HayDay Services is bringing you a series of “how-to” articles related to successful grant management.
Part 9: Budget Documentation
If you’ve listened to any of the Fundraising HayDay Podcast episodes about grant fraud, you’ll notice a pattern. The majority of people and organizations in trouble for improper grant management were typically guilty of mismanaging the funds. They either spent the grant budget on personal items, did not document their spending appropriately, or failed to follow proper procurement policies.
When every expense is analyzed, how do you ensure that your grant budgets are adhered to? Like most aspects of grant management, it takes a village, or in this case a team. As a grant professional, you want to work with your program managers, finance department, and leadership to ensure you’ve accounted for every penny.
In the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR Part 200, aka Uniform Guidance) federal procurement methods are spelled out in § 200.320. You can read all about it in a previous blog post HERE.
The important thing to remember is that the Uniform Guidance requires agencies to have its own procurement policy that is equal to or stricter than the federal regulations. Step one is ensuring that your policy meets that requirement. Step two means that everyone in your agency understands the policy and how to follow it. Step three means that anyone spending funds that will be charged to a grant knows that it is beyond imperative they follow the agency’s procurement policy.
If I’ve heard it once, I’ve heard it a million times: this is a grant and grants are special, so I don’t have to follow our own procurement. Sure, grants are special. They are SO SPECIAL that we have no choice but to follow procurement.
Please also note that even though you have an approved budget, funders sometime require certain line items get additional approval before you can spend the money. In my experience, this is often expenses related to travel or items that require a contract. Usually, it’s a check-in with the funder to ensure all plans to spend the money followed proper procurement procedures from the get-go. You’ll know which items require additional approval because it will be spelled out in your award agreement. (Another document that should be required reading so you understand all the rules of the game.)
I don’t care how small your organization is, no one person should have control over every aspect of a transaction. If you are a nonprofit with one employee, then you need to get someone else involved, be it a board member, trusted volunteer, or contracted employee.
When I worked in local government, this is how we handled grant expenses. It was up to the program director (or their designee) to actually spend the funds according to the approved grant budget. (And yes, the grants administrator was around to answer questions, direct people, and educate them about the budget.)
When expenses were charged to a grant account, the following individuals were involved in approving said expense:
Having more than one set of eyeballs on the cost ensured that procurement was followed and the expense was a legitimate grant charge. If, for some reason, the expense was not approved, the item would either be returned or charged to a different expense account (one that wasn’t grant related).
The documentation required for proof of expenses varies from funder to funder. I’ve managed a Bulletproof Vest Partnership Program Grant through the Department of Justice that didn’t require you to submit any receipts, just a report of what was spent. (But they could always audit you and ask to see receipts, so you still needed copies of every penny spent.)
I’ve managed a Hazard Mitigation Grant through the Federal Emergency Management Agency that required copies of receipts, invoices, purchase orders, contracts, and cleared checks (to prove payment to vendors). They also required the invoice you submitted matched the grant budget letter-for-letter or they wouldn’t reimburse your expenses. For instance, if a line item was labeled “grading and hauling” and you called it “grading” there would be no reimbursement until you corrected it. (Ask me how I know…)
All that to say, it’s a good idea to talk to your funder to best understand what documentation is required for your expenses so you have copies of everything needed.
Pro tip: Make sure you keep a copy of everything you send to your funder in your own files. Keep said files organized and accessible by more than one person. And keep up with these files so you are always ready for a site visit or audit.
I spend a lot of time educating program staff about the importance of sticking to the budget. I often tell them, if you suddenly realize you need something, come talk to me first. We can always ask for a budget amendment.
In my experience, as long as you have money available and a good reason for switching things around, most funders will work with you on getting approval. And getting approval up front is so much easier than asking for forgiveness after the fact. Because if a funder doesn’t approve a change, and you’ve already spent the money, then that expense is coming out of your agency’s budget (not the grant).
Some funders give you leeway to move money from one line item to another, while others won’t let you move a penny. How do you know which funder you’re dealing with? First, read your award agreement. And if that doesn’t give you the answer, then talk to your program officer and find out.
Yes, ensuring reports are submitted on time is an important step in grant management. So is making sure your program is on target to reach your objectives, meet milestones, and serve the intended audience.
But budgets are the thing that often trip up agencies and individuals. I recommend that you review your expenses on a monthly basis. Keep an excel spreadsheet that details the budget versus actual expenses so you don’t over- or underspend.
Also, make sure the money is spent in a timely manner. If you’re new to grant management, you will be amazed at how many program people tell you they can’t do their job without funding for this project or that, and then they get grant money for their project and don’t spend a dime for six months. (Another ask me how I know moment…) So yes, check on expenses monthly, and if necessary, nudge people to get spending. And don’t be afraid to nudge harder and talk to finance staff, department directors, and executive directors (or city managers, superintendents, CEOs, etc.) if money is not being spent and accurately accounted for.
All aspects of grant management are important, but the money aspect is probably the most important of all. I always told my colleagues that while I enjoyed working with them, no way was I losing a grant, losing my job, or going to jail because grant funds were misappropriated. Pay attention to the Benjamins – and make sure everyone else does too.
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