Federal Grants Management – A Primer

In response to the COVID-19 pandemic, the United States government passed a series of funding initiatives, including the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the American Rescue Plan Act of 2021 (ARPA). These stimulus packages have directed a great deal of money toward not-for-profits to help ease the economic burden caused by the pandemic and to increase not-for-profits’ capacity to carry out their missions. As a result of these stimulus packages, many not-for-profits are either receiving their first federal funding dollars or exceeding the Single Audit threshold of $750,000 of expenditures in their fiscal year for the first time.

Strings Attached

Compared to private grants and other non-federal grant sources, federal grants come with a commitment to ensure the not-for-profit understands the applicable requirements and the ability to implement systems that comply with these requirements.

The acceptance of federal funding comes with great responsibility, both from a compliance standpoint and an implementation standpoint. Some organizations that are new to federal funding are starting from scratch and need support to help get their bearings in this new funding environment. And many are reaching out to ask, “How do we make sure we are following the appropriate regulations for the type of funding we received, and where should we begin?”.

Answering these questions, and assessing your organization’s ability to meet all the requirements, can be a daunting task, but it doesn’t have to be. Ideally, your organization assessed operational and staff capacity and implemented any necessary changes prior to receiving your first federal award. But if you are trying to organize while the project is already underway, all is not lost. Follow the steps below to set yourself on the right course:

Experience Assessment

To start, assess your team’s experience with operating federal awards and with operating funds from your specific federal agency. It is important to determine if your staff have experience and an understanding of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, (aka Uniform Guidance) located at 2 CFR Part 200.

The Uniform Guidance is applicable to federal grants and cooperative agreements received by not-for-profits and state and local governments. It outlines the musts and the shoulds (i.e., best practices) of operating with federal funds. These requirements may be further supplemented by federal agency specific guidance, so additional research and trainings may be required.

If staff do not have the necessary background working with the Uniform Guidance, then management should identify appropriate trainings and support that can be acquired to give your staff the necessary tools to be successful. Even staff with prior experience should consider attending a refresher training due to the changes that the Uniform Guidance underwent in August of 2020 and the specific requirements outlined by the COVID relief packages. Be aware of changes in federal agency guidance and FAQs applicable to the program. And save documentation of the guidelines and FAQs in effect at the time decisions were made.

Grant Intake

The next item to review is the grant award letter. All staff responsible for the management and implementation of the program should review the award to understand the approved scope, budget, specific conditions, and terms and conditions agreed upon by the grantor and grantee.

The grant award letter should also reference the assistance listing number, previously referred to as the CFDA number. The assistance listing number will allow you to research your award on sam.gov to determine, among other items, applicability of the Uniform Guidance (2 Code of Federal Regulations Part 200) to the Federal program.

Understanding if all, or only portions of, the Uniform Guidance apply is especially important with the various COVID relief packages, since different programs are being held to different standards. COVID relief funding may be required to uphold the full Uniform Guidance, only submit to a Single Audit, or conduct their activities outside the requirements of the Uniform Guidance. Whatever the case may be, it is essential to remember that all organizations are expected to operate their programs with appropriate internal controls and appropriate accounting procedures.

Policies and Procedures

Once you know what parts of the Uniform Guidance apply to your federal funding streams, management should compare the organization’s existing policies and procedures against the Uniform Guidance to determine if they meet the necessary requirements.

For instance, not-for-profits with federal funding subject to the Uniform Guidance are required to have specific written policies that address topics such as procurement, time and effort reporting, subrecipient monitoring, cash management, allowable costs, etc. Each one of these has specific requirements that must be outlined within the policy.

Reviewing your policies and procedures to make sure that they reflect the current operations of the organization, and that they are in compliance with the Uniform Guidance, is key to the successful implementation of your programming.

Subrecipient Monitoring

If your organization plans on hiring a contractor or passing funds through a subrecipient, there are specific requirements that must be followed.

First, it is helpful to determine whether the arrangement you plan on entering into is with a contractor, subrecipient, or beneficiary. A flow-chart can be developed to help staff determine what type of arrangement is being considered. If you are considering a subrecipient, many federal agencies require that you seek prior approval from the funding agency prior to passing down the funds. Once approved, a subaward agreement must be entered into with the subrecipient and include all required subaward terms as detailed at 2 CFR Part 200.332(a).

Additionally, the Uniform Guidance requires that you assess and monitor the subrecipient activities. The monitoring should begin with a risk assessment to determine the level of monitoring required for the organization. The process for the risk assessment, and the procedure for determining the subrecipient’s level of risk, should be documented in your subrecipient monitoring procedure. You will want to request certain documents from the subrecipient, including the most recent Single Audit. If the subrecipient has had a Single Audit, it should be reviewed for any prior findings. Although, the Uniform Guidance does not specify a specific time when the risk assessment should occur, it is a good idea to conduct it before seeking prior approval from the funder or as part of the formal agreement process.

Once the risk assessment is complete and documented, the risk level should dictate the level of monitoring required. All monitoring efforts should be documented. In fact, all contracts, subawards, grantor communications, and other activities carried out under the federal award should be documented. It is best practice to keep a shared electronic file of information that key staff managing the award can access. Creating a central location for documenting activities will help staff respond quickly to requests during the Single Audit or as part of a desk audit performed by the funding agency. You will also want to make sure that you include submitted federal financial reports, programmatic reports, reviewed and approved expenditure detail reports, and budget-to-actual reports in this file as well.

Procurement and Suspension and Debarment

The area of procurement and suspension and debarment frequently requires changes to existing procedures. Procurement relates to the procuring of goods and services directly being charged to the federal award. Suspension and debarment are additional procedures required for those subcontracts exceeding $30,000 and all subawards.

2 CFR Part 200.319(d) requires the non-federal entity to have written procurement policies and procedures. These would include the prescribed procurement methods at 2 CFR Part 200.320 which result in more structured procurement procedures than what non-federal entities are used to. This is a must if procuring goods and services directly for federally funded activities.

Compliance Monitoring

As program activities progress, you may want to consider performing periodic internal audits to ensure that staff and all departments are adhering to the grant requirements. During the internal audit, staff can review:

1. Eligibility – by selecting sample files to confirm that the beneficiary was eligible and that the appropriate documentation was maintained in the file.
2. Procurement – by select sample procurements to validate that internal policies were followed and documentation exists.
3. Subrecipient Monitoring – to discuss the subrecipient’s progress and any setbacks they are anticipating.
4. Budget and Scope – to ensure that programming is functioning as planned and assess the need for any revisions with the grantor.

It is a good idea to review budget-to-actuals about three months before the end of the award to determine the need for requesting a no-cost extension. A no-cost extension extends the life of the award but does not add any additional funding to the award during the extension period. The no-cost extension is meant to give you the additional time that may be necessary to complete the approved scope of work. Grantors are usually amenable to an extension of up to 12 months when requested prior to the original award end-date.

Preparing for a Single Audit

See our article “It’s Your First Single Audit, What Do You Need to Know?” for more information on how you can prepare for a Single Audit.

In Conclusion

Many not-for-profits are experiencing their first ever Single Audit this year following the acceptance of COVID relief funds. If your organization has any questions on the process, reach out to a Clark Nuber professional. We would be happy to help you navigate the Single Audit.

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