Managing Public Grants

 

Overview

Welcome to the e-learning lesson on managing public grants. Understanding and honoring the requirements set forth by the Federal awarding agency is critical to successfully implementing your federally funded project. Unlike funds from private foundations or individuals, Federal funds require compliance with what may initially seem to be an overwhelming number of requirements. This lesson will provide you with resources and general information about grant management policies for most Federal funding agencies. Questions are bound to arise as you set up and implement your funded project. Since each Federal agency has specific requirements, it is critical that you become very familiar with the terms of your award and the Federal staff assigned to oversee your project. By engaging in this lesson, capacity builders and intermediary organizations will better understand the key concepts and elements required to manage Federal grants effectively, including: achieving proposed program goals, receiving and disbursing Federal funds, complying with reporting requirements, and writing continuation applications.

This lesson is a resource for capacity builders and nonprofits.

This lesson serves as a resource to assist nonprofit organizations in effectively managing Federal grants so that funded project goals are achieved in compliance with Federal regulations and reporting requirements. It can help answer frequently asked questions and direct you to necessary resources and information to assist in effectively and efficiently implementing your funded project.

Download the Managing Public Grants Glossary to help you with any unfamiliar vocabulary throughout this lesson.

The lesson will also help organizations answer several key questions.

There are three key documents when it comes to public grant management.

The first key document is the application for funding. Your application details the specific project activities your organization will undertake and the objectives you want to accomplish. The second key document is the cooperative agreement or grant agreement issued by the Federal awarding agency. This agreement specifies the terms of the award. The third key document is the award package issued by the Federal awarding agency. The award package includes the notice of award specifying the amount of the award, project period, budget period, standard terms and conditions, reporting requirements, and required forms for submission. The package may also contain information about the payment mechanism through which funds will be disbursed.

CHAPTER 1: Understanding Roles and Achieving Objectives

For many organizations, approaching and working with a Federal agency may seem overwhelming. When an award is made, a Federal program officer and a grants management officer will be assigned to oversee your project as it is implemented. Your program officer and grants management officer are your best resources for navigating unfamiliar territory as you implement your funded project. They are available to provide assistance for everything from setting up a new program to addressing closeout issues once a funded project has concluded. Project performance will be evaluated based on your progress regarding stated goals and objectives and fiscal performance. You will be required to provide project performance information at regular reporting intervals as specified in your grant or cooperative agreement. Tracking project activities, outputs, and timelines is critical to meeting your project goals and objectives.

Your roles and responsibilities revolve around the details of your project.

As a grant recipient (or potential grant recipient), your responsibilities are to successfully complete your approved project within the agreed-upon budget and time frame. In order to accomplish your project goals and ensure compliance, you should:

It is important to develop a good working relationship with Federal program officers and grant management officers who have oversight responsibility for your funded project. Open, clear, and consistent communication with your program officer and grants management officer will enhance your ability to effectively implement your program in compliance with the terms of your cooperative agreement.

There are two Federal officers that oversee your grant.

There are usually two Federal entities that play a role in overseeing your grant: the grant management officer and the program officer. The grants management officer (GMO) is the official responsible for the business management and other non-programmatic aspects of an award. These activities include, but are not limited to:

The GMO, or an assigned grants management specialist working on behalf of the GMO, is usually responsible for receiving and acting on requests for prior approval or for changes in the terms and conditions of the award. The GMO is the only official authorized to obligate the agency to the expenditure of Federal funds or to change the funding, duration, or other terms and conditions of an award.

Program officers (POs) have a vested interest in the success of your program and are responsible for the programmatic, scientific, and/or technical aspects of assigned applications and grants. They have the following responsibilities related to the grant:

Federal agency monitoring includes on-site review, audits, and reporting.

In addition to review of reports and telephone contact, Federal awarding agencies may conduct site visits to your project. Program officers and grants management officers will contact project staff with questions and concerns that may arise. Site visits allow Federal staff to observe the project underway and conduct any necessary on-site review of records.

Reporting

As a grant recipient, you are responsible for managing and monitoring each project, program, subaward, function, or activity supported by the award. Recipients are generally required to submit the original and two copies of performance reports. Refer to your award package for details on format requirements for performance reports. Many programs are now implementing standard Performance Progress Report forms, and some programs are working with OMB to customize those forms in order to collect relevant performance data. When required, performance reports generally contain brief information regarding each award, including:

Performance Reporting Frequency

The Federal awarding agency determines the frequency with which the performance reports are to be submitted in the award package. Quarterly or semiannual reports are due thirty days after the reporting period. Final performance reports are due ninety calendar days after the expiration or termination of the award. The notice of award or the program announcement will provide details about progress reporting requirements for your grant program.

Awarding agencies require evaluation because it ensures compliance and progress.

The evaluation section of your application for funding may have described the amount of time needed to evaluate, how the feedback will be distributed among the proposed staff, and a schedule for review and comment for this type of communication. To be successful, most evaluations require the collection of appropriate data before, during, and after program operations. Systems for such data collection generally must be developed prior to the start of the funded project. However, your organization must absorb the costs for setting up data collection systems prior to the start of the award because the official use of Federal funds begins at the award start date.

Evaluation requires both coordination and agreement among program decision makers. Above all, the Federal awarding agency's requirements should be highlighted in the evaluation design. If you have questions or concerns after the grant award has been made, your assigned program officer and grants management officer can provide specific information about evaluation requirements. Generally, the "Criteria for Selecting Application for Funding" section of a program announcement provides a detailed description of the exact evaluation methods required for funded programs.

CHAPTER 2: The Grant Award Process and Developing an Operational Plan

This chapter will cover two significant topics of the grant management process: the grant award process and developing an operational plan. The grant award process begins once a funding decision has been made. The Federal awarding agency will issue the applicable award instrument, as specified in the program announcement in the Federal Register and on Grants.gov, which is the online clearinghouse of Federal grant funding opportunities. Award instruments include grants, cooperative agreements, and contracts. Your operational plan will be based on information presented in your application narrative and the required reporting schedule detailed in your award package. When you developed your application for funding, you described the who, what, when, where, why, and how of the specific activities that will take place to achieve desired outcomes and project objectives.

This information can be used by organizations that have a grant or a cooperative agreement.

Grants and cooperative agreements are used when the principal purpose of the transaction is to support a public purpose authorized by the awarding agency's Federal statute. Grants are used when a recipient organization is expected to implement and achieve programmatic goals autonomously. Cooperative agreements are used when substantial involvement is expected between the funding agency and the recipient when carrying out the funded activities. Contracts are used when the principal purpose is the acquisition of property or services for the direct benefit or use by the Federal government.

Federal funds are restrictive, meaning they must be used for a specific purpose detailed in the grant or cooperative agreement. The actual terms of the arrangement between your organization and the Federal awarding agency will be specified in the cooperative agreement or grant, which will be mailed to you for negotiation and signature prior to the issuing of an award. If the Federal funding agency requires cost sharing or matching, you may be required to produce those funds before a cooperative agreement is signed and Federal funds are disbursed. Once you have signed and returned your cooperative agreement, an award will be made and funds will be released.

When a funding award is made, the Federal funding agency and the Division of Payment Management (DPM) initiate the process for receiving award payments.

Process for Receiving Award Payments

Information about how to set up your payment accounts is provided in your grant award package, or sometimes directly by DPM. It is also available on the DPM website at www.dpm.psc.gov. DPM serves many agencies, so it is important to note that organizations with multiple grants paid through DPM will have a single account for all of the grants.

Payment to your organization may be tied to reporting schedules, so it is critical to submit completed required reports on time and as specified by the Federal awarding agency. Payments to your organization may be withheld if one of the following situations occurs:

Keep in Mind: DPM offers Payment Management System user-training classes for new grant recipient organizations. For information about registering for the training or obtaining a CD of the training, visit www.dpm.psc.gov.

Developing an operational plan begins with goals, objectives, activities, and assigning responsibilities.

A sample operational plan format is provided, and includes space to account for goals, activities, responsible member, and the timeline for implementation.

Using information you provided in your application narrative and reporting requirements specified by the Federal funding agency in your award package, develop a document that relates goals, objectives, and activities to implementation and reporting timelines. This document is called an operational plan or work plan document. Set intervals that are appropriate to your project and reporting requirements. The above table provides a sample operational plan format and allows you to indicate who is responsible for completing each of the activities detailed.

In this sample operational plan format, reporting deadlines can be entered as activities, with due dates indicated in the timeline.

CHAPTER 3: Financial Management & Audits

In addition to a well-planned project, your organization's financial management systems must meet certain requirements in order for you to receive and manage Federal grant funds. Financial systems must follow a number of guidelines. Also, a sound financial management system should maintain records that adequately identify the source and application of funds for federally sponsored activities. All organizations that receive Federal funds are subject to basic audit requirements. These audits are intended only to examine the federally funded parts of an organization's operations and are not designed to identify unrelated problems. The audits are necessary to make sure that Federal dollars have been spent properly on legitimate costs. Therefore, it is extremely important for grant recipients to keep accurate records of all transactions conducted with Federal funds.

Federal agencies have banking standards and accounting and cost principles.

Federal awarding agencies do not require separate depository accounts for funds provided to a recipient, but you are accountable for the receipt, obligation, and expenditure of funds. Advances of Federal funds must be deposited and maintained in insured, interest-bearing accounts. Cost principles for nonprofit organizations can be found in 2 CFR 230. Questions about specific requirements for accounting methods and fiscal reporting should be directed to your assigned Federal grants management officer.

Most Federal agencies will reimburse their share of indirect costs.

Most Federal awarding agencies consider activities conducted by recipients that result in indirect charges a necessary and appropriate part of grants and will reimburse their share of those indirect costs. The appropriate share is either a fixed amount as specified in statute or in regulations, or is determined based on a rate negotiated by a cognizant agency with an applicant/grantee and reflected in a formal rate agreement.

To simplify relations between Federal grantees and awarding agencies, OMB established the cognizant agency concept, whereby a single agency represents all others in dealing with grantees in common areas. The cognizant agency reviews and approves grantees' indirect cost rates. Approved rates must be accepted by other agencies, unless specific program regulations restrict the recovery of indirect costs.

The cognizant agency for nonprofit organizations is determined by calculating which Federal agency provides the most grant funding. The Department of the Interior is the cognizant agency for all Indian tribal governments. For hospitals, HHS serves as the main cognizant agency. HHS is also the cognizant agency for all states and most cities. The cognizant agencies for community-based organizations are HHS and the Department of Labor.

To establish an indirect cost rate for your organization, contact your cognizant agency to initiate the application process. Indirect cost rate agreements are negotiated by a division within the agency. You will find a sample indirect cost proposal format for nonprofit organizations at http://rates.psc.gov/fms/dca/np_exall2.html.

Should You Apply for a Federal Indirect Rate?

  1. Consider the amount of the award and the actual amount of indirect costs that may be recovered.
  2. Consider the amount of time your organization will have to invest in preparing and submitting the indirect rate proposal and negotiating the indirect rate.

Earnings generated through an activity supported by a public grant are considered program income.

Program income is defined in 45 CFR 74 as income earned by the recipient that is directly generated by a supported activity or earned as a result of the award. Program income includes, but is not limited to, income from fees for services performed, the use or rental of real or personal property acquired under Federally funded projects, the sale of commodities or items fabricated under an award, license fees and royalties on patents and copyrights, and interest on loans made with award funds. Interest earned on advances of Federal funds is not program income. Except as otherwise provided in the terms and conditions of the award, program income also does not include the receipt of principal on loans, rebates, credits, discounts, etc., or interest earned on any of them. Furthermore, program income does not include taxes, special assessments, or levies and fines raised by government recipients.

Program income earned during the project period is retained by your organization for use as specified by the Federal awarding agency in the award document. In the event that the Federal awarding agency does not specify in its regulations or the terms and conditions of the award how program income is to be used, the regulations in 2 CFR 215 will provide you with specific instructions.

Organizations must submit financial reports to the Federal awarding agency.

Financial reporting requirements for your project are specified in your award package issued by the Federal awarding agency. For more detailed information about requirements for financial management systems, payment methods and rules for cost sharing and matching requirements, accounting for program income, and establishing fund availability, see OMB Circular A-110, subpart C.

You will likely be required to submit financial reports to both the Federal awarding agency and the Division of Payment Management. The Federal Financial Report is the financial reporting form for most of these reports. It combines the PSC 272, previously used by DPM, and the SF 269, used by grants management offices. DPM has fully implemented the switch to the FFR; however, many grants management offices may still be using the SF 269. Be sure to use whichever financial report is required by the grants officer.

The Federal awarding agency determines the Financial Status Report deadlines. The Division of Payment Management requires you to submit quarterly reports (FFR) that certify the disbursement of the funds within fifteen calendar days of the end of each quarter. It is important to remember that you must submit financial reports to the awarding agency and DPM on time, even if no activity has occurred during the reporting period.

Programs receiving public money are audited at the Federal government´s discretion.

Most organizations are not audited by the government itself, although the Federal government has the right to audit any program that receives public money at any time. For example, charities that spend less than $300,000 per year in Federal funds are generally asked only to perform a “self-audit.” Larger grants (those over $300,000 per year) require an audit by a private, independent legal or accounting firm.

Non-Federal organizations that expend $300,000 or more per year in Federal awards are required to have a single or program-specific audit conducted for that year. Non-Federal entities that expend less than $300,000 per year in Federal awards are exempt from Federal audit requirements for that year, but they must make records available for review or audit by appropriate officials of the Federal agency and Government Accountability Office (GAO). The scope of a single audit or program-specific audit includes a purposeful review of the following information:

OMB Circular A-133 governs audit procedures. Consult the OMB Circular A-133 for specific information.

The Federal awarding agency or any authorized representatives is entitled to all of your program´s records.

Financial records, supporting documents, statistical records, and all other records pertinent to an award must be retained for a period of three years from the date of submission of the final expenditure report. Some exceptions may apply given litigation, property records, and agency transference. See 2 CFR 215.53 for specific details.

If authorized, copies of original records may be substituted for the original records. The Federal awarding agency may request transfer of certain records to its custody from recipients when it determines that the records possess long-term retention value.        

As long as records are maintained, the Federal awarding agency, or any of its duly authorized representatives, has the right of timely and unrestricted access to any books, documents, papers, or other records of recipients that are pertinent to the awards in order to make audits, examinations, excerpts, transcripts, and copies of such documents. This right also includes timely and reasonable access to personnel for interviews and discussion related to such documents.

CHAPTER 4: Property Management

Property management entails the use of Federal funds to purchase real estate, equipment, and supplies. Federal awarding agencies have specific definitions for each of these categories. Title 2 part 215 of the Code of Federal Regulations specifies rules for acquiring and accounting for property purchased with Federal funds. This chapter will give you an overview of the specific information that may be most applicable to your organization regarding property management, including intangible property and property trust relationships.

Equipment purchased with Federal funds must be used for program purposes.

Equipment is defined in 45 CFR 74 as tangible, nonexpendable personal property, including exempt property charged directly to the award, having a useful life of more than one year and an acquisition cost of $5,000 or more per unit. However, consistent with recipient policy, lower limits may be established. Documentation of your policy must be provided to your grants management officer.

Equipment you purchase may be used for other projects or programs sponsored by the Federal awarding agency if such use will not interfere with work for which the equipment was originally acquired. If the equipment is owned by the Federal government, use on other activities not sponsored by the Federal government is permissible if authorized by the Federal awarding agency. User charges earned will be treated as program income.

You may use the equipment in the project or program for which it was acquired as long as needed, whether or not the project or program continues to be supported by Federal funds. When no longer needed for the original project or program, you may use the equipment in connection with other Federally sponsored activities. For specific instructions regarding equipment use and disposition, see 2 CFR 215, Section 34.

Titles to equipment acquired with Federal funds vest in the recipient, provided it is not used to provide services to non-Federal outside organizations for a fee that is less than private companies charge for equivalent services (unless specifically authorized by Federal statute) for as long as the Federal government retains an interest in the equipment.
Your property management standards for equipment acquired with Federal funds and Federally owned equipment must include all of the following:

  1. Equipment records including the following information:
    • A description of the equipment
    • Manufacturer's serial number, model number, Federal stock number, national stock number, or other identification number
    • Source of the equipment, including the award number
    • Whether title vests in the recipient or the Federal government
    • Acquisition date (or date received if the equipment was furnished by the Federal government) and cost
    • Information from which one can calculate the percentage of Federal participation in the cost of the equipment (not applicable to equipment furnished by the Federal government)
    • Location and condition of the equipment and the date the information was reported
    • Unit acquisition cost
    • Ultimate disposition data, including date of disposal and sale price or the method used to determine current fair market value where a recipient compensates the Federal awarding agency for its share
  2. Equipment owned by the Federal government must be identified to indicate Federal ownership.
  3. A physical inventory of equipment must be taken and the results reconciled with the equipment records at least once every two years.
  4. A control system that ensures adequate safeguards to prevent loss, damage, or theft of the equipment must be in effect.
  5. Adequate maintenance procedures should be implemented to keep the equipment in good condition.
  6. If authorized or required to sell the equipment, proper sales procedures providing for competition and resulting in the highest possible return should be used.

Upon award completion and closeout, equipment records must be maintained, but report only equipment valued at over $5,000.

Property acquired with Federal funds is under your ownership—given you are using it for the purpose of an authorized project.

The title to real property acquired with Federal funds is vested with your organization provided it is used for the authorized purpose of the project for as long as it is needed. When you determine the property is no longer needed for the purpose of the original project, you must obtain written approval by the Federal awarding agency for the use of real property in other Federally sponsored projects. Use in other projects will be limited to Federally sponsored projects or programs that have purposes consistent with those authorized for support by the Federal awarding agency. When the real property is no longer needed, you must request disposition instructions from the Federal awarding agency or its successor agency.

The title to Federally owned property remains vested in the Federal government. Submit an inventory listing of Federally owned property in your custody to the Federal awarding agency on an annual basis. Upon completion of the award or when the property is no longer needed, report the property to the Federal awarding agency for further Federal agency utilization.

Supplies are vested in the recipient upon termination or completion of a grant.

The term "supplies" refers to all personal property excluding equipment, intangible property, and debt instruments valued at less than $5,000. The title to supplies and other expendable property are vested in the recipient upon acquisition. Upon termination or completion of the grant, you may retain or sell unused supplies exceeding $5,000 in total aggregate value that are not needed for any other Federally sponsored project or program and compensate the Federal government's share.

You must not use supplies acquired with Federal funds to provide services to non-Federal outside organizations for a fee that is less than private companies charge for equivalent services, unless specifically authorized by Federal statute, for as long as the Federal government retains an interest in the supplies.

CHAPTER 5: Budget Revisions and Compliance Issues

The budget plan is the financial expression of the project as approved during the award process. Organizations must report variations from budget and program plans and request prior approvals for budget and program plan revisions. All requests for prior approval for program-related changes should be directed at your program officer. Your grant management officer must give prior approval for any budget-related changes. Compliance issues may occur if an organization does not fulfill the terms and conditions of its award. To avoid noncompliance, it is critical that grantees submit all required reports completely and on time. Open and consistent communication with Federal staff is also essential, especially if extenuating or adverse circumstances arise. The Federal awarding agency has discretion over noncompliance remedies.

Communicate with your grants management and program officers about changes in your project.

Request prior approval for any of the following program- or budget-related reasons:

The Federal awarding agency may not permit any budget changes in a recipient's award that would cause any Federal appropriation to be used for purposes other than those consistent with the original purpose of the authorization and appropriation under which the award was funded.

The Federal awarding agency may also restrict the transfer of funds among direct cost categories or programs, functions, and activities for awards. If you have a surplus of funds (but have applied for continuation funding) you do not have to submit notification.

You must communicate with your Federal awarding agency to request changes to the budget.

When requesting approval for budget revisions, you must use the budget forms that were included in the application—unless the Federal awarding agency indicates a letter of request is sufficient. Generally, the Federal awarding agency will review your request and provide notification of approved changes within thirty calendar days, or they will notify you in writing of a date when a decision can be expected.

This sample request process can help you with your budget revisions.

This request process was used by a grant program in the Office of Community Services, an office within HHS's Administration for Children and Families.

  1. Ensure that all reporting requirements are up-to-date
  2. Prepare a letter request:
    • Briefly describe the modification request
    • Explain the reason for the modification
    • Print on your official letterhead
    • Include your grant number and name of your organization, and any other relevant identifying information that your funding agency uses to track grants
    • Include the signature of your Authorized Official
  3. Complete the SF-424A Budget Information Form
  4. Prepare your revised budget clearly showing the approved budget and indicating the requested changes.
  5. Prepare a modified budget narrative, following your revised budget table and explaining each item in the budget.
  6. Submit these documents to your program officer or your grants management officer/specialist, as instructed by the awarding office.

The Federal awarding agency has discretion over noncompliance remedies.

If a recipient materially fails to comply with the terms and conditions of an award, whether stated in a Federal statute, regulation, assurance, application, or notice of award, the Federal awarding agency may (in addition to imposing special conditions) take one or more of the following actions, as appropriate in the circumstances:

The Federal awarding agency also has discretion to terminate your program's award.

Awards may be terminated in whole or in part (only if one of the following conditions applies):

If costs are allowed under an award, the closeout responsibilities of the recipient, including those for property management as applicable, are considered in the termination of the award, and provision is made for continuing responsibilities of the recipient after termination, as appropriate.

CHAPTER 6: Continuation Funding and Grant Closeout

If continuation funding is available, you should consult with your grants management officer or program officer to determine the protocol for applying for that funding. If you are not granted continuation funding from your award agency, you must complete the grant closeout process. This involves liquidating all obligations of the award within ninety days after the budget period and refunding unobligated cash. This chapter will give you a brief overview of the responsibilities of your organization during the closeout process and the responsibilities and adjustments of your Federal award agency.

You have ninety days to submit all required reports.

Upon completion of your project, you must submit all required financial, performance, and equipment reports to your grants management officer within ninety calendar days of completion of the award. Prior to the end of the project period, you may request an extension of that time period from the Federal funding agency if needed.

However, unless an extension is authorized, you must liquidate all obligations incurred under the award within ninety calendar days of the budget period or the date of completion. You must also promptly refund any balances of unobligated cash that the Federal awarding agency has advanced or paid and that is not authorized to be retained by the recipient for use in other projects. OMB Circular A-129 governs unreturned amounts that become delinquent debts. Upon award completion and closeout, equipment records must be maintained, but report only equipment valued at over $5,000.

The Federal awarding agency will make prompt payments for allowable reimbursable costs under the award being closed out. When authorized by the terms and conditions of the award, the Federal awarding agency will make any upward or downward adjustments to the Federal share of costs after closeout reports are received. In the event that a final audit has not been performed prior to the closeout of an award, the Federal awarding agency will retain the right to recover an appropriate amount of funds after fully considering the recommendations on disallowed costs resulting from the final audit.

The Federal government retains certain rights following closeout.

The closeout of an award does not affect any of the following:

Summary

The requirements for use of funds imposed by the Federal government are designed to ensure that funds are used in the most efficient manner to provide services that produce desired outcomes. The process of learning and navigating Federal grants often strengthens an organization's financial and program management systems for future undertakings. By now, you should be able to: achieve proposed program goals, receive and disburse Federal funds, comply with reporting requirements, and write continuation applications. Thank you for taking the time to learn about managing public grants.

Here are some key points for successful grants management.

Use the resources below to help you with the grant management process.

Government Funding
Grants.gov provides a comprehensive listing of Federal grant funds that are available through all departments of the Federal government. 

Departments of the Federal Government
Department of Agriculture (USDA)
www.usda.gov

Department of Commerce (DOC)
www.commerce.gov

Department of Defense (DOD)
www.defense.gov

Department of Education (ED)
www.ed.gov

Department of Energy (DOE)
www.energy.gov

Department of Health and Human Services (HHS)
www.hhs.gov

Department of Homeland Security (DHS)
www.dhs.gov

Department of Housing and Urban Development (HUD)
www.hud.gov

Department of Interior (DOI)
www.doi.gov

Department of Justice (DOJ)
www.justice.gov

Department of Labor (DOL)
www.dol.gov

Department of State
www.state.gov

Department of Transportation (DOT)
www.dot.gov

Department of the Treasury
www.ustreas.gov

Department of Veterans Affairs (VA)
www.va.gov