Grant Recipient Consideration

For many companies, getting the grant proposal accepted and winning the award is the “end game”.  The reality is that it is just the beginning of the process.  Once a grant has been awarded, the grant recipient begins the process of negotiating rates and identifying the business requirements needed to support and satisfy the terms and conditions of the grant.  While grants are “free” money – meaning they don’t normally have to be repaid, they do have technical and business performance and regulatory compliance requirements that must be met.

There are four critical aspects that businesses must be willing to address as government grant recipients:
•    Timekeeping
•    Financial controls and accounting systems, including cost tracking
•    Recordkeeping
•    Management oversight (controls)

Timekeeping is required to track all hours worked on different tasks and projects – government and non-government. The timekeeping system and documentation needs to reflect all hours worked throughout the organization – whether these hours are compensated or not.  The timekeeping process also requires management oversight through policies, sign-off on time records, and other processes and procedures.

Financial and accounting systems and controls must include traceability of direct costs, distinction between allowable and non-allowable costs, expenditure controls, and other processes, procedures, and policies that ensure funds are properly managed, controlled, and reported.

Understanding that getting the grant is just one phase of you’re the business’s journey is critical.  Failure to comply with the “business” aspects of grant funding can lead to serious complications with intellectual property ownership, equipment and asset valuation and ownership, and impact many other areas of operations and financial performance.  Non-compliance that is termed willing and knowing can result in the company being required to repay the grant (at a minimum) and even criminal and civil charges against owners, officers, and key executives.

To get the clearest picture of what your company will need to do once an award is made, do the following:

    Review the federal and agency regulations
    Obtain a draft of the clauses, representations, and certifications that will be incorporated directly or by reference in your agreement
    Understand the threshold for compliance with the granting agency and across agencies if the award “triggers” a new level of operation – such as a cost reimbursement or cost plus grant or the dollar level of awards ($500,000 in awards is often a point where additional requirements kick-in)
    Understand other regulations of other agencies such as the Department of Labor, etc. which may also be triggered by certain sizes and types of awards
    Evaluate and understand current business processes and controls in your business to determine how robust they are and whether they will satisfy the “management controls and oversight” requirements
    Identify accounting and financial control policies, procedures, and systems that are weak (i.e. QuickBooks alone will not satisfy a financial controls audit)

Know what your business will be asked to do before you make the commitment to a grant.  Grants are great sources of funds to cover costs that would be incurred in proof of concept and commercialization activities.  However, it is important to recognize that as your grant “business” grows, you will be expected to put in place sound business, management, and accounting systems and controls to monitor and administer the funds you are being entrusted with.

Copyright © 2007 F.O.C.U.S. Resource, Inc.

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