Major Compliance Requirements for Federal Awards

Federal awards represent financial assistance provided by the federal government and can either be directly provided by a federal agency or a non-federal agency as a subrecipient. The funds typically received through grants, cooperative agreements, or contracts are used to support initiatives, programs, and projects that serve a public purpose. Common examples include:

• School food programs for students from low-income households
• Law enforcement initiatives to reduce crime
• Construction or development of property for low to extremely low-income individuals
• Roads/utilities for public use
• Special education assistance programs
• Assistance with recovery from natural disasters such as floods, forest fires, or hurricanes

While federal funding is most often received by state and local governments, other types of organizations may also be eligible to apply for federal funds. These include educational institutions, public housing organizations, nonprofit organizations, and occasionally, for-profit organizations.

The award process varies significantly depending on the nature of the award, purpose, and type of entity applying.  Since grant awards are managed by various departments within the federal government, the application process may differ depending on the requirements of the awarding agency. For more details on available federal awards and application requirements visit, grants.gov or sam.gov.

Key Compliance Requirements for Federal Awards 

Federal award funding primarily takes one of two forms. The awarding agency may advance the funds to the awardee, who then funds the program directly from the funds received. Alternatively, the agency may require the awardee to incur the costs upfront and then submit requests for reimbursement. In either case, the awarding agency will likely specify criteria or stipulations as a condition of receiving the federal award. Examples include maintaining specific documentation, cost provisions, eligibility criteria such as specific income thresholds, specific procurement processes, or mandates for the disbursement process. In certain instances, the entity may be required to have an external audit of the awards performed.

The Role of Uniform Guidance in Federal Award Compliance

2 CRF Part 200 Uniform Administrative Requirements, Cost Principles, And Audit Requirements for Federal Awards, amended January 3, 2025, commonly referred to as the Uniform Guidance (UG), establishes the following:

• Administrative requirements for managing federal funds, including procurement, reporting, and financial management
• Cost principles, which define what costs are allowable and which are unallowable for an expenditure under a federal award
• Audit requirements

The Office of Management and Budget (OMB) is an authoritative source for auditors. It provides information about federal programs, audit objectives, and audit procedures. They issue the Compliance Supplement annually, a document that outlines compliance requirements for specific federal awards. Entities that receive federal awards can utilize the Compliance Supplement to understand the federal regulations and how they will be tested during the audit process.

Common Compliance Expectations for Grant Recipients  

The UG specifies that grant recipients establish and maintain certain written policies and procedures and implement and identify key internal controls over compliance with the grant award’s requirements. While the specific compliance requirements vary depending on the award specifications and the nature of the program, the OMB Compliance Supplement summarizes the requirements in the following 12 areas.

1. Allowed and unallowed activities
2. Allowable costs and cost principles
3. Cash management
4. Eligibility
5. Equipment/real property management
6. Matching, level of effort, and earmarking
7. Period of performance
8. Procurement, suspension, and disbarment
9. Program income
10. Reporting
11. Subrecipient monitoring
12. Special tests and provisions

Entities must prepare a Schedule of Expenditures of Federal Awards (SEFA) to support their grant activities. This schedule lists each grant received, the awarding agency, the passthrough agency if not directly received from a federal agency, the assistance listing number (ALN), grant numbers, and the expenditures incurred in a particular fiscal year related to those federal awards. In addition, the entity should have documented internal controls over the preparation of the SEFA to maintain its accuracy and completeness.

Compliance Challenges

Compliance with the UG and the terms and conditions of federal awards can be complex. Despite entities' best efforts to comply, it is common for audit findings to be reported regarding internal controls or compliance. Examples of audit findings include internal control deficiencies over the preparation of the SEFA, failure to establish and maintain written policies as required by the UG, disbursement of funds not in accordance with the program requirements resulting in questioned costs, or appropriate monitoring of any funds if passed through to subrecipients.

Depending on the severity of the audit finding, the awarding agency may either deny future funding or require that previously provided funds be returned. If your entity passed through these federal awards, the awardee may not be able to recoup funds paid to vendors or contractors, leaving your entity at risk.

Best Practices for Maintaining Compliance

Establishing and maintaining compliance can be challenging and complex. Follow these steps to develop stable and efficient compliance practices. Best practices include:

• Developing written policies and procedures for administering federal awards, including SEFA preparation.
• Establishing and documenting internal controls over key steps of the grant compliance requirements and administration processes. Key steps include, but are not limited to, the receipt, disbursement, reconciliation, eligibility determination, procurement of services or materials, and reporting.
• Providing key staff with grant administration training.

EisnerAmper has staff experienced in all phases of the grant award process, including application, grant management, training, and auditing. Contact us below to learn how we can help you with federal grants and awards.