Last week we looked at the recent news about the US Department of Justice (DOJ) freezing grant funds for Big Brothers, Big Sisters (BBBS) in Philadelphia after the organization couldn’t backup almost $20 million dollars in spending of federal dollars.
In this series will look at the major grant management mistakes so you can avoid having similar serious consequences at with your grant spending and reporting.
The first area we’ll look at is separation of funds.
Big Mistake #1: Don’t Mix Grant Funds Unless…
The major categories of grant management non-compliance was co-mingling the federal funds with the rest of the organization’s funds—and not ensuring that the federal spending could be accounted for separately once it was mixed in with the organization’s funds.
Is it against the Administrative Requirements for federal awards to mix grant funds with the rest of the funds?
The short answer is no, but…..
The payment management standards in 2 CFR Part 215 specifically states that federal agencies may not require grantees to keep separate accounts for federal funds with few exceptions.
And one of those exceptions is a biggie!
It’s Not One Big Bucket of Money
So what went horribly wrong with the BBBS grant management?
The exception that was missed here was that the monies were all treated like one big bucket of money to be spent-and not accounted for as separate funds-both federal and otherwise.
Grantees must be able to account for the receipt, obligation, and expenditures of each award of federal funds even in a comingled account.
This means that even though all the various funds come into the same account, the grantee must be able to report on the receipt and use of the funds as if the accounts were separate.
In other words, if you don’t have a system in place to track each grants inflows, and outflows separately, you CAN’T co-mingle grant funds with the rest of the organization’s money.
Even Federal Funds Are Not Just One Big Bucket of Cash
It doesn’t stop with tracking federal funds apart from non-federal funds.
You must be able to track and report the incoming and outgoing funds for each Federal award.
Federal funds from multiple awards should not be mixed together unless you can track the source and use of the each specific award.
Big Mistake #2 Who’s Watching The Store?
Next week we’ll look into the next big area of non-compliance with the lack of monitoring that was going on with the federal grant spending.
Lucy Morgan CPA, MBA
CEO, Compliance Warrior
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