Grants Management Process: To Centralize or Not to Centralize (i.e. Decentralize)?

When it comes to Grants Management, governments often need to identify whether a centralized or a decentralized approach is better. In the blog post below, we’ll explain the differences between a centralized and decentralized grants management process, and cover which one is preferable for a more efficient grants management.   

Is your government’s process of grants management crystal-clear to you? Can you easily access recent amounts for grants (amount awarded, amount expended, amount billed, amount collected, amount of indirect costs allocated, unspent balance, grant period, etc.), and get a clear overview of what was spent and why?  

Unfortunately, if you answered ‘no’ to any of these questions, you’re not alone. In most governments, grants are managed decentrally — meaning various parts are managed by various people, in various departments, updated at various times and places. There is no on​e central location or person keeping track of grants.    

And that’s where problems often arise. Following, is a list of common problems that can occur when grants are managed by various departments and roles.

Common Problems Associated With a Decentralized Grants Management Process:
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• No one understands the entire detailed process
• Accounting info is not easily accessible to all stakeholders
• Basic grant info is not easily accessible to all stakeholders
• No communication protocols
• Inadequate written procedures and centralized oversight
• Departments apply for grants but don’t notify Accounting
• Reimbursement requests are not reconciled to the general ledger nor reviewed
• Grant records are maintained poorly
• Non-compliance with grant provisions
• Grants are not billed & collected timely

Understanding Decentralization in an (Almost) “Real World” Example:
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Image source: https://www.imdb.com/title/tt0117998/mediaviewer/rm1516293632  

​When I think of centralization vs. decentralization, I think of the movie Twister, where the storm chasers set an armored computer in the storm’s path. The computer kept breaking, so they kept making bigger, stronger computers. It still didn’t work. Finally, they had the great idea to make hundreds of small, simple-winged computers, and let the wind pick them up and carry them into the eye of the storm... Half of these small computers broke as well, but: the rest provided a multitude of important data.

What does that teach us?
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​Centralized controls represent a single point of failure. Decentralized controls are safer for the system in total, but harder to be efficient. If one decentralized control breaks, the system is still mostly effective.

​Therefore, it is our recommendation to continue to manage grants in a decentralized manner. 

However, to make the decentralized process as efficient as possible, the following steps should be taken centrally:
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• Thorough written grants management procedures should exist. Grants personnel in all departments should be trained on these procedures.
• Every grant should be set up separately in the financial system so that grant expenditures can be tracked there instead of by various non-accounting personnel using spreadsheets that are not secure, shared and reconciled to the official accounting records.  
• A grants status report should be prepared quarterly and reviewed by senior management to assure that grants are being spent, billed and collected in a timely manner.
• A kickoff meeting between Finance personnel and the grant manager should take place when the grant is awarded.  Written procedures should be reviewed; key compliance requirements should be identified; how financial information is needed for grant reimbursement requests will be maintained should be agreed upon; responsibilities for key tasks assigned; close out procedures are determined.

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If you’d like to understand how to set up proper grants management procedures for different teams, please download our free template for procedures here.

In our next blog post, we’ll give you a few handy tips on better grant record keeping. 

Are you interested in getting personalized help to improve your grants management?
​Please email or call me directly for a free consultation and evaluation of your needs:
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kharper@kevinharpercpa.com
(510) 593-5037

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