The 7 Basics of Internal Control for Grant Management
There are seven basic controls that every grant manager should look for to reduce the risk of both grant mis-management and fraud.
Identifying all the necessary internal controls can be difficult as each grant may have varied specifications and requirements. However understanding the basics will set you on the right track.
Take a minute to review the list and ask the related questions of your organization:
Control #1: Formal Written Policies and Procedures
• Has your organization formalized written policies and procedures such as who can approve grant spending, how labor is recorded and charged, and the procedures for procuring goods and services?
• Have you reviewed your grant terms and conditions for a list of policies that must be in writing, for example drug free workplace requirements, and a process to minimize the time between requesting grant funds and paying suppliers?
Control #2: Adequate Monitoring
• Does your organization check to make sure the existing policies and procedures are actually followed?
• How are you ensuring that charges to the grant are reasonable, allocable, not be limited or excluded by Federal Cost Principles regulations?
• How do you make sure that organizational policies are applied to your grants uniformly and that spending is adequately documented?
Control #3: Reconciliations
• Are your account reconciliations current and updated in a timely manner?
• Do your property records for equipment purchased with grant funds match the accounting records?
• Have you taken a physical inventory of property purchased with federal funds recently?
Control #4: Secured, Safeguarded Assets
• How is property safeguarded from loss, damage or theft?
• What is done to prevent misuse of credit cards and other assets?
• Is periodic training held for employees on grant requirements?
Control #5: Separation of Duties
• How good is your separation of duties?
• Do you have different people recording transactions, authorizing transactions, and having custody of the assets? Or is this handled by one or two people?
Control #6: Supervisory Review and Approval
• What is the process to have supervisors approve spending on the grant?
• What reviews are done by supervisory personnel?
• How do you demonstrate the approval and reviews were done? (Are the documents signed and dated?)
Control #7: Adequate Documentation
• Are receipts required for reimbursement of spending?
• Do the receipts have enough detail to determine if the costs are allowable to charge the grant? (i.e. itemized receipts)
• Do time cards show what grants and other activities the employee spent their time on?
The Goal of Internal Controls in the Federal Grant Environment
As a general rule, the goal of internal controls is to provide reasonable assurance that grant requirements are complied with in a timely and cost effective manner. Meeting this goal involves everyone working directly and indirectly on the federal grant to know the basics of well-developed control systems.
Lucy Morgan CPA, MBA
CEO, Compliance Warrior