The following represents what we have found
to be the most common oversights for Federal and private grant
management:
Read the
Entire Grant Agreement: Although this may
seem obvious on the surface, we have found this is the most
serious and frequent oversight which occurs. The agency
and/or federal grant may require specific reporting forms,
cost principles, reporting periods, and audit requirements.
These requirements may be included as part of a regulation
or circular that is not clearly specified in the agreement.
Often these requirements are only cited or referenced in
one sentence of the grant agreement. It is the organization’s
responsibility to research its responsibilities for managing
the grant.
General
Grant Requirements: Government grants require
compliance with applicable general grant requirements. These
are in addition to the specific requirements of the grant
program. General grant requirements are as follows:
- Civil rights
- Allowable costs/Cost principles
- Administrative requirements
- Davis Bacon Act
- Drug Free Workplace Act
- Federal financial reports
- Relocation Assistance and
- Real Property Acquisition
- Cash Management
- Political Activity
The accounting staff and project managers
of the organization should familiarize themselves with these
requirements and establish procedures for properly recording
expenses and monitoring their reporting requirements.
Matching
Requirements: Grant agreements may require the
organization to fulfill the matching of expenses under the
grant budget. The grantor may provide for a portion of the
total grant budget and the organization is required to match
the remaining portion of the grant budget. The organization
may meet this requirement through excess expenses in budget
categories or excess indirect costs. However, an organization
may not use expenditures used on one federal grant to meet
matching requirements of another federal grant.
Cost Allocation
Plan: Grant agreements that allow for reimbursement
of indirect costs require the organization to have a cost
allocation plan for indirect costs. The cost allocation
plan must be submitted to the granting agency for approval.
Once approved, the indirect cost rate is considered provisional
until actual indirect costs are calculated in accordance
with the organization’s cost allocation plan. The
provisional period for an indirect cost rate varies based
on the granting agency’s requirements. Generally,
the actual indirect cost rate is submitted at the end of
the grant period. A provisional indirect cost rate is an
estimate used for budgetary purposes under the grant. Reimbursement
of indirect costs under a grant agreement is limited to
the actual rate calculated. Accordingly, the organization
will have to reimburse the grantor if actual overhead rates
are lower than their provisional rate. Timely monitoring
of actual overhead rates may allow the organization to amend
its budget if overhead is lower than expected and actual
direct costs are higher than expected. Indirect Cost Allocation.
Indirect cost allocation proposal examples
are available through the U.S. Department of Health &
Human Services web site http://rates.psc.gov/fms/dca/np_exall2.html.
Unallowable
Costs: Certain costs are not allowed under
federal financial assistance, such as travel in excess of
federal per diem rates, interest expense, alcoholic beverages,
fines and penalties, and costs not provided for in the grant
budget. OMB Circular A-122 http://www.whitehouse.gov/omb/circulars/index.html
outlines government costs principles and describes costs
that are unallowable under federal financial assistance.
Unallowable costs need to be identified for purposes of
financial reporting and indirect cost allocations. The organization
should note that even budgeted line items that have been
approved in the grant are unallowable if they exceed amounts
allowed under federal guidelines.
Financial
Reporting: Reporting requirements for government
grants require that an organization have the ability to
reconcile the general ledger to the grant reports filed
with the granting agency. Further, the grant agreement requires
that the financial reports are filed in a timely manner
in accordance with the schedule outlined in the grant agreement.
Accordingly, the accounting staff should prepare financial
reports. We have found in a number of organizations that
program managers prepare financial reports without using
information in the general ledger. This can result in erroneous
reporting of information or failure to report all allowable
expenses.
Grant Extensions:
An organization may request an extension of time
to complete a grant project. The request for extension is
applicable to performance of the grant or completion of
the final grant report. The extension does not necessarily
allow for additional expenditures to be incurred during
the extension period. If the organization wishes to extend
the period of spending under the grant, it should specifically
request this as part of its grant extension.
Grant Modifications:
Only a grant office can approve modifications to a grant.
We have found that organizations sometimes receive “approval”
from project manager at a Federal agency. These approvals
are not allowed. Accordingly, the organization should send
all requests for changes in the grant to the grants officer
identified in their agreement.
Time Sheets:
Reimbursement of salaries and fringe benefits under
a grant agreement requires the use of time sheets to support
time directly spent on the grant program, indirect time,
and direct time on other activities of the organization.
Time sheets must reconcile to the organization’s payroll
records, the general ledger, and financial reporting to
the granting agency. We have found that some organizations
simply charge the budgeted salaries to the grant without
maintaining proper timesheets.
Subrecipient/Subgrantee
Requirements: Grant agreements that provide
for subrecipients/subgrantees require that the organization
communicate the requirements of the grant, requirements
of federal financial assistance, and other applicable cost
principals to the subrecipient/subgrantee. The subrecipient/subgrantee
must communicate to the grantee controls implemented for
compliance with the grant program requirements.
Budget Changes:
Generally, each Federal agency will establish a percentage
or amount that each budgeted line item can be changed without
requesting a formal change in the grant agreement. Any changes
greater than those allowed in the agreement must be approved
in writing by the grant officer. The organization should
identify the granting agency’s requirements for budget
changes prior to implementing budget changes.
Related web sites:
www.whitehouse.gov/OMB/grants
www.nonprofit.gov/search/search.html
http://harvester.census.gov/sac/
