Successful Grant Compliance in Six Steps

Federal and state grants are a fact of life for many government and not-for-profit organizations, but managing them can be challenging for even the most organized administrator. No matter what stage you are in for the various grants your organization receives, complying with the various terms of the grant contracts require attention to detail, planning and time management.

Grant management can be centralized within one department or decentralized among several offices, but coordination with all parties is key for compliance. Success requires a collaborative approach that enables all stakeholders involved to:

• Meet the goals of the grant and the organization;
• Efficiently and effectively use grant funds, while maintaining compliance with grant requirements;
• Establish accountability for the use of grant funds; and
• Provide assurance that funds are deployed appropriately.

This checklist can help you get a handle on your practices and make improvements, if and where necessary.

1. Know your compliance requirements.

Each grant is unique, and each contract has its own terms, but there will always be specific conditions and requirements. For every grant, you need to know:

• Contract amount and terms
• Funding sources and applicable guidance
• Scope of work
• Key contacts for the grantor and within your organization for grant management
• Allowable vs. unallowable costs and activities
• Reporting requirements

2. Refer often to the OMB Compliance Supplement for your federal grants.

One of the most useful sources of information for grant compliance for federal grants is the Office of Management and Budget (OMB) Compliance Supplement. Issued most recently in August 2020, with a December 2020 Addendum, this guide identifies important compliance requirements for most major federal grants to be considered as part of an audit under Uniform Grant Guidance.

The OMB Compliance Supplement can be useful and cost-effective if you are researching an individual grant program. It is also an excellent source of information for understanding objectives, procedures, and compliance requirements for federal programs relevant to the audit of the grant. It includes audit objectives and suggested audit procedures for determining compliance.

3. Know where your risks are and avoid common pitfalls and audit issues.

The primary risks associated with grants and ineffective grant management include:

• Misuse of grant funds
• Failing to achieve the grant objectives
• Violating laws, regulations, or grant conditions
• Misrepresentation of grant results
• Reputational damage from grant misuse
• Loss of future funding

As part of your planning and grant compliance procedures, keep these general risks in mind and make sure you address them throughout your organization’s grant management process. Also, be able to self-identify weaknesses in your own grant processes, and take proactive measures for remediation. Focus on high risk areas and compliance. Consider common pitfalls and audit issues that involve missing or incomplete supporting documentation for expenditures charged to the grant, required procurement procedures, lack of segregation of duties, and lack of approvals of expenses and required reports. These issues are often the result of ineffective or outdated policies and procedures, lack of coordination in a decentralized grant management function and limited understanding and knowledge of compliance requirements.

4. Have the right internal controls in place to avoid significant deficiencies.

In addition to compliance, your auditor will focus on whether you have the right internal controls in place over grant compliance. Make sure the following internal controls are defined and disseminated in your organization’s policies and procedures:

• Segregation of duties
• Approval and authorization (expenditures, reports, procurements)
• Program monitoring (on-going monitoring or expenditures, compliance with grant requirements, performance targets, etc.)
• Segregation of physical responsibilities and IT access
• Physical restrictions
• Documentation of grant timelines and milestones
• Timely and accurate reconciliations of expenditures and related revenue, grant budget and other adjustments, as well as related financial reports and grant cut requirements

Internal control deficiencies typically are found in these areas:

• Oversight and authorization
• Purchasing (including cost coding) and disbursements
• Program operations and lack of ownership or knowledge of requirements
• Information technology
• Lack of management coordination oversight of grant amounts, usage, and administration
• Lack of internal reviews or audits of grant files

5. Regularly review your organization’s grant administration processes and procedures.

You can avoid the pitfalls and control deficiencies described above by understanding your grant administration processes. You should have a system in place that tracks all grant information so that you can answer the following questions:

• How many grants do we have?
• What are the funding sources?
• Who is responsible for managing each grant?
• What are the grant requirements?
• Does adequate documentation exist?

Part of maintaining a strong grant compliance program is identifying weaknesses and control gaps. Think about past issues and consider whether your current controls are adequate to address these issues.

To address and resolve problems that have been issues in the past, determine appropriate remediation steps and timelines. This may seem overwhelming, but you should start by focusing on high risk areas and compliance issues.

As you review your policies and procedures, be sure to coordinate with program managers and involve your auditor as needed. Your funding agency can also be a source of assistance for grant compliance.

6. Keep up with Compliance Supplement updates and COVID-19 Funding requirements.

For fiscal year 2021, it will be especially important for organizations to keep up with changes in compliance requirements and new requirements for funding related to COVID-19. The most recent audit guidance in the Compliance Supplement for COVID-19 funding can be found in the 2020 Compliance Supplement Addendum issued in December 2020. However, new stimulus funding in response to COVID-19 continues to be at the forefront of discussion. It is critical for each organization that could be allocated these funds or wants to apply for them, to keep up-to-date on requirements, deadlines, etc.  .

Grant compliance can be a headache, but preparation and knowledge are good medicine. By taking these steps and regularly reviewing and updating your processes, you can minimize the risks associated with grant administration and avoid future fallout related to noncompliance. For more information, contact us. We’re here to help.

© 2021