Call me a #grantnerd, but I love sharing “lessons learned” grant spending stories!
In a past case study, I wrote of the major areas of non-compliance revealed by the Department of Justice when over $20 million dollars of grant spending earmarked for mentoring at-risk youth through Big Brothers/Big Sisters (BBBS) of Philadelphia did not get documented as planned.
These areas of non-compliance happened during very crazy-busy spending times with stimulus funds as part of the American Recovery and Reinvestment Act. (ARRA)
- And the parallels to The CARES Act for rushing grant spending out the door as fast as possible scream “DANGER, DANGER, DANGER!” in these unprecedented times too!
That’s why I’m sharing these examples of major grant management mistakes so you can avoid having similar severe consequences with your grant spending and reporting.
Big Mistakes: Lack of Grant Spending Monitoring
In this week’s article, we are looking at a common area of non-compliance: Lack of monitoring by the grant recipient for their subrecipients and contractors.
In our BBBS example, there were three main monitoring deficiencies:
- There was inadequate monitoring of subrecipients-and the subrecipients did not provide supporting documentation of how the funds were received and spent.
- Consultants were not monitored adequately.
- Grant spending was not monitored against the approved budget for the project.
Let’s look at the requirements for each of these areas of federal grant management:
#1: Grant Recipients Must Monitor Subrecipients
First of all, federal grant recipients have primary responsibility for monitoring all activities of subrecipients.
This means the prime recipient is responsible not only for their own grant spending but also for the proper use of federal funds by their subrecipient.
So federal awardees must ensure that subrecipients comply with applicable federal administrative requirements such as 2 CFR Part 200, aka the Uniform Guidance.
The grant recipient “steps in the shoes” of the awarding agency to monitor subrecipients and make sure they are following the federal regulations.
But Wait, There’s More to Monitoring…
It’s not enough to ensure the subrecipient has provided adequate documentation on how they spent the grant funds.
- • The prime award recipient must be able to “prove” that they are conducting monitoring activities too.
This monitoring requirement means the grant recipient must document the steps they are taking to monitor the “subs” and provide evidence of that monitoring such as copies of Single Audits and other supporting documentation.
#2: Federal Awardees Must Monitor the Budget vs. What?
Next, grantees are required to monitor their actual spending against the award budget.
These requirements are part of the financial management system reporting requirements to comply with § 200.302 Financial management.
Recipients must have the ability to track and report on the project or program budget and also report the actual spending against that budget.
Does the Grant Spending Match the Financial Records?
This requirement may seem obvious, but the reports of actual spending must tie back to the organization’s financial records and source documentation.
- In other words, someone should review the source documentation for reliability.
Obtain explanations for cost overruns and underruns from operational personnel in a position of responsibility for the source data.
#3: Grant Recipients Must Monitor Consultants Too!
Finally, consultants, aka “Professional Service Costs,” get a special mention in the Uniform Guidance because historically, there have been numerous cases of waste, fraud, and abuse of taxpayer funds through consultants’ use.
Professional service costs are defined as services rendered by persons who are members of a particular profession or who possess special skills.
- Examples of professional service costs include attorneys, accountants, engineers, and others who possess specialized skills.
The requirements of allowability apply to the spending of consultants-just like any other group.
No Unallowable Grant Spending…by anyone
In other words, for costs to be allowable, they must be:
- Not be limited or excluded by federal cost principles regulations
- With policies uniformly to all activities, not just federal awards Grant Spending
- And finally, allowable costs must also be adequately documented
The grant recipient must monitor the consultants to make sure they are only billing for allowable grant spending.
- Check out our Professional Services Costs Infographic below
Ready to Improve Your Grant Management?
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We have another grant management training seminar coming soon.
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Hope to see you there!
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.