Effective Monitoring

Federal staff routinely visit sites to evaluate grantee and subgrantee compliance with grant requirements and procedures. This section helps the grantee understand and provide leadership in three critical areas: 1) subgrantee monitoring, 2) the administrative requirements that federal agencies set for grantee organizations, and 3) the ethical principles to which all federally funded programs must adhere.

Subgrantee Monitoring

The grantee bears responsibility for the proper administration of an agency’s federal funds, and must understand key staff duties surrounding subgrantee monitoring and, from the standpoint of effective control, be certain that documented subgrantee procedures and guidelines are in place. These monitoring procedures must be detailed and clearly documented as they provide the basis for state and federal review. Grantee staff will be monitoring from two perspectives: programmatic and financial. These perspectives are often combined in ongoing desk monitoring and site visits. Whenever potentially significant disparities exist, the grantee must be immediately apprised so it can determine if a more extensive financial review is necessary.

An executive director should expect grant managers to have a thorough understanding of each program’s purpose, as well as working knowledge of each program. Staff should conduct regular office-based reviews of each grant, and, after extensive preparation, periodic onsite visits. In addition, each subgrantee, as discussed in the previous section, must submit progress reports on a timely basis, and those reports should highlight overall program performance, innovations, contributions to the field, and any modifications or technical assistance needed from the grantee. Documentation of all expenditures, clear internal budget controls, and audit trails are mandatory for all subgrantees and should be closely monitored. Further, the state should expect subgrantees to regularly monitor federal- and state-imposed certified assurances, special conditions, and reporting requirements. Compliance must be constant.

When and how often to visit grantee sites is a decision that the grantee will likely delegate, but the executive director will need to know the schedule once established. At a minimum, he or she should have documented procedures outlining the expected frequency of visits. Occasionally, regular desk reviews will suggest a site visit to provide technical assistance or investigate suspected program or financial irregularities. Although agencies routinely handle technical assistance requests, staff should bring any sign of unethical behavior at a subgrantee to the director’s attention immediately.

Subgrantees must address and clearly document the following items:

Daily review:

All expenditures and cash flow;
Data measuring progress towards grant objectives; and
Timeliness, completeness, and accuracy of required reporting.

Updating and storage:

Written employment practices;
Property records of grant-funded equipment;
Time sheets recording grant activities with employee and supervisor's signatures;
Financial policies and procedures; and
Internal accounting policies and reviews, mandating items such as separation of duties, two signatures on certain checks, and reconciliations.

Evidence of:

Revenues matching dollars reported in specific cash requests;
Expenditures matching dollars reported in financial reports;
Invoices marked with unique accounting codes or grant numbers;
Accounting 1) separates revenues and expenditures by funding source; 2) records and tracks revenues and expenditures separately; and 3) allows expenditures to be classified broadly (e.g., as personnel or supplies/operating);
Subledgers reconciled to the general ledger monthly; and
Subgrantee using a clear and reasonable method to calculate, track, and report matches in each financial report (in match situations only).

A subgrantee’s careful adherence to these procedures helps ensure that it provides first-rate support to criminal justice organizations and that federal reviews of the SAA processes proceed smoothly and find no mistakes or irregularities.

Federal Agency Monitoring

Federal monitoring resembles state oversight of subgrantees. Grant managers, often called state policy advisors, regularly perform desk reviews of grants. In addition, they make routine site visits to every grantee. Just as a state agency has a delineated review process, so too does the federal agency.

The Federal awarding agency is tasked to ensure accountability and provide oversight, ensure proper spending, visit sites needing assistance, measure performance, and identify opportunities for improvement. The state policy advisor will want to be sure that an agency meets its administrative and fiscal goals and requirements, that financial and progress reports are timely and accurate, that subgrantees are being appropriately monitored, and that full and complete documentation is in place. Special conditions (see Ethical Considerations section below), delinquent reports, any open audit findings, prior problems, confidentiality issues, and the nature and amount of funding by the particular office will be matters of interest. Likewise, an agency’s programmatic strengths and weaknesses are important.

The grantee should be aware that the monitor will be assessing compliance with special conditions, technical assistance needs, and whether promising practices are used. Both strengths that might be replicated elsewhere and weaknesses in performance and financial arenas will be noted.

The director will be expected to participate in an entrance conference and an exit interview. He or she should not send a representative, but rather attend personally. The relevant grant monitors should also be made available throughout the process. The federal monitor and grantee staff will be reviewing internal files and records, signed award documents, semiannual and progress reports (discretionary grants), annual reports (formula/block grants), financial status reports, grant adjustment notices (GANs), compliance documentation concerning special conditions, tracking and reporting documentation, and subgrantee monitoring protocols (see Subgrantee Monitoring section above). In addition, the grant monitor will probably want to contact subgrantees, including a site visit. After the monitoring visit has ended, the grantee will receive written recommendations and required action items. The grantee response—an outline of improvements, corrections, and any technical assistance needed—is usually required within 30 to 60 days.

As with monitoring subgrantees, the overall goals of federal monitoring are verification that financial and programmatic goals are met and that your agency is receiving effective technical assistance. Familiarity with each and all of the requirements we have discussed is therefore essential.

Monitoring Assistance

Grantees may wish to consult with their counterparts in other states or request assistance from the NCJA. The latter can be facilitated by NCJA or can occur on an ad hoc basis. (Learn more about grants management TTA offered by NCJA). Either way, mentoring is encouraged, particularly with regard to these issues. We also recommend the Office of Justice Programs' (OJP) Financial Guide which contains the framework for OJP grant monitoring. Executive directors should read the OJP Financial Guide thoroughly.

Ethical Considerations

The grantee must meet the highest ethical standards. This is particularly so because of the nature of grant processes and the large monetary amounts involved. As a signatory, the executive director’s behavior must be beyond reproach. Not even the appearance of impropriety can occur. This principle cannot be overemphasized. Therefore, if a director is uncertain whether an act or omission might be unethical, he or she should first consult with experienced managers and read the pertinent regulations to make certain of the correct course of action.

Ethical issues affect not only the state agency and the programs it funds, but also the grantee director and staff personally. Perceptions of ethical lapses, whether valid or not, will reflect poorly on the director, diminishing his or her ability to effectively administer large amounts of federal funds.

Most ethical issues concern actual or potential conflicts of interest. The actions of staff members, moreover, are likely to be construed as the director’s actions. Therefore, it is critical that the grantee and its staff clearly understand and adhere to ethical expectations. The OJP Financial Guide is particularly instructive on this issue. The director’s understanding of this publication—and that of staff’s—is so critical. Revelant passages are quoted below.

Advice

No official or employee of a State or unit of local government or a non-governmental recipient/subrecipient shall participate personally through decisions, approval, disapproval, recommendation, the rendering of advice, investigation, or otherwise in any proceeding, application, request for a ruling or other determination, contract, award, cooperative agreement, claim, controversy, or other particular matter in which award funds (including program income or other funds generated by Federally funded activities) are used, where to his/her knowledge, he/she or his/her immediate family, partners, organization other than a public agency in which he/she is serving as an officer, director, trustee, partner, or employee, or any person or organization with whom he/she is negotiating or has any arrangement concerning prospective employment, has a financial interest, or has less than an arms-length transaction.

Appearance

In the use of agency project funds, officials or employees of State or local units of government and non-governmental recipient/subrecipients shall avoid any action which might result in, or create the appearance of:

Using his or her official position for private gain;
Giving preferential treatment to any person;
Losing complete independence or impartiality;
Making an official decision outside official channels; or
Affecting adversely the confidence of the public in the integrity of the government or the program.

For example, where a recipient of federal funds makes sub-awards under any competitive process and an actual conflict or an appearance of a conflict of interest exists, the person for whom the actual or apparent conflict of interest exists should recuse himself or herself not only from reviewing the application for which the conflict exists, but also from the evaluation of all competing applications.

Great care must also be exercised to ensure that all conditions attached to the federal grant are met, and that the grant is ethically administered. This is particularly so with regard to special conditions. Particular attention must be given to ensure compliance, both in your agency and with your subgrantees, surrounding NEPA (environmental), civil rights, limited English proficiency, confidentiality, human subject protection, anti-lobbying, and faith-based special conditions. All are clearly delineated in federal grant materials and must also be included in subgrantee agreements. Therefore, it is incumbent upon the grantee to become familiar with each. Two deserve further discussion as they may pose particular ethical and administrative challenges: anti-lobbying and faith-based special conditions.

Anti-Lobbying Restrictions

Recent amendments to the Anti-Lobbying Act have significantly expanded restrictions on the use of appropriated funds for lobbying by you, your agency, and your subgrantees. Penalties are extremely severe. The bottom line is: no federally appropriated funding may be used, either directly or indirectly, to support the enactment, repeal, modification, or adoption of any law, regulation, or policy, at any level of government, without the express approval of the federal awarding agency. Lobbying of any sort is simply not permitted with federal funds. Great care must be exercised to ensure that not even the appearance of an impropriety exists here while being supported by federal appropriations. The negative ramifications for the director, the state agency, and subgrantees can be far greater than any fine or penalty imposed. Hence it is extremely important that this special condition be highlighted.

Faith-based Conditions

Faith-based and community organizations often qualify for awards. When they do, they are to be considered on the same basis as any other applicant, and, if they receive an award, they are to be treated administratively just as other grantees. However, no proselytizing can occur within the activities being funded. Therefore, religious activities (e.g., prayer) must be separated from the federally funded program and that separation must be clearly documented and demonstrable. If the grantee is affiliated with a particular religious applicant group, he or she must take special care to recuse themselves from all funding decisions concerning that application or grant.

Risk-Based Monitoring

In addition to their policy and planning responsibilities, grantees are often best known for their grant making and management functions. With 75 percent of SAAs administering at least four U.S. Department of Justice (DOJ) state formula grant programs, SAAs are monitoring awards across all elements of the justice system at all levels of state and local government. According to a recent NCJA survey, on average SAAs had at least 30 open JAG equipment grants and an average of at 172 programmatic grants.

With 70 percent of SAAs having between one and four full-time Byrne Justice Assistance Grant (Byrne JAG) programmatic and financial grant mangers, it can be a challenge to determine how to effectively deploy limited monitoring resources. As grant managers regularly monitor grant progress indicators, financial reports, state performance measures and information submitted to the Federal Performance Measurement Tool, it is easy to understand why monitoring man power is limited. In an effort to enhance the SAAs monitoring capacities and to deploy limited SAA resources toward those segments of their grant portfolios most at risk of not meeting agreed upon goals, many states have begun to implement risk-based grant monitoring strategies. In its simplest form, risk-based monitoring strategies are comprised of a set of monitoring activities that are prioritized and implemented using a risk assessment. Grantees most at risk of not meeting agreed upon goals receive additional monitoring, training and technical assistance. By targeting resources toward those most in need of assistance, SAAs not only act in a cost effective fashion but ensure that the state’s investment is protected.

Nuts and Bolts

According to a recent NCJA survey on grant management, at least 23 states employ some form of a risk-based grant monitoring strategy. These strategies varied in formality, from those with risk assessment tools and multi-level risk categorizations to more informal systems where risk is determined using a case review model. Regardless of how formalized the SAAs risk-based strategy is, most took into consideration similar variables when determining grantee risk. These variables included:

Late or Deficient Programmatic and Financial Reporting;
Grantee’s Grant Management and Project Performance History;
Grant Size and Funding Stream;
Complexity of Project and Number of Sub-Awards;
Agency Capacity and Staff Turnover; and
Type of Agency Receiving Award.

Despite the differences in how each state assessed risk, SAAs indicated that the most common reason for a grantee to receive additional monitoring was related to the content of their reporting. When asked, SAA staff indicated that problems with financial and programmatic paperwork were seen as an early indicator that a grantee needed increased training, technical assistance or monitoring to help them meet agreed upon goals.

State Risk-Based Grant Management Strategies

Colorado

In Colorado, the SAA has set up a formal three-tiered risk assessment classification system incorporating staff input, grant reporting reviews and a standardized risk assessment tool. The risk assessment tool is used on all grantees annually and determines risk based on grant size, project complexity, past audits, organizational capacity, reporting timelines and payment requests. Results from this tool are combined with regular reviews of programmatic and fiscal reporting to determine risk score and classification. Desk reviews are used for low-risk grantees and moderate-risk grantees not selected for site visits. On-site monitoring is used for high-risk grantees and a select number of moderate-risk grantees. Those organizations determined to be high-risk are audited, receive on-site monitoring and must make themselves available for additional telephone monitoring.

Maryland

In Maryland, the SAA has adopted the use of a risk assessment matrix to inform monitoring decisions. In addition to monitoring regular quarterly reporting and fiscal/programmatic indicators, program monitors are expected to use the risk matrix to determine which of the four risk categories a grantee most aligns with. Although this matrix is not scored like an assessment tool, it provides monitors with clear direction when determining risk level. The matrix takes into account history with the SAA, award documentation, project implementation, timeliness of reporting and the number of non-compliance or delayed compliance findings. The SAA uses a grantee’s level of risk to determine who receives an on-site field audit. The SAAs grant monitors look at both fiscal and programmatic activities and provide the grantee with a report documenting the action steps needed to come into compliance and lower their risk classification.

New York

In New York, the SAA the uses a case review model where staff work together to determine if the grantee has an increased risk of not meeting their agreed upon goals. Case reviews take into consideration programmatic reporting issues, sub grantee history, project complexity and other issues within state and local justice systems. Case reviews also take into consideration the complexity of differential grant reporting requirements. Grantees determined as high-risk are provided additional site visits and technical assistance.

Pennsylvania

In Pennsylvania, the SAA has formalized a three-tier risk classification system to enhance fiscal monitoring. Risk is determined by the timeliness of quarterly reports, requests for reimbursement /allowable expenses, quarterly fiscal reports and staff input. Risk classification is broken down into three categories: low, medium and high risk. Increased fiscal monitoring is based on the sub grantee’s risk category. The SAA provides additional monitoring to 5 percent of low-risk grantees, 33 percent of medium-risk grantees and 45-50 percent of high-risk grantees. Grantees selected for additional monitoring in each category are chosen randomly and provided with detailed information about specific elements of their fiscal reporting that will be audited.

Tennessee

In Tennessee, the SAA has both an internal policy and a state mandate to use risk as a factor when determining the level of grant monitoring. In addition to the state policy that certain types of funds and projects receive additional monitoring, the SAA has also created a three-tiered risk classification system and a risk assessment tool. The risk assessment tool considers a number of factors including the number of current grants, size of the grants, agency staff turnover, program progress reports and the timeliness of state and federal reporting. In Tennessee, the SAA uses three-year grant cycles and provides on-site monitoring at least once during the life of the grant. Agencies that score higher on their annual risk assessment increase their likelihood of receiving both on-site monitoring and additional desk reviews during that fiscal year. Agencies selected for on-site monitoring receive a detailed monitoring report which is shared with the state’s Comptroller of Treasury/Division of Audit. Grantees who are found out of compliance are required to work with the SAA on a detailed corrective action plan.

Further Considerations

When thinking about whether to adopt a risk-based monitoring strategy, age grantee might consider the following things:

Number of grantees;
Size of current grants;
SAA monitoring capacity and resources;
Ratio of monitors to grants; and
Frequency of current monitoring.

Although not all grantees have formal risk-based monitoring protocols in place, the use of possible risk factors to inform grant monitoring or management is a common practice. Although the creation of formal risk protocols can be time consuming, it promotes standardization around how monitoring resources are allocated. In addition, a formalized system provides grantee staff with a clear set of indicators on which to judge a grantees ability to meet agreed up goals. Conversely, it also provides grantees with a clear understanding of the programmatic and fiscal issues that the state considers important to success. The prevalence of risk-based grant monitoring strategies among grantees, foundations and federal grant making agencies like the National Science Foundation and the Department of Education, are a testament to the practices utility.