Grants Administration

Governments often receive significant grants from other governments and organizations to support their programs and activities. Often, grants come with specialized requirements that can apply to the general operations of the grant, specific compliance rules, monitoring of other parties that may receive resources from the grants, and specialized reporting requirements. There are typically negative consequences for failing to meet these requirements. Further, grants may, either as a condition of the grant itself or as a result of practical/political circumstances, commit a government to financially maintain a program or asset after the expiration of the grant. Accordingly, a government should develop a grants policy that requires certain steps to be taken before applying for or accepting grants to maximize the benefits of grants while minimizing their risks.

While it is important to have a grants policy, a government must also ensure that it appropriately administers grants after their acceptance. Inappropriate administration can result in the failure to meet all requirements of the grants that a government receives. In such cases, some or all of the grant resources may need to be returned to the provider. Normally, a failure to meet all grant requirements is not intentional. Instead, the problem often occurs because some appropriate parties within the government are not made aware of all the requirements in a timely manner.

1. To ensure the efficient administration and operation of grant programs, the government should:
   • Maintain a process to monitor for changes in grant terms and conditions that occur after the acceptance of a grant;
   • Establish a project plan identifying timelines and parties responsible for implementing the plan;
   • Provide initial training for new and unfamiliar programs and continuing training for the government (both for oversight agencies, such as finance, and department/program staff that directly administer the grants) and others involved with the grant program (e.g., subrecipients); and
   • Maintain a process to address specific personnel issues related to grants (e.g., whether salaries and/or benefits are eligible expenditures and if so, what are the related time-keeping requirements).
2. To ensure the efficient financial management of grants, governments should:
   • Establish a central grants management function;
   • Establish one or more grant funds or unique grant project identifiers to account for all financial transactions for each grant;
   • Develop appropriate cash management procedures for drawdown and receipt of funds as well as disbursement of funds;
   • Develop procedures to reconcile internal records with federal and state reports;
   • Maintain a process to ensure that costs charged to grants are allowable, necessary and reasonable, and properly allocated, and that these determinations are made in a consistent manner;
   • Determine whether indirect costs will be allocated to grant programs, and if so, maintain an appropriate process to make the allocation;
   • Document if the government will use a negotiated rate or the de minimis indirect cost rate;
   • Maintain a process to track information about local matching funds, including identification of the source of such funds;
   • Integrate grants into the annual budget process;
   • Integrate grants into the government’s cash flows planning; and
   • Develop a contingency plan for funding services that will be continued even if the grant funding is reduced or terminated.
3. To support grants administration, governments should maintain systems that:
   • Ensure that systems will provide information to all involved parties to allow them to comply with both GAAP and grant requirements;
   • Identify and segregate costs as necessary for the grant (e.g., separate allowable and unallowable costs, separate direct costs from indirect costs, and separate administrative costs);
   • Account for and track grant funded capital items;
   • Track information for non-cash grants; and
   • Store and provide information electronically so that it is available to multiple users.
4. To maintain proper internal control procedures, governments should:
   • Document grant procedures;
   • Maintain internal control procedures over accounting, financial reporting, and program administration;
   • Maintain internal control procedures over the identification of, and adherence to, Federal and State compliance requirements, such as those relating to contracting;
   • Consider the level of program risk (e.g., high, medium, low) when establishing internal control procedures; and
   • Design and use internal control procedures to ensure the reliability of information obtained from third parties (e.g., jobs, Buy America).
5. To ensure proper subrecipient monitoring, governments should:
   • Establish requirements for subrecipients to submit progress reports;
   • Provide for administrative monitoring, including timely reporting and adherence to compliance requirements by subrecipients;
   • Provide for financial monitoring, including obtaining an understanding of, and adhering to, cost principles;
   • Provide for the receipt, review, and appropriate follow-up of Single Audit reports, when applicable; and
   • Develop contacts with the state for funds that pass through the state.
6. Establish continuous communications with:
   • The grant sponsor/provider;
   • Those with oversight responsibility including, when applicable, the Federal Cognizant Agency;
   • External financial statement and Single Audit providers; and
   • An interdisciplinary implementation task force within the government that meets regularly to discuss necessary program and control changes and how they should be implemented.
7. Establish processes to meet various specialized reporting requirements including:
   • Maintaining a comprehensive list of reporting requirements and a reminder system for meeting the reporting deadlines;
   • Identifying who is responsible for the various reporting requirements;
   • Establishing methodologies for the preparation of specialized reports;
   • Establishing approval processes for certifying specialized reporting; and
   • Establishing processes for obtaining all of the information needed for the Schedule of Expenditures of Federal Awards (SEFA).
8. Ensure compliance with auditing requirements for grants by
   • Developing and documenting an understanding of audit requirements specific to grants including, those in Generally Accepted Government Auditing Standards (GAGAS), Generally Accepted Auditing Standards (GAAS), and Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance); and
   • Developing and documenting an understanding of audit requirements for grant close-out.
9. To identify and address potential program shortcomings, governments should establish a post-implementation review process that evaluates the program, answering questions such as
   • Whether or not the program achieved its goals, and
   • Were any process or internal control issues that were identified by staff, grantor or auditors resolved?

This best practice was previously titled Administering Grants Effectively.