Grants and Contracts Accounting

Grants and Contracts Accounting encompasses the processes and controls needed to manage externally funded awards from acceptance through closeout, ensuring compliance with institutional policies, federal regulations, and sponsor requirements. 

Who is Involved? 

• Principal Investigator (PI): Provides oversight for programmatic performance, manages the project budget, and ensures that all purchases and expenses fit within the project scope. The PI is also mutually responsible with GCA for financial compliance throughout the award lifecycle. 

• Department: Initiates financial transactions related to the award and follows them through to completion, ensuring proper documentation and internal controls. 

• Grant and Contract Accountant (GCA): Supports the PI and department by managing index setup, cost transfers, reporting, compliance monitoring, and closeout activities. 

What is Not Part of Grants and Contracts Accounting? 

• Budget development and scientific proposal writing (pre-award function) 

• Classification of funds as a gift or sponsored award  

• Institutional general-purpose funds (unrestricted funds) that do not carry sponsor-specific requirements 

• Disbursement of payments unrelated to the award scope (e.g., HR payroll for non-award staff) 

• Initiating financial transactions for the project except for cost transfers. 

Rebudgeting and Adjustments: Accounting Considerations 

When funds must be reallocated or adjusted: 

• Rebudgeting of major cost categories or transferring charges may require prior sponsor approval—check GCA 

• Accounting must document and track all cost transfers, ensuring allowability, allocability, and reasonableness per applicable regulations and institutional policy (e.g., 2 CFR 200 for federal awards) 

• Cost-sharing commitments included in the award must be separately tracked and certified in the accounting system 

• Early coordination with GCA ensures changes are reflected correctly in the internal ledger and external reporting 

• Non-compliance or misclassification of funds can trigger audit findings and financial liabilities  

Best Practices for Grants and Contracts Accounting 

• Set up the award account/project code promptly once accepted and compliance checks are cleared 

• Establish a clear cost-organizational structure (e.g., budget lines, cost centers) and communicate to the PI and department 

• Monitor expenditures continuously to ensure alignment with the award’s scope and budget; review for over-spends, unobligated balances, or unapproved charges 

• Maintain supporting documentation for all transactions, especially cost transfers, rebudgeting, effort certifications, and sponsor-related deliverables 

• Coordinate closeout activities early: finalize financial reports, return residual funds if required, and archive records according to the required retention period