Good grants management requires grantees to use their federal funds in the best interests of their Federal grant.
But when the people put their personal best interests before the best interests of the Federal program the result can shatter trust-both with the funding agency and within the organization.
And trust once broken is expensive and time-consuming to repair.
The stories of conflicts of interest have been in the news a lot recently, so let’s look at how conflicts of interest can damage your organization’s reputation and grant readiness.
Two Types of Conflicts of Interest
Conflicts of interest can cause harm to a program both in appearance and in fact.
Here are some examples of these two types of conflicts of interest.
Conflict of Interest-in appearance:
A conflict of interest in appearance is when something looks bad.
Based on the facts and circumstances, there may or may NOT be a conflict of interest in fact.
- For example, when the spouse of a program director is hired as a consultant and it has not yet been determined if the hiring followed a fair selection process, with market pay rates and a specific verifiable work product, there is a conflict of interest in appearance.
Based on the review of what how the decision was made to hire the consultant, a determination should be made whether or not the conflict of interest is in fact.
Conflict of Interest-in fact:
When you have a conflict of interest, in fact, it means something IS bad. In other words, a conflict of interest has or is occurring.
- An example is when goods or services are purchased from a family member, paying a higher price than the market value.
When it is determined that a conflict of interest, in fact, has happened, the Uniform Guidance requires grant recipients to disclose this event to their funding agency.
Organizations need to have a process to identify BOTH conflicts of interest in appearance and in fact. This process should also include deterring and detecting when conflicts of interest occur.
6 Questions: Is Your Federal Grant Free From Conflicts of Interest?
Ask yourself these six questions about your grant:
Question #1: Related Party Purchases
Were the goods and services purchased from a related party such as a family member or business associate of an employee?
Question #2: Related Party Employment
Was a person hired by the organization in a business or personal relationship with someone else in the organization?
Question #3: Outside Influence
Was there undue influence by anyone within or outside the organization concerning the choice of a vendor or a sub-grant award decision?
Question #4: Inadequate Competition
Was the procurement made without full and open compitition?
Question #5: Questionable Consultants
Was a consultant hired without using a fair selection process including determining a reasonable pay rate for the specific verifiable type of work to be done?
Question #6: Circumventing Controls
Are managers or others able to override or circumvent established procurement controls and policies?
If you answered “yes” to any of these questions, you may be at greater risk of a conflict of interest existing at your organization. You may also be putting yourself at greater risk of grant fraud.
Ready to Improve Your Grant Management?
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Would you like to be a better grant manager?
We have another live on-location grant management training seminar coming soon.
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Hope to see you there!
Lucy Morgan CPA, MBA
CEO, Compliance Warrior