Get Ready for Tightened Controls Over Federal Grants
Mara Ash

​​In response to calls for more accountability, the federal government is tightening its controls over billions of dollars distributed through grants. Here’s a look at three developments that should be on your radar: 1) subrecipient monitoring, 2) the GONE Act, and 3) improper payments elimination and recovery.

Subrecipient Monitoring

Is the phrase subrecipient monitoring new to you? A subrecipient (or subgrantee) is a third party who is awarded a portion of a project to be conducted in compliance with the sponsor’s terms and conditions. Many agencies who were not required to perform extensive subrecipient monitoring in the past are starting to realize that they may now be required to do so. Why the sudden interest? The kick-off was the release of a new, streamlined guidance document for federal award programs: Omni-Circular 2 CFR 200 Uniform Grants Guidance. This guidance consolidates eight federal regulations into a single, comprehensive policy guide.

The Omni Circular requires federal agencies and subrecipient grant pass-through entities to take the following steps:

  • Perform a risk assessment of grantees prior to award.
  • Perform subrecipient monitoring including follow-up on corrective actions.
  • Perform single audit reviews.
  • Review/negotiate/approve indirect cost rates.

While these are not new requirements, the subsections and appendices of 200 more clearly outline and define types of monitoring needed for subrecipients. For more details, see the new ACGA Knowledge Brief titled Reviewing Subgrantees of Government Program Grants.

The GONE Act

The Grant Oversight and New Efficiency (GONE) Act adds another layer to the Omni Circular requirements. Agencies now need to report (and ultimately monitor) the program source funding, outstanding obligations, draw-down, and close-out processes of grants. Reporting requirements include:

  • Each federal grant award held by such agency.
  • The total number of federal grant awards, including the number of grants by time period of expiration, the number with zero dollar balances, and the number with undisbursed balances.
  • Challenges leading to delays in grant closeout.
  • Finally, for the 30 oldest federal grant awards, why each has not been closed out.

This law aims to understand why federal dollars are left on the table and why it takes so long to close them out. While there are a variety of valid reasons for lingering grant close outs, the goal of this legislation is to prompt agencies to distribute the money, make sure the money is doing what was intended (performance), and close it out. Further, for agencies with more than one-half billion dollars in grant funding, it instructs the inspectors general to determine if a risk assessment of the grant close-out process is needed. Of course, ultimately, the OMB (Office of Management and Budget) must provide a report to Congress on how to improve and strengthen accountability and oversight of grant funds.

Improper Payments Elimination and Recovery

In addition, some agencies may discover that they need to comply with the Improper Payments Elimination and Recovery Improvement Act of 2012 (IPERIA). You may ask: how is IPERIA connected? For agencies with a large grant portfolio (more than US$500 million), their grant programs may be identified as “susceptible” to significant improper payments. The improper payments may even be considered significant if they exceeded US$10 million of all program or activity payments made during that fiscal year reported and 2.5 percent of program outlays or US$100 million. As you may recall, if an agency has a significant IPERIA program, it must reduce the amount of improper payments in the subsequent years. The best way to do this in a grant program is subrecipient monitoring. Tracking findings and corrective actions can identify root cause of improper payments.

This is a quick look at the requirements of the current regulations, and we haven’t even started talking about corrective actions. That leaves me with plenty of material to use in future blogs!

About the Author

Mara AshMara Ash, CIA, CGAP, CGFM, CRMA, is a federal compliance specialist whose career has spanned federal, state, and local governments as well as private industry. Her goal is to help organizations improve service delivery, ensure compliance, and enhance transparency. She is an active member of The IIA and the Association of Government Accountants, where she has held various leadership positions.

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