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## How to Set up Financial Management Systems for My NIH Grant

** Aug 20, 2024 10:11:01 AM ** [Kathy Dise](https://www.budgetease.biz/blog/author/kathy-dise) ** [Small Business](https://www.budgetease.biz/blog/topic/small-business), [Financial Management](https://www.budgetease.biz/blog/topic/financial-management), [Bookkeeping](https://www.budgetease.biz/blog/topic/bookkeeping), [Profitability](https://www.budgetease.biz/blog/topic/profitability), [small business bookkeeping](https://www.budgetease.biz/blog/topic/small-business-bookkeeping), [payroll](https://www.budgetease.biz/blog/topic/payroll), [Biotech](https://www.budgetease.biz/blog/topic/biotech), [Online Bookkeeping Services](https://www.budgetease.biz/blog/topic/online-bookkeeping-services), [Cleveland Bookkeeping](https://www.budgetease.biz/blog/topic/cleveland-bookkeeping), [Bookkeeping Companies](https://www.budgetease.biz/blog/topic/bookkeeping-companies), [P&L Monthly](https://www.budgetease.biz/blog/topic/pl-monthly), [Balanced Income Statement](https://www.budgetease.biz/blog/topic/balanced-income-statement), [QuickBooks Bookkeeping Company](https://www.budgetease.biz/blog/topic/quickbooks-bookkeeping-company), [NIH Grant](https://www.budgetease.biz/blog/topic/nih-grant), [Government Grant](https://www.budgetease.biz/blog/topic/government-grant)

How to Set up Financial Management Systems for My NIH Grant

4:14

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I often receive calls from researchers, scientists, and tech-based start-ups who have successfully obtained a grant from the government, like the NIH, Department of Energy or the Department of Defense Grants.  The start-up business will receive a letter to complete a “Financial Management Systems Questionnaire” from the government department. This stumps the researcher because their background is in a non-financial or business field.  However, these questions tend to be all about record and bookkeeping. 

It may not be imperative to set up your QuickBooks today (see [Are you Ready for A Bookkeeper Blog](https://www.budgetease.biz/blog/are-you-really-ready-for-a-bookkeeper)).  However, it is important to know what you will be required to do.   

These are questions we have seen that we can help answer: 

| **Question**  | **Suggested Answer**  | **COMMENT**  |
| --- | --- | --- |
| **A. ACCOUNTING SYSTEM: **Applicant/recipient organization’s accounting system should align with 45 CFR Part 75.412 Classiﬁcation of Costs  |   |  Expect that you will be using QuickBooks Online (QBO) to keep all the information organized for your grant. QBO is essential to fulfilling your promises below.  |
| 1a. Is there a Chart of Accounts that provides for consistent treatment of direct costs and F&A (indirect) costs?  | YES  |  Your bookkeeper needs to set up the COA with Direct (COGS) and Indirect Costs (Facilities and Administrative)  |
| 1b. Does this chart include an account for program income in the event that income is produced by funded research?  | YES  | It is important to separate your grant expenses from your non-grant expenses like income coming from sales or refunds.  You can use customers for each grant or class in (QBO). We recommend using customers.   |
| 2. Is there a Job Cost Accounting System in place to identify income and expenses for each grant?  | YES  | See 1b.  |
| 3. Are procedures in place to ensure that all income and expenses are allocated to the appropriate source(s) of support (grant)?  | YES  | See 1b.  |
| 4. Are there procedures in place to ensure that personnel charges are allocated appropriately to individual sources of support (grant)?  | YES  | You would need to have time tracking in place.  It can be done through your payroll company or as simply as in an Excel document. Have a bookkeeper set up a system for you and then allocate the payroll each month to the appropriate line item in the COA and the Grant (Customer/Class)  |
| 5. Are there procedures in place to ensure that personnel charges are reasonable, conform to the established policy of the organization, are consistently applied regardless of the source of funds, and reasonably reﬂect the percentage of time actually devoted to the grant?  | YES  | This means that you need an Employee Manual that specifies company policy.  Possibly Employment Contract would specify the time to be spent on the Grant.  |
| **B. FINANCIAL CAPABILITY: **Applicant/recipient organization’s accounting system must provide for strong ﬁnancial capabilities to support the grant/cooperative agreement as outlined in 45 CFR Part 75.205A  | YES  | Answering YES assumes that you will be using financial software to keep track of all your transactions relating to the Grant. We recommend QBO for ease of use.  |
|     1. Does the organization prepare audited ﬁnancial statements at least annually?  | NO/YES  | Depends on your organization. Most small grants are to smaller organizations that do not need audited financial information.  You will not be required to have an audit performed unless you have more than $750,000 in funding for the government.  Funding could come from one or more grants but if you receive more than $750,000 you will be required to have an audit.  Best to try not to have an audit because it is costly and time-consuming.   |

 

If you need bookkeeping tips for biotech and technology firms, check out this other blog-"[Bookkeeping Tips for Accounting for Biotech and Technology Firms."](https://www.budgetease.biz/blog/bookkeeping-tips-for-accounting-for-biotech-and-technology-firms)

 If you need help answering these questions or setting up your business with QuickBooks, email me at [kathy@budgetease.biz](mailto:kathy@budgetease.biz). We specialize in bookkeeping for tech start-up organizations and would be happy to help you with this or any other bookkeeping questions you have.  

 

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#### Written by [Kathy Dise](https://www.budgetease.biz/blog/author/kathy-dise)

Kathy has over 30 years experience helping small businesses succeed. As a commercial lender, commercialization expert and now as a QuickBooks diamond level advisor, Kathy understands the challenges small business owners face. Her experience helps business owners quickly accomplish their financial goals. As the owner of BudgetEase, Kathy works with clients to develop a plan to efficiently process 1,000s of small transactions so owners can make informed decisions. She lives in Shaker Heights, OH with her husband Ralph and enjoys golf, curling and walking in Cleveland’s fabulous Metro Parks.

[**](https://www.linkedin.com/profile/view?id=24500018)

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