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The short answer
Grant reporting starts with a budget broken into lines the donor approved, then records every payment against a line with a voucher and receipts. Staff advances are retired with receipts and any balance returned. Each period, the NGO reports budget against actual in the donor's own template, explains variances, and keeps exchange-rate records for foreign-currency grants.
Donors fund programmes, but they renew grants based on reports. A strong programme with a late or messy financial report can lose its next tranche. Good reporting is mostly about recording things correctly as they happen, so the report is a summary, not a reconstruction.
Start with the budget
Every grant comes with an approved budget. Break it into the same lines in your books: staff costs, activities, travel, equipment, administration or indirect costs. Give each grant a code and each line a sub-code. Every payment voucher then carries both, so you can pull the spending for any grant at any time.
- Read the grant agreement for rules on moving money between lines; many donors allow a small percentage without approval and require written approval above it.
- Note any costs the donor will not fund.
- Note reporting dates, the template and the currency of reporting.
Advances and their retirement
Field activities usually run on cash advances to staff. Retirement is how the advance is accounted for: the staff member returns receipts for what was spent and refunds the balance.
- Approve the advance against a specific activity and budget line.
- Pay it by transfer to the staff member and record it as an advance, not as spending.
- Set a deadline for retirement in your policy (for example, within seven days of the activity; set your own).
- On retirement, record each receipt against the budget line and collect any unspent balance.
- Do not issue a new advance to anyone with an unretired one.
Receipts should name the supplier, date, item and amount. For participants' transport and allowances, use a signed attendance and payment list.
Budget against actual
Worked example (labelled example)
| Budget line | Budget (₦) | Actual to date (₦) | Variance (₦) | Note |
|---|---|---|---|---|
| Staff costs | 12,000,000 | 11,400,000 | 600,000 | One post vacant for a month |
| Community training | 9,000,000 | 9,850,000 | −850,000 | Extra session; donor approval on file |
| Travel | 4,000,000 | 3,200,000 | 800,000 | Two trips postponed to next quarter |
| Equipment | 2,500,000 | 2,500,000 | 0 | |
| Administration | 2,500,000 | 2,350,000 | 150,000 | |
| Total | 30,000,000 | 29,300,000 | 700,000 |
The totals check: line variances of ₦600,000 − ₦850,000 + ₦800,000 + ₦0 + ₦150,000 add to ₦700,000, which equals ₦30,000,000 − ₦29,300,000. Every variance above a level the donor sets needs a note. The overspend on training should match a written approval.
Donor formats
Each donor has its own template, reporting currency and supporting documents. Keep your books in one structure and map them to each template, rather than keeping separate books per donor. Common requirements include a financial report by budget line, a list of transactions, bank statements for the grant account, an asset register for equipment, and proof of tax deductions for staff.
Foreign-currency grants and tax points
When a grant arrives in dollars, pounds or euros, record the amount received in that currency and, each time you convert, the rate and the naira received. Donors usually say which rate to use in reports: the actual rate at conversion, or an average. Keep the bank advice for every conversion. Never assume a rate; use the one on your bank's record.
On tax, a May 2026 Mondaq summary of the Nigeria Tax Act 2025 lists goods for humanitarian donor-funded projects among VAT-exempt supplies; check whether your purchases qualify before telling suppliers not to charge VAT. Staff on salary are subject to PAYE like any other employer. CAC also requires incorporated trustees to file a statement of affairs every six months, as NNNGO explains. This is information, not tax or legal advice.
Closing out a grant
The end of a grant is where many NGOs stumble. Plan the close-out three months before the end date.
- Stop new commitments that cannot be completed and paid before the end date.
- Retire every outstanding advance and settle supplier invoices.
- Reconcile the grant account to the last naira and prepare the final budget-against-actual report.
- Agree with the donor what happens to any unspent balance and to equipment bought with the grant.
- Keep the full file, including vouchers, receipts, bank statements and approvals, for the period the agreement requires and at least as long as tax law requires.
A clean close-out is the best evidence you can offer when applying for the next grant.
Where Pryme fits
A Pryme account holds NGN, USD, GBP and EUR with local details for each, and money stays in the currency it arrived in until you choose to Swap, with the rate shown first and the fee on its own line. That keeps a clean record for each conversion. See multicurrency and multiple accounts for separating grants, and NGO bank controls and SCUML duties.
Questions people ask
What does retirement of funds mean in an NGO?
It is how a staff advance is accounted for: the staff member submits receipts for what was spent and returns any unspent balance, and the spending is recorded against the budget line.
How do NGOs report grant spending to donors?
By budget line, comparing budget with actual spending, with notes on variances, in the donor's own template and currency, supported by transaction lists and bank statements.
Which exchange rate should an NGO use in donor reports?
The one the grant agreement specifies, usually the actual rate at conversion or an average. Keep the bank record for every conversion.
Are donor-funded project purchases VAT-exempt in Nigeria?
The Nigeria Tax Act 2025 lists goods for humanitarian donor-funded projects as exempt, per Mondaq's May 2026 summary. Check whether your purchases qualify.
Sources
- Examination of the VAT provisions under the Nigeria Tax Act 2025 (Mondaq, 28 May 2026) · accessed Oct 2026
- Filing of bi-annual statement of affairs under CAMA 2020 s.845 (NNNGO, updated Apr 2024) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.