After spending a lot of time and effort writing a grant proposal, you submit the application package and, after a few months, receive notification your agency was awarded the grant! Now the hard work begins managing the grant.
The common goal of grant funders is that grant recipients do what they described in their application, with the budget they proposed. However, I’ve seen firsthand and read too many stories of agencies awarded a grant who had little to no plan as to who would be responsible for the financial recordkeeping or program reporting only for that agency to be audited and then have to return thousands or more dollars due to mismanagement of the funds.
Take for example this county in California that returned over $1 million in disaster relief funding to FEMA due to poor record-keeping. The audit came years after the project was completed. A large university in New England had to pay the Federal Environmental Protection Agency $2.5 million in damages and penalties to settle civil allegations that the institution submitted false claims on approximately 500 federal grants awarded to them. The city of Baltimore has been cited on more than one occasion for not properly accounting for millions in grant funding.
The reasons agencies are faulted for mismanagement of grant funds are numerous and can include:
- Lack of clear policies;
- Limited staff oversight;
- Faulty accounting;
- Little documentation or missing records;
- Falsifying time and effort records of grant-funded staff;
- Purchasing items not on the approved budget;
- Slow or no progress reporting to the granting agency;
- Inability to secure the required local matching funds.
The penalties for poor grants management vary based on the severity of the problem and granting agency’s procedures. These may include:
- Returning the portion of the funding that was disallowed;
- Freezing all grant funds until proper procedures are in place;
- Payment of fines to the granting agency;
- Suspension or debarment from receiving future grants;
- Increased level of financial and/or programmatic oversight by the granting agency.
The U.S. Department of Health and Human Services Substance Abuse and Mental Health Services Administration (SAMHSA) is one of many grantors that has a formalized policy and will place grantees on “restricted status” if they deem an agency to be financially unstable, have inadequate financial management systems, or are poor programmatic performers. Grants deemed restricted status require closer monitoring by the agency.
No agency wants to be placed under a microscope because of poor management of grant funds. Being good stewards of the funding awarded can put you in a strong position to receive future grant dollars to cover needed agency resources or to support innovative ideas.
Strategies for Grants Management
Follow these steps for effective grants management as soon as you receive the grant award:
- Convene a grants management team of agency staff who will be responsible for the oversight of the grant-funded project. This should include, at a minimum, your operational project manager, fiscal director, human resources staff, accounting staff and legal/ethics officer. Review the grant award documents and discuss all of the requirements of the grant contract so you are familiar with your responsibilities imposed by the granting agency.
- Delegate specific roles for those on the grants management team. Determine who will be responsible for fiscal oversight and reporting, and who will collect the data for programmatic and performance reporting. Establish internal controls for checks and balances and separation of duties.
- Draft policies and procedures on how to spend the funds, what documentation is required and how often to report expenditures. If written policies and procedures are already in place, review them with the team and revise as necessary to conform with the granting agency’s requirements.
- Establish a separate financial account for the receipt, expenditure and reporting of the grant funds. Federal regulations prohibit the commingling of federal grant funds with funds from other sources.
- Identify and earmark the local matching funds. Make sure these funds are available throughout the entire grant project period.
- Purchase only those items that were approved in your grant application budget. If you need to make changes to the budget, follow the granting agency’s guidelines and receive written approval of any changes in advance.
- Follow proper procurement and accounting practices for the obligation and expenditures of the grant funds. Seek competitive bids, and create formal purchase orders, payment records and invoices.
- Keep an inventory of all of the supplies and equipment purchased with grant funds.
- Ensure your grant-funded or in-kind personnel complete timesheets that clearly document the time devoted to the project by task area.
- Review your agency’s IT infrastructure to determine if upgrades are needed to allow for the collection of fiscal and performance data and submission of reports through the granting agency’s online portal.
- Keep good records. Establish a separate folder by grant award and keep copies of the grant award documents, vendor quotes, purchase orders, invoices, payments (checks or electronic payments), timesheets, equipment and supply inventories, contracts, accounting ledgers, project photos and submitted grantor reports.
- Complete all grantor-required financial and program/performance reports on time. Highlight your successes and discuss your implementation challenges.
If you follow these strategies, you will not only breeze through any audit or grantor-monitoring visit, but also will better position your agency to receive grant awards in the future.
