The Grant Lifecycle: From Award Letter to Final Report

This is the complete walkthrough of handling a grant in GoodBooks — setting it up, receiving the money, spending it, watching the balance, and closing it out. We'll follow one grant the whole way:

The example: The Smith Foundation awards you $10,000 for your youth program, paid in two installments of $5,000, to be spent by June 30. The money may only be used for the youth program — it's donor-restricted.

If you just want the quick reference, see Tracking Grants; this article is the full story, including why each step matters.

Step 1 — Set up the grant when the award letter arrives

Don't wait for the check. Go to Donations → Grants → Add Grant:

• Grant Name: Smith Foundation Youth Program 2026
• Funder: Smith Foundation (add them as a contact first if needed)
• Grant #: the award number from the letter
• Restricted Revenue Account: where grant money will post. If you've never had one, GoodBooks creates 4110 Contributions – With Donor Restrictions for you on save.
• Start / End Date: the award period from the letter
• Award Amount: $10,000

Setting the grant up immediately means it appears on the Grant Balance report right away — the board sees the award even before a dollar arrives — and the award amount becomes the yardstick every later report measures against.

One-time housekeeping: grant money should flow through a campaign whose gifts are donor-restricted. If you don't have one, create a campaign for restricted grants (or for this program) and switch on "Gifts to this campaign are donor-restricted" — see Understanding Campaigns. This is what routes the money into the restricted side of your books, and it's the switch that makes everything later automatic.

Step 2 — Record the check (receipt)

The first $5,000 installment arrives. Record it as a donation:

1. Enter a donation with Smith Foundation as the donor, amount $5,000.
2. In the campaign designation table, designate it to your donor-restricted campaign, and in the Grant column pick Smith Foundation Youth Program 2026.
3. Include it in a deposit batch with the rest of the week's checks and, once the money is at the bank, Mark as Deposited.

When the batch is deposited, your books record: bank deposit of $5,000, revenue of $5,000 in the with donor restrictions contribution account, and the revenue tagged to the grant. Three things just happened at once:

• The Grant Balance report now shows Revenue $5,000 against the $10,000 award.
• Your financial statements show the $5,000 in the with donor restrictions column — it's visibly not spendable-for-anything money.
• The grant has $5,000 available to release — the pool the automatic release engine will draw from as you spend (Step 3).

When the second installment arrives later, repeat this step. Nothing else changes — the grant simply shows $10,000 received.

Step 3 — Spend the money

You buy $1,200 of youth program supplies. Enter the check in your register exactly as usual — date, payee, expense account, fund — with one extra click: on the expense line, set Spend Against to Smith Foundation Youth Program 2026.

That one click does two jobs:

1. Tags the expense to the grant, so it counts in every grant report.
2. Releases the restriction automatically. GoodBooks appends a balanced pair of lines to your entry — "Released from restrictions — Smith Foundation Youth Program 2026" — moving $1,200 from the restricted column to the unrestricted column of your books. This is the "release from restriction" your auditor talks about (ASC 958), and you never book it by hand. The entry form previews the release before you save.

The release is always capped at what the grant actually has available: if the grant has $800 of unreleased money left and you spend $1,200 against it, only $800 releases. The expense itself still records in full.

A few spending rules of thumb:

• One grant per expense line. A supply order split between two grants becomes two lines on the same check, each with its own Spend Against.
• Payroll and other costs entered as journal entries can be tagged the same way — Spend Against works on expense lines wherever you enter spending in the register.
• Forgot to tag an expense? Edit the entry, set Spend Against on the line, and save — the tag and the release catch up.

Step 4 — Watch the balance all year

Two reports (Reports menu) keep the grant honest — see Grant Reports for the details:

• Grant Balance Report — the one-glance answer: Award $10,000, Revenue $10,000, Spent $6,300, Remaining $3,700. Run it before every program purchase decision and every board meeting.
• Income Statement by Grant — the detail behind it: which expense categories the grant money went to, with a column per grant. This is the report that answers a funder's "show us how our money was spent."

Because releases happen automatically as you spend, your regular financial statements stay right all year too: the with donor restrictions column shows exactly the grant money received but not yet spent, with no quarterly catch-up entries.

Step 5 — Close out the grant

When the award period ends (or the money is fully spent):

1. Run the Grant Balance Report as of the grant's end date and the Income Statement by Grant for the award period — together they're the backbone of your final report to the funder. Spent should equal the award; Remaining should be zero.
2. If a little money is left over, talk to the funder — typically you'll either get an extension (spend it, tagged the same way) or return it.
3. Open the grant and mark it inactive. It leaves the Spend Against and donation pickers so nothing new lands on it, but all history and reports remain — including next year, when the auditor asks.

Common situations

The grant isn't restricted. Some grants (rare) come with no strings. Track it the same way — receive it through the grant, tag the spending — so the grant reports still work. GoodBooks treats grant money as restricted-by-default because that's almost always right, and the automatic releases simply mirror your spending; they never overdraw what the grant received.

Multi-year grants. Set the award period to the full window and keep receiving/spending against the same grant across fiscal years — the Grant Balance report is life-to-date, so nothing resets at year end.

We got the award letter but recognize revenue when promised, not when paid. If your accountant wants the full award on the books at award time (a grant receivable), that's a journal entry to make with them; day-to-day grant tracking in GoodBooks works the same either way.

Reimbursement grants. Spend first, tag the expenses to the grant as you go, then record the reimbursement check as the grant's revenue when it arrives. The Grant Balance report will show spending ahead of revenue in the meantime — that's an accurate picture of a reimbursement arrangement.