Ten Ways to Take Grant Management to the Next Level
The Office of Management and Budget (OMB) spearheaded efforts to consolidate eight grants-related circulars into one streamlined set of requirements known as the “Omni Circular.” The guidance took effect December 26, 2013, and federal agencies have begun implementing these uniform administrative requirements. Here are 10 ways federal agencies can take grant management to the next level.
1. Manage the grant life cycle electronically
An electronic grant management system should include:
- Grants application receipt and review
- Grantee risk assessment
- Compliance with grant requirements and funds controls
- Communication (between reviewers, approvers, and grantees)
- Grant award (ensure all required reviews and approvals are obtained prior to issuance of the award)
- Program and financial management oversight (including program and financial closeout)
- Two-way interface with the agency’s general ledger system
- Data privacy and security
Several cost-effective systems are certified and accredited for grants management. If you choose the services of a shared service provider (SSP), ask for the SSP’s prior year SSAE No. 16 Type II attestation report. If controls for the entire grant management life cycle cannot be implemented electronically, put manual controls in place to address the same key areas consistently across the organization.
2. Maintain a list of subject matter experts who know your programs
Grant applications can be highly technical. Whether applications are reviewed internally by agency staff or by an external body, maintain a current list of subject matter experts who understand your mission and program requirements. Many federal grants are related to complex construction projects (e.g., highways, bridges, transit projects), or cutting edge research involving science, energy, and medicine. It is also critical to review the reasonableness, allocability, and allowability of the grantees’ cost budgeting.
3. Understand your grantees before granting awards
It is always wise to know your grantees before the money is out the door. If a grantee is receiving dollars for the first time, institute a checklist to systematically assess the new grantee in areas such as programmatic expertise, past audit findings, existing policies and procedures, segregation of duties, “tone at the top,” financial reporting, and financial capability and stability.
For existing grantees, establish a process to periodically (at least annually) assess the grantee’s program, acquisition and financial management capabilities to help target its oversight efforts. Increased oversight should occur when the grantee frequently experiences delays in its program, performance matrix, or financial reporting.
4. Track and review financial and progress reports
Agencies must use standard, OMB-approved data elements to collect grant financial and program performance data for their grant monitoring efforts. The reporting frequency should be determined by a program risk assessment that evaluates factors such as:
- The newness or maturity of the program
- The grantee’s familiarity with the program
- Volatility of the program performance based on market conditions
- Degree of technical advancement and reliance on new technology
- Managerial complexity
Post-award monitoring should be a joint process shared among the agency program, grant financial management, budget, planning, and/or acquisition personnel. Information should be shared promptly and submitted electronically so reviewers can document their results and comment directly with the grantee.
5. Follow up promptly
If a grantee has a pattern of late or missing reports, deploy oversight mechanisms to ensure there is no mismanagement or impropriety involved. Actions may include refusing draw-down requests until a long-delayed report is received, a meeting with the grantee management, or a site visit by experienced grant oversight personnel to determine where the risk exists.
You should also have a process for systematically tracking a grantee’s single audit report due dates, corrective actions, resolutions, corrective action status, and finding closeouts. When the due date arrives, automatic alerts can appear on a staff dashboard or via email to remind personnel of their follow-up actions.
6. Use data analysis for proactive project monitoring
Data analysis tools can be used to understand a grantee’s spending patterns and determine whether they are in line with the progress of the grant project and program performance. In addition, financial management staff should periodically review the inactive obligations, and work with the program staff and grantee to determine the reason for project inactivity.
7. Reconcile the grants management and the general ledger systems
Grants management and general ledger systems should interface to maximize the efficiency and effectiveness of controls surrounding both systems. Monthly reconciliations between the systems can ensure consistent reporting of the cumulative grant obligations, advances, and disbursements between the two systems at the grant or project level. The same concept applies to agencies that have separate grant payment systems that feed grantee disbursement data into one database.
8. Financial reporting for grant accrual liability
Agencies with grant programs that are material relative to their operations should have a process for estimating and validating the grant accrual liability reported on their financial statements. The Federal Accounting Standards Advisory Board’s Technical Release No. 12 provides detailed guidance on the process for estimating and validating the agency’s grant accrual methodology. Incorporate the agency’s program and grant management office’s thorough understanding of the grantees’ program performance requirements and their corresponding spending patterns into the methodology. Furthermore, document historical data, factors, and assumptions used in establishing the grant accrual methodology. Historical patterns are often found in grantee drawdown details, progress reports, and federal financial reports. The accrual methodology may need to be further segmented by types of programs.
Once a methodology is in place, have a process to validate its reasonableness and reliability with subsequent actual results. Any anomalies should be further researched to determine whether the current estimate methodology is still reasonable or if it requires further adjustment or refinement.
9. Single audit and other oversight monitoring
The OMB Omni Circular raises the single audit threshold to $750,000. Federal awarding agencies are now required to designate a senior official to oversee the single audit tool and metrics, and to evaluate audit follow-up. Federal awarding agencies should have a process for tracking single audit results, and promptly following up when the grantees’ audits are not completed in a timely manner.
You should also implement a process for tracking and monitoring corrective actions, documenting clearly what was done by the grantee to address the findings. Consider implementing financial controls to monitor how quickly grant funds are being used to identify potential problem areas.
10. Grant closeout
The grant closeout should be a joint effort shared among program, financial management, budget, and/or acquisition personnel. At the minimum, agencies should generate a quarterly report for the following:
- Grants ready for closeout
- Grants with amounts obligated but with no activity for the past two quarters
- Grants with no expenditures since inception
Review and monitor the status of all projects on a quarterly basis and communicate, review, and reconcile completed projects to facilitate the liquidation of unused funds. Whenever possible, use funds on ready-to-go projects to improve the agency’s overall program performance.
The road ahead
Reforming the federal grant-making process has proven to be a daunting task. Implementing new regulations and processes will be just as challenging as agencies move grant management to new levels of transparency and accountability and more effective use of federal funds.