Title III Administrative and Financial Requirements Policy #10: Pre-Award Risk Assessment

This content is part of a public comment period. For more information, refer to Minnesota Board on Aging – State Plan on Aging.

Authority Reference	45 CFR § 75.205 Office of Grants Management Policy 08-06 Pre-Award Risk Assessment
Operating Category	Title III Administrative and Financial Requirements

Policy

1. To protect the interests of the federal government and the State of Minnesota, AAAs must complete a pre-award risk assessment before awarding a contract or grant of $50,000 or more to a potential service provider to assess the risk that they cannot or would not perform the required duties specified in the contract or grant agreement. This needs to occur prior to when a contract or grant is awarded and does not need to be conducted when the contract or grant agreement is amended, unless the amendment increases the dollar value of the agreement above the $50,000 threshold for the first time.

2. In making this assessment, AAAs must consider the following as applicable:

· (i) The potential service provider’s history of performing duties similar to those required by the grant or contract;

· (ii) Whether the grant or contract requires the potential service provider to perform services at a significantly increased scale and, if so, whether the service provider has the capability and organizational capacity to do so;

· (iii) Review the potential service provider’s financial information and/or internal controls;

· (iv) Reports and findings from audits; and

· (v) Review compliance with certain other state and federal requirements.

3. If the service provider does not have a history of performing similar duties, does not demonstrate the capability and capacity to perform the duties at the scale and pace required in the grant or contract, or the results of analyzing the financial information and internal controls review raise concern, then the AAA may:

· (i) Require additional information to determine whether there is a substantial risk that the potential service provider cannot or would not perform the required duties of the contract or grant agreement; and

· (ii) Create a risk mitigation plan in response to the substantial risks that may include technical assistance and increased oversight; or

· (iii) Not award the grant or contract.

4. MBA is not required to conduct a pre-award risk assessment for AAAs because the policy is not applicable to formula grants.

Procedures

1. The AAA must review the following information for all potential service providers prior to contract or grant award and determine whether a risk mitigation plan and/or enhanced oversight is required to responsibly award the funds. The financial information and internal control review must include the respective requirements in (c) through (e) below as applicable to the type of entity (nonprofit, business entity, political subdivision).

a. Potential service provider’s history of performing duties similar to those required by the grant or contract:

· (i) Determine if the potential service provider has received other grants or contracts for similar amounts and similar duties, including the history of performance at the granting AAA.

· (ii) If the potential service provider has not demonstrated the ability to perform the same or similar duties, on a comparable scale, then the AAA may do the following: (i) request more information for the purpose of satisfying the AAA’s concerns; (ii) develop a risk mitigation plan to accompany the grant contract agreement; and/or (iii) provide enhanced technical assistance and oversight.

b. Potential service provider’s organizational capabilities and capacity to perform at the scale required by the grant or contract:

· (i) Determine whether the grant requires the potential service provider to perform services at a significantly increased scale.

· (ii) If the grant requires the potential service provider to perform services at a significantly increased scale, then the AAA must determine if the potential service provider has the capabilities and organizational capacity (such as skills, knowledge, resources, processes, leadership) to perform services at the increased scale.

· (iii) If the AAA determines the potential service provider has substantial organizational risks, then the AAA may do the following: (i) request more information for the purpose of satisfying the AAA’s concerns; (ii) develop a risk mitigation plan that accompanies the grant contract agreement and describes how the service provider will make organizational changes to increase its capabilities and capacity to perform the duties at the increased scale; and/or (iii) provide enhanced technical assistance and oversight.

c. Potential nonprofit service provider’s financial information review:

· (i) Review the nonprofit’s most recent Form 990 or Form 990-EZ filed with the Internal Revenue Service.

· (ii) If the nonprofit has not been in existence long enough or is not required to file Form 990 or Form 990- EZ, then review the following documentation of the nonprofit: (i) proof of its tax-exempt status; (ii) its most recent board-reviewed financial statements; and (iii) documentation of internal controls.

· (iii) If there is no nonprofit board, then review the financial statements and internal controls documentation from the nonprofit’s leadership or managing group.

· (iv) Review the nonprofit’s most recent certified financial audit if the nonprofit is required to complete one under Section 309.53 Subd. 3.

· (v) Confirm the nonprofit’s good standing with the Office of the Secretary of State.

· (vi) Confirm none of its current board members or staff with authority to access grant funds have been convicted of a felony financial crime in the last ten years. This does not require a DHS background study. This process may be completed through local law enforcement, the Minnesota Department of Public Safety or the FBI.

· (vii) If the AAA determines the nonprofit has substantial financial risks that inhibit its ability to perform the required duties under the grant contract agreement, then the AAA must either request more information for the purpose of satisfying the AAA’s concerns, develop a risk mitigation plan to protect the interests of the state, or not award the grant.

d. Potential business entity contractor’s or grantee’s financial information review:

· (i) Collect the business entity’s most recent federal and state tax returns and review current financial statements.

· (ii) If the business entity has not been in business long enough to have a tax return, then review current financial statements and documentation of internal controls.

· (iii) Receive certification that the business entity is not under bankruptcy proceedings and disclosure of any liens on its assets.

· (iv) Confirm the business’s good standing with the Office of the Secretary of State.

· (v) Confirm none of its current principals, board members or staff with authority to access grant funds have been convicted of a felony financial crime in the last ten years. This does not require a DHS background study. This process may be completed through local law enforcement, the Minnesota Department of Public Safety or the FBI.

· (vi) If the AAA determines the business has substantial financial risks that inhibit its ability to perform the required duties under the grant contract agreement, then the AAA must either request more information for the purpose of satisfying the AAA’s concerns, develop a risk mitigation plan to protect the interests of the state, or not award the grant.

e. Potential political subdivision contractor’s or grantee’s review:

· (i) Confirm none of its current public officials, board members, or staff with authority to access grant funds have been convicted of a felony financial crime in the last ten years. This does not require a DHS background study. This process may be completed through local law enforcement, the Minnesota Department of Public Safety or the FBI.

· (ii) If the AAA determines the political subdivision has substantial risks as applicable per (1) and (2) that inhibit its ability to perform the required duties under the grant contract agreement, then the AAA must either request more information for the purpose of satisfying the AAA’s concerns, develop a risk mitigation plan to protect the interests of the state, or not award the grant.

2. AAA procedures should document the following steps:

a. Before awarding a grant or contract of $50,000 or higher, AAAs must complete a pre-award risk assessment for all potential grantees or contractors as defined in this policy.

b. AAAs request that all potential grantees and contractors, including sole and single source grantees and contractors, submit, as applicable, the required information as outlined in this policy. In a competitive grant process, instead of requesting financial documents from every potential grantee, AAAs are only required to request this information from the finalists in the selection process.

c. AAA staff document their review and analysis of the submitted documents.

d. If no substantial risks are identified, the AAA takes steps to award the grant or contract.

e. If substantial risks are identified, the AAA follows procedures to mitigate or resolve substantial risks before making a grant award or contract. If it is determined that enhanced monitoring is needed, the AAA must create enhanced monitoring procedures related to the identified risk and incorporate those enhanced procedures under its monitoring plan.

f. If the AAA is unable to work with the potential grantee or contractor to resolve the substantial risks or develop a risk mitigation plan, the agency should follow procedures to not award the grant or contract.