Federal grant funding FLASHBACK to the American Recovery and Reinvestment Act (ARRA) aka the Stimulus Grants.
CBS News reported that the U.S. Justice Department froze frozen federal grant funding to Big Brothers, Big Sisters (BBBS) after an audit revealed that BBBS couldn’t account for nearly $20 million dollars of federal grant funds that were drawn by the organization for mentoring youth.
FAST FORWARD to the CARES ACT…
Bad things can happen when lots of money is pushed out by the federal government in a BIG HURRY!
Vanishing Federal Grant Funding-Lessons for the CARES Act
It’s a simple, but painful lesson for grant recipients to learn:
- Federal grant funding comes with LOTS of monitoring, reporting, and performance requirements.
In this example, auditors found that the grantee was in material non-compliance with most of the federal requirements related to their grants.
Now it’s 2020 and The CARES Act is pumping trillions of dollars of stimulus spending into the economy including federal grants.
Our story of vanishing federal funding during the ARRA days should serve as a cautionary tale for anyone accepting the CARES Act federal grants funding.
10 Major Areas of Non-Compliance
So what went wrong?
How did good grants go bad at a great organization?
- The Office of the Inspector General-United States Department of Justice reported 10 primary areas of non-compliance.
These are ten areas that all grant recipients should pay special attention to with their grants as well:
- The Grantee didn’t adequately safeguard federal funds.
- There was inadequate monitoring of subrecipients-and the subrecipients did not provide supporting documentation of how the funds were received and spent.
- The grants were charged for unallowable costs and many of the costs were not adequately documented.
- Indirect costs were charged to the grant which did not follow the approved indirect cost agreement.
- Consultants were not monitored adequately.
- Funds were drawn by the grantee without regard to the actual spending on the federal award.
- Grant spending was not monitored against the approved budget for the project.
- Property purchased with federal funds was not safeguarded from loss, damage, or misuse.
- The Federal Financial Reports (FFR’s) were not based on actual spending.
- The grantee didn’t report program income that was earned as a direct result of the federal award.
Federal Grants Are Not Just One Big Pot of Money
Too often in the rush to get the programs doing the great work of federal grant funding, recipients forget that each grant must be tracked separately.
- The major categories of non-compliance included co-mingling grant funds with the rest of the organization’s funds—without a way to track the money separately once it was mixed together.
When you have multiple funding streams, including private donors and foundations, all the funding sources and expenditures must be accounted for by the fund.
So Many People Lose, So Few Excuses
It’s easy to look upon this as just another grant spending scandal.
Unfortunately, stories like this continue to diminish the taxpayer support of programs like these, and their view of grant professionals in general.
And let’s not forget the children that these grants are intended to serve are the biggest losers.
Because there really is no excuse for mismanagement of grant funding.
And it is so infuriating because this kind of situation is so preventable.
Don’t Let This Happen To You
Sometimes, bad things happen to good grants because of bad people doing bad things.
Sometimes bad things happen to good grants because of sloppy documentation.
But in both cases, things can quickly go far off-track and the beneficiaries of the federal grant funding are the ones left suffering.
You can avoid a similar fate at your organization by understanding and communicating the requirements to your staff, sooner rather than later.
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.