The past few years have seen a profusion of new startups in spaces like Clean Energy, Agtech, and Materials Tech, along with rapid growth of the related ecosystems. This is thanks in part to billions of dollars now available through government grants and private funding.
Burkland’s Grant Accounting team is working with a number of these startups to help navigate federal and state grant requirements and ensure compliance. Many startup founders who have received grants approach us saying something like, “We have a grant, and we don’t know if we’ve been managing it right. Can you help us?”. If you can relate to this, you’re not alone. The fact is that grant accounting and grant compliance are both extremely complicated and important to scaling your startup.
Many early-stage startups in Clean Energy and other sectors develop their POCs and pilot their solutions with funding from grants, R&D Credits, and government contracts before looking to venture capital to scale. Clients usually approach Burkland after they receive their first grant and realize the complexity involved. GAAP accounting won’t cut it, as most regular CPAs don’t have the intricate knowledge of how grants are evolving. Every grant is unique and comes with different rules and requirements at both the grant level and agency level. Federal and State agencies are constantly building out new and different compliance systems.
It’s important to stay on top of agency requirements and make related accounting updates to avoid missing out on future grants, losing funds under current grants, reputation damage, and even civil and criminal penalties. This is why grant compliance is so important.
Grant Compliance & Accounting Requirements
The following eight items are particularly important focus areas for startups that have received federal grants. Burkland’s team supports our clients in each one:
- General Compliance: Keeping up with grant-specific requirements like qualified expenditures, as well as requirements at the overarching agency-level and making necessary accounting updates to stay in full compliance.
- Timekeeping: Implementing timekeeping systems and procedures to keep people costs in-line with grant requirements and internal budgeting needs.
- Cost Pools: Identifying and tracking direct vs. indirect costs and implementing a consistent methodology that aligns with your startup’s goals and procedures and ongoing major federal funding requirements.
- Advanced Financial Reporting: Committing to advanced financial reporting that provides the data to support your startup’s growth plans and relationships with grant makers and other funders.
- Budgeting & Rebudgeting: Preparing to approach funders for re-budgeting and increased budgets by making the ‘dollar value case’ for innovations.
- Invoicing: Developing grant-compliant billing procedures and systems as your startup scales and becomes revenue-producing.
- Audit Preparation: Preparing your financial statements and additional information required for Single Audits or Program Specific Audits—required for the acceptance of any federal grants of $750K or more.
- R&D Expenditures: Maximizing runway by identifying tax credit opportunities and maintaining proper financial records in order to be able to receive those credits.
Grant Application Support
Burkland also supports startups that are still in the process of exploring and applying for grants. Our Grant Accounting experts help companies:
- Develop budgets for grant proposals.
- Ensure personnel costs are in line with market rates allowed by granting entities.
- Develop a compelling financial narrative.
- Respond to grant budget questions.
- Review RFPs to determine program financial complexities.
The significance of implementing robust grant accounting practices can’t be overstated for startups fortunate enough to secure grants. Effective financial management is key to success and sustainability, ensuring transparency, accountability, and compliance with grant requirements.
By embracing the right accounting practices from the beginning, startups can optimize the utilization of grant funds and build trust with stakeholders, paving the way for continued support and future opportunities. As Clean Energy and others sector continue to evolve, the need for sound financial stewardship grows, making it essential for startups to prioritize and integrate best practices into their operational framework. Ultimately, a commitment to excellence in financial management will strengthen the foundation of your startup and contribute to the larger goal of advancing a sustainable and resilient future.