Key Grant Regulations You Need to Know to Stay Compliant and Avoid Penalties

Grants are complex and the regulations in 2 CFR 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards aren’t exactly straight forward and easy to understand. When you receive a grant, you are expected to have internal controls in place such as policies and procedures, segregation of duties, timekeeping, documentation requirements, etc. If you do not have internal controls, you will need to implement them as soon as possible after award. While anyone can make mistakes, you don’t want continuous errors, overbillings, billing of unallowable costs to become significant noncompliance issues requiring corrective action or even the appearance of alleged fraud.

Common Issues on Grants

Accurate timekeeping can be a major area of noncompliance. For example, research grants involve a significant amount of labor. Many established organizations that receive their first grant may think they only have to track time worked on the grant. This is incorrect, accurate time reporting is required for the entire organization on all projects even commercial jobs or privately funded grants.

Let’s discuss some of the other common noncompliances identified with grants:

• Estimating labor or charging the wrong project
• Cost allocation issues
• Lack of sub-recipient monitoring resulting in overbillings
• Billing duplicate costs
• Lack of competition for goods and services
• Applying indirect costs incorrectly
• Billing costs that were incurred on another award
• Billing costs in excess of compensation limitations
• Not providing or maintaining support for costs incurred
• Lack of disclosure of conflict of interest
• Failure to deposit advance payments in an interest bearing account

How are These Non-Compliances Identified?

Non-compliances can be identified in billings by the Federal Agency or external auditor during a single audit for non-profit, state or local government, Institute of Higher Education or compliance audit for profit entities. These issues can also be reported by a whistleblower, yes, your employee, in which case the Office of the Inspector General of the Federal Agency is involved if there is alleged fraud. The results of an OIG’s investigation can result in fines, penalties, and even debarment from receiving future grants. The OIG investigates allegations under the False Claims Act related to many of the let’s just say “mistakes” listed above as well as:

• Charging personal expenses as business expense
• Charging for costs which have not been incurred
• Charging more than one grant or contract for the same work
• Influencing government employees to award a grant to a particular organization

Although fraud usually occurs when there is intent, a lack of internal controls and ignorance of the regulations can be a trigger for fraud. By signing a grant, you are agreeing to compliance with the requirements of 2 CFR 200 – and one of the biggest requirements is having internal controls.

It is important when there is a mistake made, that organizations are proactive, make the correction and depending on the significance of the issue, discuss it with the Federal agency. Organizations generally are given an opportunity to correct a noncompliance or implement a corrective action plan to correct the noncompliance. You don’t want to get stuck repaying a significant amount due to continuous errors that could have been resolved timely.

What Should Organizations Do?

Review your award agreement and terms and conditions. Make sure you understand the requirements in 2 CFR 200 since most award agreements just reference the regulations and don’t explain which ones apply. Ensure you have written policies and procedures in place for accounting, timekeeping, removal of unallowable costs, and billing procedures. Understand the audit requirements and whether you meet the threshold for a single audit, compliance audit, or no audit is needed. The grant regulations are not easy to maneuver, and you may need assistance. Even a for-profit company that receives a grant and may still have to get a compliance audit performed, even though their FAR based contracts are audited.

How Redstone GCI Can Help

Redstone Government Consulting can assist your organization in a variety of ways, including providing an Accounting Manual template for both non-profit and for-profit organizations, as well as a Procurement Manual template. They can also help develop specific policies and procedures tailored to grant requirements for your organization.

In addition, Redstone GCI can assist with establishing an accounting system or providing ongoing monthly accounting services. They offer services such as performing cost or price analyses, managing post-award compliance efforts unique to grants (such as preparing quarterly SF425 reports or reviewing invoices), and conducting assessments of your internal controls. Finally, Redstone provides web-based or in-person training on grant compliance and timekeeping to ensure your organization stays compliant.