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 Federal Government recommend?
I also was able to check out recommendations from the Office of the Inspector General for suggestions for your organization to prevent grant embezzlement:
#1 Thorough Background Checks: Do you know 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 involved in 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 grantee employees, volunteers, as well as clients, and donors should get at an appropriate amount of training designed to educate them as to preventing fraud, including embezzlement.
This education program should include describing the process for reporting suspected fraud, theft, or embezzlement within the grantee’s existing policies.
Communication Part 1:
Grantees must have open and transparent communication with the agency’s grant official. This communication is, of course, not limited to instances of suspected fraud or embezzlement. Grantees in the normal course of grant management should address any questions that might arise regarding the requirements of the grant.
However, one of the very first steps that should be taken if fraud or embezzlement is suspected is to contact the grant official immediately. The issue at hand may simply be due to error or oversight – but the issue must be investigated and resolved promptly.
Communication Part 2:
Grantees 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 member), review bank statements.
- Demonstrate strong internal processes for handling all types of financial transactions, including payroll, payments to vendors, 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.
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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.