How to prepare for when something goes wrong and how to respond when it does

What could possibly go wrong?

When something goes wrong with a grant or a funded project it can be a result of grantee wrongdoing (intentional or otherwise) or simply bad luck. The possibilities range from the relatively inconsequential to the very serious. They include:

• getting your logo wrong on their web page
• spending grant money on something that was not in the agreement
• not spending grant money on something that was in the agreement
• failing to meet agreed milestones
• failing to meet agreed outcomes
• failing to respond to communication or requests for information
• speaking negatively in public about the grant and/or the project
• changing the scope of the project without consulting you
• poor governance
• poor record-keeping
• poor financial management
• providing false information
• not complying with grant conditions
• fraud
• not providing required documentation.

How might the problems affect your organisation?

• It can take up staff time - grant staff, finance staff, legal staff, audit staff, communications staff. This costs money.
• It can result in ministerial attention.
• It can result in media attention.
• You might receive complaints from organisations that missed out on the funding the errant organisation received.
• You might have to invest in remedial activities such as negotiation, arbitration and litigation.
• You lose the benefits you were expecting to accrue from the project.
• You might see more red tape introduced.
• The validity of the grant program might come into question.
• The grant program might even be cancelled.

How do you find out that a grantseeker is doing something wrong?

There are many ways you might uncover a grantee's wrongdoing. You might learn about it:

• directly from the grantee, if they are upfront and come to you
• from a whistleblower within the grantseeking organisation
• from a third party, such as another funding body or end-user complaints about service delivery
• as a result of an audit
• during an onsite visit
• as a result of a review
• as a result of milestones not being met
• as a result of acquittal requirements not being met
• via a trigger such as poor communication from the grantee
• via a trigger such as poor documentation from the grantee.

How should you respond?

• Inform the grantee that you know about the issue/incident. Contact them by telephone, for speed, followed by a formal letter/email. Request (in person or on paper) an explanation.
• Consequences don’t have to be punitive: in the first instance it is a good idea to work with the grantseeker to negotiate a way forward. It is helpful to have a budget in place for dealing with performance issues. You can invest in:
  • positive, practical intervention strategies
  • audits
  • mediation
  • training
  • management support
  • mentoring (directly or with a third party)
  • negotiating contract variations.
• If a collaborative approach does not resolve the issue, some other options include:
  • issuing an official warning
  • providing written notice of non-compliance
  • closer monitoring
  • applying an audit warning (suspending further consideration of any other applications until the matter is resolved)
  • demanding that part or all of the grant is paid back
  • initiating legal proceedings
• If you can't find a way forward with the grantseeker, you may choose to re-auspice the project - look for another community group to deliver it or terminate the agreement.
• Share any lessons learned with others who may benefit. Lessons about what did not work can be even more useful than lessons about what did work.

What can you do to prepare for or prevent wrongdoing?

• A program-level risk assessment enables you to anticipate and mitigate potential issues, and plan for risks that may be realised.
• Have an early-intervention plan ready to be activated as soon as any issues come to your attention
• With identified risks in mind, clearly articulate responsibilities when drawing up the grant agreement.
• Stipulate that any variation to the agreement must be made in writing.
• Stay in touch with project teams so you can identify any problems early.
• Release a funding instalment only after an interim acquittal document has been submitted.
• Build flexibility into your funding arrangements and your expectations. Things don't always go to plan.
• Subject projects to ongoing reviews so that aims can be adjusted to remain relevant to need.
• Have a strong policy in place to guide your response. Include a position regarding in what circumstances you would fund the same grantseeker again if they applied with what sounded like a good project. For example, you might fund them again:
  • if they have been open and honest with you
  • if they have developed insight into the causes and consequences of previous problems
  • if they have demonstrated their capacity to complete the project
  • under strict conditions and reporting requirements (including a detailed audit of financial records)
  • with conditions in place regarding governance requirements
  • with closer monitoring
  • if they can demonstrate that they have addressed the issue of concern.