Guide to Risk Assessments for Grantmakers

Guide to Risk Assessments for Grantmakers

Grantmakers have a unique responsibility to ensure the funds they disperse do as much good as possible. Risk assessment plays a crucial role in achieving this goal, and it’s often required for organizations dispersing federal funds.

Still, the guidelines can vary widely. We’ve built a risk assessment guide to help grantmakers dive into what risk assessments look like, how to assess grant risks and how grant management systems can help.

What Is Risk Management in Grantmaking?

Risk management has long been a staple of modern businesses, assessing and making plans for risks in various categories, such as financial, technical and organizational risks. In grantmaking, risk management’s primary purpose is to avoid events that would prevent the organization from advancing its policy goals when disbursing funds. If risks go unidentified and unmanaged, the grant program is less likely to reach its intended outcomes.

To avoid this situation, grantmakers develop risk management programs to offer tools, strategies and structures for assessing potential grant recipients. A disorganized approach to risk management can be detrimental to the program’s goals. Fortunately, many state, federal and local agencies have created resources and guidelines to make things easier.

Some areas of risk these programs might address include:

  • Financial risks: Financial risks usually depend on the recipient’s ability to effectively use the funds to reach their desired outcomes. Adverse events might involve fund mismanagement, inadequate reporting, fraud or misuse.
  • Programmatic risks: The grant program or project must be feasible. Risks include failure to reach desired outcomes, inadequate monitoring and lack of alignment with the organization’s mission.
  • Operational risks: As with most businesses, operational inefficiencies or inadequate systems can cause problems that range from poor selection processes to data vulnerability. These risks are wider in scope and may require more cultural or systematic changes.
  • Compliance and legal risks: Grantmakers must often abide by laws, regulations and grant agreements. Failing to meet applicable requirements and regulations can create significant risk for a grantmaker and impede their ability to award funds in the future.
  • Reputational risks: Reputational damage can be difficult to recover from, so preventing the impacts of a failed program or award is crucial.

When choosing resources and developing an approach, remember that risk management is an ongoing process. Risks are constantly evolving, and new resources are always created. You will need to revisit your strategy regularly to ensure it stays up-to-date and relevant.

Why Is Risk Assessment for Grants So Important?

Assessing the risk associated with awarding funds is essential to performing due diligence. Without it, you may end up awarding funds to an irresponsible organization that misuses the funds, whether intentionally or unintentionally. Adverse outcomes can do much more than slow down your progress toward reaching goals — they can also hurt your credibility, impacting your ability to disperse funds in the future.

In helping mitigate these events, risk assessment offers several valuable benefits, such as:

  • Reduction of adverse events: Of course, risk assessment can help you avoid adverse events in the first place so you can make as much progress as possible toward your mission.
  • Maintenance of a strong reputation: When funds are used inappropriately, many will look to the awarding agency for evidence of due diligence. A robust risk assessment shows that you performed this research and awarded the funds based on the information available. Whether by avoiding poor selections or backing up your choices, assessments can help safeguard your reputation.
  • More educated decision-making: During the risk management process, you collect various details on your applicants, which can better inform your decision. More information can help you find the most qualified recipients, improving your overall selection process.
  • Better understanding of risk: A clearly defined risk management program can help your staff understand the importance of high-quality award decisions. It promotes a more responsible culture overall.
  • Improved performance and outcome monitoring: The data required to manage risk is often the same data used to monitor outcomes and performance. It can help organizations improve their understanding of achieving outcomes and make more progress toward goals.
Why Is Risk Assessment for Grants So Important?

While implementing risk assessment is critical, it should also come with a thorough awareness of why your organization does it. Stakeholder buy-in is particularly important when addressing common risk assessment challenges, such as empowering staff with a good management platform and addressing competing priorities. Having everyone on the same page can help you tackle risk assessments with a cohesive, well-aligned strategy.

Government Grant Requirements and Resources

Federal, state and local governments often implement risk assessment requirements for the organizations awarding their funds. These requirements may not always be specific, but you must abide by them to maintain compliance.

The most ubiquitous requirement you’ll find is the Uniform Guidance, which refers to the Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards. This regulation outlines guidance for pre-award risk assessment and covers areas like performance reporting, sub-recipient monitoring and audit requirements.

Grantmakers must assess various characteristics of a potential recipient:

  • Internal management system quality.
  • Financial stability.
  • Ability to address audit findings.
  • Historical performance in complying with grant program requirements.
  • Prior experience with the grantmakers.

Program-specific data, such as size, complexity and award size, are also commonly considered. The Uniform Guidance allows grantmakers to impose conditions for an award, like reimbursements instead of advance payments, prior approvals and additional financial reporting requirements.

Within the education industry, you may also encounter the Education Department General Administrative Regulations, which outline how education funds can be used.

In today’s digital environment, you’ll also find legislation about how you handle data. This legislation includes:

  • The Digital Accountability and Transparency (DATA) Act, which requires organizations to publish reports to increase public access to information.
  • The Grants Oversight and New Efficiency (GONE) Act, which asks for annual reports with grant information to help the federal government identify and manage outstanding grants.
  • The Grant Reporting Efficiency and Agreements Transparency (GREAT) Act, which creates reporting formatting standards for grants to ease audits and reporting.

Grantmaking Risks to Consider

Common risks associated with grantmaking can be broken down into these three categories:

Grantmaking Risks to Consider

1. Program-Level Risks

Program-level risks are associated with the grant program as a whole and are usually related to being unable to meet the grant objectives. Keep an eye out for a significant number of high-risk grantees that require monitoring. You’ll also want to consider your team’s experience with the program. If it’s new or you’ve made big changes, you may want to take extra measures to prevent problems.

2. Entity-Level Risks

Despite being separate organizations, your grantees can create considerable risk. Any risk management program should include careful vetting of potential recipients. Consider ranking your applicants on factors like:

  • Prior experience with your organization.
  • Prior awards and performance data.
  • Recent audit results.
  • Status on SAM.gov.
  • How long the organization has been operating.

Some features that might point toward a high-risk grantee include a history of poor performance in meeting award goals, financial instability, a track record of questionable business practices or poor management systems. If you have a high-risk grantee, you could mitigate risks by imposing special conditions.

3. Award-Level Risks

Most risks at the award level come from an inability to meet the specific objectives of the award. When reviewing specific awards, consider how much progress each recipient achieves toward the award objectives. Compare planned and actual spending, and review audit results to monitor success.

Risk Assessment Strategies and Tools

When conducting risk assessment, most of your work will happen before awarding the grant, while assessing individual applicants and the program itself. You can also use information collected throughout a program to inform your decisions for next time.

For example, monitoring and documentation can tell you whether high-risk grantees reached their goals with an award. If not, you could cut back on the number of high-risk recipients next time or implement special conditions to ensure the effective use of funds.

However you choose to perform these tasks, structure and clarity are crucial. You must keep track of your risk management activities and identify a standardized method for assessments. Fortunately, many different groups have created assessment resources, and your grant management system (GMS) can help with tracking and organization.

Grant Risk Assessment Tools

Grant Risk Assessment Tools

Starting with individual assessments, you’ll find various resources to inform and guide your evaluations of applicants. Most requirements, like the Uniform Guidance, allow you to find an approach that works well for your organization.

Information on government-funded awards is often available to the public. Keep these resources in mind when performing risk assessments:

  • The System for Award Management: SAM.gov is a United States government website that contains a register of many entities interacting with the government, including award recipients. You can search for entities and view publicly available award data on potential recipients.
  • USAspending.gov: USAspending.gov is another website with data on recipients of federal funds, created by the DATA Act. You can view recipient profiles and see where the money goes, including agencies and subagencies.
  • The Federal Audit Clearinghouse (FAC): Organizations that spend over $750,000 in federal funds in a given year must submit an audit to the FAC. You can access and view these audits online.
  • G5/G6: The U.S. Department of Education hosts grant management information on G5, soon to be G6. It offers several tools for grantmakers to use when assessing applicants for education grants.

Many grantmakers use scorecards to combine collected information into an easy-to-use, objective value. Higher numbers correspond to increased risk. This approach puts risk assessment for grants into a step-by-step, standardized process.

Grant Management Systems

For overarching risk management, you will likely need a dedicated program for grant management. A GMS can help state, county, city, tribal and federal government agencies manage all of the data associated with their grants in one place. Nonprofits and educational organizations also use these platforms.

Alongside tools for workflow automation and streamlined processes, a GMS can facilitate assessments, reporting, monitoring and application processing so nothing slips through the cracks. In today’s modern business environments, paper-based files or spreadsheets are simply outdated and often not enough to meet administration requirements. With a GMS, you can greatly improve visibility and process controls while working more efficiently.

Of course, if you want a GMS to help you with risk management and assessment, it must have the right capabilities. Your program should help you personalize your grant applications, coordinate and review workflows and provide advanced monitoring and reporting tools.

How to Assess Risks for Grants With IntelliGrants® IGX

IntelliGrants® IGX is a GMS designed to support the entire lifecycle of a grant and the grantmaking process. With a wide range of resources and a user-friendly interface, this platform facilitates comprehensive risk assessment.

Some of the risk management and assessment tools in IntelliGrants IGX include:

  • Application management and scoring: Organize and manage applications and score applicants according to your chosen methodology. You can personalize applications to request the necessary details for your risk assessment strategy.
  • Streamlined reporting and monitoring: Keep an eye on grantees by coordinating inspections and performance reviews and storing the data alongside the rest of your entity information. Generate metrics to evaluate all levels of risk and track your recipients over time.
  • Fiscal reporting: Watch your finances through robust accounting tools to track, process and report on fiscal data.
  • Data management: IntelliGrants IGX can help minimize errors with strong data controls to eliminate duplicate entries, flag incomplete submissions and calculate payments and allocations.
  • Workflow coordination: Optimize how you assess grant risks by creating personalized workflows that boost efficiency and efficacy in choosing high-quality grantees.
  • Integrations: Enjoy compatibility with assessment tools like SAM.gov and address validation for faster evaluations.
  • Traceability: IntelliGrants IGX offers granular auditing and reporting for full traceability to help you meet reporting requirements.

All of these risk management resources are available through your web browser, with an accessible design to accommodate users of all abilities. Our no-code program offers extensive personalization and branding capabilities. It supports your organization in whatever the future holds, with baked-in scalability, automation tools and regular software upgrades.

Take Control of Grant Risk Management With IntelliGrant IGX

Take Control of Grant Risk Management With IntelliGrant IGX

Grant programs involve many moving parts, and a well-structured approach to risk management is crucial. Now that you’ve finished our guide to risk assessments in grantmaking, you’re well-prepared to tackle these requirements and build a high-quality program.

IntelliGrants IGX is on your side with an array of risk management and assessment tools. We’ve been in the business for over 35 years and hold a 98% retention rate. As a Microsoft Gold Partner and General Services Administration contractor, IntelliGrants IGX is a trusted provider for governments, nonprofits and educational groups across the country.

Book your demo today to see why so many organizations trust IntelliGrant IGX!