Institutional Compliance

My institution at the time was a large 501c3 research organization with over $100 million in grant revenue per year, and an award portfolio of almost $1 billion. Like most nonprofits and research institutions, we lived and died by our ability to procure grants and maintain a healthy sponsored projects portfolio. Participation in proposal development was mandatory for researchers, and the institution was constantly forecasting workload needs based on submitted, pending, awarded, and closing grants. The culture at my institution encouraged PIs to aim for large, multi-year grants with padded budgets, since these were the most likely to yield an automatic no-cost extension or two. Furthermore, most researchers could only maintain employment through their grant portfolios. Given this environment, it is easy to understand how this PI believed that the grants being awarded to him were his personally.

Accountability to the Donor

Unveiling the truth about grant awards is rather anti-climactic. In the simplest language, grants are non-repayable funds or products, disbursed by a sponsor to a recipient. Most awards support a specific project and require some level of compliance, evaluation, and reporting. Sponsors of all kinds have the money and desire to advance certain agendas, activities, or research areas, but do not have the internal resources to do so. Specifically, foundations and not-for-profit organizations award funds based on a recipient’s ability to further a mission or goal, as well as fulfilling the work outlined in a proposal submission. Although a PI or team submits the proposal, sponsoring organizations do not recognize individuals as entities that can or will share responsibility on the same level. Instead, that burden falls to the organization or institution to which those PIs and teams belong. Moreover, a single person cannot carry out the proposed work or research to the degree that an organization can.

Tax Liability

The additional issue of tax liability is enough to dispel the erroneous notions of possession from most researchers. Institutions with the capacity to receive grants are either exempt from IRS tax liability, or they are large enough to absorb said tax liability. Excepting most scholarships, fellowships, and some disaster relief aid, if a grant is awarded and accepted by an individual, that person will be responsible for paying all the tax liabilities associated with it. I will never forget a meeting where I met a handful of faculty members who had been accepting grants awarded to them personally. The IRS had finally caught up with them and was demanding over $50,000 in back taxes, with the penalty for non-payment being time in prison. Had the institution accepted these awards, there would have been no tax liability at all.

Remember, grants are made to institutions, not individuals. Understanding why grants are awarded, and what the researcher’s role is in administering the award is vital for an organization’s ability to survive an Office of Management and Budget (OMB) audit. As Project Directors or PIs, you have been selected by your institution to act as the representative for the award. You have been made accountable for managing the programmatic requirements supplied by the sponsoring organization. While this is an awesome responsibility, it does not make the grant funding yours. Should there be an audit issue down the road, you may end up quite grateful for this fact.

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I have encountered other participants just like the former secretary. I have also had excited and enthusiastic participants who are new to writing grants. The organizations they tend to represent typically have zero experience with grants, but the participant feels that he or she should start writing proposals in support of what his or her organization does. They view grants as a way out of funding reductions, a means to supplement an existing program, or to maintain office staff. In these cases, the senior management of such institutions often does not know that their staff is thinking about submitting grants. Or, if they are aware the employee is writing a grant, they have merely tasked the job to a staff member with little or no direct support.

Being in either of these situations is horrifying and happens more often than you might think. It doesn’t matter whether an organization is forcing unqualified employees to write full grant proposals without the support of programmatic experts, or employees are considering applying for grant funding without the support or even full knowledge of their institutional senior leadership. Such proposals are most likely doomed for rejection in either scenario. In the case of the research facility mentioned above, the institution lives and dies by their ability to procure large grants. Failure is not an option. For the independent staffer who wants to submit proposals regardless of their institutional support, there is a small chance that they will get lucky and win an award. However, that almost inevitably dooms the organization to mismanagement of the programmatic and financial aspects of the award.

Institutional Support and Buy In

When I teach the Professional Grant Development course, I remind the participants of a handful of key concepts about grants every morning and afternoon. One is that proposals are submitted by and awards made to institutions, not individuals. Grant writers, principal investigators, and project directors are representatives selected by the institution to write competitive proposals. In theory, they are largely the same people when it comes to the technical proposals. These representatives are entrusted to successfully carry out the programmatic aspects of an award. Before any organization decides to jump into the grant writing game, the management of that organization needs to be committed to supporting their staff in grant-writing endeavors and award management. Senior leadership needs to support programmatic experts on drafting technical language for a proposal, as opposed to the administrative staff. Once an award is made, time and resources must be made available to grant writers and administrators to ensure proper management of the award.

Tone at the Top

At some point in your institution’s lifespan – assuming it is successful at procuring federal grants – it will need to go through an OMB 133 audit. Many people confuse this with a financial audit, which it is not. The 133 audit examines how grants are managed and grant expenses handled. One vital element to any good 133 audit is a test of the Tone at the Top. Tone at the Top is a term that originated in the accounting field and is used to describe an organization’s general ethical climate, as established by its board of directors, audit committee, and senior management. Having a strong Tone at the Top is believed by ethics experts to help prevent fraud and other unethical practices. For instance, if the management of an organization understands the grants process, provides resources and management tools for successful proposal development, and sets the proper tone regarding correct grant management, then that strong Tone at the Top will permeate through the entire organization, down to the very most junior staff. However, if the Tone at the Top is weak, it can sour the entire organization. One example of a weak Tone at the Top is when senior management creates mandates out of desperation or panic. The former secretary whose leadership expects subject matter novices to write or review winning technical proposals is a striking real-life example. A weak Tone at the Top can lead to an unethical approach to grantsmanship that trickles down through the entire organization.

Both situations I mentioned exhibit a weak Tone at the Top. In the case of the research facility, I see very little hope for their ability to turn themselves around and rescue their dying organization. The Tone at the Top is one of intimidation. The attitude is one of “I don’t care what we need to do, just get the grant funds in the door.” Should an award be made – which is unlikely with a novice writing scientifically technical research proposals – that same attitude would filter through the post-award management of the grant. However, in the second example, there is the possibility of a bright future. While the ideal is to develop a strong Tone at the Top long before writing proposals, this situation can be recovered. The employee who wants to start writing grants to extend or expand programming, or ensure continued employment for staff is promising. It speaks to an organization where a staff member can work with his or her senior leadership to develop a strong Tone at the Top.

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