Good grant management won’t overburden your staff with paperwork and excessive red tape or inhibit their ability to provide the best services. The secret is designing and administering programs from the outset with compliance in mind.
Compliance with federal grants can be complex. Managing these programs is not just about applying rules and flowcharts — it’s about working with your teams to deliver the best services while complying with federal guidelines. Good grant management won’t overburden your staff with paperwork and excessive red tape or inhibit their ability to provide the best services. The secret is designing and administering programs from the outset with compliance in mind.
Understanding How Grant Funds Work
Federal grant funds usually flow from a federal agency (the grantor) to a state or local agency, which in turn distributes it to school districts and other organizations to accomplish program goals. When you win a grant, that makes you a grantee. The first thing you’ll do is sign a grant agreement that spells out the conditions and requirements you must meet and documentation you must collect.
Grant administration is the process of making sure all the links in this grant chain are strong: that everyone understands the requirements and has set up processes to make sure that requirements are met over the long term, even as people come and go. Grantees must also understand that each phase has different requirements, and appropriate internal controls must be put in place to ensure continued compliance. Regardless of their role, everyone must comply with the same requirements at 2 CFR 200, commonly called Uniform Guidance.
The key to an effective, compliant grant program is designing the program with the end in sight, by building robust documentation and processes from the beginning. You need to make sure you understand every detail of the grant agreement. If you are going to accept grant funds, you must be willing to make the investment in skilled administration and compliance so that you meet all requirements.
Grant Compliance and Monitoring
Each grant is unique, but implementing good grant design, administration and compliance will put you a step ahead. Know your compliance requirements by utilizing resources such as Uniform Guidance. Work closely with your grant administrator to understand documentation requirements and familiarize yourself with the details of your award contract, including contract amount, approved funding sources, terms and conditions, scope of work, program objectives and reporting requirements.
The Office of Management and Budget (OMB) Compliance Supplement identifies important compliance requirements for most major federal grants. For example, it lays out rules for expenditures, cost allocations, HR and procurement. By following the Compliance Supplement, you will prepare yourself for the single audit at the end of each year.
The Single Audit Requirement
Grant recipients and subrecipients that spend $750,000 or more in federal funds a year are subject to a single audit. The purpose of this audit is to demonstrate that you, as recipient, have complied with grant funding requirements and implemented satisfactory internal controls. Texas also has a single audit requirement very similar to the federal program, but which applies to state grant funds.
Single audits are designed to assess your adherence to a grant’s financial and compliance requirements laid out in the award contract and to Uniform Guidance. The auditor will also review financial statements and the Schedule of Expenditures of Federal Awards (SEFA), assess your internal controls and follow up on any previous audit findings.
If the audit finds “material” (serious) noncompliance, you will be asked to address the issue. If the issue cannot be corrected or is severe enough, you could be forced to repay funds. Material findings in a single audit could also affect your eligibility for future federal grants.
A single audit can at times seem intimidating but instituting a compliance and monitoring program before a single audit is performed can help you see what you are doing successfully, as well as identifying areas for improvement. By staying aware and continually improving compliance, you can expand your capacity to use grant funds efficiently and increase your district’s chances of receiving more federal funding in the future.
Common Single Audit Issues
Most single audit findings relate to unallowable costs, missing or incomplete financial and program documentation, late reports, limited or ineffective subrecipient monitoring, or poor governance and internal controls. These are some steps you can take to improve grant compliance and reduce the risk of findings in a single audit:
- Build an appropriate governance structure for the grant, requiring appropriate sign-offs and internal controls, as well as documentation of both decisions and expenditures.
- Understand and train staff on the requirements stated in the grant awards, and make sure each requirement is implemented from the design phase through administration and closeout.
- Establish frequent contact with the grant-making agency and any subrecipients you may have. Open lines of communication provide opportunities for you to clarify grant requirements and facilitate timely reporting.
- Plan for the audit and closeout from the first day you receive the grant. Make sure there is an internal control to support every grant requirement, adding or strengthening controls early in the process.
- And, of course, document, document, document, and keep that documentation organized. All policies and procedures must be in writing, including IT policies that govern the systems your organization uses for grants management. Your organization and your subrecipients, if any, also need written procurement standards. Formalize how you select, award and administer contracts paid with federal funds, and disclose any conflicts of interest.
Planning for Success
Effective grant compliance requires ongoing and consistent collaboration among grantor, grantee and subrecipients. When there are multiple stakeholders, checks and balances occur more naturally. But first, everyone must be on the same page.
Include grantors, key internal stakeholders and internal auditors in compliance conversations so you understand their expectations in order to design and administer the program effectively and to ensure all parties understand the grant’s intent. These players want your programs to be effective, just as you do.
NOTE: This article is a condensed version of Compliance from Day One: Designing and Administering Efficient, Audit-Ready Grant Programs. This article, as well as Readying State and Local Governments for the $550B Infrastructure Investment and Jobs Act Funding is available to download on Weaver.com.