Thoughts

Securing grants for your nonprofit is just the beginning. The real challenge lies in channeling those funds with precision and generating reports you can trust to hand off to your stakeholders. While traditional accounting and manual methods of labor allocation often fall short, Criterion can harmonize your payroll and accounting processes.

With real-time labor tracking against grants and seamless integration with your ERP, Criterion streamlines complex grant management and accounting. With meticulous reporting, multi-location management, and holistic HR functionalities, our platform ensures every grant is maximized with minimal burden on your team.

But Criterion is more than just a niche solution provider — we’re a strategic partner, here to help you improve processes across the board. With your Criterion account, you get a dedicated representative  to help you tackle any HR challenge that comes your way.

Don't let inefficiencies hinder your mission. Embrace the power of Criterion and gain a comprehensive view of your nonprofit’s financial landscape. Book a demo today to see how Criterion can improve your nonprofit in virtually every way.