Ever wish you had a crystal ball to see how the mind of Uncle Sam looks at grant funds?
Think the Uniform Guidance is super complicated?
Or maybe you just wish you had a checklist of what gets grant recipients into trouble and how to avoid those “speed bumps”?
It may seem a little “geeky,” but we’ve figured out the thirteen compliance focus areas for grant funds.
These are the ones that get the most scrutiny during an audit of federal funds.
And as a result, they are the biggest “gotchas” for grant recipients.
13 Ways to Lose Grant Funding
Do you remember the old Indiana Jones movie where the Holy Grail is wheeled off to a government warehouse, never to be seen again?
When your organization files it’s annual Single Audit Act audit, it may feel like that.
Like Professor Jones’s experience, the federal government has “virtual” warehouse where all the audit reports are filed.
By examining the program reporting forms submitted to the audit clearinghouse, I found 13 of the most common grant management “gotchas.”
This is like a “cheat sheet” of the items most likely to get you into trouble!
If you focus on doing these 13 things right, you will be on the right track to keep the grant funds flowing.
Gotcha #1: Unallowed Activities
Are you doing any activities 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 program’s specific objectives, don’t spend federal funds on it.
This process starts with the (not-so) simple requirement to communicate precisely to everyone working on the grant what activities are allowed and NOT allowed by that particular federal award.
For example, if this award does not allow conferences, there shouldn’t be requests to attend conferences, not spending on conferences!
Gotcha #2: Disallowed Costs
Costs must be:
- Reasonable
- Allocable
- Not be limited or excluded by federal cost principles regulations
- Policies applied uniformly to all activities
- Adequately documented
If you miss any of these items, the costs can be disallowed!
For example, if you don’t document the spending as required, costs can be disallowed.
If you buy things so close to the end of the period of performance that an auditor decides it is unreasonable for you to use up the items before the award is over, costs can be disallowed.
Yikes!
And paying back grant funds that are long gone is NO FUN!
Gotcha #3: Poor Cash Management
When you get grant funds advanced to your organization, be careful that your cash management practices meet the administrative requirements.
In other words, you don’t have to wait for reimbursement of costs, but you can draw funds as you need them to do the work of the grant.
Sounds like a great setup, doesn’t it?
Here’s the thing…
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 a written policy stating that is also required for all grant recipients!)
Gotcha #4: Ignoring Davis-Bacon Act
Oh, my gosh, as if there weren’t enough things to worry about managing grants with the Uniform Guidance, now there is this even more complicated set of rules for many construction projects called Davis-Bacon!
And a whole set of pesky contract provisions and special rules apply to the Davis-Bacon Act!
So please don’t ignore them!
The auditors will spend a lot of time checking that you have all your ducks in a row regarding including Davis -Bacon provisions in your contracts and comply with them.
Gotcha #5: Ineligible Participants
Do your grants come with eligibility requirements?
If so, you are required to ensure only eligible people receive the benefits of the federal program.
This little detail can trip up many grantees, especially those who are letting people “self-certify” that they are eligible for benefits.
You can reduce the risk of cost disallowance by ensuring your process for testing eligibility is robust and reviewed by management periodically.
Gotcha #6: Sloppy Property Management
Wondering what happened to all that property paid for by the Federal Government?
You know the stuff I’m talking about…
- The cool high-water rescue vehicles.
- The tablets to get kids excited about reading!
- Or that heavy-duty laptop that is used by the program staff for doing research out in the field.
Property and Equipment purchased with federal funds come with a long list of requirements that go on long past the end of the grant.
And guess what?
You have to track and report on many of these items even after your grant is all done!
Ensure you have a system to continue safeguarding, tracking and reporting on the various types of property and equipment even after the grant is done.
Gotcha #7: Clueless Matching Compliance
If your award comes with matching requirements, how will you show the federal agency that you comply?
Matching has many nuances that are easy to miss!
For example:
- How are you documenting the match?
- How are people tracking their time if that is used for the match?
- How are you ensuring you aren’t matching with dollars provided by another federal award?
And then, you have to track whether you are ahead or behind schedule for the matching funds compared to the federal funds spent to date.
One of the worst-case scenarios with matching is for the program to spend all the funds assuming, the match was met.
When it’s discovered too late to make adjustments that the match was not met, you will be paying back funds.
Ouch!!
Gotcha #8: Spending Outside the Period of Availability
This gotcha feels a lot like the Goldilocks Dilemma.
Which time period is “just right“?
Trying to start spending too early or finish up too late can cost you big!
Auditors want to ensure that your grant spending is within the timeframe allowed in the federal award.
And lately, they are getting even stricter with this requirement to make sure the spending is reasonable for using what you are buying before the period of performance is done!
Gotcha #9: Oblivious Procurement and Suspension and Debarment Monitoring
Let’s face it: procurement with federal funds has a lot of requirements.
The end of the procurement grace period is moving grant recipients out of the realm of “denial” and into a mad scramble to get all the documentation in place.
Here are some examples of what you may be missing…
In addition to promoting opportunities for women and minority-owned small businesses and watching for conflicts of interest, you must also monitor that no federal monies are flowing out to excluded parties.
Yup, we just covered 3 “speedbumps” that will trip you up if you don’t have good processes in place.
It’s easy to miss something if you don’t have good procurement practices in place.
Wondering how to get the best practices in place in your organization?
Click on this link to check out our Editable Procurement Manual Template
Gotcha #10: Disregarding Program Income
Mine! Mine! All mine!
Are you experiencing PIDS? (Program Income Denial Syndrome)
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.
And program income can also have different requirements for what needs to happen with the money generated.
In other words, you may not get to keep program income to spend as you see fit!
Watch the requirements and you can keep the auditors happy.
Miss this one, and the feds can get the money back!
Gotcha #11: Real Property Acquisition and Relocation Assistance
These two little items can get you in trouble if you aren’t careful.
Sometimes, the awarding agency doesn’t want you getting “real” and prohibits the purchase of any real property (like that badly needed clinic building) 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.
If real property is prohibited, don’t do it!
And recognize there are perils with relocation because if the person you relocated leaves before twelve months is up, your organization pay back 100% of the relocation funds to the federal government.
Gotcha #12: Overdue or Missing Reporting
Timeliness matters.
If you procrastinate in completing your federal reports or ignore them, it will bite your organization.
This has never been truer than today, as your ability to meet your reporting requirements is part of what agencies look at when deciding if you are a good bet to get more grant funds.
The new risk and integrity assessment requirements are putting the burden on grant recipients to have their act together like never before.
And this little, simple thing can demonstrate goodwill and integrity to your organization.
Why?
Because if an organization can’t submit their reporting on time, it often is a red flag that bigger issues are going on.
Gotcha #13: Shoddy Subrecipient Monitoring
This last “gotcha” catches many grantees.
And it is typically a very expensive learning experience for pass-through entities.
When you subaward (pass-through) federal funds, you are “stepping in the shoes” of the federal agency.
This means YOU are responsible for those lower-tier organizations spending federal funds correctly.
In other words, you become the “gotcha” enforcer.
Ensure that you are doing an adequate job determining the level of monitoring needed.
And, of course, you need to document what you find from beginning to end!
Don’t skimp on monitoring your subrecipients.
Auditors focus on this every time and are waiting to issue those “gotcha” findings.
Ready to Deepen Your Understanding of Federal Funding?
Would you like to be a better grant writer or manager?
Deepen your understanding of procurement and the single audit for federal grants?
We have another grant training seminar coming soon.
Click here to get all the details!
Hope to see you there!
Rachel Werner, MPA, GPC, PMP
MyFedTrainer Principal, Compliance Champion