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Grant Compliance –Avoiding Common Pitfalls

May 9, 2019

THOUGHTWARE®

PresentersNeely DuncanPartnerndduncan@bkd.com

Emily GeorgeSenior Managing Consultantegeorge@bkd.com

Maura JacksonManagermjackson@bkd.com

Samantha WakelandAssociateswakeland@bkd.com

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To Receive CPE Credit

Individuals• Participate in entire webinar• Answer polls when they are provided

Groups• Group leader is the person who registered & logged on to the webinar• Answer polls when they are provided• Complete group attendance form • Group leader sign bottom of form• Submit group attendance form to training@bkd.com within 24 hours of webinar

• If all eligibility requirements are met, each participant will be emailed their CPE certificate within 15 business days of webinar

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Agenda

It Takes a Village

What Can Go Wrong?

Common Causes of Noncompliance

Pitfalls• Audit & award requirements• Pre-award • Post-award• Other

Best Practices for Compliance

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It Takes a Village

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• Proper tone at the top• Training & education• Involves all departments

• Procurement/purchasing• Legal/contracting• Program personnel• Accounting/finance

department

It Takes a Village

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What Can Go Wrong?

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What Can Go Wrong?

• Loss of funding• Award amount impact

• Reduction in future payments or funding amounts• Recoupment of federal funds already received & spent• Imposed fines & penalties

• Termination of grant• Suspension or debarment

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What Can Go Wrong?

• Reputational damage• Front page news• Credibility• Turnover

• Special status for oversight & review• Increased staff time• Additional oversight responsibilities

• Corrective action plan

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Common Causes Of Noncompliance

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Common Causes of Noncompliance

• Lack of understanding• Staff roles• Staff responsibilities• Job descriptions

• Inadequate resources• Inadequate training & education

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Common Causes of Noncompliance

• Policies & procedures• Incomplete• Outdated • Nonexistent

• Lack of supporting documentation• Improper perceptions

• Internal control systems are not necessary• It’s not that hard• Administrative burden is equivalent to other funding

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Pitfalls

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Audit Pitfalls

• Understanding difference between an external audit & a desk review or other monitoring/site visit

• Financial statement deficiencies & material weakness will result in single audit findings

• Not using or understanding compliance supplement

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Audit Pitfalls

• Schedule of Expenditures of Federal Awards• Inaccurate• Incomplete• What is not there? • Managements responsibility

• Understanding complexity of identifying the source of funding (federal, state, local)

• Subrecipient vs. contractor determination

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Pitfalls –Award RequirementsMultiple layers of complex regulations

Federal requirements (Uniform Guidance)

Departmental requirements (HHS, DOL, DOJ)

Grant requirements (Notice of Award)

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Pitfalls – Pre-Award• Improper or insufficient planning• Not understanding or assessing complexity or administrative

requirements of award• Not performing a detailed review of financial information

(indirect cost rate, salary information, calculation)• Evaluate the timing needed to scale up & scale down

operations

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Pitfalls –Post-Award Reconciling Items

• Timing differences• Subrecipients paid vs.

subrecipient expense• Program income• Matching• Rejected costs• Variances between accrual

estimates & actual

When to Reconcile• Cumulative & by period at

month, quarter & annual for • Grant reporting year-end• Your year-end• Calendar year-end• Total grant project end

Reconciliations

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Pitfalls – Allowable Costs• Unallowable direct costs

• Insufficient support for direct costs• Improper period of performance• Food & meals charged to grant when not allowable

• Misallocation of costs• Between direct & indirect costs• Between grants

• Improper cost transfers

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Pitfalls – Payroll Expenditures• Manual nature of time & effort tracking• Payroll reported based on actual effort

• Understanding time vs. effort• 100% of effort tracked & included in calculation

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Pitfalls – Payroll Expenditures

• Timesheet• Timely submissions• Accurate submissions• Proper approvals

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Pitfalls – Payroll Expenditures• Calculation errors

• Human error• PTO considerations• Application of benefits• Salary cap limitations

• Proper cutoff (period of availability)

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Pitfalls –Indirect Costs

• Rate approval & application following Uniform Guidance requirements

• Duplication of costs in direct & indirect cost bucket

• Proper base to apply indirect cost rate to• Modified total direct cost

• Subawards• Exclusions

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Pitfalls – Procurement• Understanding procurement requirements

• Current thresholds• Noncompetitive proposal

• Policies & procedures • Not updated for Uniform Guidance requirements • Only partially address the requirements• Include small & minority business & women-owned business enterprises

provisions

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Pitfalls – Procurement• Documentation of grace period adoption• Lack of sufficient documentation

• Procurement method used• Vendor/contractor selection rationale• Agreements with the vendor/contractor do not address the contract

provision requirements of Uniform Guidance• Lack of documentation for cost price analysis

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Pitfalls –Procurement

• Lack of communication & coordination with other departments

• Decentralized• Varying policies by department • Staff knowledge & training • Monitoring

• Debarment checks

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Pitfalls –Reporting

• Understanding various reporting requirements

• Timeliness • Method to track deadlines• Accuracy of financial & performance reports• FFATA• Data Collection Form filing

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Pitfalls –Matching

• Not applying the same requirements for match that are required for other federal spending

• In-kind match• Volunteer hours• Supporting documentation

• Timing of application of match amounts

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Pitfalls – Subrecipient Monitoring• Assessment of subrecipients ability to administer prior to

entering into arrangement• Risk assessment

• Not performed• Incomplete• Inadequate

• Contract requirements excluded from contracts with subrecipients

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Pitfalls – Subrecipient Monitoring• Appropriateness of monitoring procedures performed

• Request supporting documentation• Timeliness of invoicing• Agreed upon procedures

• Timely addressing known issues• Staff turnover• Audit findings

• Varying requirements between not-for-profits, universities & states

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Pitfalls – Program Income• Various methods • Appropriate method of applying program income• Method to track & account for• Underspend & overspend

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Pitfalls – Eligibility• Complexity• Supporting documentation• Who is responsible?

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Pitfalls – Equipment• Prior approval• Purchases• Physical inventory of equipment• Disposal

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Pitfalls – Special Tests & Provisions• Key personnel• Salary cap limitations• Unique & specific for certain grants

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Other Pitfalls

• Training• Changing regulations & staying current• Document, document, document• Communication with granting agency

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Other Pitfalls

• Budget to actual monitoring & variances• Fund balance controls• Monitoring controls for compliance• Grant closeout procedures• Document retention

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Consequences of Noncompliance

• Financial impact• Reduction in future payments or funding amounts• Recoupment of federal funds already received & spent• Imposed fines & penalties

• Termination of grant• Reputational damage• Special status for oversight & review• Corrective action plan• Suspension or debarment

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Best Practices

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Best Practices for Compliance

• Focus on internal control systems• Checklists• Review requirements• Use of technology & systems

• Policies & procedures• Staff training & education• Understanding by staff of roles & responsibilities• Adequate resources

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BKD, LLP is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.nasbaregistry.org

Continuing Professional Education

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The information contained in these slides is presented by professionals for your information only & is not to be considered as legal advice. Applying specific information to your situation requires careful consideration of facts & circumstances. Consult your BKD advisor or legal counsel before acting on any matters covered.

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CPE Credit

• CPE credit may be awarded upon verification of participant attendance

• For questions, concerns or comments regarding CPE credit, please email the BKD Learning & Development Department at training@bkd.com

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bkd.com/nonprofit | @BKDNFP @BKDHigherEd @BKDGov