The U.S. Government Accountability Office (GAO) has estimated that, for fiscal years 2018 through 2022, the U.S. government’s total direct annual financial losses will range from $233 billion to $521 billion. ^[1] This staggering amount encompasses various types of fraud, including grants.

Primary Stage of Fraud Occurrence

The majority of fraudulent activities transpire after the award is granted, specifically during the active award phase (also known as post-award), when the award has been conferred, work is in progress, and financial transactions are ongoing. Granting agencies utilize a range of procedures and tools to identify fraud during this post-award period; however, these measures are predominantly reactive rather than proactive.

Lack of Structured Fraud Data Compilation

Given the wide variety of grant fraud, agencies may encounter different types of fraud across grant programs. Some of the common categories of fraud encountered are:

• Program fraud
• Procurement fraud
• Misallocation of funds
• Nepotism

Diverse, disconnected, unstructured data on fraud originating from multiple sources and in incompatible formats is lost without a standardized storage and reporting framework. The type and nature of the fraud, along with other associated details, aren’t captured in a format that can be used to perform future checks against grantees.

Closeout Evaluation: Data with a Strong Purpose

Closeout evaluation isn’t merely a report or a formality to be completed. It is a powerful tool that captures comprehensive feedback on the grant. When used as intended within the specified timelines, it serves as a one-stop shop for highlighting the grantee’s operational, financial, and behavioral performance on the grant, which ultimately helps prevent future grant fraud. By capturing potential red flags in a structured format across these categories, the evaluation clearly documents deviations from standard grant management procedures. The recommendations below are not exhaustive, but are intended to guide practical, detailed action for documenting abuse, fraud, or waste concerns in a structured, consolidated format.

• Financial Indicators:
  • Spending arrangement (especially at award end)
  • Reallocation of funds without conforming to procedures
  • Frequent budget revisions
• Operational Indicators:
  • Poor and/or missing documentation, patterns indicating false deliverables
    • These two forms of fraud illustrate tactics used to obtain willful gains
  • Deviations in reporting requirements and monitoring results
  • Unverifiable/false reporting on outcomes
    • In the case of “Feeding Our Future,” multiple entities were created to open Federal Child Nutrition Program sites throughout Minnesota, falsely claiming to serve thousands of children within days or weeks of formation
  • Behavioral Indicators:
    • Repeated late submissions, multiple resubmissions, and corrections of documents
    • Irregular conduct or inconsistencies observed on a consistent basis
    • Unresolved issues or concerns with overall performance

A grant applicant’s past performance can be evaluated either manually or using newer technologies, such as Artificial Intelligence (AI). A standardized format leveraged by AI can perform a quantitative risk analysis. It can generate risk scores for each grantee based on its analysis of the evaluation categories.

To conclude, well-structured, properly completed closeout evaluations not only facilitates the closure process but also serve as vital input for assessing the grantee in future grant applications. Using the grantee’s Unique Entity ID (UEI), agencies can review previous closeout evaluations and generate a summary of past performance and related metrics to evaluate the grantee’s future proposals. This creates a complete cycle in which closeout evaluations inform the risk assessment during the pre-award phase.

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Bharadwaj (B) Raghuram, PMP, CSM, is a program manager at I&I Software Inc. with more than 20 years of experience in the private and public sectors. He currently advises state and local governments, with a focus on program and technology transformations, particularly the modernization of grant initiatives. His current work emphasizes improving grant programs through AI-powered fraud detection and prevention. He may be reached at bharadwajraghuram7@gmail.com
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[1] Fraud Risk Management: 2018-2022 Data Show Federal Government Loses an Estimated $233 Billion to $521 Billion Annually to Fraud, Based on Various Risk Environments – GAO-24-105833 – Published: Apr 16, 2024. Publicly Released: Apr 16, 2024, 2.

Joey DeSantis and William Treanor of EY were a part of NGMA’s monthly webinar series. In their presentation, How to Get Sub-Awardees to Understand and Follow the Rules: A Lifecycle Approach to Uniform Guidance Compliance, they offered practical strategies for ensuring sub-awardees understand and comply with federal, state and organizational regulations. This article summarizes key takeaways from their presentation.

Access the recording through Grants Management Academy, NGMA’s education portal.

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Over the last year, grant professionals have been operating in a more uncertain environment than usual. Funding pauses, program terminations, legal challenges, and updated federal guidance have created real pressure for both prime recipients and their sub-awardees. In this climate, expectations around sub-awardee oversight have continued to increase, even as capacity remains strained.

Based on recent discussions with grant professionals, three themes consistently stand out when it comes to strengthening sub-awardee oversight in today’s environment.

1. Sub-Awardee Oversight Starts Earlier Than Many Organizations Think

Many compliance issues traced back to sub-awardees do not originate during project execution. They begin much earlier, often during pre-award or onboarding, when expectations are not clearly communicated or risks are not fully assessed.

Recent policy changes and audit findings reinforce the importance of treating oversight as a lifecycle responsibility. Risk assessments, eligibility verification, flow-down of requirements, and documentation of expectations all need to happen before funds are released. Waiting until reporting problems or audit findings surface makes issues harder—and more expensive—to correct.

Organizations that invest time upfront tend to spend less time later responding to findings, negotiating corrective actions, or repairing strained relationships with sub-awardees.

2. Many Compliance Issues Reflect Capacity Gaps, Not Resistance

In practice, most sub-awardee challenges are not caused by a lack of willingness to comply. They are caused by limited staffing, competing priorities, and unfamiliarity with federal requirements, especially among smaller organizations or first-time recipients.

When oversight is framed purely as enforcement, it can lead to pushback, delays, or breakdowns in communication. When it is paired with clear guidance, onboarding support, and targeted technical assistance, outcomes tend to improve for everyone involved.

Grant managers frequently see better results when they focus on helping sub-awardees understand what is expected, why it matters, and how to meet those expectations within their existing capacity.

3. Risk-Based Monitoring Is More Effective Than One-Size-Fits-All Oversight

Not all sub-awardees pose the same level of risk, and monitoring approaches should reflect that reality. A risk-based framework allows organizations to focus attention where it is most needed, rather than applying the same level of scrutiny across the board.

Effective monitoring programs typically include regular desk reviews, periodic site visits for higher-risk partners, follow-up on audit findings, and clear documentation throughout the grant period. Just as important, they build in opportunities to adjust monitoring as circumstances change.

This kind of structured approach helps organizations identify issues earlier, use oversight resources more efficiently, and demonstrate due diligence if questions arise later.

Looking Ahead

Sub-awardee oversight is becoming more visible, more scrutinized, and more consequential. Federal agencies, auditors, and the public all expect stronger accountability across the full chain of grant funding.

For grants professionals, the goal is not simply to avoid findings. It is to create oversight practices that support compliance while allowing programs to operate effectively. Organizations that take a proactive, risk-informed approach are better positioned to meet that challenge—especially in an environment where uncertainty is likely to continue.