You see it on the news all too frequently. Funds are embezzled from grants awarded by the federal government, and taxpayer dollars are lost to grant embezzlement.

Furthermore, embezzlement has an extremely negative impact on the grantee organization. Trust is broken, professional reputations are tarnished, and there is a predictable loss of public support.

The U.S. Inspector General not only aggressively prosecutes the crime of embezzlement but has also made recommendations for simple ways organizations can reduce the risk of embezzlement.

There is a wide range of grant fraud prevention tips at Grants.gov

What does the Federal Government recommend?

I recently checked some great resources from Grants.gov about grant fraud, including federal award recipients’ roles and responsibilities.

I also was able to find timely recommendations from the Office of the Inspector General for suggestions for your organization to prevent grant embezzlement.

#1 Thorough Background Checks: Who is working on your grants?

Agencies awarding grants often require that the grantee provide certifications that all statements and representations in their application are true. It is also common for other certifications to be required of the grantee, such as certifying that the grantee has a conflict of interest policy in place.

Similarly, grantees should conduct thorough background checks on all employees and other stakeholders administering the grant or its programs.

Organizations need to ensure that they are not introducing a history of theft and dishonesty into the grant administration process.

#2 Education: Do people know what to look for?

Are you getting the word out about the signs of waste, fraud, and abuse of grant funds? And do people know what to do if they see it?

All grant recipient employees, volunteers, clients, and donors should get appropriate training designed to educate them on preventing fraud, including embezzlement.

This education program should describe the process for reporting suspected fraud, theft, or embezzlement within the grant recipient’s existing policies.

#3 Communication

Communication Part 1:

Grant recipients must communicate openly and transparently with the funding agencies’ representatives.

This communication is, of course, not limited to instances of suspected fraud or embezzlement.

In the normal course of grant management, grant recipients should address any questions regarding the grant’s requirements.

However, one of the first steps to be taken if fraud or embezzlement is suspected is to contact the funder’s grant official immediately.

The issue may be due to error or oversight – but the issue must be investigated and resolved promptly.

(Here’s an interesting article on the Dept. of Justice’s efforts to combat COVID-19 Fraud.)

Communication Part 2:

Grant recipients should also review their current policies to ensure that the organization has practiced and communicates the need to:

• Practice separation of duties and do not allow one person to accept, spend, and account for funds.
• Require practices where multiple parties, both within and outside the organization (i.e., board members), review bank statements.
• Demonstrate strong internal processes for handling all types of financial transactions, including payroll, vendor payments, credit card use, and cash management.

These three simple steps of checking out who is working on the grants, educating stakeholders, and strong communication can reduce the risk of grant embezzlement and help keep your organization from being another unhappy headline in the latest scandal.

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