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Can You Have Compliance Without Controls?

11/11/2015

The federal grantor arrives for a monitoring visit and just like clockwork, the first thing that is requested is the organization’s policies and procedures.  The finance director, anticipating the request, points to the thick binder on the table labeled “Accounting Policies and Procedures.”  But is this binder enough?  

Although the grant monitor will be interested in financial controls and procedures, the primary reason for the visit is grant compliance. Well-written accounting policies and procedures will address some compliance issues, but not all.  What the federal grant monitor wants to see are “Grants Management and Compliance Policies and Procedures.”  

Grant monitors are not the only ones who need to see these specific policies and procedures. Independent auditors performing a Single Audit will also be interested because the Single Audit requires the auditor to obtain an understanding of the internal controls used to ensure compliance with major program compliance requirements and to test these controls.   

Compliance requirements are primarily non-financial in nature and cover topics such as eligibility, activities allowed (what services are within the scope of the grant), sub-recipient monitoring and performance reporting.   Grants management and compliance policies and procedures document the grants management process for the organization and what controls the organization has in place to ensure compliance, especially the non-financial aspects of compliance.

Most organizations have a grants management process and controls to ensure compliance, but they are not well documented. A great way to start the New Year is to document the grants management process.  This can be done in a step-by-step format and/or a flowchart. The grants management process should ensure that communication, controls, reporting and monitoring happen at the right time and involve the right people in the organization and follow the life cycle of a grant.  

As depicted below, the life cycle of a grant begins before the grant is even awarded.  Unfortunately, in some organizations the formal process for grant management doesn’t begin until after the grant is awarded, which often results in critical steps such as the accountant determining the “true cost” of running the program being left out or performed when it is too late.