There are a number of instances in which a grantee's financial information can be useful to a funding organization.  For example, if the financial statements indicate that the prospective grantee is experiencing financial difficulties, the grantmaker may decide not to proceed with the grant or may consider making the grant for a smaller amount or a shorter time period. Serious financial stability issues will be disclosed in the audit opinion, typically with a "Going Concern" paragraph. In addition, by reviewing the notes to the financial statements, the grantmaker receives insights into the organization's governance structure such as disclosures for related-party transactions, conflicts of interest, subsequent events, and the summary of the organization's significant accounting policies.

Additionally, understanding various accounting issues will help the grantmaker review periodic financial reports required under the grant agreement. The periodic financial reports or audited financial statements may be reviewed for adherence to the organizational or project budget, inconsistencies in reporting, adherence to re-granting requirements, fulfillment of matching requirements, calculation of refunds due the grantmaker, etc.

PLEASE NOTE--While every attempt is made to ensure that this information is up to date and accurate, it is for informational purposes only and should not be used as a substitute for the services of a certified accounting professional. 

Who sets accounting standards in the U.S.?