Transportation grants can be at risk when procurement procedures are missing or incomplete.

With all the infrastructure and transportation grants flowing of late, we decided to revisit this cautionary tale from the past.

Here’s what happened…

An Inspector General report highlighted the risk to over $7 billion dollars in undisbursed funds for the High Speed Intercity Passenger Rail (HSIPR) program.

This discretionary grant program supported the creation and expansion of high-speed and intercity passenger rail networks.

However, an Inspector General Report on the Federal Railroad Administration (FRA) delivered a condemning look at the lack of processes and procedures for assessing the risk of federal awards funded by the Department of Transportation.

Risk Assessment Requirements Expanded with 2 CFR Part 200 Grant Regulations

In a previous article, we discussed The Ugly Truth about the New Risk Assessment mandated by the grant regulations for federal agencies and pass-through entities.

As we mentioned in the article, the concerns of the grant community were justified as the consistent application of this requirement is challenging many federal agencies.

Yes, I know it seemed simple enough… § 200.206 Federal awarding agency review of risk posed by applicants, mandated federal agencies to have in place a framework to assess the level of risk posed by grant applicants before awarding federal funds.

However, an Inspector General Report on the Federal Railroad Administration (FRA) delivers a condemning look at the lack of processes and procedures for assessing the risk of federal awards funded by the Department of Transportation.

Federal Agencies: Do As We Say, Not As We Do…

The grant regulations contained in 2 CFR Part 200 (also known as the Uniform Guidance) were designed to make the regulations more consistent across various federal agencies.

However, what our research has shown, at times, the application of the risk assessment framework has not always been consistent.

Is this another case of “do as we say-not as we do” by Federal agencies?

It certainly makes grant management by even the most conscientious award recipient a challenge!

Risk Assessment: What Happened?

The inspector general found that the FRA policies were incomplete regarding risk assessment.

This absence of effective procedures substantially lessened the internal controls at FRA and could expose federal awards to greater risk of waste, fraud, and abuse.

Here are some examples:

• Policies on risk management and documentation are incomplete.
• When issues are identified during monitoring by the agency, the staff is not required to document the grantee’s corrective actions.
• Compliance with internal control requirements depends on staff knowledge rather than written procedures-which violates the Antideficiency Act.
• FRA policies and procedures don’t define the tolerance for risk or how to analyze the risk posed by a grantee prior to awarding work.
• Lack of response strategies for amendments and special conditions could expose the Federal Government to higher levels of risk than are acceptable.

What Does the Inspector General Recommend?

The risk assessment has also been a challenge for grant recipients.

Many were left wondering what this requirement would mean to them and how to respond when it seems like each agency has its own criteria.

Grant recipients can take a lesson from the recommendations of the Inspector General to the FRA.

Here are some of the recommendations:

1. Document policies and procedures for the prevention of violations.
2. Ensure policies and procedures establish a process that includes defining, assessing, and documenting the risk assessment to ensure taxpayer funds are protected from waste, fraud, and abuse.
3. Have policies and procedures require documentation of significant analyses and decisions.
4. Clarify policies and procedures to require documentation of corrective actions to resolve findings and follow up on unresolved matters.
5. Require staff to report all suspected instances of fraud, waste, and abuse.

These five recommendations are also sound principles to build updated policies and procedures on at your organization.

5 Tips for Improving Your Award Policies and Procedures

To make this cautionary tale more meaningful, here are five tips for improving the award policies and procedures at your organization.

Take a minute and see if your organization is:

1. Preventing violations of the award terms and conditions-both intentional and unintentional
2. Establishing a process so award funds are protected from waste, fraud, and abuse
3. Requiring sufficient documentation for spending, performance, and reporting
4. Documenting corrective actions and monitoring the results of a corrective action plan
5. Implementing a process for reporting instances of fraud, waste, and abuse along with other violations of law as required by the grant regulations.

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!

Author:

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.