Rose Report: Issue 12

Planning Ahead for Grant Reporting

The recent controversy surrounding the nonprofit Big Brothers Big Sisters is a prime example of what can happen to an organization that doesn’t stay on top of managing grant money. Last month, the Justice Department froze all funding to the charity after auditors determined the group couldn’t account for $19.4 million in taxpayer-funded grants.

The organization, which provides mentoring for at-risk youth, has stressed that it did not intentionally mismanage or misdirect the money. But whether on purpose or not, it appears that it didn’t have adequate accounting controls and systems in place to make sure it could sufficiently monitor how grant funding was allocated.

Though it’s an extreme case and hopefully a scenario that most organizations will never contend with, the lesson is broadly applicable—and timely, since it’s currently crunch time for many organizations that receive government grants. In most cases, federal grant reports are due at the end of July, but as the Big Brothers Big Sisters matter shows, closely managing funds and preparing for annual reporting all fiscal year long is crucial to an organization’s success.

A major component of being well prepared for end-of-year grant reporting is closely tracking budgeted and actual expenditures on a monthly basis and keeping tabs on whether indirect costs continue to match up with the rates an organization proposed when applying for the grant. Any fluctuations in such costs should be evaluated and recorded, so the organization can explain them to the grant-maker. It’s also important for an organization to hold regular monthly meetings involving both accounting staff and the staff managing its grant programs to make sure they’re on the same page.

Organizations should regularly maintain detailed personnel activity reports for anyone whose salary is totally or partially getting paid by a grant. This way, they’ll be able to demonstrate to grant-makers precisely how and why certain amounts of the money were spent on personnel at year-end.

Another key part of managing grants is tracking milestones. Typically, when an organization applies for a grant, it proposes milestones—or benchmarks when it will be able to clearly demonstrate that it’s making progress. For instance, an organization focused on standardized testing research may propose that by the third month of the grant, researchers will have assembled a group of students and begun collecting data from them. If the organization is awarded the grant, when it hits the third-month mark, it will be required to produce a report demonstrating that it has achieved that milestone. Often, there’s a cost associated with milestones and they should be reflected and planned for in the organization’s budget. When the time comes to turn in a grant report, the group will easily be able to explain any increases in spending associated with milestones.

It’s true—avoiding trouble down the road requires meticulous planning and management. But an organization wondering whether the extra work is worth it should contemplate the impact this internal control weakness is having on Big Brothers Big Sisters.