Internal controls are fundamental to every government’s ability to detect and prevent internal & external fraud. Previously in this series, we wrote that the war on government fraud starts with the five components of internal control known as the Committee of Sponsoring Organization (COSO) framework. This article continues the discussion by highlighting another critical area in which every government should apply this framework: grants and program management. This article presents part one of this topic.

You may have seen recent headlines that fraudsters may have stolen $200 billion in Federal Covid Relief. Frauds involving government grants in both the public and government sectors are not new; however, with the pandemic brought on by COVID-19, the dramatic increase in available grants meant more opportunity for fraud. These fraudsters could be persons within government organizations, or someone belonging to a government organization’s vendor.

Governments need a robust internal control system for the management of grants to meet six objectives:

1. The monies expended reach the appropriate recipients and are spent in accordance with applicable laws and regulations.
2. Everyone understands their rights, requirements and responsibilities under the grant and correctly discharge their responsibilities.
3. The purposes of the grant are met.
4. Audit findings are promptly resolved.
5. Reporting required is completed accurately and on time.
6. The government complies with cost allocation plans where applicable and any federal, state, or local laws.

Red Flags

The following document identifies red flags of grant & program management fraud. For each red flag, preemptive measures are listed to assist you in combating the potential for fraud.

Recommended Resources

These online tools can help a government win the war against fraud in grants and program management:

• “AGA Candidate Assessment Tool for Grant Management Professionals” (Link) – This tool helps Governments hire qualified grant management personnel.
• “Compliance Supplement – 2 CFR Part 200 Appendix XI” (Link) – This is a link to most recent Federal Compliance Supplement.
• “Internal Control Checklist for New Jersey Local Governments” (Link) – Issued by the New Jersey Office of the State Controller. Although this checklist is specific for the Coronavirus Local Fiscal Recovery Funds, its attributes can apply in overall grants management.
• “National Association of State Controllers (NASC) Grant Admin Questionnaire” (Link) – This questionnaire is a tool to evaluate the internal controls over grant programs.
• “Office of the State Controller, State of Maine Self-Assessment Tools” (Link) – These tools include a checklist for documenting the Governments’ control environment and risk assessment, including those for grant compliance.
• “The Funding Has Arrived – Now What? Internal Control Guidance Over Coronavirus State and Local Recovery Funds” (Link) – This is an article published on the Bowman & Company LLP blog. Although specific to the Coronavirus State and Local Recovery Funds, its attributes apply in overall grants management.

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