CBS News recently reported that the U.S. Justice Department has frozen federal grant funding to Big Brothers, Big Sisters (BBBS) after a recent audit revealed that BBBS couldn’t account for nearly $20 million dollars of federal funds that were drawn by the organization for mentoring youth.
How Does That Happen?
Auditors determined that the grantee was in material non-compliance with most of the federal requirements related to their grants.
10 Major Areas of Non-Compliance
The Office of the Inspector General-United States Department of Justice reported 10 primary areas of non-compliance.
1) The Grantee didn’t adequately safeguard federal funds.
2) There was inadequate monitoring of subrecipients-and the subrecipients did not provide supporting documentation of how the funds were received and spent.
3) The grants were charged for unallowable costs and many of the costs were not adequately documented.
4) Indirect costs were charged to the grant which did not follow the approved indirect cost agreement.
5) Consultants were not monitored adequately.
6) Funds were drawn by the grantee without regard to the actual spending on the federal award.
7) Grant spending was not monitored against the approved budget for the project.
8) Property purchased with federal funds was not safeguarded from loss, damage, or misuse.
9) The Federal Financial Reports (FFR’s) were not based on actual spending.
10) The grantee didn’t report program income that was earned as a direct result of the federal award.
It’s Not Just One Big Pot of Money
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.
So Many Losers, 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.
It is infuriating because this kind of situation is so preventable.
Don’t Let This Happen To You
In the coming weeks, we’ll look at where things went so far off-track and what federal administrative requirements and cost principles were violated.
We’ll look at what you can do to avoid a similar fate at your organization.
Lucy Morgan CPA, MBA
CEO, Compliance Warrior
P.S. If you’d like to find out more about how to avoid grant management problems and pitfalls?
Check out Grant Management Boot Camp training that helps that helps people work through these issues.
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