How Your Finance and Program Teams Can Work Together to Ensure Grant Compliance

As Winston Churchill said, with great power comes great responsibility, and nowhere is that felt more acutely than those who are successful enough to receive federal grants.

In these days of increased cost-effectiveness and budget cuts and redirects, being awarded a grant is an important accomplishment, but it is also a responsibility. Applicants are primarily responsible to demonstrate proper financial stewardship while simultaneously showcasing how grant funds are used to support their beneficiaries and advance federal program priorities and objectives. A grantmaking agency must ensure that their recipients and pass-through entities will be good stewards of funding, and in turn, these must fulfill the grant requirements throughout the funding period.

The process of grants compliance is a team sport and given all the financial and programmatic requirements, it requires collaboration between these two core functional areas. In addition to a thorough understanding of the funding requirements, true grant compliance includes internal controls through oversight and documentation, reporting, monitoring and evaluation, and staff training on these compliance obligations:

• Ethics and Code of Conduct: Ensure ethical behavior and prevention of waste, fraud, and abuse.
• General Grants Management: Ensure oversight of federal funding.
• Program Management: Ensure adherence to grant award program requirements.
• Financial Management: Ensure the financial integrity of award administration.

The best way to ensure effective grant administration is to build a culture of compliance and work together as a team, before the grant application is even submitted. Whether you operate in a large, siloed environment or a small three-person department, there are core tenants that must be in place as part of general grant administration best practices. Consider this your grants compliance checklist.

Align Your Program and Finance Teams on a Shared Goal

How do you align your teams so everyone prioritizes grant compliance? What roles can program and finance play?

By taking the right approach, program and finance staff can improve compliance outputs for not only their departments but also their organization. Let’s examine the grant administration process and how your departments can work together towards the same objective—grant compliance.

Step 1: Pre-award

For organizations preparing to receive federal funding, staying compliant and identifying and minimizing risks should be the highest priority. A basic compliance risk assessment for any organization large or small can start with questions such as:

• What 2 CFR 200 Internal Control requirements are in place?
• Do you have the personnel and technology infrastructure to manage the award upon receipt?
• Do you utilize an accounting system with project cost and personnel tracking mechanisms?
• What policies and procedures are in place to oversee subawards and contractors?

It is important to ensure both the funding agency and project-specific compliance requirements are satisfied. Noncompliance can have serious consequences for your organization’s financial stability and reputation. Your teams will need to comply with financial management requirements concerning allowable costs, code and track ALL grant-related expenditures, and adhere to programmatic and financial reporting requirements.

How Finance and Programs Work Together

During this initial step, it is critical that the project manager—whoever is designated that role within the organization—reviews the 2 CFR 200 Internal Control requirements. There are components that both Finance and Program staff will be responsible for depending on the category/function.

All financial policies and procedures related to accounting and finance will be overseen by the finance team and the other areas related to progress reporting, program administration and performance measurement will be handled by the program team. They should each update their respective policies and procedures and share this information with each other to ensure consistency and effective flow. Some areas that are specific to the core organizational operations, such as standards of conduct, may be managed by administrative or operational staff.

Step 2: Award

The agreement has been signed. Now the award phase begins. It’s time to round up your grants administration key personnel, which should include your Financial, Programmatic, and Operations teams, for a kickoff meeting. The purpose is to review the notice of grant award terms and conditions, identify roles and responsibilities, and set up a tracking system to manage tasks. This is also the time to create accounting codes specific to the award to avoid any budget modifications in the future.

Consider holding a grant kickoff and then regularly scheduled meetings so your administration teams are all on the same page. These ongoing meetings can be used to relay budget information, accounting codes, and permissible cost guidance. This is also the time to confirm encumbrance amounts and share deadlines and all other important information that may be cross-cutting.

How Finance and Programs Work Together

As with the first step, it is important to designate specific functions for each role once the award is administered. Each team member should receive the notice of grant award so there is clarity about the terms and conditions, such as what the recipient is bound by regarding the governing grant requirements.

While the finance team is generally responsible for setting up the accounting system of record with the correct grant code and managing the budget vs. actual expenditures, the program team must understand the budget categories and the specific expenditures that are allowable. The program team should set up a process for reviewing the performance measures as a team and accurately recording their time in the accounting system.

Step 3: Ongoing Support and Maintenance

Proper management of the grant is critical, not just for the success of the award, but also your organization’s ability to apply for additional funding. Proper grant support and maintenance should include these reporting and monitoring components:

Budget vs actuals for financial reporting

Financial integrity is important. Comparing the difference between the actual amounts spent and what was planned or budgeted is not only beneficial but also necessary. It’s good practice to notify your funding agency if significant variations in budget projections are realized.

Progress reports

Progress reports document a recipient’s accomplishments and compliance with the terms of the award. It is important to remember that reports are the main communication with your funding agency to inform them of your progress and ability to succeed. Your project lead should communicate reporting periods and due dates during your standing meetings and through your tracking systems regularly so the entire team can leverage resources accordingly.

Time and effort reporting

Time and effort reports are compensation documents that show how grant-funded workers are spending their time and are used as a tool to validate the allowability of payroll expenditures charged to federal grants. Completing (and collecting) functional timesheets is a major component of grant compliance. As part of your internal controls, timesheets should be reviewed against the approved budget to monitor personnel changes and deviations in time. 

Procurement and subrecipient and contractor monitoring

The basics of grant-compliant procurement, including subrecipient and contractor monitoring, are centered around ethics and social responsibility but also include pre-screening, assessing risk, and tracking. The goal is to establish a structured procurement framework and selection criteria to determine appropriate subrecipients and contractors and then oversee their activities through completion. Internal controls are paramount and regular assessment with coordination between departments will be helpful to your agency’s success with compliance.

How Finance and Programs Work Together

Throughout this process, hold regular meetings between key points of contact throughout the organization. This is important to ensure consistent communication and reporting to the federal agency if there are deviations in the budget or activities. There are some activities like time and effort reporting and procurement that will involve both program and finance team members. In these instances, the clarity of the roles is critical. For example, with time and effort reporting, the finance team is responsible for the financial reporting on actual vs. budgeted time spent, but the program team (and other staff) must provide accurate information for these reports and authorizing the reports through the appropriate channels.

Step 4: Document Maintenance and Single Audit Preparation

The inclusion of sufficient document maintenance and control can make or break your next Single Audit. Document maintenance is the process of capturing, tracking, and storing documents related to the administration of your grant from pre-award to closeout. Good document maintenance and management includes document security, centralized storage, audit preparation, and streamlined search and retrieval capabilities, which save time and money.

Grant recipients should create and follow a written document maintenance policy. This should also include staff training on document collection and retention and regular assessment of risks associated with the policy. Each funding agency and award will have its own retention requirements for you to keep records for a set period as outlined in the notice of grant award. All new awards should be reviewed for retention requirements outside of your established retention policy.

How Finance and Programs Work Together

Recordkeeping is everyone’s job! If you are unsure about the records to keep, refer back to the notice of grant award and the 2023 Compliance Supplement, which outlines the steps needed to prepare for a single audit within your organization. In some instances, records must be maintained for three or even five years or longer, so establishing a document-sharing system that is accessible to all stakeholders will enable different team members to gather and maintain all grant-related documents more effectively and efficiently.

Use Your Grant Process as a Template

If you continue to pursue and receive federal grants, this process can be adapted—rinse and repeat—each time you receive an award. The more your organization understands the importance of grants compliance from a team perspective, the better you will be at managing this work in the future and avoiding as many roadblocks as possible.

Are you getting started with applying for government grants or want to learn more about how your get your finance and program teams to work together on grant compliance? Check out our webinar, “Building a Strong Grants Compliance Team: The Importance of Finance and Program Staff Collaboration,” where we provide more best practices and case studies of success.

Learn how a fund accounting system built for grant management can help simplify your grant tracking and reporting, watch this three-minute video.