Grant Reporting Insights
Grants are vital: Operating grants may help support stationing a police officer at the high school or maintaining museum exhibits, after school recreation programs, or ESL classes at the library. Capital grants may help replace aging sewer systems, repair bridges, add bike lanes to city streets, or purchase police body cameras. Grants enable governments to offer services that they might not be able to even consider otherwise.
Grants come from many sources:
- Federal and State health, highway, education, and conservation departments help local governments fulfill legislative policy mandates by providing funding for either specific uses or general program support.
- Private foundations, charitable trusts, and individual donors contribute to efforts that help further causes they support.
Grants Have Strings – As You Know All Too Well
Grant dollars rarely come without reporting requirements, restrictions on the use of funds, specific time limits, and programmatic objectives. Receiving governments have usually prepared grant proposals when they applied for the grant with detailed budgets, project plans, and deliverables. Meeting each grant’s specific requirements is essential, yet it imposes real costs on the grantee.
Both grant reporting costs and indirect overhead for administrative and other provided support that fulfill the grant’s objectives can be recovered from the grantor when governments take the proper steps to allocate and report these costs. Federal grants require that reimbursable costs be developed using an approved Cost Allocation Plan under 2 CFR part 200 (formerly and commonly known as an A-87 plan). Other grantors are usually happy to see their grantees follow the Federal rules. Grant programs may result in long-lived assets that the government will need to provide maintenance funding for. They normally have local match funding requirements that may be burdensome.
Grantees also have various official provisions and commonly understood rights to detailed reviews or audits of expenses they fund. Federal grants are audited each year by the governments’ CPAs at the same time they do the city’s audit. The “Single Audit” includes each Federal grant and the audited amounts associated with it. This summary process does not preclude the Federal grantee and all other grantees from performing program audits and procedural reviews of various depths.
Starting Points from GFOA Best Practices
GFOA considers grant funding vital to local governments and proper grant management so critical that several Best Practice papers have been issued in recent years, providing substantial guidance to practitioners. CSMFO and other organizations include grant reporting and management sessions in their conference training programs. We surveyed this body of work and highlight five points to consider in how you support your grant portfolio and staff:
- Digitize information: Having “a methodology to store and provide information electronically so that it is available to multiple users” is important for sharing statuses, validating costs, and preparing reports to grantors.
- Plan in Advance: Including grants in the annual budget process and having plans ready in case funding ends helps integrate grant funded activities with overall objectives. This avoids having staff depend on grant funding for on-going payroll.
- Report from the Cloud: Employing a cloud-based reporting solution such as OpenGov makes it easier to support the CPA’s doing the financial statements and single [grant] audits, and other program auditors, around grant reporting and compliance.
- Develop Cost Allocation Plans: Cost allocation plans allow the government to recover costs it incurs in supporting, managing and reporting the grant’s operational work.
- Support a Grant Oversight Committee: Quality internal web-based reporting helps the work of a GFOA recommended Grants Administration Oversight Committee.
Governments must do their Homework
We encourage Finance Directors to review the following Best Practices on GFOA’s website, and have included just a few paraphrased highlights here to illustrate the value of their recommendations. They are worth reading in full and incorporating into your procedures.
Establishing an Effective Grants Policy (Best Practice, Feb 2013) is a good starting point. Make sure you know what you are getting into – and that it is well aligned with local priorities, not just a chance to pick up additional funding for general departmental expenses. To achieve this, policies address five key points: Grants identification and application, strategic alignment, funding analysis ,evaluation prior to renewal or grant continuation, administrative and operational support.
Administering Grants Effectively (Best Practice, May 2013): “recommends that governments establish processes to promote awareness throughout the government that grants normally come with significant requirements.” Among their recommendations:
- Monitor communications from grantors, establish project plans with timelines and responsibilities, provide training for staff and subrecipients, and monitor staff costs.
- Ensure charged costs are “allowable, necessary and reasonable, and properly allocable . . .”, including indirect cost process, and matching funds.
- Include grants in annual budget process, and have plans ready in case funding ends.
- Develop a methodology to store and provide information electronically so that it is available to multiple users.”
- “Maintain internal controls over accounting, financial reporting and program administration,” compliance with Federal and State requirements.
- Meet various specialized reporting requirements, including deadlines, methodology, and aggregation of federal awards. Ensure completion of auditing requirements, including GAGAS, GAAS and OMB circulars, grant close-out reporting.
Framework for Entity-wide Grants Internal Control (Best Practice, undated): The Committee of Sponsoring Organizations (COSO) updated its Internal Control-Integrated Framework in 2013 with five essential components: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring, which GFOA organized into best practice steps for grant internal control. Steps include utilizing financial management systems to support compliance with grant-related legal and regulatory requirements, ensuring that grant information is available to internal stakeholders, ongoing dialogue with financial statement, single audit, and program auditors concerning grant reporting and compliance, and processes to ensure that quality, supportable information is utilized in grant decision making.
Taking Advantage of Indirect Cost Allocations (Best Practice, Feb 2014): This paper discusses relative merits of using a vendor or staff to prepare the Cost Allocation Plan (CAP), and whether that vendor would negotiate directly with grantors if needed, and the value of capturing and documenting data contemporaneously.
Establishing a Grants Administration Oversight Committee (Best Practice, undated): GFOA recommends having a dedicated committee to insure proper grant oversight from before grants are applied for, all the way through post-grant management residual assets.
Mike McCann moved into government service in Ukiah, then Monterey CA, after beginning his career in corporate (ADP, Wells Fargo Bank, Blue Shield of CA), not-for-profit (Blue Shield of Ca, Mendocino Private Industry Council), and start-up accounting. For the last 20 years, Mike has been hands-on with budget, financial reporting and accounting operations, including City budgets and CAFRs. He holds a B.S. in Accounting from SJSU and M.S. in Instructional Technology from CSUMB.
Category: Government Finance