Federal Grant and Supplanting Pressure
A mid-sized county with a population of 240,000 receives a $3.2 million federal human-services grant. The grant requires a 20% local match and prohibits supplanting existing local funds. The proposed budget would use $2.1 million of grant funds to pay salaries of 18 caseworkers who have been paid from the general fund for six years. The finance director notes a $1.5 million general-fund deficit and argues the grant 'frees up' general-fund dollars for other uses. The county attorney has not reviewed the grant terms. The grant period begins in 60 days.
1. May the county use the grant to pay the 18 existing caseworkers? Analyze supplanting and the match requirement, and identify what the county must document.
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Supplanting rules prohibit using federal funds to replace state or local funds that would otherwise be used for the same purpose. Paying salaries for positions that have been locally funded for six years is a strong indicator of supplanting. The finance director's 'freed-up dollars' argument is exactly what the rule is designed to prevent. Grant funds may support only an incremental portion, such as additional caseworkers or expanded service hours, if the approved budget and time-and-effort records show the increase. The 20% match must be non-federal cash or in-kind and cannot be met with other federal funds. Before charging salaries, the county should obtain written guidance from the awarding agency, have legal counsel review the terms, separate grant-funded new positions from existing positions in the accounting system, and maintain documentation of service levels and match. If it cannot document that the positions are new or expanded, it should not charge the salaries and should either use the grant for allowable new costs or decline the award.
2. What budget and control actions should the county take before the grant period begins?
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The county should adopt an amended budget that recognizes the grant revenue, appropriates allowable costs, identifies the source of the 20% match, and keeps grant activity in a separate cost center. It should assign a grant manager and adopt written policies for allowability, procurement, time and effort, cash drawdowns, subrecipient monitoring if applicable, and record retention. The governing body should approve acceptance only after seeing the match obligation, reporting requirements, Single Audit implications, and termination risk. Because the county has a deficit, it should avoid using one-time grant funds for recurring salaries beyond the grant period and should plan for sustainability. Monitoring should include budget-to-actual reports, match tracking, supplanting certifications, and periodic review by someone outside the grant program.