Grant management (especially since the new Uniform Guidance happened) is not just about doing everything right-it also can involve steering your organization clear of those nasty situations that can lead you astray.
Here are eight of my most common-but completely avoidable grant mistakes:
Before You Get the Grant: 5 Warning Signs of Grant Fraud
According to the Better Business Bureau (BBB), these five warning signs should flash “Danger-Danger-Danger” to any organization.
Here are signs that offers for Federal grants may be fraudulent:
#1 You are contacted by someone offering you unsolicited grant funds in exchange for a processing fee.
• The Federal Government does not contact potential recipients to offer them money or charge you to receive grant payments.
#2 You have to pay a fee to get information about grant opportunities.
• Federal grant opportunities are listed on the free government website called Grants.gov and there is no cost for the information.
#3 You need to pay fees to apply for a grant.
• While you will likely need to provide financial information in your grant application-a legitimate grant application process will NEVER request fees to submit your application.
#4 You are promised grant funds without even having to apply.
• Grant recipients receive federal funds because they have applied for and been awarded grant funding. The Federal government will not call you and offer you money for a grant that you have not applied for. Somethings really are too good to true!
#5 You are promised grant funds with “no spending strings” attached.
• Grant funds are awarded primarily to states, cities, tribes, institutions of higher education and non-profits to accomplish a specific public purpose. And that purpose comes with lots of rules, regulations, objectives and performance measurements. In other words, there is no such thing as “free” money.
After You Get the Grant: 3 Common Forms of Grant Fraud
The National Procurement Fraud Task Force (NPFTF) looked at the three most common fraud scenarios discovered when investigating existing grant recipients:
#1 Mischarging personal expenses to the grant as business expenses.
• This common fraud often starts out small and grows when it is not detected and stopped. Having a strong internal compliance and ethics program can pay big dividends by reducing the risk of continued fraud behaviors. Encouraging recognition and reporting of fraud, waste, or abuse can mitigate the risk of mischarging personal expenses to the grant.
#2 Charging the grant for costs which were either not really incurred, or are not really attributable to that specific grant.
• Make sure your organization has an adequate and effective system of accounting, internal controls, records control, and records retention. (Remember the no-free-money part above?) A strong system of checks and balances reduce the risk that bogus charges will be claimed for the grant-or incorrectly attributed to the grant.
#3 Inflating costs or hours for labor-including contractors and consultants.
• Time an effort reporting gets a lot of scrutiny from auditors for the simple reason that it is often a source of fraud. Put in place strong review and approval processes for labor charging to ensure the grant is charged for the actual costs of labor. This should include whistle-blower processes to lessen the chances of labor costs being “ puffed up “whether inadvertently or with the intent to defraud.
Learn More About Grant Management
Want to learn more about how to be a better grant manager?
We offer two-day grant management training online, on-site and at our live training seminars called “Grant Management Boot Camp.”
Lucy Morgan CPA, MBA
CEO, Compliance Warrior