HayDay Services is bringing you a series of “how-to” articles related to successful grant management.
Part 8: Mistakes Were Made
What can go wrong with grant management, and why does it matter?
Even with the best intentions and preparation, projects may face delays, outcomes might not match projections, or administrative hurdles may arise. Or more seriously, a lack of internal controls can pave the way for theft, fraud, and other serious actions, with the ultimate losers being the communities you serve.
This post includes an overview of the most common forms of grant management mistakes and their consequences, and it ends with some tips on dealing with mismanagement if and when you discover it. Not disclosing failures in grant management makes you complicit in those actions.
Types of Grant Mismanagement
- Fraud involves intentionally misrepresenting or concealing information to get grant funds or benefits. Examples include falsifying data or qualifications in grant applications, billing for services not rendered, or creating fake vendors to divert funds. Fraud is a serious criminal offense and can result in prosecution, imprisonment, and substantial financial penalties.
- Waste may not always be intentional, but careless or excessive use of grant resources, such as overpaying for goods or services, making unnecessary purchases, or failing to seek competitive bids, demonstrates a lack of stewardship. The agency at fault may be required to repay misused funds and lose credibility with grant funders.
- Abuse: Abuse is the intentional misuse of grant funds for personal benefit. Often closely related to fraud, examples of abuse include using grant-purchased equipment for personal use, diverting funds for unauthorized activities, or making decisions that benefit friends or family.
- General Mismanagement is the most common form, and most often stems from excessive turnover or just a lack of knowledge or experience in how grant management works. Examples include insufficient documentation for expenses, poor internal controls, or not adhering to grant terms and conditions. Even if it was a mistake, unintentional mismanagement can result in the need to repay funds and jeopardize future funding opportunities.
Consequences of Mismanagement
- Loss of Current and Future Funding: Grant funders may terminate current awards and bar your organization from receiving future grants if mismanagement is detected. Public findings of fraud, waste, or abuse can harm your organization’s reputation, making it difficult to secure funding from any source. Negative publicity and loss of trust can also affect relationships with partners, donors, and the communities you serve
- Legal Actions: Fraud and serious abuse can lead to civil lawsuits or criminal prosecution. Under laws like the False Claims Act, organizations may face treble damages (three times the grant amount), substantial fines, and even imprisonment for individuals involved in fraudulent schemes.
- Debarment and Suspension: Federal agencies can suspend or debar organizations and individuals from receiving federal funds government-wide. Debarment is a formal process that can last several years and severely limit an organization’s ability to operate if it relies on federal support.
- High-Risk Designation: Organizations with a history of mismanagement may be designated as “high risk.” This status can result in additional oversight, restrictive terms and conditions on future awards, or outright denial of funding. High-risk can be challenging to reverse, impacting your organization’s reputation and funding prospects.
- Increased Scrutiny and Oversight: Organizations with mismanaged funds may be subject to more frequent audits, additional reporting requirements, and closer monitoring by funders. This can increase administrative burdens and reduce your flexibility in managing future projects.
What to Do When Grant Management Goes South
Here’s how to respond effectively when challenges emerge:
- Communicate Early and Honestly: If your project encounters obstacles, inform your funder as soon as possible. Transparent communication demonstrates professionalism and respect for your partnership. Most funders appreciate proactive updates and may even offer guidance or flexibility.
- Document Everything: Keep thorough records of challenges, decisions, and corrective actions. This documentation can help explain deviations from your original plan and provide a basis for future learning.
- Adjust Realistically: If project goals or timelines need to change, propose realistic adjustments. Avoid overpromising; funders value honesty over unattainable commitments.
- Engage Stakeholders: Ensure key staff and stakeholders are aware of issues and involved in developing solutions. Their buy-in is crucial to correct the mismanagement and prevent future problems.
While there may be grant-funded “unicorns” out there—programs where nothing ever goes wrong, nothing is ever late, and there are never any issues—the rest of us work in the real world where things go wrong.
Regular program and financial oversight, and frequent, clear communication, can go a long way in preventing or mending most issues caused by grant mismanagement.
Kimberly Hays de Muga, GPC, is an expert trainer and coach in nonprofit capacity building, grant writing, fundraising, and board development. She brings more than 25 years of fundraising experience that includes raising $100 million from individuals, foundations, corporations, and local, state, and federal funding for nonprofit agencies in the education, health, and human service sectors—from food banks to pediatric hospitals, to state-wide mental health coalitions.
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