As a high-ranking member of a not-for-profit, you’ve spent countless hours working closely to improve fiscal monitoring and keep an eye on your sub-grants to ensure proper use of allocated funds. As an ever-evolving organization, your duties and responsibilities constantly change, placing increased importance on this vital financial step. Above all else, you’d like to be assured that every detail – no matter how big or small – is in order. With that in mind, sub-recipient monitoring programs are an ideal necessity.
Taking a close look at your sub-recipients isn’t a process you have to undertake alone. These organizations often have wide-ranging annual budgets, a broad assortment of personnel and unique needs. Clark Schaefer Hackett has been working with NFPs for a number of years on their sub-recipient monitoring programs and we’ve discovered several key areas you should be aware of:
A lack of monitoring leads to problems
Developing a sub-recipient monitoring program is a vital process for not-for-profit organizations. As such, it presents a number of steps where an oversight or mistake could result in noncompliance. The basic act of sub-granting doesn’t relieve your organization of its fiscal responsibilities, and more monitoring needs to be completed to determine effectiveness of sub-grantees and appropriate use of funds. Without sub-recipient monitoring, you could find yourself with a myriad of problems.
The goal of monitoring includes looking at the inherent and contractual requirements of your organization, from both an internal control and a compliance perspective. As long as sub-grants are involved, there is usually an expressed requirement to monitor the sub-recipients.
The process then begins with a discussion of your desired outcomes, followed by an identification of risks. The conversation here must include the scope, depth and timing of the procedures. Factors that can affect this process include program complexity, percentage of the award that was passed through, the number of awards and the risk levels, according to The NonProfit Times.
Risks that can be exposed by a lack of sub-recipient monitoring are numerous. Based on a separate article from The NonProfit Times, some common hazards include:
- Financial loss
- Social media misuse
- Loss of federal tax-exempt status
- Conflict of interest
- Fraud
- Discrepancy between board policy and practice
Analyzing risk vital for monitoring
Understanding the risks faced by your not-for-profit organization is extremely important for the overall efficiency of your sub-recipient monitoring. Better controls and an examination of inherent threats can lead to lower overall exposure.
Therefore, you will want to look at the possible steps to manage high-risk recipients, such as improved monitoring, more detailed reports and increased analysis frequency, The NonProfit Times explained. Any special conditions must also be discussed by the pass-through entity and the sub-recipient. Performing sub-recipient monitoring to guarantee compliance is a fantastic way to build trust among all involved parties, which is one reason why looking closely at risk is so important. One simple mistake could lead to a ripple effect throughout your organization.
The techniques behind sub-recipient monitoring
Sub-recipient monitoring will help not-for-profits large and small ensure fiscal responsibility by gaining hard data about which sub-grantees are the most effective with their grants. There are several key steps which can make the entire process more efficient.
These include submitting required reports, visiting sites, reviewing records and maintaining contact with the sub-recipients, The NonProfit Times noted. In addition to desk reviews and on-site field reviews, phone inquiries can also be helpful. When more than one sub-grantee exists, analyze trends and perform comparative analysis. In the event corrective action is needed, you’ll want to complete an assessment of the plan’s likelihood of success. Then, draft up a timeline and due dates. The depth of these measures will depend on the severity of the problem.
Working with experts is valuable
The development of a sub-recipient monitoring program requires several steps, and a lack of proper implementation could result in fiscal and financial problems in the future. Trusted advisors understand these elements, can provide crucial consultations, and offer advice to help you avoid common problems and create the most effective program possible.
When you are looking to create a quality sub-recipient monitoring program and ensure compliance throughout your not-for-profit, be sure you work with a firm that has a dedicated team of experts who are well-versed in the industry. You need an educated, sophisticated team of experts who can work by your side during fiscal monitoring to ensure your sub-recipients are compliant.
Maintaining a close relationship with advisors when building a sub-recipient monitoring program is beneficial for the overall fiscal health of your not-for-profit. Clark Schaefer Hackett is always engaged and informed about the issues facing your industry. We field one of the strongest dedicated NFP teams in the region, serving more than 600 NFP clients in the cultural, educational, grant-making, governmental, healthcare, religious and social services sub-sectors of the not-for-profit industry.
The not-for-profit organizations who have performed sub-recipient monitoring well have analyzed their operations, including sub-recipients, under a microscope, and have collaborated with a firm that offers crucial advice from the start to the finish.
