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What is a High-Risk Grantee?
what-is-a-high-risk-grantee-the-nonprofit-times

To win grant awards and manage them well, organizational managers need solid policies and procedures, internal systems, and management competence. It is always critical to avoid grant management slip-ups such as flawed program implementation, late or faulty reporting, and the inappropriate allocation of grant funds. 

Nowhere is solid management more urgent than when implementing federal grants. Federal grants are usually large, ranging from hundreds of thousands to millions of dollars, and the government takes stewardship of those public funds seriously. 

“If your organization makes significant mistakes in managing a federal grant, it maight earn the problematic designation of high-risk grantee,” said Barbara Floersch, grants expert and author of You Have a Hammer: Building Grant Proposals for Social Change. “To work successfully within the federal grants system, it’s imperative to avoid that label.” 

Section 29 of the Code of Federal Regulations §97.12 defines the circumstances that would cause an organization to earn the high-risk grantee designation. Those include a history of unsatisfactory performance, financial instability, management systems that do not meet federal standards, failing to conform to terms and conditions of previous federal awards, or demonstration of being otherwise irresponsible. 

Prior to making a grant award, federal agencies are required by law to review the risk posed by potential grantees. They complete that assessment using repositories of governmentwide eligibility, qualification, and financial information and, at a minimum, potential grantees must pass screenings for satisfactory execution of prior awards, integrity, and business ethics. 

Federal agencies will either refuse to make grants to an organization labeled as high-risk or will impose special conditions on the award corresponding to the assessed degree of risks. Special conditions can include payment on a reimbursement basis, withholding authority to proceed until the government receives evidence of acceptable performance within a given funding period, requiring more detailed financial reports, additional project monitoring, requiring technical assistance, and establishing additional prior approvals.

To shed the dreaded high-risk designation, correct any flawed internal systems to ensure that financial management is compliant with rules and regulations and that internal oversight and supervision systems are adequate to support high-quality program implementation. Correct past mistakes as possible, doing what is necessary to resolve audit findings and other problems that are tarnishing your reputation.

“The best medicine is prevention,” said Floersch. “Make sure your systems are up to par, abide by rules and regulations, report thoroughly and on time, and reach out to the federal awarding agency if you have questions or concerns.”