With the One Big Beautiful Bill Act (OBBBA) signed into law,1 billions of dollars will become available to various entities seeking federal funding, such as state, local, and tribal governments and nonprofit organizations. While waiting for new Notices of Funding Opportunities (NOFOs) to become available, organizations should take this time to refamiliarize themselves with best practices of grants compliance because complying with regulatory requirements can be one of the top tools for maintaining and securing new funding.
The Nuts & Bolts of Grants Compliance
Grants compliance, a critical aspect of the grants management process, is the process of adhering to the federal regulations that govern the allocation and utilization of government grant funds.2 While there are certain federal agencies such as the National Institutes of Health (NIH) that have specific compliance requirements, the following are some of the most common and applicable across various funding agencies:
- Adhering to and understanding each of the clauses, stipulations, and specific programmatic requirements defined in your grant agreements
- Spending funds during the period of performance as defined in your grant agreements
- Using funds on allowable expenses
- Maintaining timely and accurate financial and programmatic reporting as defined in Title 2 of the Code of Federal Regulations (2 CFR) Section 200.328-330
- Following procurement standards as defined in 2 CFR §200.317-327
- Maintaining records as defined in your grant agreements
- Establishing and enforcing clear policies and procedures related to internal controls
The Importance of Grants Compliance & Consequences of Noncompliance
Grants compliance has become increasingly important as government spending has come under increased scrutiny. Considering an organization’s compliance with laws, regulations, and 2 CFR 200 is also part of routine processes in the grant life cycle, such as financial and reporting, and the Single Audit.
Instances of noncompliance can lead to financial and reputational consequences for grantees and subrecipients. From a financial perspective, noncompliance can cause an entity to return awarded funds or lead to fines. A pattern of noncompliance red flags for future funders could impact an organization’s ability to apply for future funding. Understanding the best practices in grants compliance can be an excellent tool in gaining and maintaining a stream of government funds.
Grants Compliance Best Practices
- Conduct periodic self-audits to uncover any compliance issues or areas of improvement.
- Host routine training sessions for staff to keep them abreast of any regulatory changes and reiterate current regulations.
- Create and maintain relationships with awarding agency staff. If you can’t reach someone, maintain a detailed log of efforts made, such as emails, phone calls, or portal messages to demonstrate attempts of compliance.
In addition to the above best practices, creating and enforcing strong internal controls can help create checks and balances to gauge if:
- Funding is being used efficiently
- Grants are utilized in compliance with applicable laws and regulations
- Financial and performance reporting is accurate
- Assets created or purchased with government funds are protected properly3
Key Internal Control Components
The Government Finance Officers Association (GFOA) defines the following as the core elements of internal controls:4
| Component of Internal Control | Definition | Examples |
|---|---|---|
| Control Environment | A set of standards, processes, and structures used to conduct internal controls |
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| Risk Assessment | Creating and utilizing a process to identify and gauge risks related to compliance and/or achieving grant program goals |
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| Control Activities | Actions created by policies and procedures to mitigate risk |
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| Information & Communication | Providing, sharing, and obtaining important information on a regular basis |
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| Monitoring | Conducting regular evaluations of internal controls to determine compliance |
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Collecting and maintaining good documentation is also a crucial aspect of grants compliance. Documentation requirements can differ based on what type of expenditure you have, the cost of that expense, internal policies, and where you live. For example, salaries may require copies of the payroll register, bank statement, and time-and-effort logs, whereas hiring an architect may require copies of ads, competitive bids, a bid matrix, and a contract. Uniform Guidance from 2 CFR §200.318(a) states that an entity should follow the most restrictive policy when multiple policies apply. The type of grant you received can also include additional requirements stated in your grant agreement, such as environmental reviews.
By integrating these practices into daily operations, organizations can regularly and consistently navigate compliance requirements, which can help safeguard funding and strengthen program reliability.
How Forvis Mazars Can Help
At Forvis Mazars, we understand that grants compliance involves a multitude of rules and guidelines that need to be followed. Our Grants Management team is well versed in helping state, local, and tribal governments and nonprofits create grants management policies and procedures, conduct compliance assessments, and prepare for reporting and Single Audits. If you have any questions or need assistance, please contact a professional at Forvis Mazars.