Strong Policies Can Enhance Financial Oversight
Grant recipients should establish solid internal policies to ensure that they are complying with all financial reporting requirements while never losing sight of the intended mission of their federal awards, a Nevada-based official told attendees at the National Grants Management Association’s (NGMA) annual grants training recently held in Crystal City, Va.
“The results of your [financial] reports and your reconciliations, especially in your closeout, are a direct result of the business practices and business management that you apply to your grants,” according to Jessica Hoban, policy and communications chief for the Nevada Office of Chief Information Officer, adding that these practices should include continuous review of policies and procedures, internal controls and training efforts. “Grants are complicated, but if your practices are based on a good foundation, they can carry you throughout the grants lifecycle.”
Hoban emphasized three primary “pillars” for proper financial oversight of grants — cash management, time management and performance measures. She warned that recipients should avoid supplanting funds (i.e., federal funds must be used for the awarded program, either new or existing, not to replace state and local funds or services that would otherwise be provided) (see ¶312 in the Federal Grants Management Handbook). “You don’t want to take grant funds from one grant and give it to another; that’s not good management of public funds,” she said.
Also, Hoban noted that some recipients may have grants in which the project performance year differs from the entity’s fiscal year. She urged recipients to develop policies and procedures that address how to manage awards when there are competing timelines, particularly as it affects grants closeout. “Make sure you close out your grant responsibly, and that you are not spending outside the time parameters of the federal award,” she said, adding that proper record retention also is critical. “Even though your [organization] may have a certain time period when dealing with a grant, the record retention period requirement at the federal level begins when [the] grant ends, so if you have a multiple-year federal award, the first day of your retention period does not start until the grant ends” (see ¶466 in the Handbook).
‘First In, First Out’
Hoban also discussed grantee obligation and expenditure periods, explaining that recipients should spend funds on a “first in, first out” basis. For example, if an organization receives annual awards for multiple years, the organization should spend all the funds for the first year before spending funds from the second year’s award. (A discussion of the “first in, first out” requirement can be found at Chapter 22.214.171.124.4 of the NIH Grants Policy Statement.)
“Don’t start spending on the second award until after you have exhausted all of the funding amounts from the prior award,” she said. “Make sure that you train your people so that they understand the process. Also, make sure someone is regulating whatever method you use for your balance sheets so that you know the available amount [remaining] on your award.” She encouraged organizations to have policies and procedures to ensure that these payment processes have adequate oversight to ensure that accounts are accurate.
Budgeted vs. Actual Costs
Recipients should be aware, according to Hoban, that budgeted costs estimated in an organization’s grant application often are different than the post-award actual costs. “Budgets are a plan when you apply for grants,” she said. “However, what happens in reality concerning actual costs is what you are measured on for compliance and performance. Many things do not go the way we planned.”
Hoban explained that some recipients have sought reimbursement for costs based on budgeted amounts and did not reconcile their spending to actual obligations or whether funds were spent appropriately, particularly concerning personnel costs (see ¶465 in the Handbook). “If some of you never had to do time-and-effort tracking and now you do, this is a method to demonstrate actual [staff] support and focus on a benefiting program,” she said. “In some cases, you’ll have personnel spending more time on a grant than what was approved in the budget. Go back and look at what actually happened [concerning personnel costs], and make sure your [time-and-effort] reporting is verifiable, compliant and can stand up to an audit.”
Hoban emphasized that federal grant funding is intended to forward the mission of the grant to serve the public good, so management decisions should aim to meet this mission, not just to receive a single audit with no findings. “Use [mission goals] to drive your decisions,” she said. “When you focus so much on compliance, you’re actually inhibiting the benefit to the public. Make sure you know the grant [mission] is the primary driver for the services you are providing and set up your parameters and your decisionmaking on program management based on that intent.” With that in mind, however, Hoban urged attendees to review and follow the accounting and administrative requirements in the uniform guidance and the federal regulations overseeing their award programs.