November 17, 2016

How One HCM Company Made Grant Allocation Easy for Nonprofits

How One HCM Company Made Grant Allocation Easy for Nonprofits

By Kit Dickinson on November 17, 2016


The Housing Assistance Council (HAC) is a non-profit corporation in Washington, D.C., that helps local organizations build affordable homes in rural America. The HAC staff works on multiple grant-funded project assignments throughout a pay cycle.

For billing purposes and to improve visibility into their various projects, the payroll team had to allocate the salaried employees’ earnings in proportion to the projects they worked on. This proved to be a painful process and they began looking for help.

Non-Profits Struggle with a Payroll Process That’s Not Up to Code

Non-profits like HAC are under the gun to accurately allocate salaries in proportion to their grants to satisfy reports and audits from funding sources. At one time, non-profits could have gotten away with estimating how much was spent on each grant, but federal regulations and funding sources are now requiring exact breakdowns.

That’s an added burden that many non-profits aren’t equipped to handle easily.

For example, let’s say an employee gets paid $2000 biweekly and works 48 hours on Grant A and 32 hours on Grant B, for a total of 80 hours in two weeks. HAC would need to allocate the earnings proportionately across the two grants so that 60% of the salary would go to Grant A and 40% to Grant B. If someone takes PTO during that time, it needs to be allocated proportionately as well. In the next pay, cycle the mix of time to grants and non-grant activities could be very different and that $2000 salary needs to be allocated differently.

Now with the upcoming changes to FLSA overtime regulations on December 1, 2016, these organizations are now faced with several complex layers to factor in. As more non-profits have to face decisions on how employees should be classified (hourly vs. salary), ty default, time-and-attendance systems start charging overtime at the 41-hour mark. But for grant-based organizations, it causes problems because that doesn’t represent how overtime should be allocated across grants.

If you try to do all of these calculations in spreadsheet macros, you run the risk of inaccurate allocations — you can get rounding errors or a cell could have an incorrect formula, and you’d never know it. If you allocate manually, it’s rife with the potential for human error and it’s an even bigger time-consuming mess.

Finding Real Solutions to Non-Profits’ Greatest Payroll Pains

HAC came to our partner for a payroll solution. After beginning discussions, our partner quickly saw that fully solving HAC’s problem meant finding a way to automate their grant allocation. They brought in IDI to help.

Together we worked closely with HAC to understand their organization, technical issues, and their allocation and compliance requirements. We proposed a comprehensive solution that would manage employee time and labor, automate their salary allocation logic, and outsource their payroll processing tasks.

Clients are sometimes skeptical that automated salary allocation can really be done — they’ve been burned by other payroll vendors who said they could do it. The problem is that these other payrolls can’t allocate exactly to the penny or handle complications like when an employee takes paid time off.

But IDI’s Time Bank application can easily manage these kinds of requirements. We were able to build trust and lean on prior experience to establish credibility that we can do it.

An Integrated Payroll System with a Solid Foundation

We customized Time Bank to meet all of HAC’s grant allocation needs. At the end of each pay period, Time Bank:
Reads employee worked and non-worked hours, broken out by project and location, from the time-and-attendance system.
Determines the percentage of each employee’s salary that should be allocated across each project or grant, based on which projects were worked during the pay period.
Exports the results for processing in the exact format of HAC’s version of payroll.

Besides allocating earnings to different grants, a key benefit of Time Bank is that it includes critical rounding logic to precisely allocate salaries to the penny every time. Without this logic, an employee with a $2000 salary could get paid something like $1999.98 some periods and $2000.02 other times. This doesn’t sit well with employees who expect to see their exact salary.

HAC now has a robust employee data system in place that allows the non-profit to focus on their calling rather than painful and stressful payroll processes. Reporting is much simpler and there’s no need to worry about providing inaccurate grant information.

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