Grants and Program Management
Grants and programs are, in many respects, similar to contracts. Grantees and their subgrantees may attempt to perpetrate fraud through kickbacks, falsification of credentials, overstatement of costs or performance, and failure to render adequate levels of service.
Grants and programs are fraud magnets because they involve a great deal of money and it is sometimes difficult to measure or verify if the grantee has actually done what he or she was paid to do.
A common type of fraud perpetrated against grants and programs is simply the provision of services at a level less than that agreed upon. Another common type of fraud is the overstatement of the number of beneficiaries who were, or are, being served.
Because the government is not the direct recipient of the services covered by the grant or program, it’s often difficult to ascertain the levels of service actually provided or the number of beneficiaries who actually receive the service.
Awards are often subject to a number of legal requirements, such as the Buy American Act. Recipients can reduce their costs by flouting these laws. Such non-compliance can be lucrative for the recipient and difficult for the grantor or program administrator to detect.
Fraud, Waste and Abuse
Inadequate grant monitoring processes.
Unrealistic performance targets.
Lack of risk assessment.
Missing communication channels.
No fraud reporting hotline.
General Guidance
According to Federal Funds Information for States, the federal government provided state and local governments with nearly $729 billion in federal funds in fiscal year (FY) 2016. Government programs are, to a large extent, carried out by grants—the Federal government to state and local governments, state to local governments, governments to private sector contractors, suppliers and vendors, etc. These programs involve vast sums of money. Some of that money finds its way into the pockets of those not intended to receive it. The link to the right provides a tool to evaluate the internal controls over your grant programs. The cells below contain information to help you spot and deter fraud in grant programs.
Grant Purposes Not Being Met
No follow up on grant recipients/subrecipients.
Required reports not received.
Complaints from intended clients.
Perform oversight of prime/sub/vendor contract requirements to ensure agency gets what it pays for. Use onsite visits, milestones achieved or reports filed to check performance/progress before next allotment of funds; inspect goods/services received; compare invoice and purchase order to prevent overpayment.
Perform spot reviews or audits on vendor time sheets in a random sample to ascertain if hours worked match payroll invoices, or do site inspections. Different types of inspection reports can be designed or are available on the Internet.
Site Inspection Template
Matching, Level of Effort or Earmarking Requirements Not Being Met
Requirements are not budgeted in the program.
In-kind contributions not documented.
No monitoring reports in place.
Misdirected Payments
Payments are misdirected to someone posing as a legitimate vendor. No proper documentation or approval of additions, changes, or deletions to vendor master file.
Vendor addresses do not agree with vendor approval application.
Verify that all changes to vendor records (name, address change, bank account) are submitted by an authorized vendor signatory, and approved by an agency signatory. This is to prevent theft or misappropriation of funds.
Segregate duties between processing of accounts payable invoices and updates to vendor master files.
Non-Compliance with Federal Civil Rights and Drug Free Workplace Laws
Irrational employee behaviors.
Unexplained employee absences.
Non-compliance with State/Local-Wide Central Service Cost Allocation Plans and Indirect Cost Rate Proposals
Unwarranted profitability of internal service funds.
Non-Compliance with The Buy American Act
Evidence of foreign-produced materials.
Problems that Could Lead to an Audit Finding Not Addressed Early Enough
Repeat audit findings.
Unallowable costs.
Non-compliance with Treasury/State Agreement (CMIA).
Excess +/- balances of federal cash.
Expenditure of federal funds outside the availability period.
Program income not identified and/or reported
Program is Not Serving the Right Clients/Beneficiaries
Complaints from intended clients.
Recipients and Sub-Recipients Do Not Understand Requirements and Responsibilities
Audit findings that go unaddressed.
Reporting Issues
Inaccurate reporting.
Federal reports filed late or not at all.
No management review of reports.
Related audit findings.
No monitoring of federal requirements for changes.
Sub-Recipients Ineffective in Program Implementation
New subrecipients.
Repeat audit findings.