By Lucy Morgan CPA MBA
When it comes to financial management with federal grants, it seems like you have to become a Uniform Guidance “Master” to figure out what the requirements are.
Even if you consider yourself a problem-solver, 2 CFR Part 200 is “peppered’ with an overwhelming list of documentation requirements centered around, payment management, property management, record retention and a long list of miscellaneous requirements.
And those little critical pieces are scattered throughout the grant regulations.
It can be a huge challenge to ensure all the requirements are included in your documentation.
So, if you are planning to create a written manual from scratch to support your federal grant management, don’t despair…
I have created a roadmap for success to help you end up with quality documentation for your grants.
Written Financial Management Manual
Alright, now that you’re ready to improve your grant documentation, you may want to know what things are requirements vs. best practices.
The Uniform Guidance says that you must have a written payment management policy and a policy for cost allowability.
Are you thinking “That’s it?”
The fact is, there are many other areas of financial management that you’ll want to cover in your policies and procedures to ensure you are meeting the best practices for grant management (especially if you’ve decided that NOW is the time to update or even create your first written manual.)
And, there are lots of benefits to creating a well-constructed financial management manual such as improved communication and reduced risk of cost disallowance.
>>You may have noticed that federal agencies are being more aggressive about reviewing your policies and procedures than ever before!
In this article, I’ll walk you through how to create a written financial management manual from scratch for your organization.
I will also cover an easy-to-implement solution to get your financial management manual completed in record time!
Get Started: Table of Contents
The place to begin creating your documentation is to outline what things will be in your written Financial Management Manual.
A Table of Contents can help you organize the topics you want to cover in your written Financial Management manual from beginning to end.
You should lay out how financial management is handled at YOUR organization-especially as it relates to grant management.
This also includes the related process for closing out awards and records retention.
The Table of Contents can include major categories like:
- Details about Financial Management Office
- Glossary of Terms
- List of Federal Financial Management Rules
- Description of the Financial Management Life Cycle
Most importantly, the Table of Contents provides a structure for the overall framework of financial management with federal funding at your organization.
Section One: Details about the Financial Management Office
Moving on to the next step to start on the details in your written Financial Management manual, describe the Financial Management Office.
You may know the Financial Management Office as the Finance Department, or the Accounting Office, or the Office of Finance and Administration.
But no matter what you call it, this is the place where the bulk of financial management activities occur on federal grants with help from other departments such as Sponsored Programs, Procurement, Legal and Human Resources.
Here are some of the things you could include in this section:
- About the Office
- The <Office Name>
- Description of Financial Management Office
- Responsibilities of various personnel
- Key contacts within the Financial Management Office
Finally, a Glossary of Terms is a great thing to add to clarify the unique terminology used in financial management with federal grants.
Let’s admit it, working with federal grants means lots of special terms and jargon.
I also like to include a reminder to employees at the beginning of the document about the importance of ethical behavior when spending taxpayer funds.
When financial management is not done well, it can be the source of large cost disallowances, damaged reputations, and even criminal prosecution.
Section Two: Federal Grants Financial Management Rules
The next section is where you would list what regulations you are using to manage your financial activities with federal grant funds.
And yes, grants have lots of regulations both from the Office of Management and Budget (OMB) and also the individual federal agencies.
For most of us, the main set of regulations comes from grant regulations contained in 2 CFR Part 200 also known as the new Uniform Guidance.
This section should also describe what processes and procedures you must have in place to support the federal financial management standards requirements.
You would also specify things like:
- General Financial and Performance Management Standards in the Uniform Guidance
- Standards of Conduct for making financial management decisions that are free from conflicts of interest and non-competitive practices
- Other Rules like:
- Cost Principles
- Debarment and Suspension
- Contract Provisions
- Individual federal agency-specific financial management rules
The goal of this section is to have a comprehensive list of what financial and performance management rules you have to follow as a federal grant recipient.
This will also help employees new to grants have a better understanding of what is required when you manage and report on the financial activities of federal awards.
Section Three: Financial Management Lifecycle
In this section, you will walk through your process for the financial and performance management of various federal awards.
This is the process that supports federal awards from the grant application to the documentation of how you ensure costs are allowable to charge the federal award, and to how to meet the record retention requirements.
You should include the basic steps in the financial management lifecycle such as monitoring spending, and reporting results to the funding agency.
Also, look at how to:
- Meet cost-share requirements-when applicable
- Support cost transfers between awards and accounts
- Stay in compliance with time and effort reporting
- Meet payment management requirements
- Administer property tracking and reporting
- Communicate cost allocation methods
- Retain records.
Here are some examples of each of those areas:
Pre-Award Process for Financial Management
- Who reviews the grant budget in the application?
- Who approves the grant application submittal?
- What is your process to set up new grant accounts?
- Who is the appropriate person to sign the award agreement?
Spending Grant Funds
This is where the rubber meets the road when it comes to financial management processes. (And procedures often get overlooked in a rush to spend the grant funds!)
You should include your procedures and processes for:
- Ensuring you have adequate source documentation to support the purchases are reasonable and necessary to support the work of the federal award
- Reviewing budgets to make sure spending is in budget and in approved budget categories
- Reviewing individual award financial management requirements for special conditions and limitations on spending
- Disclosing conflicts of interest as appropriate
If you have these policies in other documents, then you would reference those documents in this section rather than duplicate all the policies and procedures.
Monitoring and Reporting
This next section on managing grant awards covers critical financial management activities that center around monitoring the award spending and reporting on spending and performance of the grant objectives.
- How do you ensure that policies and procedures are followed?
- Do you have adequate segregation of duties?
- What steps do you take to strengthen internal controls?
- How are you monitoring subaward recipients?
- When is financial performance reporting due and who is responsible for submitting the reports?
This next section provides communication tools to share around the organization and guidance on the rules for ensuring costs charged to the federal awards are allowable.
- How do you ensure that only allowable costs are charged to the federal awards?
- How do you document that the costs are reasonable to charge to a specific award?
- What do you do when you receive credits such as rebates on purchases made with federal funds?
This next section should meet the requirements for a written payment management policy required in 2 CFR Part 200 and also document your process for receiving and safeguarding federal funds at your organization.
- How do you track federal funding as it comes into the organization?
- How do you ensure that payments are made to contractors in a timely manner?
- What are the requirements for where advanced funds need to be deposited?
This next section should address your custodial requirements for property purchased with federal funding including definitions of equipment vs. supplies and insurance requirements.
- Do you track the various types of property purchased with federal funds?
- How are you monitoring the “property-trust” relationship?
- When do you need to buy insurance on the property purchased with federal funding vs. letting the federal government “self-insure” the property?
This next section should communicate how your organization handles the allocation of costs to federal awards and other activities that aren’t funded by federal awards.
- How do you allocate costs to both federally funded and non-federally funded activities?
- How do you allocate facility costs?
- What things go into calculating fringe benefits and how are they applied to federal awards?
- What special allocations are used by your organization, such as shared services for motor pools and information technology (IT) services?
- Do you track the various types of property purchased with federal funds?
And the list goes on and on…
Step back and think of all the frequently asked questions (FAQ) by finance and program staff during the period of performance for your grants.
Then put guidance in the manual for the most FAQ about managing the financial and performance management aspects of your federal grants.
Closing Out Awards
This final part of your process documentation should lay out how the financial management activities for awards are closed out.
Here are a few examples:
- What happens if you need to make an adjustment after the award has been closed out?
- What records do you need to retain?
- How long do you need to keep the various types of documentation?
You may also want to add an index to make it easy for people to find the relevant parts of your Financial Management manual as well.
Section Four: Appendices
An appendix is the “catch-all” place for other things relevant to the financial management for your federal award, that doesn’t “logically” fit in a different section.
It is a great place to add examples of forms, guides, and checklists.
Here are a few things we like to see in the federal Financial Management manual:
- Sample-Signatory Authorization Form
- Sample-In-Kind Contribution Form
- Sample-Cost Transfer Form
- Sample-Personnel Activity Report (PAR)
- Sample Subrecipient Risk Assessment Checklist
- Sample Subcontractor Evaluation Checklist
- Sample Contractors vs. Subawardees Guide
- Selected Items of Cost Guide
- Prior Written Approval Requirements
- Example-Form SF-270 Request for Advance or Reimbursement
- Sample-Sole Source Justification Form
- Sample-Property Records Tracking Form
- Sample Cost Allocation Matrix
- Sample Record Retention Matrix
We hope this article helped the creation of your manual go smoother!
Lucy Morgan CPA, MBA
CEO, Compliance Warrior