Guiding Principles in Grant Management and Internal Controls for Grant Monitoring

Grants Management and Internal Controls

Guiding Principles

Grants are an important source of revenue for many governments and allow investments in infrastructure, development of programs, and results for the community that otherwise would not be possible using local sources alone. State and local governments rely on federal grants for a portion of funding to provide essential programs and services in every community.

GFOA Member Alert:

GFOA will be monitoring federal government actions that impacts federal disbursements to state and local governments. 

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Establishing an Effective Grants Policy

Governments should develop a formal grants policy and that such a policy should address steps to take prior to applying for or accepting grants.

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Grants Administration

GFOA recommends that governments establish processes to promote awareness throughout the government that grants normally come with significant requirements.

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10 Steps to Managing Grants

To help manage its grants effectively, GFOA has developed the following ten steps to act as a checklist to develop a grants management policy and procedure for your organization.

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Grant Management Essentials

1) Prepare an Inventory of All Grants

Work with staff from all departments to create an inventory or database of your current grants and federally funded programs. The grant inventory should identify the following:

  • Current status
  • Grant terms
  • Grant amount
  • Grant administrator (Department)
  • Eligible expenses
  • Capital asset restrictions
  • Does grant involve any pass through funding for other organizations
  • Is subrecipient monitoring required

2) Prepare for the Single Audit

If your organization expends $750,000 or more in federal awards, you are required to have a Single Audit, per the White House Office of Management and Budget’s Uniform Grants Guidance.  For fiscal years beginning on or after 10/1/2024, the threshold is $1,000,000. The Single Audit requires you to prepare a Statement of Expenditures from Federal Awards (SEFA). 

3) Prepare for future grant activity

Be mindful of grant and funding application and reporting deadlines.  Consider sharing timelines and due dates among different parts of your organization.

4) Alert program staff of grant requirements

Make sure federal grant information and awareness is shared in multiple levels of your organization.  Program managers, procurement staff, facility and equipment managers may be in various stages of a solicitation or contract related to a federally funded program.  It is important that any actions your locality is taking until more information is known, reaches the right people at this time.   

4) Exercise Due Diligence Before Entering into Third Party Contracts

Consider placing written controls in place that help your jurisdiction exercising due diligence and caution by having program staff communicate internally before taking unilateral action to enter third party contracts that use federal funds.  

Important Grants Management Terms and Definitions

Obligation

The US Government Accountability Office's definition of an obligation (published November 2023) that demonstrates the need for a present and definite agreement: a definite commitment that creates a legal lability of the government for the payment of goods and services ordered or received. . . . An obligation occurs, for example, when an order is placed, a contract is signed, a grant is awarded, or a service is purchased.” 

Appropriation 

  • Any federal agency or program needs language in appropriations bill to get funding 
  • Can modify policy as well through appropriations process 

Authorization 

  • Establishes a framework, e.g. what should a program do, where it should be located 
  • Essentially authorizes federal government to do something, i.e. can spend the money on a specific purpose if it chooses 
  • Advance appropriation sometimes included, think IIJA 

Expenditure-driven grants 

  • Must incur qualifying expenditures to “obtain claim to resources” (i.e., incurrence is an eligibility requirement) 
  • Often require matching funds or other actions by grantee, referred to as “contingencies” 
  • Most Federal grants 

Purpose-restricted grants 

  • Includes: Entitlements, some formula-driven grants, shared revenues, endowment and other restricted donations  
  • Do not need to incur eligible expenditures before recognizing revenue

Additional Resources

GFOA Fiscal First Aid Resources

To help local governments deal with the many short-term and long-term financial challenges, the GFOA has a provided a program called Fiscal First Aid.

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Uniform Grants Guidance

Guidance from GFOA's Emily Brock and Todd Buikema published in the October 2024 Government Finance Review

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Demystifying Compliance in Federal Grants Management

This GFR article from December 2024 will help you navigate and understand the complexities of these compliance requirements and offer insights into efficient management of federal grants.

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