Ever wish you had a crystal ball to see into the mind of Uncle Sam?
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”?
Well, it may seem a little “geeky” but I’ve figured out the thirteen focus areas of compliance.
These are the ones that get the most scrutiny during an audit of federal funds.
And as a result 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 a bit like that.
Similar to the Professor Jones’ experience, the federal government has “virtual” warehouse where all the audit reports get filed.
And by examining the program reporting forms that gets 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 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.
And 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 conferences are not allowed by this award, there shouldn’t be requests to attend conferences, not spending on conferences!
Gotcha #2: Disallowed Costs
Costs must be:
- 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.
And paying back grant funds that are long gone is NO FUN!
Gotcha #3: Poor Cash Management
When you get grant funds are advanced to your organization, be careful that your cash management practices are meeting the administrative requirements.
In other words, if 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 set-up, 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 there are a whole set of pesky contract provisions and special rules that apply to Davis-Bacon Act!
So don’t ignore them!
The auditors will spend a lot of time checking that you have all your ducks in a row when it comes to including Davis -Bacon provisions in your contracts and comply with them as well.
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 a lot of grantees-especially ones 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!
Make sure you have a system in place 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 are complying?
Matching has many nuances that are easy to miss!
- How are you documenting the match?
- How are people tracking their time if that is used for the match?
- How are you making sure you aren’t matching with dollars that were provided by another federal award?
And then you have to track whether you ahead or behind of schedule for the matching funds when 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.
Gotcha #8: Spending Outside the Period of Availability
This gotcha feels a lot like the Goldilocks Dilemma.
Which time period is “just right“?
If you try to start spending too early or finish up too late, it can cost you big!
Auditors look to make sure 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 business and watching for conflicts of interest, you also have to monitor that no federal monies are flowing out to excluded parties.
Yup, I 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?
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 will be paying back 100% of the relocation funds to the federal government.
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.
This has never been truer than today, as your ability to meet your reporting requirements is part of what agencies are looking at when they decide if you are a good bet to get more federal 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.
Because if an organization can’t submit their reporting on time, it often is a red-flag that there are bigger issues 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 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 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 Improve Your Grant Management?
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Hope to see you there!
Lucy Morgan CPA, MBA
CEO, Compliance Warrior
Author of “Decoding Grant Management-The Ultimate Success Guide to the Federal Grant Regulations in 2 CFR Part 200” The 2nd Edition is now available on Amazon in Paperback and Kindle versions.