Maribeth Vander Weele
Segregating Grant Management from Monitoring Protects Program Integrity
In September 2022, Federal authorities charged 48 people in Minnesota with conspiring to steal $250 million in COVID-19 funds from a child nutrition program—the largest pandemic fraud scheme to date. In the aftermath, the obvious question arose: how could this have happened?
While the full answer is undoubtedly complex, one piece stood out to us: the same organizations charged with managing grant funds on behalf of grantees were also tasked with monitoring the funds. In addition, the program’s structure—in which these organizations received 10 to 15 percent of reimbursements for children’s meals paid out by their sponsored grantees —incentivized fraud and theft. If the indictments brought forward by the U.S. Department of Justice are true, the fox was managing the henhouse.
This case is a perfect example of why we at the Vander Weele Group generally believe in segregating grant management from grant monitoring.
In the world of auditing—which we argue is separate from grants monitoring—there are strict legal requirements concerning the independence of the auditors. Employees running a program aren’t permitted to audit or approve their own operations. While no such standard exists for grants monitoring, allowing an organization to both execute a program and hold sole authority for guaranteeing its integrity seems to be a conflict of interest by any reasonable definition. As we’ve seen again and again in nationwide news, it creates opportunities for fraud, waste, and abuse that could be mitigated by separating program management from grant monitoring.
What the Uniform Guidance and Federal Watchdogs Say About Management vs. Monitoring
The Uniform Guidance, more properly called the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, strongly suggests that Federal authorities view monitoring as a distinct function, separate from financial management. Support for this argument appears in several places:
Subparts C and D of 2 CFR 200 distinguish pre-award grant activities from post-award grant activities;
Subpart D further segregates post grant award activities into functions including, but not limited to, Performance Measurement (§200.301), Financial Management (§200.302), Internal Controls (§200.303), and Revision of Budget and Program Plans (§200.308);
Under Subpart D, Performance and Financial Monitoring and Reporting (which includes subrecipient monitoring) is clearly delineated as a separate section of the document;
Within this section, Financial Reporting (§200.328) and Monitoring and Reporting Program Performance (§200.329) are identified and discussed separately;
Specific instructions concerning pass-through entities’ obligation to monitor and what monitoring includes are presented in yet another, separate section of the Code (§200.332).
If the Uniform Guidance itself isn’t convincing enough, the evidence from Auditors and Inspector Generals certainly is. Annual reviews of audit findings from around the country repeatedly show programs being cited for failing to have a monitoring program, failing to develop a monitoring plan, failing to provide monitoring reports, failing to conduct monitoring risk assessments, and other deficiencies. In our most recent review of 79 such reports, there were nearly 500 findings related to monitoring and internal controls.
Structure Matters: Key Questions to Ask When Separating Monitoring and Management
When it comes to grants management and grants monitoring, it’s critical that pass-through agencies, subrecipients, and grantees think through the relationship between these two vital aspects of grant oversight. Specifically, it’s important to consider the risks, rewards, and complications associated with segregating these functions—or not. Budgetary concerns, time constraints, lack of expertise, and changing state and Federal regulations all factor into decisions about the most realistic ways to protect program integrity.
Whether you choose to build a monitoring function in-house or contract with a grants monitoring firm, key questions to consider when structuring and sequencing your program are:
Do we have a formally documented monitoring plan? If not, who should be involved in developing one, and what should it include?
Do we have designated monitors tasked with conducting compliance and performance reviews? If so, are their duties separate from those of the program management personnel?
How do we differentiate monitoring activities from reimbursement reviews? Do they ask different questions and test different standards? Is sampling of expenditures included?
Are we monitoring each program, function, and activity of the grant program (as required by §200.339) and does our monitoring include all the mandatory elements laid out in the Uniform Guidance?
Are we offering technical assistance to grantees, a recommended element of the Uniform Guidance?
What role do site visits play?
If you’re struggling with the answers to these questions, we’d be happy to partner with you to make your monitoring program the best it can be. Whether you need support in developing and executing risk assessments, conducting site visits, collecting and reporting program data, developing training and technical assistance curriculums, or if you want a complete, turn-key monitoring program, the Vander Weele Group is here to help.
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