Federal grants can be an excellent way to grow your mission and diversify your funding streams. However, federal grants require responsibility and oversight once accepted. Whether it be a direct grant with a federal agency or a subgrant from a pass-through entity, a federal grant is a legally binding agreement with the federal government. With the agreement, the organization commits to administer the grant funds in accordance with specifically outlined rules and regulations.

In other words, federal grants and subgrants come with strict strings attached.

To effectively administer federal grants, organizations should evaluate capacity by asking these five questions:

1. Do we have adequate policies and procedures for developing, reviewing, and accepting federal funding?

An organization should develop pre-award procedures to uniformly vet and apply for funding. Considerations include protecting the organization from risk and ensuring appropriate assessment of capacity to carry out grant activities. Specifications may be outlined in the Notice of Funding Opportunity (NOFO), along with unique requirements for each application for federal funding.

To accomplish this task, procedures should outline responsible parties and the timing around:

  • Assessing opportunities consistent with the mission and approving the organization to pursue the funding,
  • Developing the grant application in coordination with individuals in the program and administration (HR, IT, Finance, etc.) needed to support the grant operations,
  • Reviewing the application prior to submission,
  • Being aware of applicable terms and conditions as a grant recipient and assessing your ability to comply, and
  • Accepting awarded grants to ensure that expectations are reasonable and thoroughly understood by all responsible parties.

2. Are our staff appropriately trained on the Uniform Guidance (UG) and other applicable rules and regulations within the Notice of Award (NoA)?

The UG (2 CFR part 200) contains the standard rules for administering federal awards. Rules include allowable cost provisions; procurement and suspension and debarment; cash management; and subrecipient monitoring among other requirements. Organizations considering federal funding must ensure that key staff are trained on these rules to safeguard the organization and are prepared to comply. Furthermore, it is important that staff administering the grant have studied the NoA to ensure that all the rules and regulations are understood and assessed for compliance. The NoA may also include additional specific conditions for administering federal funding.

3. Do our entity-level and accounting policies and procedures comply with the UG?

The UG outlines areas of grant administration provisions that are a “must” (required) and those that are a “should” (best practice). Existing policies and procedures are to be assessed against the UG to guarantee that all the areas deemed a “must” are covered. Examples of policies that must be written are:

4. Can our current financial system support our federal grant needs?

Maintaining accurate, current, and complete accounting records is a must in federal award management (2CFR Part 200.302). The organization should perform timely closes and maintain a financial software capable of tracking revenues and expenditures by funding source. The software should also be able to generate budget to actual reports. Designated staff should review expenditures via these systems and reports on a routine basis, prior to reporting, to confirm that expenditures charged to the awards are reasonable, allowable, and allocable.  

Before awarding funding, federal agencies will often perform a risk assessment for first time grantees to verify that federal funds can be effectively managed. Verifying the capabilities of existing systems and/or implementing a new financial software that is capable of tracking transactions by grant is important for the management of federal funding and to support future growth.  

5. Do we have a secure yet central location for storing and retaining grant documents?

All activities under an award should be well documented to prove they were carried out in compliance with the organization’s policies and procedures, in addition to the UG compliance. Grant documentation should be stored (electronically or in paper) in a secure and central location. A central grant file helps organize all the pertinent grant information in one location to help with reporting, close out, grantor desk review, and the Single Audit – which is required of organizations with $750,000 or more of federal grant expenditures in a single fiscal year. Additionally, organizations should develop a document retention policy to manage grant and organizational documentation. The UG requires grant documents be retained for at least three years following the submission of the final fiscal report for the grant. (2CFR Part 200.334) 

Key Takeaways

Answering these five questions and assessing your organization’s readiness to administer federal grants is a crucial part of ensuring compliance. Keeping your organization educated on updated requirements and agency specific guidelines is an ongoing process. Organizations should evaluate capacity with the possible addition of every new grant opportunity, and policies and procedures should be periodically reviewed to avoid noncompliance. With training, education, and a targeted review of systems and policies, your organization may confidently pursue federal grant opportunities and further serve your community.  

If you have questions on federal grants or your organization’s preparedness to accept them, send me an email and I’d be happy to talk with you.

© Clark Nuber PS, 2022. All Rights Reserved.

This article contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.