Grant Noncompliance Policy

Version: 2.0

Effective Date: 06/26/2019

Approval: Board Decision #19-26

Grant recipients are responsible for managing State grant funds in compliance with statutes, rules, grant agreements, BWSR policies, local policies, and other applicable laws and requirements. BWSR has developed the following policy and procedure to categorize levels of noncompliance and establish procedures for when errors are found. BWSR staff has the discretion to consider factors not covered in this policy.

Often, mistakes in grants management result from simple misunderstandings and the majority of incidences are resolved without requiring a formal corrective action plan. When corrective actions are considered, the first goal is always to bring the grant recipient back into compliance. Noncompliance is generally found through the review procedures of monitoring or financial reconciliation. Noncompliance can be minor (Level 1) or more substantial (Level 2).

Level 1: Failure to follow required administrative procedures

Examples of Level 1 noncompliance may include, but are not limited to: lack of detail to justify an expense or payment, improperly completed forms or contracts, incorrect, insufficient, or late reporting, incomplete files, or deficient operation and maintenance plans. Deviation from locally established policies or procedures may also be noted as Level 1 noncompliance.

Level 2: Failure to follow statute, rule, policy, or grant agreement

Examples of Level 2 noncompliance may include, but are not limited to, missing signatures or dates on contracts, overpayment on contracts, lack of required technical assessment or sign-off by a technical representative, installation of practices that are not allowed or failure to address program purpose, lack of an operation and maintenance plan, projects occurring outside contract starting or completion dates, or expenditure of funds outside the term of the grant agreement or for ineligible activities. Repeated instances of Level 1 noncompliance may be categorized as Level 2 noncompliance.

Reason for this Policy

The purpose of this policy is to provide clear direction for grantees and document BWSR compliance with Minnesota Statutes §103C.401 (2018) which establishes BWSR's obligation to assure program compliance.

Requirements

When noncompliance is found, grant recipients will be notified they are out of compliance in a memo, letter, or other means of communication. If the noncompliance is Level II or repeated Level I, the communication will be addressed to the chair of the board of the grantee, and copied to the grantee's administrator or lead staff and potentially other partners. Communications will document the noncompliance and suggest corrective actions to bring the grantee back into compliance, which may include a requirement to develop a corrective action plan or a requirement for repayment. The grantee must respond to BWSR and explain how each corrective action will be met. If a corrective action plan is required, BWSR must approve the plan and may require implementation of the plan for the grantees to be considered back in compliance

For findings of noncompliance, BWSR has the authority to withhold payments on any or all grants or hold execution of future grants. This authority is provided under the Minnesota Department of Administration's Office of Grants Management Policy 08-13, Grant Closeout Evaluation, that requires state agencies to consider a grant applicant's past performance before awarding subsequent grants or making a new grant award of over $5,000. Holds on grant payments and execution of future grants will be maintained until the grantee is considered back in compliance.

For substantial noncompliance or if work under the grant agreement is found by BWSR to be unsatisfactory or performed in violation of federal, state, or local law, BWSR has the authority to require repayment of grant funds. If repayment of grant funds is required, the grantee must either pay the penalty directly or may be allowed to apply the penalty as a reduction to the amount of a future grant. When repayment is required, BWSR may hold any or all grant payments and/or hold execution of future grants until repayment is received.

Alternatives may also be considered and used at the discretion of BWSR.  

Appeal

A grant recipient may appeal a finding of noncompliance. The appeal must be in writing, include all supporting evidence, and be sent to the BWSR Regional Manager within 30 days of receiving noncompliance communication from BWSR. The Regional Manager and Assistant Director of Regional Operations will review the appeal and supporting evidence, and render a decision. The Assistant Director of Regional Operations may stay any penalties until the appeal is resolved.

If no resolution can be achieved between the grant recipient and the Assistant Director of Regional Operations, the grant recipient may request in writing to the Executive Director and chair of the Board for the appeal to be heard by the appropriate Board Committee. The Committee will make a recommendation to the Board to dismiss, amend, or uphold the appeal.

Definitions

Corrective Action Plan: A formal, organized document that at a minimum describes specifically how noncompliance issues will be addressed, who will be responsible, and when the solutions will be implemented.

Financial Reconciliation: Comparing a grantee's request for payment for a given period with supporting documentation for that request, such as purchase orders, receipts and payroll records.

Monitoring: Reviewing and ensuring progress against the grant's goals, to address any problems or issues before the end of the grant period, and to build rapport between the state agency and the grantee.

Noncompliance: Failure to manage state grants in accordance with statutes, rules, grant agreements, BWSR policies, local policies, and other applicable laws and requirements.