Avoid these 3 BIG mistakes for your Federal Grants Management GSA SPENDING SCANDAL:
Hey Compliance Warriors: Want to avoid having to plead the 5th before a Senate Committee? Don’t want to be the lead story on 60 Minutes?
Let’s break down the GSA spending scandal and look at 3 mistakes and the short answer about how you can avoid making the same mistakes.
Mistake #1 Lack of Competition
“Most of the contracts at the Las Vegas conference — including $59,000 to an audio-visual firm, a $12,500 commission to an outside event planner — were not competed, and some were duplicated by services provided by the hotel, according to the inspector general’s report. Neely told investigators the expenses ensured the best quality.”
Solution: Use Competitive Practices
The Administrative Requirements for grantees require procurement transactions to support “free and open” competition to the “maximum extent practicable.” The procurement standards require awarding bids that are most advantageous to the grantee, as opposed to awarding bids on non-competitive factors, such as personal preferences.
Mistake #2 Unreasonable and Unnecessary Spending
“Conference travel was common among Pacific Rim staff members, from senior managers to interns. Many conferences were held at luxury hotels, a practice reflected in the buildings service’s rising travel budget, GSA budget figures show. Generous mementos were routine, and motivational speakers the norm. The Las Vegas conference featured a mind reader, commemorative coins for attendees and a clown.”
Solution: Make sure spending is reasonable and necessary
“Reasonable” cost means the amount of the expenditure doesn’t exceed the amount a “prudent” person would have spent. One way to look at “reasonable” costs would be to ask the following question: Would I feel comfortable defending this purchase to a Taxpayer or a Senate committee?
Actions that unjustifiably increase the costs to the Federal Government would not be considered “reasonable” according to the regulations. Remember, if costs are not defendable as “reasonable” they risk being disallowed by your funding Agency.
The procurement standards require a written statement in the procurement procedures that says “recipients must avoid purchasing unnecessary items.” The grantee is expected to only purchase items needed by the project or program to further the objectives of the award.
Mistake #3 Inadequate Documentation
“He acknowledged that he rarely sought legal advice from government lawyers in writing because it would slow down business. He also told investigators: “You put it in writing [and] it’s discoverable for
purposes, or lawsuit purposes, and so on and on and on. So to be blunt, I think there is a reluctance to do that.”
Solution: Don’t avoid the required paperwork (just because it may be “discoverable.”)
Adequate source documentation includes having written documentation with sufficient detail to be able to determine:
- What the funds were spent on?
- When the spending occurred?
- Who approved the purchase?
Procurement files should include:
- The basis for the contractor selection
- The basis for the price or cost of the purchase
- A written justification, if applicable, documenting the reasons for the lack of competition on the procurement; for example, on a sole-source purchase
Avoid these 3 big mistakes in managing your Federal grants!
Quotes from Washington Post Published April 15, 2012
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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.