Avoiding the Risk of Paying Back Federal Grant Money

Public agencies that fail to comply with the terms of federal grants risk being required to pay grant money back to the federal agency providing the funds.

3 proactive steps:  Here are four important steps public agencies can take to avoid having to pay back grant money:

• Know what's required:  Read the terms of the grant agreement and understand your obligations.

• Designate a point person:  Designate an individual(s) within your agency to be responsible for complying with the terms of each grant.

• Ask the Feds:  Find and develop a knowledgeable contact person with the federal agency who can help interpret what is required.

• Ask other public agencies:  Seek assistance from other public agencies who have received similar grants.

Common pitfall:  One of the most common areas of non-compliance with the terms of federal grants occurs when public agencies fail to check the status of contractors, consultants, and vendors (with contracts of $25,000 or more) to ensure they are not suspended or debarred from participating on federally funded contracts.  Payments made to an ineligible party are not allowable costs and would be subject to recovery by the federal funding agency.

Audit findings:  Four school districts in Washington state were recently hit with audit findings by the State Auditor's Office for failing to check and document the suspension and debarment status of organizations they contracted with using federal funds.  Click on the links below to read the audit findings:

• Elma School District No. 68 (Grays Harbor County)
• Mossyrock School District No. 206 (Lewis County)
• Nine Mile Falls School District No. 325/179 (Spokane County)
• Othello School District No. 147 (Adams County)

How to check for federal debarment:  It's easy to check for whether a business your agency is contracting with has been suspended or debarred from doing business with the federal government.  Go to www.sam.gov, and enter the name of the business.  If the search does not reveal a record, click on the "save PDF" link that will include the name you searched for as well as a note indicating there were no search results.  Print this PDF and maintain it in your contract/project file for when you are audited.

Mike Purdy's Public Contracting Blog
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