A few weeks ago, I participated in a webinar that discussed A-133 audits. For those of you who are not familiar with this term, Circular A-133 is the document that provides information about audits for state and local governments and nonprofit organizations. If you are already receiving federal grant funds, your business office is probably familiar with this document. If it isn’t, you should bring this document to the attention of your business office to prepare for any audit of the federal funds you receive.
In 1981, the President’s Council on Integrity and Efficiency (PCIE) was created. According to the council’s web site, "the mission of the PCIE is to continually identify, review, and discuss areas of weakness and vulnerability in federal programs and operations to fraud, waste, and abuse and to develop plans for coordinated, government-wide activities that address those problems and promote efficiency and economy in the programs and operations." The membership of the PCIE is made up of Inspectors General appointed by the president and federal agency heads. A list of these individuals can be found at http://www.whitehouse.gov/omb/fedreg/pcie-memberlist.pdf.
Although the webinar went way over my head about halfway through the slides (I am not an accounting expert by any means), the results of a 2007 report mentioned by the speaker caught my interest, because it contained wise advice for any grantee regardless of the size of its grant award. This report, the Single Audit Sampling Project (SASP), looked at audits that had been conducted and identified specific areas of weakness that were common to federally funded programs. There were two areas reported by the speaker that contain helpful information, I think, for districts that receive federal funds subject to A-133 audits.
The first area of weakness identified in the SASP was a lack of documentation for the expenditure of federal funds. Grantees must take special care to create a "paper trail" that shows what grant funds were spent on—and when. Unless the grantee has received special permission from the funder, these allowable expenses typically will be outlined in the notice of grant award. Consequently, if asked, a grantee should be able to show paid invoices and/or receipts for those items that were purchased with grant funds and were part of the approved budget for the grant project. Lacking this documentation raises a red flag during an audit, as there is no proof that federal funds were spent on items they were supposed to be used for in a grant-funded project. This could have serious consequences for a grantee.
The second area identified in the report was a lack of documentation for staff time that was paid for using federal funds. Again, although it might be cumbersome to document this, grantees must keep detailed records of a staff member’s time if federal dollars are used to pay for his or her salary and benefits. In some cases, grantees might find that separate time sheets must be created and/or completed based on the requirements of the funder. I think it’s critical that you identify the documentation requirements at the beginning of a grant-funded project that helps pay for staff salary and/or benefits, before getting too far along with the project. Having to backtrack and create time sheets will likely lead to problems remembering the specific tasks that were completed during specific weeks of a project.
Although these weaknesses were noted in regard to federally funded projects, they are important to understand for all grantees that undergo an audit of grantfunded projects. I don’t know of any funder who sends a check to a grantee and says: "Have fun spending this money on whatever." Keeping careful documentation of your expenditures is a critical part of the grantsmanship process, whether you are tracking the expenditure of $500 or $5 million in grant funds.