Op-Ed: Puerto Rico’s recovery lacks good policy management
It was an overstatement when I indicated in this publication that state and municipal governments in Puerto Rico are continually challenged by failing to manage the post-award phase of a grant’s lifecycle, irrespective of the federal awarding agency.
Among the most common mishaps are the untimely and incomplete submission of programmatic reporting, lack of internal controls, problems with following internal procurement procedures, absence of clear policies and procedures, return of unspent funding balances, and making unauthorized grant expenditures.
Local media has featured the most recent cases in which the Puerto Rico Comptroller’s Office has reviewed the operations of government agencies’ performance with federally funded programs. Two instances are very distressing.
One involved the improper payment of $27 million by the Puerto Rico Disaster and Emergency Management Bureau during the first few months after Hurricane Maria.
The other involved the Puerto Rico National Guard Trust, which made contracts that needed more compliance with government regulations, and there needed to be more internal controls.
In both cases, problems with making unallowable expenditures and needing more internal controls are evident. What is also clear is that the staff is required to follow Commonwealth regulations. But would they have avoided such problems had they implemented clear policies and procedures? The answer would be a resounding yes.
The recovery process would benefit from good Policy Management.
According to the nonprofit OCEG, policies are the vehicles that communicate and define values, goals and objectives so that the culture does not morph out of control. An organization may have a corrupt culture even with policies in place, but it can only effectively operate with them.
Policies must be adhered to and enforced, limiting an individual’s discretion within the organization and reducing the bias inherent in decision-making.
Policy management is critical for effectively managing federal grant programs and addressing related Governance, Risk Management and Compliance (GRC) issues. These elements are essential in following the Uniform Guidance under 2 CFR 200.
Mature policy management aligned with federal grants guidance enables the organization to meet grant objectives reliably, address uncertainty and act with integrity. Policy management is essential because:
- Federal grants have extensive regulations and requirements around allowable activities, eligible costs, financial management, procurement, reporting, etc. Documented policies are necessary to ensure compliance.
- Clear policies establish standards and expectations for grant personnel on critical aspects like financial controls, documentation, monitoring and oversight.
- Well-designed policies aligned with Uniform Guidance 2 CFR 200 help mitigate waste risks, fraud, abuse, improper payments, noncompliance findings and other issues.
- Policies aid governance by setting boundaries on acceptable grant activities and behaviors.
- Policy management principles, like collaboration, accessibility and engagement, help secure buy-in from grant stakeholders.
- Documented policies provide consistency in grant management practices across different programs, departments and personnel.
- Strong policy management, centered on federal grant requirements, is essential for passing Single Audit compliance reviews.
- Periodic policy review and improvement driven by performance metrics and risk assessments help keep policies current and address emerging issues proactively.
- Exception handling policies prevent excessive deviations while allowing flexibility when warranted.
There are plenty of methodologies to provide coherence to policy development and management. I recommend using the Policy Management Capability Model, which provides a sensible guide to address the ambiguity of creating policies and has principled performance.
There is no legal prohibition for state agencies and municipalities to prepare policies based on laws and regulations. To expedite and fix the recovery process, this is essential.