Internal controls – what does this term mean to you as a grant professional? To me, it almost sounds like "mission control." So who is commanding the post? From an accounting perspective, internal controls involve everything that controls risks for an organization, and ensures compliance with applicable laws and regulations (Sawyers Guide for Internal Auditors, The Institute of Internal Auditors Research Foundation, 2012).At the basic organizational level, most policies define internal control objectives as they relate to the reliability of financial reporting, timely feedback on the achievement of operational or strategic goals, and compliance with laws and regulations. Without internal controls, there would be no structure or guidelines with which to manage millions of dollars in public and private funding.
Why Are Internal Controls Important?
The Auditing Perspective
How are you ensuring that you have the most up-to-date information concerning the administration and management of your grant awards? Here are some items to consider:
- Are your grant budgets aligned with the actual dollars expended or disbursed for each award?
- How are you maintaining this information? Is this captured electronically (preferred) or manually?
- If you are audited annually, were there any red flags identified by your auditors? Have you responded to any corrective actions?
- What are you doing to ensure financial compliance with applicable funder reporting and guidelines requirements?
Poor financial controls can send alarm bells to existing potential funders, and weakens your ability to support grantees, and/or apply for funding.
The Programmatic Standpoint
Internal controls related to programmatic activities should focus primarily on the evaluation of outcomes and alignment of goals to outcomes.
- Does your organizational strategic plan align with a funding strategy?
- Do you have and/or update a logic model to sequence how such goals align with the service offerings within your organization?
- How do you evaluate the effectiveness of your program? Do you use an internal quality control process or external evaluator(s)?
- Can you track achievements of your programs, and document whether targets have been met?
The Administrative View
Oversight includes the policies and procedures that document all of the financial, programmatic, and operational activities that take place within your grants office. These are sometimes referred to as standard operating procedures. If you do not have such documents, how will you, your team, and leadership be able to effectively execute on any grant-related activity? These are living documents, and establish your organization as highly effective in addressing issues of compliance and organizational efficiency.
What Types of Internal Controls Are Most Important?
While many of the internal control issues above impact grantors and grantees/sub-grantees, there are certain grant activities unique to each group of professionals.
- Alignment of grant priorities to organizational/agency strategic goals
- Standard operating procedures regarding all aspects of grants management (pre-award funding opportunity announcement preparation, award administration, monitoring/oversight, closeout, cost allocation, etc.)
- Training and technical assistance program to applicants and grantees/sub-grantees on the administration and execution of grant awards
- Training program to grants management team on roles and responsibilities, and understanding of updated guidelines and policies
- Regular meetings between financial and programmatic teams to ensure concurrence on policies and management of existing awards
- Alignment of fundraising priorities to organizational/agency strategic goals
- Standard operating procedures regarding all aspects of development (grant seeking, grants management, reporting, funder communications, etc.)
- Training program to grants/development team on roles and responsibilities, and understanding of updated guidelines and policies
- Regular meetings between financial and programmatic teams to ensure concurrence on policies and management of existing awards (including collaboration on grant reports)
While each organization/agency is different, there are similarities that connect each one. We have seen the impact of the financial crisis on our nation’s economy over the past few years, and have been badly burned in the process. The lesson that we can learn from this is that while compliance and strategic planning seem tedious and extraneous to existing work, these are the only ways we can ensure that we remain good stewards of funding that support our public policy missions.
About the Author
Rachel Werner’s career has spanned the corporate, nonprofit, and public sectors. The founder of RBW Strategy, Ms. Werner spent nearly seven years as a dedicated fundraiser and grant writer for nonprofit organizations and freelance clients. She has served as a dedicated fundraiser and grant writer for nonprofit organizations and as a grants management specialist implementing a compliance system for large U.S. Department of Education No Child Left Behind funds within charter schools across the U.S. In addition to being a skilled project manager, she has strong subject matter expertise pertaining to the grants lifecycle. She can be reached at Rachel@rbwstrategy.com.
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