Preparing Accounting Departments for Federal Grant Reforms

6757849129 68dd2374cc o 2In a StreamLink Software report, we found accounting/financial roles were least likely to express confidence in federal grant reforms—perhaps a result of their involvement in tracking grant funds and facilitating compliance.

To help accounting departments better prepare for federal changes, we’ve outlined some key steps to guide them below.

Understand Changing Regulations

The Office of Management and Budget (OMB) rolled out new federal reporting regulations that require grantees to be more transparent and accountable for spending. To comply, accounting and financial departments must first understand the changes:

  • Grantees must demonstrate programmatic performance and have a performance management system or process in place that demonstrates sound oversight practices and internal controls for their organization.
  • To apply for federal funds, grantees must show that they corrected issues identified in past audits.
  • Grantees must standardize their internal business processes and data.
  • Cost information must be managed consistently across prime recipients, sub-recipients and vendors.
  • Internal controls must be in place to demonstrate fund and management accountability.

Run Internal Reports

For reporting purposes, the grantee must be able to associate its performance requirements to its expenditures. To do so, an organization’s accounting operation must be able to provide an accurate expenditure report that the organization can then use to show how funds were used to meet the grant’s performance requirements.

This requires grantees to run internal reports to keep grant spending on track throughout the grant lifecycle, and to compare spend and activity data to budget narratives and performance. Regularly monitor total expenses spent versus budget goals, time spent on activities (organizational and individual), and resources used.

Understand Allowable Costs

Understand what costs are allowable for each federal grant to ensure your organization gets the most money out of its awarded funds. New federal requirements standardized how direct and indirect costs are handled; key details include:   

  • Funds must be administered based on program agreements and award terms.
  • Grantees must apply organization and management business practices in writing (or establish as a policy or procedure) to show how they oversee expenditures and address allowable cost requirements, if pre-approval is required, etc.
  • Oversight policies must be in place to manage sub-recipients.
  • Costs must be treated consistently once deemed direct or indirect.
  • Costs that would have historically been deemed indirect may be able to be tracked as direct if they can be tied to a specific award.

Develop Strong Financial Reporting Processes 

Accounting departments must develop financial systems that comply with federal requirements. Some tips to keep in mind are to:

  • Effectively distinguish grant spend versus non-grant expenses.
  • Account for each grant (and its financial expenditures and activities) separately and be able to identify each grant by its award number and other required identifying data.
  • Keep data up-to-date throughout the entire grants lifecycle.
  • Link financial expenditures to performance metrics.
  • Ensure detailed documentation to support spending (i.e. electronic payments, receipts, invoices, etc.) are kept and uniquely identified to a specific grant.
  • Establish internal controls that comply with financial reporting requirements, and properly train your staff on new processes. Enhanced internal controls will reduce legal liabilities, and help achieve desired budget and performance goals.

Interested in learning more about the current state of grant management? Download our report, “The 2015 State of Grant Management Report.


   2015 State of Grant Management


How is your accounting department preparing for federal grant reforms? Share in the comments below.

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