3 min read

Federal Grant Reform: A Call for Internal Controls

Featured Image

Rumors and whispers concerning federal grant reform became real with the release of the Office of Management and Budget (OMB) Uniform Guidance (2 CFR 200) on December 26 of last year. Commonly known as the Super Circular or Omni-Circular, the Uniform Guidance takes effect the same date this year. The new regulations are intended to improve the federal grant award process by providing a framework that focuses on performance over compliance; ensuring financial integrity and enhancing existing or future federal award guidelines; streamlining the administrative, costing principles, and audit administrative for federal awards; and strengthening federal grant oversight to better protect against “waste, fraud, and abuse.” The overarching goal is to provide “a backbone for sound financial federal award management.”

Upon reading the Uniform Guidance, I got the impression that the new regulations are designed to transition federal grant awards from “gifts with strings” to binding contracts with serious consequences for mismanagement, noncompliance, or poor performance. The common theme I noted was the Omni-Circular’s repeated calls for better management of the $600 billion in taxpayer investments expended annually on federal grants. Simply put, 2 CFR Chapter I, Chapter II, Part 200, et al., calls for the development of “internal controls” when spending federal money. This section bears emphasis.

Internal Controls for Grantee Grants Management

So, exactly what are internal controls as they relate to grantee grants management of federal funding? According to Part 200.303, federal grantees will be expected to answer questions similar to the ones below (taken from the American Institute of CPAs, or AICPA) during their Single Audits:

  • Does the organization have a comprehensive code of conduct or other policies addressing acceptable business practice, conflicts of interest, and expected standards of ethical and moral behavior?
  • Are the level of competence and the requisite knowledge and skills defined for each job in the accounting and internal audit departments?
  • Is the selection of accounting practices made in the long-term best interest of the organization (as opposed to short-term benefits)?
  • Do senior managers get involved as needed to provide direction, address issues, correct problems, and implement improvements?
  • Do employees understand that sub-standard performance will result in remedial action?
  • Does the organization consider risks from external sources such as creditor demands, economic conditions, regulation, or labor relations?
  • Are milestones to achieve financial reporting objectives monitored to ensure that timing deadlines are met?

If you caught yourself scratching your head to answer either of the above, I strongly suggest you begin reading through the Uniform Guidance today to prepare. The federal grant world is positioned to significantly change the way federal grants are written, awarded, and managed.

Remember, non-federal entities that receive more than $750,000 in federal awards annually are expected to be prepared and will be expected to have their internal controls in place by December 26, 2014. You can also take eCivis’ grant reform-readiness assessment by clicking the button below:

Super Circular

About the Author

Jennie Larry Johnson headshot

Jennie Larry Johnson is the Founder, Chief Executive Officer, and Lead Project Funding Consultant of Creative Funding Solutions, Inc., a Houston-based firm made up of technical writers who are educators, administrators, and former executive directors. Jennie is a seasoned technical writer with over 30 years of experience in banking, finance, government relations, quality control, and project management. To date, she has helped her clients secure over $12.4 million in grants and investment opportunities.