A few years back I wrote a case study about mismanaged federal grant funds from a highly critical audit report criticizing a lack of grant management.
The Baltimore Brew reported that the City of Baltimore was preparing to repay nearly $7 million in federal funding from a $9.5 million federal award earmarked to serve the homeless community.
- With the push to spend The CARES Act funding FAST…you may experience similar issues managing your federal grants.
Lack of Grant Management-3 Main Issues:
The US Office of the Inspector General for Housing and Urban Development (HUD) reported that virtually 100% of the grant funds expended where not substantiated at the time of the audit.
The main areas of the audit findings centered around three areas:
- Lack of oversight and monitoring of subrecipients
- Missing supporting documentation for expenditures
- Drawing funds based on a prorated amount rather than actual costs
How Could This Happen-Lessons for The CARES Act:
According to the Inspector General report, the root cause of the grant management issue stemmed from:
Lack of Training:
The City didn’t completely understand its responsibilities for managing the federal funds and didn’t ensure that the program staff and support departments had adequate training.
Rush to Spend:
The City was in a hurry to get the funds to spend the money to comply with obligation and expenditure deadlines connected to the American Recovery and Reinvestment Act.
- (Are you feeling a similar push to spend funds quickly with The CARES Act?
The City did not develop or implement a monitoring program for its sub-recipients.
- The responsibility to develop and document a monitoring plan for subawards starts early in the grants lifecycle.
- The requirement to continue monitoring and document the oversight activities lasts throughout the period of performance.
Mismanaged Federal Grants-Missing Oversight and Documentation
It is alleged that the City and its subrecipients did not adequately document its spending for most of the funds drawn.
- This happened both through a lack of supporting paperwork and also missing oversight.
In short, the grant was not always spent to help the people it was designed to reach due to a lack of grant management!
For example, rather than verifying that participants met the income requirements for eligibility, participants receiving grant funds were often able to “self-certify” rather than provide third-party verification.
Ineligible Activities and Spending
Grant funds were channeled to various organizations charged with helping the homeless population.
In turn, these funds were spent on potentially ineligible activities.
The lack of oversight led to numerous issues such as:
- Potential double-billing the federal government for the same services.
- Draw-downs of grant funds in excess of actual spending
- Payment of wages for non-grant staff
Additionally, grant monies were spent on activities that did not meet the programmatic objectives of the federal funding pointing again to a lack of grant management and oversight.
How Will You Ensure Your Federal Award Doesn’t Suffer the Same Fate?
When organizations are under a lot of pressure to spend money quickly, (like The CARES Act) important details can get missed.
Here are 3 things you can do to avoid trouble with your federal grant:
- Pay subrecipients based on actual expenditures and only with adequate documentation
- Develop a subaward monitoring strategy and get out and do the monitoring
- Ensure internal controls are in place to prevent, detect and correct problems
Ready to Improve Your Grant Management?
How about you?
Would you like to be a better grant manager?
We have another grant management training seminar coming soon.
Click here to get all the details!
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.