A Nonprofit Bookkeeper’s Guide to Managing Program Expenses
For nonprofit bookkeepers, managing program expenses is about more than tracking costs—it’s about demonstrating impact and ensuring resources are used efficiently to fulfill your mission. Whether you’re managing grants, donor restrictions, or just trying to keep your budget on track, here’s a guide to staying on top of program expenses while keeping your nonprofit’s finances mission-aligned.
1. Track Expenses by Program
Accurate tracking is essential for understanding how funds are allocated and reporting to stakeholders.
Best Practices:
Set up your accounting system to track expenses by program or fund.
Use categories or tags in accounting software to allocate costs correctly.
Regularly review expense reports for accuracy.
Pro Tip: Consistently update your chart of accounts to reflect active programs.
2. Monitor Budget vs. Actual Spending
A program’s budget is only as useful as your ability to monitor it.
Steps to Take:
Generate monthly reports comparing budgeted vs. actual expenses for each program.
Investigate variances early to address overspending or reallocations.
Share updates with program managers to keep them informed and accountable.
3. Allocate Shared Costs Fairly
Many nonprofits have expenses, like rent or utilities, that benefit multiple programs.
How to Allocate Shared Costs:
Use an allocation method based on reasonable metrics (e.g., program staff hours, square footage).
Document your allocation process for audit purposes.
Review and adjust allocations annually as program needs change.
4. Stay on Top of Donor Restrictions
Donor-restricted funds can add complexity to managing program expenses.
Best Practices:
Clearly identify restricted funds in your accounting system.
Track expenses to ensure they align with donor-imposed restrictions.
Notify stakeholders promptly if a restriction prevents spending within the timeframe.
Pro Tip: Set up separate accounts or tags for restricted and unrestricted funds to avoid commingling.
5. Leverage Technology for Efficiency
Manual tracking can lead to errors and inefficiencies.
Tools to Consider:
Accounting Software: Automate expense tracking and reporting.
Grant Management Systems: Keep track of spending and compliance requirements.
Time-Tracking Software: Allocate personnel costs across programs accurately.
6. Communicate with Program Staff
Your program managers play a key role in keeping expenses on track.
How to Foster Collaboration:
Provide monthly financial updates tailored to their programs.
Offer training on how to read and use financial reports.
Create clear policies on expense approvals and reimbursements.
7. Prepare for Audits and Funders
Transparency and accuracy in managing program expenses are critical for audits and funder reports.
Steps to Take:
Keep detailed records of all program-related expenses.
Maintain documentation for all allocations, including formulas and justifications.
Conduct internal reviews to ensure compliance with grant or donor requirements.
Final Thoughts
Managing program expenses requires diligence, transparency, and a collaborative approach. By implementing these practices, you’ll not only keep your nonprofit on solid financial footing but also show your donors and funders that their contributions are making a meaningful impact.
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