Get your ducks in a row if your non-profit accept government grants

The news last week that the Justice Department will freeze grant funding for Big Brothers Big Sisters (BBBS) should send a chill up the spine of every non-profit organization who accepts government funding.

Here is the CliffNotes version of what is going on:

• BBBS co-mingled its federal grant dollars with its general fund,
• Oversight of disbursements from the national organization to its local affiliates was allegedly lacking,
• Documentation required by the grant agreement allegedly wasn’t well or is missing, and
• Grant dollars were allegedly spent on things it shouldn’t have been.

If you’re interested in more information, here are a few links you may want to click on:

• CBS News: “Justice Dept. freezes funding to Big Brothers Big Sisters“
• Fox News: “Justice Department freezes funding to Big Brothers Big Sisters following audit“
• News Talk Radio KRMG: “Big Brothers Big Sisters funds frozen by Justice Department“

As I said in the title to this blog post, I see this as a cautionary tale for all non-profit organizations who accept public funding from any level of government (e.g. local, state or federal).

Why?

I believe that when money is abundant controls are less strict. Conversely, when resources are scarce . . .

• every penny is watched,
• those agencies that don’t have the money are making the case for why those who do have the money shouldn’t have the money (e.g. classic have’s versus have-not’s),
• there is a debate occurring among policymakers about the “role of government” and whether or not government should even be in the business of allocating money in this manner (e.g. redistribution of wealth versus letting private philanthropy markets do so), and
• decision-makers are looking for reasons to take money away because it is easier to tell voters that funding was eliminated when there are good reasons (and alleged mismanagement of funding is always a great reason).

Here are a few simple and cheap things you can do to ensure your agencies doesn’t end up in the same place as BBBS:

1. Assemble a task force of board volunteers to help you conduct an internal review of your government contracts.
2. Pull out your grant agreements and carefully review the items you are contractually obligated to deliver.
3. Randomly conduct spot checks of documents you are contractually obligated to keep.
4. Randomly conduct spot checks of expenditures charged to the grant and ensure they were allowable expenses.
5. If you find discrepancies, put together action plans to fix the problems and monitor implementation. If money was inappropriately used, re-appropriate / re-budget the money and use it in the manner that it was intended.
6. Document this process simply by keeping meeting notes. This way, if you get audited, you’ll be able to demonstrate your due diligence and commitment to internal controls.

Are you concerns about the recent developments between the Justice Department and Big Brothers Big Sisters? Are you taking special precautions at your agency to get your ducks in a row? Do you think I am overreacting? Please scroll down and share your thoughts in the comment box below.

Here’s to your health!

Erik Anderson
Founder & President, The Healthy Non-Profit LLC
www.thehealthynonprofit.com
erik@thehealthynonprofit.com
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