3 steps to maximizing federal grant compliance
Consider the following:
- A public hospital conducting testing at an off-site location
- A school district or state college shutting down all campus activity and suddenly implementing distance learning
- A city government procuring personal protective equipment and opening an emergency operations center for an indefinite amount of time
Each of these entities will expect to receive a significant amount of federal funding, some of which is new funding that did not exist before now, and may be subject to The Stafford Act and other federal regulations for the use of federal grant monies. State and local government entities face significant challenges in prioritizing public health and safety while balancing prudent, careful and well-documented procedures in order to facilitate and maximize eligible costs for reimbursement. But this is also an opportunity to centralize how organizations manage their grant funding and to evaluate controls and procedures around procurement, contracting and documentation of expenditures funded by grants.
The code of federal regulations includes specific rules for how to administer the use of federal funding. Specifically, Title 2, Subtitle A, Chapter II, Part 200 “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards”— – 2 CFR § 200— – allows for a standardized methodology by which federal agencies gather data and distribute funds in order to carry out their respective statutory responsibilities, even during a global pandemic or other emergency event.
3 Steps to compliance
Here are three important steps for eligible entities, including state and local governments, to take as they submit applications and reimbursement requests for funding in compliance with federal requirements.
1. Understand the procurement requirements
Subsections § 200.317 – § 200.326 are the procurement standards of the regulations. The most common area of non-compliance of awarded funds noted by federal auditors and inspectors general relates to ineligible costs as a result of noncompliant contracting practices.
Examples that RSM has noted during compliance audits related to CFR § 200 include improper or incomplete justification for non-competitive selection when claiming exigency or emergency, not having a proper contract in place when required, not establishing reasonableness of costs paid when awarding sole source or time and materials contracts, and not including (or adequately monitoring) the required contract provisions for the use of federal funds. It is important to note that following one’s own procurement policy for emergency purchases is not enough, as the federal requirements are generally more restrictive than local policies.
Generally, the easiest control measures to consider related to these issues include (but are not limited to) the following:
- Documenting sole source justification as soon as possible, to include the circumstances of the emergency and specifically why the chosen vendor(s) was selected. This should include a cost analysis in relation to similar services provided during a non-emergency event by the same and at least one other contractor, and the source of the data included in the analysis. A cost analysis should also be performed for any contracts that are time and materials based, rather than fixed fee or unit cost pricing.
- Ensuring that a documented contract is approved and executed. A purchase order or vendor invoice is not enough, primarily because the required scope, timing, approved costs, and terms and conditions are not properly documented or complete on POs or invoices.
- Updating contract templates to include the required federal provisions, and marking them as “not applicable” as needed. This could be included in the primary agreement or as an exhibit to the standard agreement.
- As soon as practical after the emergency event, issuing a competitive solicitation for the services under a continuing agreement, to be used as needed until closure for the current event, as well as to reduce the need for future disaster emergency procurement.
2. Collect and organize documentation
In addition to contracting, the second most common request for supplemental information is for missing supporting documentation. This includes copies of invoices, proof of payment, and labor support, among others.
All expenditures must have adequate supporting documentation in order to be eligible. Depending on the nature, extent and amount of the expenditures, this can prove to be challenging for agencies of any size, but can be particularly cumbersome for small or decentralized entities.
Entities should keep their grant-related information in one place. It may help to adopt a naming convention for all electronic files, tagging them with fields that distinguish respective categories. It may also help to use internal project numbers or activity codes if systems will allow for that configuration. Each expenditure related to the event should include that project or activity code.
If possible, data collection should be centralized to a grant manager or a grant team, and periodic training should be performed for administrative personnel who will be responsible for documenting or collecting the data. It is also very important to note that certain categories of costs require multiple pieces of information. For example, debris removal after a storm requires several items, including truck certifications, debris load tickets, activity and monitoring logs, and photos. Not having one or more of the items can delay reimbursement and possibly deem the expenditures as ineligible for funding.
3. Consider the use of technology
Software can help centralize all of an entity’s federal and state awards onto a single platform, perform calculations, assist with grant administration, and provide information necessary for reporting. Entities must examine their needs and organizational readiness to determine whether Microsoft Excel or a third-party software program best suits them. In general, third-party software is superior for entities with a relatively large number of grants but can also prove to be very beneficial for smaller entities.
Various studies have shown that up to 90% of spreadsheets contain errors as a result of human entry errors that could have been avoided. Some examples include formula errors, inaccurately copying and pasting into the wrong cells, and keying in incorrect information, such as transposing a number.
As third-party software continues to develop, programs range in their capabilities. Basic software can perform calculations and generate reports. More advanced technology can onboard leases, remind users of renewals, account for footnote disclosures and more.
A trusted advisor can help implement this software and centralize an organization’s grant funding portfolio as part of a comprehensive plan tailored to the entity’s needs. For related insights on this topic, visit our resource center.