Federal grants can provide essential funding for nonprofits, but managing these grants requires a thorough understanding of federal requirements and meticulous compliance. Here’s a comprehensive deep dive into what nonprofit leaders need to know to successfully navigate the complexities of federal grant management.
Key Federal Resources
Title 2 U.S. Code of Federal Regulations (CFR) Part 200 (Uniform Guidance): This includes the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. The Uniform Guidance consolidates previous circulars to provide a streamlined, comprehensive policy for managing federal grants.
Annual Compliance Supplements: Issued by the Office of Federal Financial Management, these supplements provide updates and additional requirements to the Uniform Guidance. They include detailed audit objectives and suggested procedures for various federal programs.
Auditor Resources:
- The Yellow Book by the U.S. Government Accountability Office (GAO) provides standards for audits of government organizations, programs, activities, and functions.
- The AICPA Audit and Accounting Guide for Government Auditing Standards and Single Audits offers practical guidance for auditors performing single audits, which is generally updated annually.
Understanding Single Audits
Single audits are critical for organizations that spend $750,000 or more in federal awards in a fiscal year. These audits ensure that the financial statements and the Schedule of Expenditures of Federal Awards (SEFA) are accurate and that the organization complies with federal regulations. Single audits cover a broad range of compliance areas, making them essential for maintaining the integrity of federal programs.
Objectives of Single Audits:
- Validate the accuracy of financial statements and SEFA.
- Assess the design and operation of internal controls within the organization and over federal programs.
- Evaluate compliance with laws and regulations that could impact the financial statements and the proper use of federal funds.
Single Audit Components
Auditee Responsibilities (Sections .508 – .512):
- Procurement: Conduct audits in accordance with federal regulations to ensure compliance.
- Financial Statements and SEFA Preparation: Prepare accurate financial statements (FS) and a Schedule of Expenditures of Federal Awards (SEFA) that align with the audit period. SEFA should include detailed information about each federal program, such as the federal awarding agency, the Assistance Listings Number, and amounts provided to subrecipients.
- Follow-up on Audit Findings: Implement corrective actions for any audit findings and document the status of previous audit findings.
- Providing Access: Ensure auditors have access to necessary personnel and records to complete the single audit efficiently.
Auditor Selection (Section .509):
- Follow procurement rules and evaluate auditors based on responsiveness, relevant experience, qualifications, results of peer reviews, and cost. It’s essential to ensure that auditors are not involved in preparing indirect cost proposals if indirect costs exceeded $1 million in the prior year.
Financial Statements Preparation (Section .510):
- Ensure financial statements for the audited fiscal period match the single audit period. The SEFA must include individual federal programs listed by agency, details of subrecipient awards, and notes on significant accounting policies.
Audit Findings and Corrective Actions
Audit findings must be meticulously followed up with corrective actions. These findings, detailed in Section .516, should include:
- Status of Prior Findings: Indicate whether findings were corrected, and if not, describe planned corrective actions.
- Corrective Action Plans (CAP): Include the name of the responsible person, the planned corrective actions, and the anticipated completion date. If there is disagreement with a finding, provide specific reasons.
Compliance Requirements for Federal Grants
Federal grants come with various compliance requirements that nonprofits must adhere to:
Activities Allowed/Unallowed (Subpart E)
Ensure your organization only undertakes activities permitted by the grant. This includes understanding the specific allowable activities for each federal program.
Allowable Costs/Cost Principles (Subpart E)
It’s critical to understand which costs are reimbursable and manage any questioned costs effectively. The compliance supplement provides detailed guidelines on what costs are allowed and the specific requirements for different programs.
Cash Management (Subpart D 200.305)
Manage the timing of fund disbursements and reimbursements effectively. When funded on a reimbursement basis, ensure program costs are paid with organizational funds before requesting reimbursement. For advance payments, follow procedures to minimize the time between fund transfers and disbursements.
Eligibility (Grant Award Terms)
Maintain comprehensive documentation proving eligibility for program participation and funding amounts. Eligibility criteria are unique to each federal program and must be adhered to meticulously.
Equipment & Real Property Management (Subpart D 200.311-6)
Adhere to federal requirements for managing and reporting on equipment and property purchased with grant funds. This includes maintaining proper records and ensuring equipment is used for its intended purpose.
Procurement & Suspension/Debarment (Subpart D 200.311-6)
Follow strict procurement policies and avoid working with debarred vendors. Verify vendor eligibility using the federal suspension and debarment list to ensure compliance.
Subrecipient Monitoring (Single Audit Section M)
Properly monitor subrecipients to ensure they comply with federal regulations. This includes having clear subrecipient agreements, monitoring their performance, and following up on any audit findings.
Reporting Requirements
Nonprofits must submit audit reports within 30 days of receipt from the auditor or nine months after the fiscal year-end. These reports should be made available for public inspection and include:
- Financial statements.
- Summaries of prior audit findings.
- Auditor’s reports.
- Corrective action plans.
Internal Control Reporting:
- Financial Reporting: Report significant deficiencies and material weaknesses in internal control over financial reporting.
- Compliance Reporting: Disclose instances of noncompliance affecting federal awards.
Federal Financial Accountability and Transparency Act (FFATA)
Prime recipients of federal grants exceeding $25,000 must report subawards. The report should include details such as the entity receiving the award, the amount, the funding agency, and the program source. Accurate and timely reporting is crucial for maintaining transparency and compliance.
Reporting Requirements:
- Submit the FFATA subaward report by the end of the month following the month in which the subgrant was awarded.
- Include detailed information such as the name of the subrecipient, the amount of the award, and the purpose of the funding.
Conclusion
Navigating federal grant requirements can be complex, but understanding the key components and compliance areas will help your nonprofit manage these funds effectively. Ensuring accuracy in financial reporting, adhering to compliance requirements, and following up on audit findings are essential steps for maintaining the integrity of your federal funding.
For detailed guidance and support, consider consulting with a CPA or audit professional specialized in federal grants. Their expertise can help ensure your nonprofit remains compliant and can effectively manage federal grants to support your mission.
If you have any questions or need further assistance, feel free to reach out to our team for tailored support on federal grant compliance and audit preparation. We are here to help you navigate the intricacies of federal grant management with confidence and success.
