Grant Funds

5 Common Challenges in Distributing Grant Funds

Find five of the most common challenges in distributing grant funds, and actionable tips to overcome them.


Grant payments are often subject to various challenges, which can include anything from accountability and compliance issues to the likelihood of fraud. In this article, we'll explore five of the most common grant payment challenges. They are:

  1. Accountability issues
  2. Compliance mistakes
  3. Likelihood of fraud
  4. Delays in approval
  5. Demands of detailed reports

Now that you have a rough overview of what frequently encountered challenges grant makers face, let’s break them down further to help you avoid them in your programs.

1. Accountability Issues

One of the biggest grant administration challenges with distributing grant funds is ensuring that accountability is maintained throughout the process. This means clearly defining who is responsible for what aspect of the distribution process, and making sure that all parties involved are aware of their obligations.

The stakeholders of the grants - recipients and those giving the funds also need to be clearly defined. Who is giving and receiving the grant exactly? Get it all in writing so there are no questions or complications. The last thing you want as a grant program manager is to not be able to explain to your shareholders/donors what happened to the money.

This is also where writing out the use of funds will come in handy. A nonprofit or individual receiving the grant likely has specific intentions in mind when they apply for it, but when other people get involved it’s critical to ensure the money goes where it was indicated it would go.

accountability-issues

For example, if a grant program issues money to a community college to build a library, but they then take the funds and use it to build a new gym, the money didn’t go where it was indicated it would. Having it in writing helps to hold the receivers accountable to do what they said they would with the money.

Using good grant management software makes it easy to lay out all of your expectations in writing and share it with your grant candidates.

2. Compliance Mistakes

Grant payments are subject to both legal and funder guidelines, and any errors in adhering to these guidelines can result in delays or even disapproval of funds.

Funder's guidelines can and should be very specific about how the funds will be used and how recipients should report back on their use of the funds. Another common mistake is failing to properly document the distribution of funds. This can make it difficult to track where the money went and whether it was used for the purpose intended. Finally, misusing grant funds can be a serious violation of compliance rules. Grant money should only be used for the purposes specified in the funding agreement, and any deviations from this should be approved in advance by the funder.

Grant recipients may make mistakes when filling out paperwork or may not be aware of all the requirements to receive their funds and/or what is expected of them if they accept the grant. In the worst cases, depending on the nature of the grant and the receiving party, compliance errors can result in fines/sanctions from governments or standards and practices organizations.

Again this is why it’s so important to get everything in writing. There’s less likelihood of grant payment challenges when everyone involved knows what is expected of them.

For example, a nonprofit is required to disclose where any funding received is coming from, and what they intend to use it for. Failure to be transparent can result in the loss of their 501(c)3 status. In the case of not for profit medical related organizations, grant payment mistakes could have much larger implications including but not limited to:

  • Medical malpractice suits
  • Loss of license for medical practitioners
  • Even HIPAA violations, depending on the nature of the compliance mistake in question.

Bottom line - it’s critical that your grant program understands the compliance rules for giving grants for your organization as well as the rules for your recipients. It’s also imperative to write up your own compliance documentation for your recipients so they have a record of things like:

  • What they can do with the money
  • Who exactly the funds are coming from, and
  • How much money they will be receiving.

3. Likelihood of Fraud

Unfortunately, there is always a risk of fraud when distributing grant funds. Grant payment pitfalls can happen if someone uses false information to apply for a grant or if they misappropriate funds once they receive them. Though it might feel unnecessary, references and background checks are always a good idea. This is especially true if there is a significant amount of grant money changing hands.

Ensuring you have security protocols in place is also a good idea. Things like website security software, loss prevention specialists, and even background checks on your grant program committee may seem like overkill, but it’s better than losing hundreds if not thousands of dollars to fraud.

fraud-issues

The reality is, when you’re giving away money, in any amount, there is always the chance that someone will try and find a loophole to gain access to those funds. Grant payment mistakes like this are even more likely in the digital age when most applications and even grant programs themselves are managed online. However, by being vigilant and enforcing proper procedures, your program can help ensure that grant money is distributed fairly and appropriately.

4. Delays in Approval

Grant applications can sometimes be delayed due to missing information or paperwork errors. This can cause frustration for both applicants and funders, and can lead to delays in distributing the funds.

Grant payment challenges related to delays in approval can be avoided if you’re very clear about your timelines in your application and materials. Simply stating that the selection and awards process can take 60 to 90 days or even up to a year will make your hopeful recipients a lot less likely to clog your phone lines and email inboxes with inquiries.

 

Using grant management software and setting up protocols for your review process will help streamline the process and diminish delays. While getting everything set up in the beginning may take some time, the right software can get your grant program up and running much faster than using paper forms and outdated review tools.

5. Demands of Detailed Reports

When grantmakers distribute grant funds, donors and/or shareholders often require detailed reports on how the money was spent. These reports can be quite time-consuming to produce, but they are important for both the grantmaker and the grantee. The grantmaker needs to be sure that the money was used appropriately, while the grantee can use the reports to improve their program and demonstrate its effectiveness.

detailed-reports

There are a number of elements that should be included in a detailed report on distributing grant funds. First, the report should outline how the money was allocated and what it was used for. Second, it should also describe how the project or program was implemented and what results were achieved. Finally, it should include an evaluation of the project or program, including both positive and negative outcomes.

Your funders will demand these reports simply because they want proof that the money they are investing is going to their intended cause. Reports like these are much easier to produce with grant payment software.

Conclusion and Next Steps

We’ve alluded to this a few times now, but the key to avoiding or at the very least lessening the amount of grant payment challenges a grant program experiences is to use grant management software. By using grant payment software such as SendGrant, you can help streamline the process of distributing grants, mitigate the risks we’ve covered in this article, and make your entire grant making operation more efficient.

Want to learn more about SendGrant and what it can do for you? Click here to get a free demo today!Using a Grants Payment Management System


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