In last month's newsletter, we discussed the need for grant recipients to perform risk analyses of potential subgrantees and highlighted various methods of assessing, recording, and analyzing risk. In this month's newsletter, we continue our review by examining the Uniform Guidance's requirement for monitoring plans, which can be found at 2 C.F.R. §§ 200.331(d) and 200.328(a). In addition to a review and discussion regarding monitoring plans, we also highlight a recent Department of Interior Office of Inspector General report that found that a division chief violated federal law by participating in a Fish and Wildlife Service (FWS) cooperative agreement that financially benefited his family member, and neither the division chief nor his family member disclosed their relationship in writing to the FWS.
The Uniform Guidance's Monitoring Requirements
Section 200.328 of the Uniform Guidance provides that non-federal entities must:
[M]onitor [ ] activities under federal awards to assure compliance with applicable federal requirements and performance expectations are being achieved. Monitoring by the non-federal entity must cover each program, function or activity.
2 C.F.R. § 200.328(a). Further, Section 200.331 of the Uniform Guidance requires that grant recipients:
Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.
Id. at § 200.331(d). More specifically, these monitoring activities of the subrecipient must include:
- Reviewing financial and performance reports required by the pass-through entity.
- Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and other means.
- Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient from the pass-through entity …
Id. However, the Uniform Guidance does not provide detailed guidance as to the frequency of the grant recipient's monitoring activities—simply providing that it be done "as necessary." Id. at § 200.328(a).
Implementing Monitoring Plans
While the Uniform Guidance lists three specific requirements for every monitoring plan, organizations should not view this list as exhaustive. In fact, as discussed last month, Section 200.331(b) provides that organizations "[e]valuate each subrecipient's risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring…" Id. at § 200.331(b). Thus, in addition to the above requirements, grant recipients should prepare their monitoring plan based upon the risks identified and as appropriate based upon the risk assessment. For example, a simple credit check at the outset of a multi-year grant may be better monitored by having that credit check performed annually so that your organization is aware of any financial issues the subrecipient may be experiencing during the course of the program.
In addition to developing this plan, it is equally critical that organizations document their plans, including their creation date, as well as revisions to any such plan, and the activities under the plan. Through documentation, should a subrecipient falter, the higher-tiered organization can demonstrate it took reasonable and appropriate steps to administer federal funds and should not be liable for any waste, fraud, or abuse.
The Department of Interior's Office of Inspector General Report
On February 20, 2018, the Department of Interior's Office of Inspector General (DOI OIG) issued a report detailing its conclusions that an FWS supervisor violated conflict of interest ethics laws when he, without disclosure, participated in the decision to award an FWS cooperative agreement to a nonprofit with which a family member was associated.
In sum, the DOI OIG found:
We found that neither Ruggiero, his family member, nor the [International Fund for Animal Welfare (IFAW)] disclosed the relationship between Ruggiero and his family member in writing to anyone at the FWS during the course of the cooperative agreement with the IFAW. Disclosure in writing by the non-federal entity of any potential conflict of interest is required under federal conflict of interest regulation 2 C.F.R. § 200.112, which states that non-federal entities must disclose in writing any potential conflict of interest to the federal awarding agency.
The IFAW's funding application to the FWS, dated May 30, 2014, listed Ruggiero's family member as an instructor in the training program; the family member was an independent contractor to the IFAW. The IFAW failed to disclose on the application the relationship between Ruggiero and his family member as a potential conflict of interest.
A senior official at the IFAW told us that Ruggiero's family member was one of the conservation experts involved in writing the IFAW's funding request to the FWS. The IFAW senior official said neither Ruggiero's family member nor the IFAW disclosed the relationship with Ruggiero during the application process for funding from the FWS. The IFAW senior official added that he thought it was not the organization's responsibility to do so.
DOI OIG Report at 2. Notwithstanding the fact that the individuals involved did not believe it was their responsibility, they were mandated to disclose and/or address the clear conflict.
While the U.S. Attorney's Office for the Eastern District of Virginia declined to prosecute the matter, the DOI OIG also provided its report to the acting FWS director for any action deemed appropriate, which could include a referral for suspension or debarment. Accordingly, given the gravity of these issues, this incident serves as a stark reminder of the Uniform Guidance's clear obligations to disclose and address conflicts of interest, which we have previously discussed in these monthly newsletters.