Compliance With Federal Grants: Everything You Need To Know
Federal grants can provide substantial funding for government programs, infrastructure, research, community development, healthcare, education, and other government initiatives. However, there are strict compliance requirements related to the funding.
While federal grant compliance is more than submitting reports or tracking expenditures, government agencies are sometimes responsible for managing allowable costs, procurement, subrecipient monitoring, reporting, internal controls, documentation, record retention, and other conditions attached to an award.
This is especially challenging if agencies manage several government grants at once because different awards have different deadlines, reporting requirements, funding restrictions, and documentation requirements.
A good federal grant compliance process allows government teams to maintain those requirements throughout the lifecycle of the award rather than trying to reconstruct records when it's time for reporting or an audit.
What Is Federal Grant Compliance?
Federal grant compliance is the process of meeting laws, regulations, award conditions, policies, and reporting requirements related to federal funding.
For many federal grants, recipients and pass-through entities have to meet requirements under the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, known as Uniform Guidance, found in 2 CFR Part 200.
There are numerous areas in grant administration where grant compliance requirements could apply, including:
- How funds are used
- How expenses are accounted for
- How contracts are procured
- How subrecipients are monitored
- How performance is reported
- How records are maintained
- How conflicts of interest are handled
- How audit documentation is managed
The exact requirements depend on award terms, the recipient, and the federal program involved.
Why It Is Different For Government Grants
Government grants usually have more strict oversight than many private or corporate grants.
Since the funding comes from the public money, there are additional requirements related to transparency, accountability, documentation, and proper usage of funds. Government agencies have to prove not only that the money has been spent, but also why the expense has been made, how the decision was reached, and whether the funded activity has met the requirements of the program.
There are also multi-level compliance requirements related to some federal grants.
In such cases, the federal agency provides funding to the state or local government first and the money moves through the pass-through entity before reaching another organization. Each level adds extra oversight and reporting responsibilities.
This is why the documentation is extremely important. Government teams have to maintain a reliable history of approvals, payments, amendments, communications, performance data, and other compliance activities.
How Requirements Vary Depending On The Type Of Government
Government grant compliance processes can be very different for different types of governments.
State governments, for example, could manage federal programs and provide funding to counties, municipalities, non-profits, and other subrecipients. This way, the state government has to deal with subrecipient monitoring in addition to award compliance.
Local governments could receive federal grants directly or through state agencies and comply with both federal and local requirements related to procurement, budgeting, approval, and accounting processes.
Federal grants could be provided to tribal governments in the context of programs with specific statutory, programmatic, and administrative requirements.
So, the compliance process depends greatly on the role the organization plays in the funding structure.
How Federal Grants Are Different Based On Type
Not all government grants have the same requirements.
Transportation grants, for instance, have different performance measures and procurement requirements than the public health grant. There are also housing grants, emergency response funding, workforce grants, environmental grants, and research grants with unique reporting structures and restrictions.
The requirements could vary depending on:
- The federal agency
- The particular program
- The amount of award
- The purpose of the funding
- Cost categories
- Performance measures
- Presence of subrecipients
- Frequency of reporting
- Any special conditions of award
That is why agencies shouldn't assume that one federal grant works like another and have to consult the actual notice of award, program rules, applicable regulations, and other award documentation.
Federal Grant Compliance Requirements
Even though the requirements could be different, there are some areas which usually are critical in federal grant compliance.
Allowable Costs
Usually, expenses have to be necessary, reasonable, allocable to the award, and consistent with applicable laws and award conditions.
Government agencies should maintain documentation proving how the costs relate to the particular program.
Internal Controls
Recipients of government grants should have procedures in place to safeguard the federal funds and ensure compliance with award terms and conditions.
This could include defined approval authority, separation of responsibilities, financial control, and documented procedures.
Procurement
Federal grants could have specific procurement standards.
Government agencies should maintain a detailed history of procurement decisions and whether competition, documentation, and conflict requirements have been met.
Subrecipient Monitoring
Agencies which provide federal grants to subrecipients are sometimes responsible for evaluating risk, communicating the requirements, monitoring the performance, reviewing the reports, and dealing with compliance issues.
Performance Reporting
It's common for government grants to have performance reporting requirements along with financial spending.
This way, teams have to have a connection between financial and program data and grant reporting.
Record Retention
Government grants could require retention of supporting records for certain period of time according to applicable federal regulations and award terms.
Audit Readiness
Government agencies should be able to produce documentation explaining spending, approvals, procurement, subrecipient oversight, reporting, and other grant activity.
What Could Happen If You Are Audited
During an audit, it will be thoroughly checked whether the federal funds have been managed according to applicable requirements.
The audit team could check financial transactions, internal controls, procurement documentation, subrecipient monitoring, reporting, supporting documentation, and compliance with award conditions.
The most difficult situation isn't that there has been any problem with the process. The problem is that the agency couldn't show what has happened.
If documentation is scattered across emails, spreadsheets, financial systems, shared drives, and individual staff records, then preparing for an audit is quite time-consuming.
Audit results could lead to corrective actions, additional monitoring, questioned costs, repayment obligations, and other consequences depending on the issue.
The better the documentation process, the easier the audit team could review the information and raise the question.
How Fluxx Helps With Audits
Fluxx could help government agencies to build a more consistent documentation process throughout the award lifecycle.
Instead of waiting until audit and collecting information, government agencies could use grant management software to maintain a more consistent history of awards, decisions, requirements, payments, reports, and communications.
Fluxx could help government teams:
- Maintain centralized documentation of awards: keep award information, documentation, approvals, amendments, reports, and historical activity in one place.
- Maintain visibility into compliance requirements: track deadlines, conditions, deliverables, and reporting obligations.
- Document workflows: maintain more consistent workflow and review and approval process.
- Maintain subrecipient documentation: track subrecipients, their requirements, reports, and other activities.
- Improve audit readiness: make historical records easier to find for auditors.
- Improve reporting: provide clear access to grant and program information.
- Preserve institutional knowledge: keep history of the award even after personnel changes.
Grant management software doesn't replace any expertise in accounting, legal, audit, or compliance fields. Grant management software helps government agencies to maintain the operational records.
Building Better Federal Grant Compliance Process
Federal grant compliance is more than just reviewing the requirements at the end of the award.
Government agencies have to know what requirements are attached to each award, assign responsibility, maintain documentation, track spending, monitor subrecipients, retain supporting records, and prepare for reporting and auditing throughout the entire lifecycle.
The process gets even more complicated with increasing the number of awards and stakeholders.
Consistent grant management process helps government teams to have better visibility of what has already happened, what is left to do, and where they could find the required information.
Book a demo with Fluxx to learn how grant management software could help your agency to improve federal grant compliance and manage complex funding programs.
FAQs
What is federal grant compliance?
Federal grant compliance is the process of complying with laws, regulations, award conditions, policies, and reporting requirements related to federal funding.
What is 2 CFR Part 200?
2 CFR Part 200 is Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).
Are federal grant compliance requirements the same for every award?
No, federal grant compliance requirements vary depending on the federal agency, the funding program, award terms, the recipient, activities, presence of subrecipients, and other conditions.
What could be reviewed by auditors during the federal grant audit?
Auditors could review financial transactions, internal controls, procurement documentation, subrecipient monitoring, reports, supporting documents, and compliance with award conditions.
How could grant management software help with federal grant compliance?
Grant management software helps with centralization of award information, maintenance of compliance requirements, documentation of workflow, improved subrecipient management, maintenance of historical records, and audit documentation.