Zeroing-Out a Grant

3.4 Zeroing-Out a Grant

Controversies: 3.11, 3.19, 6.19 Key Words: state grant, contracting, misuse of money, public interest Case Complexity → Low CD: 4.42 Violating Public Trust CD: 6.3 Government Finance Officers Code of Ethics

44 ◾ Ethics Moments in Government: Cases and Controversies

Your agency has received a state grant. At the end of the fiscal year you face a deci- sion whether to return unspent portions of the grant to a state that is in dire need, to spend the money on nonessentials, or to encourage employees doing valuable work on other projects to list their unfunded work under the budget for this grant, thereby zeroing-out the grant. You know that if all of the money is not spent, next year’s grant will be reduced by a substantial amount. What should you do?

Discussion Questions

1. Is this an ethical matter?

2. A management matter? Both? Neither?

Case Assessment

Joanne Gram, Charitable Trust Analyst, Michigan Department of Attorney General:

An ethical manager will resist overstepping programmatic and finan- cial boundaries to maintain future funding levels. The situation pre- sented is particularly common in the first year of program funding. Initial proposals often lack a historical perspective to fully anticipate outcomes. A program manager imagining ways to cover noncompli- ance with grant requirements has an ethical dilemma. Justification based on perceived good purposes is a serious step toward breaking down the integrity of the grant process. That breakdown will result in a diminished ability to measure performance, inaccurate reporting, and potentially depriving other worthy programs of state funds. An ethical program manager contemplating unspent funds will honestly seek assistance from the grant administrator.

Grant administrators are specifically charged with ethical, audit- able behavior. They have experience assisting program managers who must sort through acceptable and unacceptable methods to zero-out grants. For example, near the end of a fiscal year a manager may be able to project certain deliverables needed in the coming year. The grant administrator may allow ordering those items from current funds for the future use. In some cases, the grant administrator may determine funds must be returned to the state. Even if funds are returned, future proposals will gain a historical basis for committing future resources. By working with the grant administrator, a program manager supports programmatic and financial grant elements in an open and ethical manner. Thus, the integrity of the process and the manager will be preserved.

Professionalism and Ethics ◾ 45

Gilbert Machin, Operations Manager, Housing Choice Voucher Program, Hillsborough County, Florida:

Unused funds are often an indicator of agency capacity. Many agen- cies in their grant applications promise the world and only delivery an island. Unfunded work products associated with the funded ser- vice should always be presented to the funding source (the state in this case) for consideration and generally are approved. Agencies may consider necessary purchases for the upcoming year and pur- chase products in bulk, providing they have the necessary storage space. This action will free up funds from the next year’s budget, even if it is reduced, and will enable the agency to purchase needed items at this year’s discounted bulk rate. However, purchasing non- essentials from public funds just for the purpose of retaining cur- rent funding levels in the upcoming year should not be practiced, unless and only if prior approval is received from the state. Failing to participate in assisting the state in dire need can only reap near- term benefits and could affect your ability to be considered when

additional funds become available for distribution to responsible service agencies.