In our last post we looked at what to expect when you are expecting a federal fund audit at your organization.
Today we’ll look at 13 focus areas of compliance that get the most scrutiny during an audit of federal funds.
13 Ways to Lose Grant Funding
Do you remember in the Indiana Jones movie where the Holy Grail is wheeled off to a government warehouse, never to be seen again?
It may feel a bit like that when you realize where audit reports go.
Similar to the Professor Jones’ experience, the federal government has “virtual” warehouse where all the audit reports get filed.
By examining the program reporting form that gets submitted to the clearinghouse we found 13 of the most common grant management “gotchas.”
Focus on these 13 areas and you will be on the right track to keep the grant funds flowing.
Gotcha #1: Unallowed Activities
Are you doing any activities that are not allowed by your award terms and conditions?
No matter how good (or bad) your intentions, if it’s an activity not called out in the specific objectives of the program, don’t spend federal funds on it.
Gotcha #2: Disallowed Costs
Costs must be reasonable, allocable, not be limited or excluded by federal cost principles regulations, applied uniformly to all activities, and adequately documented.
• Even if you spend federal funds on allowable items but don’t document the spending, costs can be disallowed.
Paying back grant funds that are long gone is no fun.
Gotcha #3: Poor Cash Management
If grant funds are advanced to your organization, be careful that your cash management practices are meeting the administrative requirements.
Taking cash draws too soon, or requesting too much can land you in hot water.
Remember, you should only be drawing the funds you need to pay for the immediate cash needs of the program (and be able to prove that is the case as well.)
Gotcha #4: Ignoring Davis-Bacon Act
Remember all those pesky contract provisions like Davis-Bacon Act?
Yes, the auditors really do check that you include them in your contracts and comply with them as well.
Gotcha #5: Ineligible Participants
Do your grants come with eligibility requirements?
Then you are required to ensure only eligible people receive the benefits of the federal program.
This little detail can trip up a lot of grantees.
Gotcha #6: Sloppy Equipment and Real Property Management
Wondering what happened to all that property?
Property and Equipment purchased with federal funds come with a long list of requirements that go on long past the end of the grant.
Make sure you have a system in place to continue safeguarding, tracking and reporting on property and equipment-even after the grant is done.
Gotcha #7: Clueless Matching, Level of Effort, and Earmarking
If your award comes with matching or earmarking requirements, how will you show the federal agency that you are complying?
Likewise, level of effort requires you to demonstrate that the amount of money spent translates into specific program objectives.
Can you show if you ahead or behind of schedule for the funds spent to date?
Gotcha #8: Spending Outside the Period of Availability
If you try to start too early or finish up too late, it can cost you.
Auditors look to make sure that your grant spending is within the timeframe allowed in the federal award.
Gotcha #9: Oblivious Procurement and Suspension and Debarment Monitoring
Let’s face it; procurement with federal funds has a lot of requirements.
In addition to promoting opportunities for women and minority owned small business and watching for conflicts of interest, you also have to monitor that no federal monies are flowing out to excluded parties.
It’s easy to miss something if you don’t have good procurement practices in place.
Gotcha #10: Disregarding Program Income
Are you in program income denial?
Some organizations like to pretend that program income is like Las Vegas, when happens in the program, stays in the program.
However, program income may require special reporting.
Program income can also have different requirements for what needs to happen with the money generated.
Watch the requirements and you can keep the auditors happy.
Gotcha #11: Real Property Acquisition and Relocation Assistance
These two little items can get you in trouble if you aren’t careful.
Sometime, the awarding agency doesn’t want you getting “real” and prohibits the purchase of real property with federal funds.
Similarly the awarding agency doesn’t want you relocating people who get homesick and want to move back after a few months.
Know the limitations of your award, and recognize the perils of relocation when it’s paid for with federal funds.
Gotcha #12: Overdue or Missing Reporting
If you procrastinate in completing your federal reports, or ignore them all together, it will come back to bite your organization.
Gotcha #13: Shoddy Subrecipient Monitoring
This last “gotcha” catches many grantees.
When you subcontract, subaward, or pass-through federal funds, you are “stepping in the shoes” of the federal agency.
This means that you are responsible that those lower-tier organizations are spending federal funds properly.
In other words, you become the “gotcha” enforcer.
Make sure that you do an adequate level of monitoring and that you document what you find.
Auditors focus on this every time.
Let’s Get This Party Started!
The audit process doesn’t have to be scary, and a little knowledge of what to expect can boost your confidence and make the whole process run more smoothly.
Take a deep breath and get this party started!
Big Grant Management Changes in 2014
Big changes are come to the grant regulations in 2014.
Is your organization ready?
In the coming weeks, we’ll be sharing regular updates about the dramatic revamping of the federal grant management regulations.
Lucy Morgan CPA, MBA
CEO, Compliance Warrior
P.S. Making sure that grant funds are spent consistent with certain regulations, and appropriate oversight can feel a bit overwhelming.
If you’d like to find out more about how to avoid grant management problems and pitfalls?
Check out Grant Management Boot Camp training that helps that helps people work through these issues.
Click the link below for your type of organization to get more information about our courses and to get signed up.