How to Establish Best Practices in Grants Program and Financial Management
Get Grant Compliance Out of the Way so You can Focus on Achieving Greater Program Results
Publication Date: March 30, 22
By John Yakaitis, MBA, CGFM, CPCM
HPBS, LLC
According to OMB’s Analytical Perspectives, which provide analyses of the President’s Budget, the federal government funded over $925 billion in grants and cooperative agreements to State and Local Governments in 2020. This amount excludes grants and cooperative agreements to entities besides the State and Local Governments, such as non-profits, colleges and universities, and for-profit organizations.
In addition, REI Systems’ 2021 annual grants survey indicated that the greatest areas needing improvement are people, process, and technology. HPBS has published an AGA Journal article that explores the use of modern technologies to reinvent grants management. (See the article on our “Insights” page for more information.) REI’s survey has shown also that significant
challenges relate to process issues. These include:
Inefficient bureaucratic processes
Ineffective financial management at the recipient level Inexperienced recipient program managers
With the advent of COVID, the federal government provided unprecedented grant funds to address resource needs. Establishing consistent and efficient processes to manage this extraordinary grant influx has become even more critical than ever to ensure that:
Grant funds are properly spent and managed in accordance with the terms and conditions of the grants, and relevant laws and regulations
Grant programs are carried out to effectively achieve the intended program outcomes
With this background, based on our extensive work in grant auditing and consulting, we present several ideas sorted by major grant activity that may assist your entity, as a grant recipient, in establishing and maintaining sound internal control systems for the program and financial management. These best practices can serve as force multipliers that will enhance the probability of successfully accomplishing your organization’s mission.
I. SMART Program Management
In the early eighties, Peter Drucker postulated his Management by Objectives concept which
has since become “SMART” theory. He recommended that managers work “SMARTer” ---not
harder. In fact, some business scholars have since revised SMART to include two additional
goal areas—Evaluated and Reviewed—thus becoming SMARTER.
Our recommendations for SMARTER program management are as follows:
Develop strategic goals and objectives applicable to capabilities that are Specific, Measurable, Achievable, Results-oriented, and Time-limited.
Your goal should be clear and SPECIFIC, otherwise, you won't be able to focus your efforts or feel truly motivated to achieve it. What is it you want the grant to accomplish?
Track and MEASURE your progress and stay motivated. Measure your progress frequently and look for ways to continuously improve and innovate for better program delivery—prepare a dashboard that shows grant costs, program goals, and performance trends---and compare it with budgeted targets.
Your goals need to be realistic and ATTAINABLE.
Choose only a few goals that support the organization’s vision and focus on RESULTS.
Every goal needs a TIMELINE, so that you have a deadline to focus on and something to work toward.
Develop performance measures and collect and analyze performance data from sub-recipients to measure their progress towards achieving goals and objectives.
Ensure sub-recipients take timely and effective action to address deficiencies found in either the recipient’s regular monitoring efforts or audit reports.
Summarize progress each quarter toward achieving goals and objectives and use this information as a basis for making decisions.
Identify, report, and resolve issues.
Communicate with the grantor’s program officer as soon as practicable and develop a revised performance plan, obtain technical assistance on areas of need, outline actionable steps keeping in mind that initial steps were perhaps too numerous (or unachievable).
Missed goals may not be failures—view them as lessons learned and
move on. Being overly critical is the real failure.
Develop and implement policies and procedures to ensure that:
strategies contain target dates when objectives would be achieved,
baselines are identified for the capabilities that will facilitate measuring progress, and
strategies are consistent with the risk assessments.
II. Financial Management
The Office of Management and Budget's (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (commonly called "Uniform Guidance") was officially implemented in December 2014. The Uniform Guidance – a "government-wide framework for grants management" – is an authoritative set of rules and requirements for Federal awards. The reforms that comprise the Uniform Guidance aim to reduce the administrative burden on award recipients and, at the same time, guard against the risk of waste and misuse of Federal funds. OMB's Uniform Guidance does the following:
Removes previous guidance that is conflicting and establishes standard language.
Consolidates and streamlines eight previously issued circulars (A-21, A-50, A-87, A-89, A-102, A-110, A-122, A-133) that were issued at different times for different types of entities/operations.
Directs the focus of audits on areas that have been identified as at risk for waste, fraud, and abuse.
Lays the groundwork for federal agencies to standardize the processing of data.
Clarifies and updates cost reporting guidelines for award recipients.
There are practical tips that could further your objectives towards meeting the intent and
requirements of the Uniform Guidance, as follows:
Develop and implement procedures, with appropriate internal controls, to ensure that grant funds are expended in a timely manner and within the grant period.
Document procedures for cash drawdowns to ensure compliance with program requirements. Perform a drawdown reconciliation with incurred expenditures beforehand to ensure the drawdown is made to meet immediate payment needs.
Check your “Burn Rate” often. Compare budgeted cash with monthly operating expenses and the program progress.
Establish procedures so the finance division receives all financial information necessary to ensure that payments are properly authorized and that account balances are kept current.
Establish an electronic file management system to store and access grant awards related supporting documentation such as grant awards and their proposed budgets, subrecipient selection, subrecipient pre-award risk assessment, time allocation sheets, receipts, and procurement solicitations, contracts, and invoices.
Ensure compliance with federal time reporting requirements for personnel costs charged to federal awards by requiring employees to prepare activity reports or develop a system to identify hours charged on federal awards by activity.
Without documentation indicating what grant activities employees are working on, there is no assurance that the time charges were expended to further the grant program delivery. This could lead to questioned costs.
Ensure that the internal control system enables a comprehensive accounting of individual subrecipient finances from initial award to grant closeout.
Maintain an up-to-date and complete subrecipient filing system, perform reconciliations between award amounts and invoices, and cost sharing information.
Establish procedures to include periodic inspections of subrecipient supporting documentation for reimbursement requests.
Make sure subrecipients submit invoices as support for their reimbursement requests and use this information to keep a running comparison on budgeted amounts versus the actual request for payment.
Monitor subrecipient’s fiscal management practices and provide the necessary technical assistance in a timely manner.
Review procedures to ensure that funds are available to subrecipients in a timely manner.
As with requiring subrecipients to support their drawdown requests, ensure that the subrecipients are reimbursed timely. Subrecipients often experience cash flow issues and need funding in a timely manner.
III. Property Management
According to the Uniform Guidance, equipment acquired under a federal award will usually vest upon acquisition with the recipient. Equipment must be used by the recipient in the program or project for which it was acquired as long as needed, whether or not the project or program continues to be supported by the federal award, and the recipient must not encumber the property without prior approval of the federal awarding agency. The recipient should:
Ensure that property management procedures, including the subrecipients, comply with federal property management requirements for equipment purchased with federal funds.
Require subrecipients to furnish plans for performing regular physical inventories within a specified timeframe and to provide details on how they will become compliant with property management requirements.
IV. Subrecipient Monitoring
Recipients are responsible for managing and monitoring their subrecipients' performance and compliance with federal rules and regulations. As a recipient, you are also responsible for taking appropriate action when you identify performance and compliance issues with the subrecipients. Using subrecipients to administer all or part of your grant program increases the likelihood that you may, at some point, experience compliance problems.
Remember that subrecipients are your partners, and you need to work together in achieving your program goals. It is, after all, a collaborative effort. We recommend the following best practices:
Assess the protocols for monitoring subrecipients to include reviewing a performance monitoring checklist for evaluating subrecipient compliance with federal requirements, such as procurement and equipment inventories, and determining criteria and methodologies for assessing subrecipient efficiency and effectiveness in accomplishing program objectives.
Ensure that subrecipient monitoring cover each program, function, or activity, and require subrecipients to adhere to the same performance monitoring and reporting standards as required of the recipient itself.
Develop policy and monitoring procedures that include frequency of visits, methodology for selecting subrecipients to visit, and a protocol for reviewing financial and performance-related activities during the visits.
Recipients are responsible for monitoring subrecipient use of federal awards through reporting, site visits, regular contact, or other means. Recipient monitoring should provide reasonable assurance that the subrecipient administers federal awards in compliance with laws and regulations, as well as the provisions of contracts or grant agreements.
Develop a uniform set of procedures for monitors to use during evaluations of subrecipient program performance to ensure consistency in the scope and methodology of the evaluations from subrecipient to subrecipient.
Make sure you follow the same playbook and employ similar guidelines. Compare findings to identify systemic issues.
Implement policies and procedures for subrecipient on-site monitoring and give priority to larger subrecipients as well as those needing additional monitoring.
Perform risk analyses on your subrecipients and focus your resources accordingly.
Ensure adequate resources are provided to subrecipient monitoring efforts - complete regular site visits or obtain subrecipient monitoring information through other sources of visual verification such as date stamped video, photographs, or internet-based videoconferencing.
“Trust but verify”…R. Reagan
In sum, the federal government expects much more than “simply “providing the funds to achieve the purposes of the grant. It expects an unwavering commitment to compliance with program and financial requirements. OMB’s Uniform Guidance was developed to assist the recipient (and the subrecipient) in ensuring that the grant purposes are fulfilled and that all applicable laws and regulations are followed as well. Become intimately familiar with the Guidance, employ as many as of the best practices as feasible, and, in the end, work SMARTER.
