One year after a highly critical audit report, the Baltimore Brew reports that the City of Baltimore is preparing to repay nearly $7 million in mismanaged federal grant funds from a $9.5 million federal award earmarked to serve the homeless community.
3 Main Grant Mismanagement Issues
The US Office of the Inspector General for Housing and Urban Development (HUD) reported that virtually 100% of the grant funds expended where not substantiated at the time of the audit.
The main areas of the audit findings centered around three areas:
• Lack of oversight and monitoring of subrecipients
• Missing supporting documentation for expenditures
• Drawing funds based on a prorated amount rather than actual costs
How Could This Happen?
According to the Inspector General report, the root cause of the grant management issue stemmed from:
Lack of Training:
The City didn’t completely understand its responsibilities for managing the federal funds.
Rush to Spend:
The City was in a hurry to get the funds spend to comply with obligation and expenditure deadlines connected to the American Recovery and Reinvestment Act (aka Stimulus grants)
The City did not develop or implement a monitoring program for their subgrantees.
Missing Oversight and Documentation
It is alleged that the City and its subgrantees did not adequately document its spending for most of the funds drawn.
This happened both through a lack of supporting paperwork and also missing oversight.
In short, the grant was not always spent to help the people it was designed to reach.
For example, rather than verifying that participants met the income requirements for eligibility, participants receiving grant funds were often able to “self-certify” rather than provide third-party verification.
Ineligible Activities and Spending
Grant funds were channeled to various organizations charged with helping the homeless population.
In turn these funds were spent on potentially ineligible activities.
The lack of oversight led to numerous issues such as:
• Potential double-billing the federal government for the same services.
• Draw-downs of grant funds in excess of actual spending
• Payment of wages for non-grant staff
Additionally, grant monies were spent on activities that did not meet the programmatic objectives of the federal funding.
What About You?
How about your grant management?
Are you ensuring your award doesn’t suffer the same fate?
3 things you can do to avoid trouble:
• Pay subgrantees based on actual expenditures and only with adequate documentation
• Develop a monitoring strategy and get out and do the monitoring
• Ensure internal controls are in place to prevent, detect and correct problems
Many of the deficiencies could have been avoided by the simple step of training.
Good grant management starts by making sure the grant staff is sufficiently trained on grant administration and compliance requirements to spend the federal funding responsibly.
It’s never too soon to start.
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.