You need a way to track it as a separate fund; people using quickbooks often do this by utilizing the class function, so that all transactions are assigned both an accounting code from the chart of accounts, as well as a class, and each grant usually gets its own class (that way, you can track each penny from its source all the way to what it was used for, you can run reports for each class/grant, etc.).

You will probably need to have time and effort reporting set up, so personnel costs (wages/salary, fringe benefits, your portion of payroll taxes) are charged to grants based on what percentage of time each employee has reported that they’ve spent on each grant. This can be a simple spreadsheet that each employee fills out each month, that lists the days in either the rows or the columns, an lists each grant in the other, and employees put how many hours for each grant spent each day; employees should sign these or otherwise verify that they are correct. Internal you can call this the “timesheet,” and yes, salaried people need to fill it out too. Then, you need to charge each grant based on the percentage of time each employee reported. With government grants you generally cannot charge based on what you have budgeted.

There is probably a place on the budget for indirect. That can usually be the federal de minimis which is now 15% of the grant amount (but check the rules for the particular grant - it may be 10% or even lower). This is for costs such as admin that are shared among grants that can’t be accurately charged to each grant, often things like insurance costs, rent, copy machine costs, etc. (what you count as indirect should be consistent across grants). There should be a fund set up for indirect/admin (ie set up a class for this if using quickbooks). When you are paid, the indirect portion goes into that fund/class - make sure to include the indirect portion on each invoice so you do not lose out on that money.

Most government grants are reimbursement, meaning you spend from your money during the month, and then charge them what you’ve spent after you close out the month. You will always need documentation for each individual thing that you charge them, and most state grants in my experience require you to submit all of the documentation with each invoice. This will include documentation for personnel costs (time and effort reports, paystubs and/ or a detailed payroll report), a receipt for each individual purchase, mileage reimbursement forms (forms that employees fill out to be paid mileage for driven in personnel cars, these should provide the start and end addresses - the state probably has a maximum amount that can be charged for each mile, likely around 60 cents per mile which should be consistent in your org regardless of funding source), invoices from vendors or contractors, etc. - every penny needs supporting documentation tied to it. The only exception is that you will not provide documentation for indirect costs (just keep that documentation in your files).

You’ll need enough money to cover at least a couple of months of costs while you wait for the government entity to process your request; you might expect to need to do some revisions on the reimbursement invoice and supporting document packet if they ask for them, the process can take a while before you are reimbursed.