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Introduction

Grant dollars play an integral role in funding important state initiatives. After tax revenue, federal funds are states’ largest funding source, making up almost 31 percent of expenditures, according to the U.S. Government Accountability Office (GAO).

These grants, if states manage them properly, can provide significant resources to citizens. Grant revenue at the state-level benefits everything from education to infrastructure to health programs. Currently, however, several things are deterring states from managing grants as effectively as possible, which can result in noncompliance, unused dollars, and lost revenue. From a lack of internal controls to antiquated processes, the mismanagement of grants is still all too common at the state level.

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In 2016 alone, the federal government (GAO)disbursed nearly $5.5 billion in grant awards to states and local governments. However, almost $1 billion in undisbursed funding remained in grant accounts. – GAO

Best Practices for Compliance and Grant Dollars

In recent years federal legislation has played a large role in the success of state grant programs as these pieces of legislation are now focusing on results-based funding. Because of this, noncompliance, missed deadlines, and disorganized processes are usually to blame for lost drawdown. If expenditure reports are incomplete or inaccurate, or deadlines are missed, the grantor may withhold funds.

For instance, according to the Grant Accountability and Transparency Act’s 2018 Annual Report, if Illinois had not complied with data regulations, the state would have not seen an estimated savings/ cost avoidance of $236,575,000.

Initiatives States Must Comply With to Ensure Grant Dollars

So what are some of the initiatives states have to comply with during the grant lifecycle so they don’t potentially lose such a substantial amount of grant dollars?

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Uniform Grant Guidance (UGG)

“Aims to reduce the administrative burden on award recipients and, at the same time, guard against the risk of waste and misuse of Federal funds.” (grants.gov)

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Digital Accountability and Transparency (DATA) Act

“The nation’s first open data law. It requires the U.S. federal government to transform its spending information into open data.” (datacoalition.org)

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Treasury “Do Not Pay” Initiative

“The purpose of this order was to reduce improper payments by intensifying efforts to eliminate payment error, waste, fraud, and abuse in the major programs administered by the Federal Government, while continuing to ensure that Federal programs serve and provide access to their intended beneficiaries.” (fiscal.treasury.gov)

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Grant Reporting Efficiency and Assistance Transparency (GREAT) Act

“The proposed law will transform federal grant reporting from disconnected documents into open data by directing the executive branch to adopt a standardized data structure for the information grantees must report to agencies.” (datacoalition.org)

Challenges and Solutions to State Grant Management

Research from the GAO and Data Foundation on state grant programs has identified some of the most common missteps that states make when managing grants.

After researching current data legislation, the next step to improving your state’s grant management is understanding why so many state grant dollars are being left on the table. Furthermore, why are some states having grant dollars taken away?

Understanding what these challenges entail as well as potential solutions to these setbacks is the first step to standardizing your state’s grant management.

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1. Lack of Internal Controls

Many times, there are a number people and departments involved in the grant lifecycle, and this often includes sub-recipients as well. The more people included in the process, the more difficult it is to maintain internal controls, and GAO audits have identified that there are already clear deficiencies in internal controls of grant management. A lack of internal controls negatively impacts grant awarding, eligibility, proper fund allocation, and proper financial statements.

Solution

Regular and detailed trainings are important to maintain effective internal controls. Everyone involved in grants management in your state needs to be fully aware of your processes and comfortable with any technology deployed.

Another solution to improving internal controls is having a centralized hub for your grants. This is especially helpful when sub-recipients are involved. Instead of using disparate systems, consolidate your information on one system to consolidate information and keep everyone from your team to your sub-recipients on the same page.

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2. Lack of Allocation of Duties

When states don’t distinguish a clear allocation of duties, parts of the process may fall to the wayside. If there is not a system or structure noting who handles what task and when, it’s more likely that your state will forget or ignore grant dollars.

Solution

To ensure proper allocation of duties, your state must have clearly defined user roles and set goals for each of these roles. Setting these distinctions right away will streamline your grant management and improve communication.

Specifically, there are four primary user role types you should consider assigning: a team lead, impacted employees (employees who are actively involved in the grants process), a middleman between your organization and outside vendors, and an executive-level employee who can assist with internal roadblocks.

And if you are employing a workflow tool, be sure to assign user roles in the system upfront.

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3. Issues with Non-Compliance

In recent years, more pieces of legislation have emerged regarding data and grants management. With nearly $1 billion in funding remaining in grant accounts in 2016, the federal government is becoming more aware of the dollars it is allocating and is becoming more stringent on ensuring that states manage these dollars appropriately. If states aren’t complying with legislation, it could result in fees and loss of future funding.

Solution

States Should Always:

4. Improper Monitoring in Progress

Ensuring transparency of grant spending is of the utmost importance for tracking performance. With no solid approach to verifying data, states will produce erroneous performance metrics.

Solution

Transparency leads to accuracy. When the grant management process is more transparent, there is more oversight and, in turn, less mismanagement.

As Michael Wood, former Executive Director of the Recovery Accountability and Transparency Board, stated, most of maintaining accurate reports is making sure your books and accounts are in order. Therefore, maintaining proper progress reports is all about having a strong understanding of your reporting standards and building your record-keeping processes around those.

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5. Lack of Timeliness for Grant Closeout

Many times, there are a number people and departments involved in the grant lifecycle, and this often includes sub-recipients as well. The more people included in the process, the more difficult it is to maintain internal controls, and GAO audits have identified that there are already clear deficiencies in internal controls of grant management. A lack of internal controls negatively impacts grant awarding, eligibility, proper fund allocation, and proper financial statements.

Solution

While closeout is the final piece to your grant lifecycle, that doesn’t mean it should be an afterthought. In fact, your state needs to be cognizant of closeout and preparing for it every step of the lifecycle. Your state’s best defense against missing grant closeout is a robust notification system throughout your grant’s lifecycle.

By setting up automatic notifications through software, employees will receive alerts on approaching deadlines and reviews. Some software will even provide notifications on spending thresholds.

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State Success Stories

Being aware of typical grant management mistakes and current legislation makes it easier to make the process more efficient and effective. After noting their own inefficiencies, a number of states have been making strides to improve their processes and, in turn, increase their drawdown.

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Illinois

Because of GATA, GATU intensely reviewed Illinois’ grant management processes. It was determined the state should procure a grant management software. GATU determined in fiscal year 2018 that since deploying grant management software, Illinois saw an estimated overall $258,075,000 in cost savings.

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New York

When it comes to transparency of grants management, New York state is leading the way. At the current time, New York has developed over 1,600 resources on the state’s data information. The state also produces an annual report on open data so it’s citizens can be aware of how valuable grant dollars are to their quality of life.

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Maryland

Maryland works very hard to make sure proper grants management is a priority for the state. Not only does the state make sure all employees are trained in grant management processes, Maryland also hosts an annual grants conference. The state provides resources, training, research, and guidance on all aspects of federal grants and federal funds to ensure the state takes an informed, team-approach to grants. Maryland is also focusing on efficient sub-recipient management.

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California

California is paving the way for other states to be more open-minded when it comes to grant management improvement. While many state agencies host their own open data portals, California’s data portal hosts data from multiple agencies. Many of the state’s agencies even host competitions to discover the best way to manage data and maintain transparency.

The states that are making positives changes to their grant management follow similar processes and use similar systems that ensure they are drawing down their grant dollars appropriately as well as allocating their grant dollars as effectively as possible.

Specifically, states who have procured grant management software have seen an improvement in the following grant management practices:

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Mindfulness of spending; Tracking grant parameters
and not allocating money to items not outlined.

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Pay out funds for grant activities in a timely fashion
after drawdown.

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Maintain reports on both time and effort.

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Provide all necessary team members access to data and
have a system to monitor fiscal activity.

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Track all grant activities (expenses and deadlines)
in one location.

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Use a specialized solution to maintain grant records.

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Ability to track activities against goals.

Next Steps for State Grant Management Improvement

Once states begin recognizing missteps and, in turn, start developing better grant management habits, they are likely to see more positive results from their grants. This includes reduced audit findings, increased drawdown, improved compliance, consistency, and many other things.

While improving your state’s grant management processes won’t happen overnight, there are three steps you can now take to start seeing improvements in compliance and drawdown.

1. Evaluate what your grants goals are for the next year

The best way to do this is to evaluate your state’s historical data. By reviewing information such as your past deliverables, spend, and outcomes, you can better pinpoint where your challenges lie and what solutions you should adopt. Internally auditing your grant history will help you figure out how to set and achieve your state’s grant goals for the future.

2. Pinpoint where your grant management processes are succeeding as well as lacking

This is achieved most easily by understanding the current grant landscape and how your state fits into it. We compiled research and surveyed customers to help you better understand current legislation and technology trends in the space.

3. Consider if procuring technology could streamline your grant management processes

Everything from the number of grants you manage to the tools you are currently utilizing will influence if software is right for your state. Fill out our grant management software readiness to see if evaluating software options is the right next step for improving grant management.