Grant accounting: does previous NGO experience matter?

 I have often been questioned by individuals from all walks of life - professional accountants and budding ones, and the general populace - on this controversial subject. Many job adverts for accounting positions require individuals to have prior experience in managing or handling donor-funded projects or programs to be considered, and others in extreme circumstances would prefer individuals with specific experience in managing grants of specific funders like the USAID, EU, 

Oxfam, Africa Aid, Norwegian Aid, and Dutch Aid to name just a few. In this series, I will outline the theory of grant accounting in non-governmental organizations (NGO)s, motivation behind prior experience requirements, the demotivation against such practice, and the potential avenues available to both funders and NGOs to curb the externalities associated with this practice. While these are just my thoughts, I will recommend areas for empirical studies at the end of the discussion.

Grants and Grant Accounting in NGOs

Basically, a grant is a sum of money that one organization gives to another to support an initiative or reward excellence. Grant accounting is a technique that uses the accounting system to track and record government grants and other forms of aid. Depending on the type of grant, grant accounting may employ the income or capital approach. Over the time required to align

them with the associated costs, the grant is recorded as revenue. The grants themselves come in three flavors: matched, conditional, and unconditional. Whereas conditional grants include specific usage guidelines or additional implementation restrictions, unconditional grants are given out with no strings attached.

A particular kind of conditional donation known as a matching grant is one in which the donor promises to contribute money only after the organization has raised a predetermined sum from other sources. Much of these distinctions in future publications.

Now, there are few things we need to know about grant accounting in the NGO sector. Research indicates that the grant an institution receives must be used in a way that conforms with all existing rules and regulations, and the entity must comply

with the grant criteria to be eligible for accounting for a grant. The entity decides whether to return a grant if requirements are not fulfilled. To properly account for a grant, the following processes are involved:

• The entity must maintain a record of all the documentation and grant criteria.
• It must maintain organization and meticulous documentation of all exchanges and correspondence with the grantor.
• Grants should be documented using the matching principle (not cash basis).
• Recognize the grant's particular requirements as well as the acceptable accounting procedures and methodologies.
• Keep track of income and gifts/grants in the accounting period in which they are received.

The prior experience requirement

Prior experience has always been considered the best assessment variable in the hiring of human capital in many organizations as part of the HR Strategy to minimize the risk of adverse selection. When an employer uses methods or procedures that result in unfair treatment of an individual or group of individuals who belong to a protected category, such as women or minorities, it is engaging in adverse selection. Thus, in insisting on parameters like prior year experience, they would be limiting exposure to this risk. So, what is experience?

 

Simply put, experience is the work you've done that has assisted you in developing the abilities and knowledge you possess in your line of work. It differs from qualifications in the sense that qualifications are the education or training you have received to get ready for a job in your field. Proficiency in technology, mathematics, science, or history is necessary in many occupations. A college degree, certification, license, or high school graduation are typical examples of qualifications. 

Before a candidate applies for a job, employers could need them to meet specific educational requirements or obtain additional credentials. While experience demonstrates that you have worked in your area regularly, qualifications demonstrate that you have the knowledge required for your career. Employers can check qualifications by getting in touch with your institution or the licensing body for your field, and they can confirm your work history by getting in touch with the businesses you have previously worked for. Experienced candidates

 

may need less training than less qualified candidates, yet candidates with specialized training may be more knowledgeable about a certain subject these days.

The NGO sector is notably one of the sectors that have been adopting the prior experience requirement seriously in recent times. But, given the above discussion, the three one-million-dollar questions hiring managers in NGOs should be asked are: 

1. What caliber of accountants should they hire to ensure compliance with grant accounting rules?
2. Must they be experienced in managing projects or programs of their particular donors?
3. Is NGO grant accounting anywhere different from the mainstream accounting discipline or field such that it must be considered a different discipline altogether?

Obviously, these questions need answers. This series will tackle them systematically as we proceed. Please hang on tight.

What to expect next

In this bulletin, I have managed to put the discourse across in quest of your anxieties in this interesting discussion. Up next, I will delve into the implications of the prior experience requirement in the hiring process and its negativities in sectorial innovations, and other externalities. I will then strive to recommend available avenues to put the cancer to rest. Until next time, please continue to feel excited. I mean, very excited.