Sneak Preview: Even Minor Subgrantee Risks Can Pose Hazards

May 31, 2012 | By Jerry Ashworth | Post a Comment

(The following was excerpted from an article in the Federal Grants Management Handbook.) Prime recipients monitoring their subrecipients’ internal control risks should treat even minor concerns seriously because they could eventually become more significant if not addressed early.

“A lot of the time, [the control risk] is not intentional and could simply be an issue of lack of training or inadequate systems,” Eric Russell, consultant with Crowe Horwath LLP, told attendees recently at the National Grants Management Association’s annual training conference. “We may look over the small print that may not be exposing too much risk. Those items tend to go by the wayside. While we focus on finance and procurements, we forget about the other items that can be incredibly important. [Concerns] like that make a big difference and will grow as the [program] dollars grow, so you have to recognize them before they reach a level of materiality.”

Russell said that prime recipients should have risk-based monitoring procedures to determine which subgrantees they will evaluate through a desk review and which will require a site visit. Prime recipients also should provide ongoing assistance to inform their subgrantees about the applicable compliance requirements.

Russell stressed the importance of maintaining and retaining proper supporting documentation when working with subgrantees. It also is critical to “know when to ask for help,” especially with new programs. “Periodically, [our firm] will find conflicting items in the [program] regulations but rather than [the prime recipient] following up on those and modifying the agreement or the controls around each area, it will move forward and that exposes it to risk,” he said. “It’s important to know when to ask for help from outside parties or the federal government to protect yourself.”


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