Implementing Sound Principles of Grantee Financial Management

Adhering to sound principles is important, regardless of the grant source. Solid practices in this area help to build a relationship of trust with funders and make the management process within an organization more orderly. This effective practice from Kristina Tecce of Walker & Company, LLP was developed from materials shared at the Financial Management Institute in San Diego, CA, in October 2006.

 

Issue

Sound financial management leads to program sustainability.

Action

Sound principles include the following:

  1. Know regulatory and grant requirements. A cooperative agreement or grant award is a legal and binding contract between a funder and a grantee. Essential business information about a grant can usually be compiled from three sources: the grant application or proposal, the grant award documents, and the project budget. The grant award letter and the accompanying grant agreement will contain information about applicable compliance requirements. Developing a written checklist of requirements that apply to your grant and noting the action required to demonstrate compliance will assist an organization in organizing information.
  2. Document your policies and procedures and maintain good internal controls. An operations and procedures manual is a record of the policies and procedures for handling administrative and financial transactions. The manual can be a simple description of how financial functions are handled (e.g. paying bills, depositing cash, and transferring money between funds) and who is responsible for what, ensuring that the project manager and staff have a reasonable plan of action for carrying out each approved activity.
  3. Maintain adequate documentation to support expenditures (i.e., periodic expense reports, financial status reports and electronic funds requests or draw downs). Organizations should have a process in place that ensures all financial transactions have supporting documentation that demonstrates each expenditure is reasonable and necessary to carry out the program activities.
  4. 4. Manage cash effectively. Responsible cash flow management begins with accurate bookkeeping records and financial statements. Cash flow projections can be made on a monthly basis for the upcoming fiscal year, estimating when the project will incur expenditures and will receive income from the grant. Cash drawn down from the Department of Health and Human Services (HHS) system must be used in a timely manner to ensure funds are expended within three business days. This is important for the timely distribution of funds.
  5. Have and utilize an efficient accounting system. The accounting system must meet generally accepted accounting principles. Organizations need to ensure that they can track both grant funds and match by budget line item. This might entail amending the chart of accounts to accommodate unique accounts, such as member or volunteer training. The reporting system should fairly and accurately document the spending of grant funds.
  6. Maintain effective internal controls. Establish fiscal policies that protect the organization from either intentional or unintentional misuse of funds. Decide how funds will be handled internally to ensure that they will be safely received, recorded, deposited, and expended in a manner that seems appropriate. There exist established guidelines on what are generally accepted and appropriate procedures.
  7. Document and report employee member time and activities accurately. It is essential that organizations have a system to properly document time, as personnel costs account for a majority of grant funds. Organizations should review the OMB (Office of Management and Budget) circulars to ensure compliance with federal regulations. Grant-funded personnel should be treated consistently as other employees, though they may be viewed as temporary employees whose employment is subject to the availability of grant funding.
  8. Meet match requirements and document in-kind contributions appropriately. These can generally be found as part of the contracting documentation. (See the effective practice, "Documenting in-kind contributions.")
  9. Report timely and accurate financial information. Financial reports should be clear, concise, all-inclusive, and comparable (show financial activities over a period of time).
  10. Monitor subgrantees. If an organization chooses to sub-grant part or all of the funds they have been granted, they are responsible to ensure compliance of all their sub-grantees. It is essential that sub-grantees are aware of the rules and regulations and that there is monitoring in place to ensure compliance.

Context

All service organizations that receive grants for their programs need to establish sound financial management. Different types of organizations are subject to various OMB circulars and should be aware of what circular is applicable to their type of organization. Ideas on this topic are shared in the effective practice, "Applying OMB Circulars to AmeriCorps grants."

Implementing Sound Principles of Grantee Financial Management.Tecce, Kristina. Financial Management Institute, San Diego, CA. 2006. English.

Last Reviewed: June 2009

Last Updated: September 8, 2015