Navigating the complexities of grant compliance is no small task. For organizations receiving grants, it’s crucial to adhere to regulations and requirements to ensure continued funding, reduce risks, and avoid penalties. However, with shifting priorities under the new administration, staying compliant can feel like a moving target.

This guide will walk you through the fundamentals of grant compliance, including:

Grant Compliance FAQs

What is grant compliance?

Grant compliance refers to the process of ensuring organizations meet the regulations, funding requirements, guidelines and terms and conditions set by their grantors. Failing to comply can lead to serious consequences, so understanding the core components of compliance is crucial.

Grant compliance involves:

1. Adhering to regulations: Following all rules and guidelines provided by the funding source, whether the funder is a government agency, nonprofit, or private entity.
2. Meeting deadlines: Submitting required reports and documentation on time to demonstrate proper use of grant funds.
3. Accurate record-keeping: Maintaining detailed and organized records to support transparency and accountability.
4. Using funds correctly: Ensuring that all grant money is utilized only for its intended purposes, as the grantor outlines.

Why is grant compliance important?

Federal grant compliance is the backbone of successful funding management. It ensures that organizations not only meet the expectations of their grantors but also maintain operational integrity. By adhering to regulations and using funds appropriately, organizations can foster trust, achieve their goals, reduce risks, and secure long-term financial stability.

Failing to comply with grant requirements, especially IRS regulations, can carry serious consequences. Here’s what’s at stake if compliance is neglected:

1. Loss of Funding: Noncompliance can result in the immediate revocation of grant funds. This disrupts projects, jeopardizes organizational goals, and diminishes your organization’s ability to serve communities or stakeholders effectively.
2. Audits: Improper reporting or lack of documentation can trigger single audit findings (which are discrepancies discovered when nonprofits experience an audit). Continued audit findings can lead to funders deciding against funding or threaten your efforts to receive future grants.
3. Legal Issues: Misuse of funds or failure to meet federal grant compliance standards may lead to legal action. Violating regulations, for instance, could result in fines, penalties, or even criminal charges for intentional wrongdoing.
4. Reputational Damage: When an organization is flagged for noncompliance, it risks losing credibility with current and future grantors, stakeholders, and the public. A tarnished reputation makes securing future funding.

What are the key components of grant compliance?

Grant compliance is a multifaceted process that requires attention to several key areas. Here’s a breakdown of the essential components every organization must prioritize to remain compliant and maintain trust with funders.

Financial Management

Effective financial management practices are the foundation of grant compliance. This ensures accountability and proper use of funds. Key steps include:

1. Tracking and reporting funds properly: Maintain detailed records of all financial transactions related to the grant.
2. Providing receipts for expenses: Document how funds were used and keep receipts to demonstrate transparency.
3. Revisiting the grant budget consistently: Monitor spending to ensure you stay within budget and adjust as needed to prevent overruns.

Grant-Specific Compliance

Each grant comes with unique requirements. To meet specific conditions set by the funder, organizations must focus on the following:

1. Delivering promised services or activities: Execute the programs or initiatives outlined in the original grant proposal.
2. Meeting performance goals: Achieve the targets agreed upon with the grantor to demonstrate success.
3. Submitting timely reports: Provide both financial and programmatic updates by the deadlines specified in the grant agreement.

Adherence to Regulations

Compliance goes beyond internal processes — it also means adhering to external rules and standards. Grantees must follow all applicable guidelines set by federal, state or private entities. For federal funding, these rules are especially critical and include:

1. Uniform Guidance (2 CFR 200): This comprehensive document provides federal award recipients with standardized requirements for managing funds. It ensures consistency and accountability across grant programs. Notably, the Office of Management and Budget (OMB) most recently updated the Uniform Guidance in 2024, introducing clarifications and revisions to improve federal grant compliance.
2. Single Audit Act: The Single Audit Act is crucial in promoting accountability and transparency for entities that receive significant federal funding. Its primary purpose is to create a standardized and efficient audit process while ensuring funds are used in compliance with applicable laws and grant agreements. The Act applies to nonfederal entities, such as state and local governments, nonprofits, and educational institutions, that spend $750,000 or more in federal funds in a single fiscal year. The threshold increases to $1 million under the 2024 Uniform Guidance revisions, applying to awards with fiscal years beginning on or after October 1, 2024, such as audits for entities with fiscal years running from October 1, 2024, such as audits for entities with fiscal years running from October 1, 2024, to September 30, 2025.
3. Federal Funding Accountability and Transparency Act (FFATA): Ensures transparency by requiring the disclosure of how federal funds are spent.
4. Digital Accountability and Transparency Act (DATA Act): Expands reporting to include how data is managed and made available to the public.

Additionally, applicants must stay informed about updates to these regulations, including the OMB’s annual Compliance Supplement. This resource is designed to help organizations understand federal grants’ specific requirements and evaluate their compliance practices effectively. Regularly consulting these materials ensures that grantees are prepared to align with evolving expectations.

By adhering to these regulations, organizations demonstrate financial integrity and build trust with funders.

Audit Readiness

Being audit-ready at all times is an essential part of grant compliance. Even if an entity doesn’t meet the single audit threshold, it still may undergo a performance audit. It’s critical to stay prepared by adopting these practices:

1. Prepare for external reviews: Ensure your organization can demonstrate that funds were appropriately spent and managed.
2. Keep detailed records: Organize all financial, operational and program-related documentation in an accessible format for easy reference.

By focusing on these key components, organizations can ensure compliance, foster funder confidence and maintain a strong foundation for continued funding opportunities.

How Does Compliance Vary from Government to Foundation Grants?

Compliance requirements differ significantly between federal and foundation grants, with each presenting unique challenges. Federal grants are known for their strict and standardized regulations, requiring detailed financial tracking, precise reporting, and adherence to guidelines like the Uniform Guidance (2 CFR Part 200). Frequent audits and oversight ensure funds are used appropriately, demanding rigorous processes from organizations to maintain compliance.

Foundation grants, on the other hand, have more diverse and funder-specific compliance requirements. Each foundation sets its own policies, so guidelines can vary greatly—from detailed reporting to more flexible expectations. Navigating these differences requires organizations to adapt their systems to meet the rigor of federal compliance while staying flexible for the varied needs of foundation grants. Understanding these distinctions helps maintain strong funder relationships and streamlines grant management efforts.

 Best Practices for Ensuring Grant Compliance

Establish Internal Policies and Controls

First, you’ll need to ensure everyone on your team is on the same page about roles, responsibilities, and best practices.

1. Develop clear procedures that outline every step of the grant management process, including budget tracking and reporting.
2. Assign designated personnel to oversee compliance tasks, ensuring accountability and minimizing confusion.
3. Implement a system of checks and balances, such as having team members verify expenses or review submitted reports for accuracy.
4. Use these measures to reduce errors and misuse of funds while promoting organizational accountability.

To establish a system that works best for your team, involve many team members in the decision process. Ask grant managers, financial experts, fundraising coordinators, and leadership to bring their unique perspectives to the table, creating guidance that plays to everyone’s strengths.

Understand Grant Requirements

Properly understanding grant requirements is critical for maintaining compliance, effectively managing funds, and staying ahead of regulatory changes. It is imperative to:

1. Thoroughly review the grant agreement to understand the expectations and obligations associated with the funding.
2. Familiarize yourself with Uniform Guidance (2 CFR 200) to effectively manage federal grant funds.
3. Stay informed about policy updates to avoid unintentional compliance violations.
4. Subscribe to regulatory updates or attend training sessions to keep your team up to date with changes in grant requirements.

Implement Effective Financial Management Practices

Effective financial management practices are essential to ensure transparency, maintain compliance, and accurately track the use of grant funds.

1. Use separate accounts and funding codes for each grant to ensure clear and transparent tracking of funds.
2. Verify each expense before processing to confirm it complies with the grant’s stipulations.
3. Maintain detailed records of time and effort reporting for personnel paid through grant funds.
4. Follow strong financial management practices to ensure transparency and reduce the risk of non-compliance.

Maintain Accurate Reporting

Accurate and timely reporting is the backbone of compliance, credibility, and trust, enabling organizations to meet funder expectations, streamline audits, and secure future opportunities.

1. Submit all financial and programmatic reports to funders on time to maintain compliance and credibility.
2. Keep documentation well-organized to allow quick retrieval during audits or internal reviews.
3. Ensure reports are complete and error-free by maintaining consistent and thorough documentation practices.
4. Reliable tracking and reporting strengthen funder relationships and pave the way for future grant opportunities.

Train Staff on Compliance

Empowering your team with knowledge and training in compliance not only minimizes risks but also builds a culture of accountability and ensures your organization stays ahead in meeting federal grant requirements.

1. Educate staff on fraud prevention, financial best practices, and regulatory updates through regular training sessions.
2. Organize in-house compliance workshops or engage external resources such as professional consultants.
3. Build a team that is well-informed about grant compliance roles and responsibilities to reduce risks.
4. Foster a culture of accountability and preparedness, ensuring staff can identify and resolve federal grant compliance issues proactively.

Want to stay informed on the latest grant compliance updates? Head over to Thompson Grants’ News page for reliable insights.

How to Find Grants Compliance Resources

Navigating grant compliance requires consistent diligence in updating your knowledge and finding the right resources. Staying informed and continuously training your team are key to maintaining compliance and building funder confidence. Here are some actionable ways to access the resources you need for success:

1. Leverage technology: Tools like Grants Compliance Expert can streamline your compliance efforts. GCE offers features such as updates on regulatory changes, expert insights into compliance challenges, and access to robust training modules designed specifically for grant professionals. With these tools, you can ensure your team stays informed and prepared.
2. Join an industry association: Being a part of professional networks like the National Grants Management Association (NGMA) provides you with invaluable resources, such as best practice guides, peer support and access to industry events focused on compliance.
3. Frequently check Grants.gov: For the latest funding opportunities and compliance updates, make it a habit to browse websites like Grants.gov. These platforms are treasure troves of information that keep you current on grant regulations and policies.

Taking advantage of these resources will empower your organization to stay ahead and tackle compliance challenges effectively.

Wrapping Up

Effective federal grant compliance doesn’t happen by accident — it requires commitment, the right tools and ongoing education. Take the next step by exploring comprehensive compliance training solutions and equipping your team with the knowledge they need to succeed. Staying proactive today sets the stage for long-term funding success tomorrow.