Are you applying for new federal awards? Know the strings attached

It is important to think about all that comes with managing a new federal program for your government, ideally before you apply for it – and especially before you accept it. New federal awards are like getting a new puppy; they come with ramifications, implications and potential future costs for your government. If you think those things through, and understand what you are taking on, then you will be in a better position to manage the new award. 

As auditors, we sometimes observe governments experiencing surprises with new federal awards. In some instances, program staff missed a federal program requirement. In other situations, the government incurred additional costs that they could not charge to the federal program. Governments typically faced these surprises because they did not take the time to understand the strings attached to a new federal program, and properly plan to address them – such as by dedicating additional resources. 

We’d like to help you plan before you accept a new federal award, so we have compiled a list of 10 questions for you to consider. 

1. Have you considered the effects on your cash flow? Federal programs often require you to pay for the costs, and then seek reimbursement. This requires you to maintain a larger amount of working capital or cash for your operations. 
2. What will be your out-of-pocket costs? As a part of a match requirement, you may need to contribute some of your own funding to the federal program. You may also need to cover some administrative costs to manage it, depending upon the limitations of your federal award. 
3. Will you incur any costs after the period of performance ends? The period of performance is the period of time the awarding agency allows you to incur costs and charge them to the federal program. The award recipient typically covers any costs incurred after this period ends. For example, you may need to cover the staff time to close out the award, or you may need to pay for leave buyouts, which tend to occur when the federal program ends and staff are let go. In some cases, you may also have contractually agreed to cover certain costs, such as keeping employees for a period of time after the federal award closes. 
4. Will you need a federal single audit? Will the awarding agency perform monitoring? A single audit may result in additional costs to your government. Your federal program might reimburse you, but it depends largely on remaining funding and timing (audits often take place after the period of performance ends). If you already receive an audit, you may incur a larger bill (when your activity increases, your auditor may have to add additional programs). The awarding agency may also perform its own monitoring. Ultimately, audits and awarding agency reviews require staff time to respond to inquiries and provide records. 
5. Does your staff have the experience and training they need to manage a new federal award? Experienced staff are more efficient at understanding a new award’s compliance requirements. If you have less experienced staff, they will need extra time to get up to speed. You may also need to hire outside expertise to support them. Provide ongoing training to all staff managing federal programs. 
6. Does your staff have capacity to manage a new federal award? You should not underestimate the amount of time and research a new federal award can potentially require. The award will include references to various laws and regulations, and staff will need time to carefully read them and make plans to comply with them. (If an award cites a law or regulation briefly, that carries the same weight as if it included the full text.) 
7. How complex are the requirements of the federal award? Do you expect them to change over time? Federal programs vary greatly in complexity, so you should assess new programs carefully. Staff will need extra time, support, and training to understand, monitor, and manage federal awards with complex or changing requirements. One resource is the Compliance Supplement, which is published annually by the federal Office of Management and Budget. You might review it and compare it to your understanding of compliance requirements. (The Compliance Supplement is designed to help auditors, but you will find information about compliance requirements for many programs in Part 4).
8. Do you have experience working with the awarding agency? Does it provide guidance and support to recipients? Federal agencies and/or state pass-through agencies may provide invaluable assistance. For example, they might publish manuals to help award recipients, offer training, maintain helpful websites, and provide contacts to help recipients with questions.
9. Do you have the capacity to mitigate high fraud risk, if applicable to the federal program? For example, someone may misrepresent their eligibility status to obtain benefits, or the federal program may involve equipment that you must safeguard. If you accept the award, you will need to design and establish controls to mitigate the fraud risk.
10. Have you involved all departments or stakeholders potentially affected by the new federal program, to receive their input? A federal program rarely affects just one department or one person. Make sure that you involve all key stakeholders in preliminary discussions about whether to apply for or accept new awards.

You shouldn’t necessarily let challenges deter you from pursuing new federal programs, but it’s also important to be realistic about the time and resource commitment before you forge ahead. We hope these questions help you and your staff better understand the commitments involved.

Additional federal program-related resources

• Government Finance Officers Association: Establishing an Effective Grants Policy – A grants policy can address the steps you should take before applying for or accepting grants.
• State Auditor’s Office: Federal programs risk assessment tool – Use this tool each year to help you assess risk or challenges related to meeting the objectives of federal programs. For more information on how to use this tool, read this article.

Want help?

Remember, we are here to help. While your awarding agency is the best source for information about a federal program, you can also submit technical questions about federal awards to our HelpDesk in the client portal.

For training on federal award requirements, see the Washington Finance Officers Association non-conference training schedule. Our Office will be offering a virtual course on federal award requirements on April 16 and May 14, from 8 a.m. to 3 p.m. Other organizations also offer training, such as Government Finance Officers Association, American Institute of Certified Public Accountants, and the National Grants Management Association.

If you have other questions, comments or suggestions, feel free to email us at Center@sao.wa.gov.