How would you like to write a $2.3 million check to the US Treasury because your grant was mismanaged?
A recent Office of the Inspector General report recommended that $2.3 million in grant funds be repaid to the Federal government.
The award was made by the Federal Emergency Management Agency (FEMA) to the state of Louisiana with a pass through to a local nonprofit.
Three Ways Things Went Wrong
The Inspector General cited $2.3 million of grant mismanagement in their scathing report.
Audit findings recommended over $768,667 to be repaid by the nonprofit organization and the remainder by the state.
>>First, $325,853 in spending at the subrecipient was not adequately documented.
>>Then, the subrecipient spent $135,319 of the grant funds on ineligible items.
>>Also, $307,495 in grant spending occurred after the end of the period of performance.
>>And finally, the state didn’t adequately monitor the nonprofit’s federally funded activities and didn’t properly closeout the awards.
Let’s look at each of these in more detail.
The subrecipient had over $325,000 in spending with time and material contracts that were not adequately supported.
The nonprofit officials said they didn’t get supporting documentation from contractors because they were not aware they needed to obtain records to support the invoices that were submitted by their vendors.
Just like the state had a duty to monitor the nonprofit, the nonprofit also had a requirement to monitor their contractors for compliance with applicable grant regulations and procurement standards.
Remember, ignorance of the law is not an excuse.
The spending of Federal funds included over $135,000 of unallowable costs.
The main items that were disallowed were payments for things that were outside the scope of work of the Federal award.
Additionally, payments were made for things that were not the subrecipient’s responsibility to pay for.
>>For example, repairs were made by the nonprofit organization in an area that was co-owned by another legal entity, and therefore not entirely the responsibility of the nonprofit.
The subrecipient indicated this was an oversight on their part and will work with the state to resolve the issue.
Do people working your grants understand what the scope of work includes?
And what is not included?
Spending Too Late
It’s a Cinderella moment.
>>You know the one.
The clock strikes midnight and the beautiful carriage turns into a Pumpkin.
Grant spending is like that.
>>Once the period of performance is over, the party’s over.
The nonprofit spend Federal funds on repairs over three years after the end of the period of performance.
They said they didn’t realize that had to file an extension of the period of performance to continue spending the money.
Fortunately they had a fairy godmother with a magic wand.
It looks like FEMA officials retroactively approved an extension The Shocking Truth.
Should you count on a fairy tale turning into real life grant management with your spending?
>>Or keep your spending within the period of performance.
(Please don’t turn your grant into a Grimm Fairy Tale.)
Spend It or Lose It
The Inspector General also recommended that the FEMA de-obligate $1,493,606 of unused funds.
The nonprofit spent $1.4 million less than the budget estimates for the project Million Payback of Grant Funds The Shocking Truth, but the state didn’t notify FEMA that the funds would not be used as anticipated for over six years.
>>Think about this.
Six years after the majority of the work is complete The Shocking Million Payback of Grant Funds Truth and the award recipient still hasn’t let the Federal agency know that they didn’t spend all the money.
Fast Forward: Adding Insult to Injury
You may be thinking about how bad it would be to have to repay funds.
Now picture what will happen when the new 2 CFR Part 200 grant regulations (also known as the OMB Super Circular) become fully implemented this year.
The new grant guidance will ramp up the penalties and responsibilities Million Payback of Grant Funds of grant recipients.
The new grant regulations include potential prosecution of officials who certify the costs for their organization under the False Claims Act.
Do I have your attention now?
>>Yes, people could go to jail under the new grant regulations.
Don’t be in denial about this.
Ready to Improve Your Grant Management?
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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.