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GAO's Report on the Cost of Custom Grant Systems (Part 1)

by Rob Sherman on November 1, 2017
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Grant Monitoring Report by the GAO

The U.S. Government Accountability Office (GAO) recently published a report on information technology modernization that highlights costs that may not be considered by organizations when debating between purchasing SaaS grant management software and designing a custom system. In the report, GAO identifies a number of lessons that are relevant to all federal and non-federal grant recipients. Those lessons have been summarized in this post. 

It is certainly appealing for state and local governments and tribal nations to want their own systems to be flexible and tailored to their unique needs. It is important, however, to be aware of the pitfalls involved. While it may seem counterintuitive, it is often easier, cheaper and faster to update your own internal processes and engage a SaaS solution that meets most of your needs than it is to ask a vendor to build a custom solution. Don’t take my word for it, though.  Let’s look at a case study from the U.S. Government Accountability Office (GAO).

Grant Monitoring: The GAO's Report

The Corporation for National and Community Service (CNCS) is a federal agency that receives about $800 million in appropriations to fund nearly 2,300 grants.  The CNCS has been using a custom-built, internally hosted grant management software and hardware solution since 1998.  From an end-user perspective, someone would use a computer on their desk and a web browser with a network connection to log into the system.

This past September, the U.S. Government Accountability Office (GAO) released a report titled "Information Technology Modernization: Corporation for National and Community Service Needs to Develop a System That Supports Grant Monitoring .“ It concluded that executive management may not have been the best equipped to design, develop, and oversee project timelines of their own legacy IT modernization of their grant management system, and it led to wasted dollars and effort. Among many problems, “CNCS officials reported that, in fiscal year 2016, they spent about $11 million maintaining their legacy IT environment," which includes the custom-built grant management system "and other systems used to manage functions such as payroll and benefits." Eleven million dollars starts adding up when you factor in IT hardware, software development, licensing, network resources, and full-time labor resources with high degrees of specialization like network, security, analysts, and database administration.

Lessons Learned:  Hidden Costs

More examples of hidden or unforeseen costs include:

  • Replacing older servers and hardware that fall out of warranty every five years or so.
  • Constantly updating and testing software as hardware changes occur.
  • System maintenance and further customization to stay current with policy, procedural and legislative changes.

Let's especially look at the last point above. Once you implement a custom solution, you will begin to see the deficiencies of the system manifest in “interesting” ways. As policy or legislation pass, the system is no longer equipped to accommodate needed change. If budget dollars have not been allocated to correct the problem in the system, users may:

  • Find workarounds by putting data in fields not intended for such data.
  • Violate standard conventions.
  • Take part of the process offline entirely since it cannot be supported online anymore.

These disparate actions make it much harder to have an efficient and accountable system and has the added burden of increasing staff time and costs.

We have just looked at how internal customized systems can be extremely costly and difficult to maintain in light of constantly changing grant environment. Part 2 of this article will talk about how customized systems impact grant management itself.

Topics: Grants Management Articles