Nonprofits answer to more than one audience. The board wants a clear financial position, auditors want a full trail, and every funder wants to know exactly how its money was spent. Many organizations keep grants and donors in separate spreadsheets or a donor database that never quite matches the general ledger. Business Central can bring this together, provided the design starts with funds and grants rather than adding them later.
Restricted and unrestricted funds
Start by listing every fund and its restrictions:
- Unrestricted operating funds.
- Temporarily restricted funds, by purpose or time period.
- Permanently restricted funds such as endowments.
In standard Business Central, dimensions are a common way to tag transactions by fund, grant and program. Dimensions alone, however, record where money went; they don't stop a transaction that breaks a restriction. Decide whether you need restrictions enforced at entry, or simply reported afterwards.
Grant budgets and utilization
For each grant, you will usually need:
- The awarded amount, period and eligible cost categories.
- A budget by cost category or line, sometimes by month.
- Utilization to date, remaining balance and spending rate.
- Indirect cost allocations, where the funder allows them.
Business Central's budgets and dimensions can carry much of this. If you also need encumbrance accounting (committing funds when a purchase order is raised), confirm early how it will be handled, because it affects purchasing setup.
Donors and pledges
- Donor records, gifts and pledges, and how they connect to customers in the ledger.
- Pledge schedules and write-offs.
- Receipting requirements, including Canadian official donation receipts for registered charities.
Keeping donors in the same system as the ledger removes a monthly reconciliation step.
Reporting and audit trail
- Statement of financial position and statement of operations by fund.
- Grant reports in the format each funder requires.
- Drill-down from any report line to the transactions behind it.
- Approval history for spending against restricted funds.
Our approach
Our Fund & Grant Management extension for Business Central adds restricted fund enforcement (transactions that would breach a restriction are blocked or flagged automatically), grant reporting templates and donor and pledge tracking inside the same system as your general ledger. It sits on top of standard Business Central finance, so your accountants keep the tools they know.
Questions to ask any solution
- Can a user post an expense to a restricted fund it is not eligible for?
- How long does it take to produce a funder report at month-end?
- Can an auditor trace a grant report figure to the source document?
- Does the donor database reconcile to the ledger without manual work?
Next step
See how we configure Dynamics 365 for nonprofits and fund management, or send us a Fund & Grant Management enquiry and bring one of your funder reports as a test case.