11.1    Management

The grantmaking Agency, in accordance with the minimum requirements established herein, shall prescribe and implement grant or subgranting procedures by written policy or, where applicable, formal rulemaking, to ensure fiscal accountability and prevent waste, fraud, and abuse in programs administered pursuant to this Order.  The Agency shall conduct and document oversight to ensure compliance with the District’s or the original Grantor’s award requirements.  It shall maintain an administrative and monitoring system that ensures that all grantees perform in accordance with the terms, conditions, and specifications of their grants or subgrants.  The system should include a minimum of two monitoring activities per year to check for fiscal and programmatic compliance.  Agencies should refer to the District’s SMM for additional information on post-award monitoring requirements (included as an appendix to this Sourcebook).

OMB Circular A-133 assigns certain responsibilities to primary recipients of federal awards that, in turn, subgrant funds to other organizations.  Such primary recipients are generally referred to as “pass-through entities (“PTE”)” and those organizations that ultimately receive the funds are typically referred to as “sub-recipients”.  All subrecipients shall be subject to monitoring including private non-profits, for-profits, public non-profits and state and local government entities.  Among other things, A-133 requires such PTEs to monitor the activities of sub-recipients “as necessary” to ensure that federal awards are used as intended.  Pass-through entities are also required to ensure that sub-recipients meet any federal audit responsibilities.

Similarly, the Government of the District of Columbia has an interest in ensuring that local funds provided to grant recipients are used appropriately and that performance goals are met.  Accordingly, Agencies must have or develop management tools to assist them in ensuring that recipients and sub-recipients meet their program responsibilities.  In this regard, there are a variety of methods Agencies can use to oversee the compliance and performance of their sub-recipients.  Many of these tools are already part of the grant award and management process, while others constitute common actions that can be taken to effectively monitor sub-awards.  Agencies will need to determine what works best for them, their mission, grantees and subgrantees.  What works best for one particular Agency or organization may not be the best tool for each and every sub-award or recipient.

PTEs should refer to the federal grants management and audit policies as a starting point for choosing or developing monitoring tools.  For example, the OMB has published several circulars that are instructive for federal grants such as its A-133 Compliance Supplement.  District Agencies should also comply with the procedural requirements of this Sourcebook, including the SMM (included as an appendix). The Office of Integrity and Oversight (“OIO”) within the Office of the Chief Financial Officer (“OCFO”) has been designated to coordinate the District’s Single Audit pursuant to OMB Circular A-133 and follow-up on outstanding findings that are part of the Single Audit. 

11.2    Monitoring

Monitoring may involve observation, interviews, collecting and reviewing reports, documents, and data, and any other appropriate activity.    Monitoring efforts should be designed to determine generally the grantee’s level of compliance with Federal and/or District requirements and identify specifically whether the grantee’s operational, financial and management systems and practices are adequate to account for program funds in accordance with Federal and/or District requirements.

Monitoring personnel should have duties that are separate from program and fiscal management, technical assistance or any other function related directly to grant administration.  This separation of duties allows for the independence and objectivity of the monitoring staff.  District grant-making Agencies are required to develop a plan to address their monitoring needs.  That plan should: (1) identify the priority of all grantees to be monitored; (2) determine the relative depth of review and frequency for each grantee; and, (3) describe the process and criteria used to select and prioritize the sub-recipients for monitoring purposes.

Every grantee must be appropriately monitored.  The Agency may employ one or more risk-assessment tool(s) to assist in determining the priority of grantees to be reviewed, the level of monitoring to be performed and the frequency thereof.  Such tools should be able to evaluate, at a minimum, factors like program effectiveness, personnel, operating systems, internal controls, Board involvement, operational changes and contract experience with the Federal and/or District government to name a few.

Agencies may make use of other information in determining how frequently and extensively to monitor a particular grantee.  For example, Agencies may use historical or anecdotal information in assessing a grantee’s risk level and, thereby, the required frequency and extent of any monitoring.  Based on the results of the risk assessment, an Agency will classify each grantee as “low-risk”, “medium-risk” or “high-risk”.  Such classification shall then determine how extensively a grantee is monitored, how often and which financial reporting requirement shall apply to that grant award as set forth below.  See the SMM attached hereto as Appendix No. 12 for a fuller discussion of the minimum monitoring requirements attributable to each level of risk assessment.
As part of the follow-up responsibility, the OIO will monitor the subrecipient review process that is on-going within the Agencies.

11.3    Disallowed Costs

“Disallowed costs” are costs charged to a grant or subgrant that are later disallowed by the original grantor for not complying with terms of the award agreement.  The disallowed costs might be discovered by the District or by the original (federal or private) grantor.  If the Government of the District of Columbia, through the District Agency, notifies the grantee that any disbursements made under a grant or subgrant are disallowed costs, the grantee shall be given the opportunity to justify the questioned costs prior to the District’s final determination of disallowed costs.  If the District ultimately determines the costs are disallowed, reimbursement in full to the District of said amounts must be made by the grantee within forty-five (45) calendar days after final official notification from the District. If the reimbursement is not received in full after forty-five calendar days the grantee shall receive no further grant or subgrant funds from the District until such time as the reimbursement is made in full.

Any Agency intending to make a grant or subgrant must first contact the Office of the Chief Financial Officer, Office of Finance and Treasury (OCFO) to familiarize itself with the then-current procedures for encumbering and drawing down grant funds.

11.4    Reports

The monitoring staff shall prepare written reports to communicate its findings and concerns to the Director or his/her designee regarding the grant awards that it reviews.  Such reports shall be maintained in the files and made available for audit purposes, upon request.  The SMM sets out several specific reporting requirements that must be addressed in such reports.  Generally monitoring staff must document its observations in the areas of internal controls and financial reporting.  The SMM contains several checklists in those areas of internal controls like personnel, payroll and procurement.  With respect to financial reporting, the SMM also contains checklists for review of functions related to budgeting, accounting and cash management.
When the monitoring report is complete, it should:

• Identify Subrecipient information and the award(s) monitored;
• Describe program activities and eligible client population;
• State the date(s) of the review;
• Note the reviewer(s);
• Describe the monitoring activities and test procedures (if any) used to collect information;
• Clearly set forth the findings together with associated references to applicable Federal and/or District regulations and requirements;
• Identify corrective action recommendations, when the corrective action plan is due and to whom it should be submitted; and,
• Note staff’s observations (strengths and weaknesses) in the areas `of internal controls and financial reporting, at a minimum.

11.5    Auditing

All entities that receive a grant or subgrant should expect to be audited in connection with the close-out of that grant.  The awarding Agency’s monitoring report, which contains its risk assessment of that entity, will determine what kind of financial statement will be required of that grantee or sub-grantee.  If the awarding Agency assigns a “high-risk” designation to that entity, or the sub-recipient expends $500,000 or more of grant funds during the grant year, an independent and in-depth financial statement and audit of the type required by OMB Circular A133’s “single audit” for any entity that expends $500,000 or more of grant funds during the grant year is required.

Grantees or sub-grantees that are assigned a “medium-risk” assessment by their awarding Agency, or  those that expend between $499,999 and $250,000, shall be required to prepare and file at close-out a less-extensive financial statement report prepared by an independent accountant containing: 1) an income statement, 2) a balance sheet, 3) a reconciliation of cash balances, 4) a reconciliation of stockholder equity (if the grantee is a for-profit entity), and 5) an independent review of management’s internal controls.

Grantees or sub-grantees receiving and expending between $25,000 and $249,999 during the grant year shall be required to file a financial statement that contains: 1) an income statement, 2) a balance sheet, 3) a reconciliation of cash balances, and 4) a review of management’s internal controls.
Finally, grantees or sub-grantees assigned a “low-risk” designation, and any other grantee or sub-grantee that receives and spends up to $24,999, shall file a simple financial report containing: 1) an income statement and 2) a balance sheet.