Hikers display teamwork climbing mountain

The past few years have seen a windfall of federal grant program written into recent legislation. In November 2021, the bipartisan Infrastructure Investment and Jobs Act (IIJA) was signed into law, resulting in a historic $1.2 trillion investment in hundreds of funding opportunities to improve our nation’s highway and bridges, transit systems, railroads, broadband networks, energy grids, drinking water and more. Nearly a year later, the Inflation Reduction Act (IRA) allocated more than $500 billion in new funding to grant programs, tax incentives and loan guarantees. With IIJA and IRA grant programs rolling out new selections for initial funding cycles every day, some public sector entities are receiving their first federal grant awards in organizational memory.

Post-award compliance with federal regulations and award conditions can be a convoluted and time-consuming process, but it’s one well worth navigating. Compliance begins with grant pursuit and can prove just as vital to your organization’s bottom line, avoiding costly legal mistakes, enabling you to keep current awards through project completion, and increasing your readiness for future funding opportunities. Regardless of program or agency, all proposals for federal grants undergo applicant risk assessments during evaluation, including review of financial stability, quality of management systems, history of past performance, audit reports and findings, and ability to effectively implement requirements. Building relationships with your program officers can also provide insights into future opportunities through greater transparency into the agency’s planned activities and priorities. A strong track record of managing federal grants can thus be a vital element of your pursuit strategy, opening the door to more funding down the road. 

So, how can utilities, municipalities and tribes pursuing and receiving federal grant funding set themselves up for success with post-award management?

Fundamental compliance standards for federal awards

First, upon receiving an award, the project or grant managers should familiarize themselves with the administrative guidelines and requirements set for their particular federal award. Three documents that are essential reading for new federal recipients include: authorizing legislation, Notice of Funding Opportunity (NOFO) guidance and federal agency/program office procedures, grant agreement terms and conditions/award specifications based on risk and other factors.

Authorizing legislation

The authorizing legislation that allocated funding to the relevant federal grant program takes top priority in the complicated hierarchy of rules and regulations for their usage. The federal agency administering the program will pass down these stipulations through NOFO guidance released when soliciting applications; the legislation will determine the priorities for selection, eligible uses of funds and in certain cases, add legislatively specific guidelines for recipients. A good example of this is the Build America Buy America requirements for domestic procurement attached to all grants receiving money through the IIJA the past few years. Being familiar with the restrictions and priorities attached to IIJA or IRA funding can ensure your organization is prepared to receive awards from these grant programs.

Code of federal regulations

The second key document for determining compliance requirements is the Code of Federal Regulations (CFR), particularly the sections devoted to federal grants and contracts, 2 CFR section 200.

The CFR codifies the general and permanent rules published in the Federal Register by the executive departments and agencies of the federal government. Full text for the CFR is divided into 50 titles that represent broad areas subject to federal regulation. Key sections break down uniform administration requirements, cost principles to guide expenditures, single audit requirements and department specific requirements for each federal agency.

Unless regulations unique to the authorizing legislation state otherwise, the CFR applies to all federal funding received by a recipient, making it a crucial resource for grant management planning.

Grant agreement terms and conditions 

Finally, in addition to conditions at the federal and programmatic level, there may also be terms and conditions specific to the recipient. Federal agencies can put additional requirements in place for recipients that have been flagged for grant management risks during evaluation. This might mean increased reporting frequency, additional program office oversight, and other measures to ensure compliance. Likewise, additional leniency might be granted on certain requirements based on application materials, such as an approved waiver for Build America Buy America requirements or approved sole source request to bypass competitive procurement. Always review the agreement specific to your award, sometimes called the Notice of Award document, to note down any additional requirements or changes that apply to your organization.

Eight key areas of compliance to ensure post-award success 

Once award negotiations begin, recipients have a few months before official selection and notification to set up their grant management protocols, but these processes and written policies can often be requested during the negotiations themselves. In other words, evaluating your management practices for federal grant oversight now and working to fill the biggest gaps can prepare your organization for this tight turnaround. Large-scale organizational planning for key compliance areas is vital for public sector utilities, municipalities and tribes seeking to leverage transformative infrastructure funding.  

Internal controls are essential for preparing to successfully manage a federal award’s terms and conditions and comply with other federal regulations. The U.S. Government Accountability Office (GAO) provides the overall framework for designing, implementing and operating an effective internal control system in Standards for Internal Controls in the Federal Government (Green Book).

When evaluating readiness for federal grant oversight, look to build a culture of accountability with clear channels for oversight at every level. Identifying risks, particularly risk of fraud and financial mismanagement, is the first step toward implementing solutions and developing general controls through written policies and procedures. Establishing clear systems of communication between internal teams involved with grant management, project implementation and organizational finances also ensures all departments work seamlessly together to keep the grant on track and monitor its progress internally.

Documenting procurement for federal grant projects, including policies by threshold, process and selection rationales, is another central pillar of compliance. Under federal regulations, recipients expending federal funds should evaluate potential contractors’ performance histories, integrity records and compliance with public policies and laws; they should also ensure all applicable terms and conditions for the money are included in resulting contracts. Due to broader national priorities, recipients should, as far as possible, ensure open and free competition in purchasing and make good faith efforts to contract with disadvantaged business enterprises whenever procuring construction, equipment, services or supplies.

Prior to receiving the funding, there are several steps you can take to evaluate readiness for federal standards of procurement. Have your internal point of contact for the grant familiarize themselves with the different thresholds of federal procurement and the required processes for each to determine which are applicable to the proposed budget. This can help ensure in advance that internal procurement processes and procedures align with federally mandated ones. Putting conflict of interest rules in place for staff during procurement, ensuring staff sign commitments to adhere to these rules annually, and setting up periodic internal reviews of procurement files to ensure compliance are all simple steps for accountability that will save your organization time and frustration down the road.

Awareness of and adherence to cost allowability principles can prevent fraud and potential revocation of federal funding. According to the CFR, to be allowable under federal awards, costs must be:

  • Necessary and reasonable to carry out the award 
  • Allocable to the award-funded activities 
  • Not prohibited under state or local laws 
  • Aligned with guidance from the Office of Management and Budget 
  • Treated consistently and consistent with accepted accounting practices 
  • Not used for cost sharing or matching requirements on other federal awards 
  • Adequately documented

Apart from familiarizing key staff on the Code of Federal Regulations, a simple approach to ensuring allowability is keeping to the approved budget and getting prior approval from the program office on any proposed changes before expending the funds.

Federal grant recipients should have an accounting system in place that meets federal accounting standards. These standards provide clear guidelines on how to track expenditure to ensure compliance, even while managing more than one federal grant simultaneously. The accounting system should identify the receipt and expenditures of funds separately by grant and ensure that expenditures are recorded by project component and budget category as shown in the approved budget for that grant. Internal controls should ensure expenditures on all grants do not exceed the approved totals and prevent overlap in use of federal funds and claimed cost shares between grants. When managing multiple grants at once, it is also essential that staff log their time by project to ensure salary expenditures do not overlap across federal grants and provided cost shares.

Accounting on federal grants is particularly important as recipients are required to submit regular financial reports to the program office documenting their expenditures to date. Setting up processes and procedures for compiling and submitting compliant reports that also accurately reflect your spending on each grant will help keep the project on track, prevent fraud and abuse of funds, and set your organization up for a successful single audit upon completion.

Regular communication between your grant finance and project management staff members should be established and maintained throughout the life of the award; these communications should include a clear process for approving expenditures for a grant budget internally prior to executing any purchase orders or contracts, as well performing monthly grant reconciliations to review expenditures and correct errors. If a grant functions on a reimbursement basis, it is also helpful to establish procedures for drawing down funds no more than three days in advance of invoice payments to ensure no excess of funds on hand.

In addition to financial reporting, recipients will be responsible for performance reporting. Particularly for grant programs funded through new legislation, performance reporting requires more than updates on milestones achieved; federal agencies will often require data collection on evaluation or impact metrics to demonstrate how their funds are achieving the intended objectives of the program. Evaluation or impact metrics can be application-specific or program-specific by measuring what the funds are meant to achieve (i.e., technical – reduced outages; or community benefits – number of jobs created).  

Part of award acceptance and set-up should be not only creating a schedule of reporting deadlines but creating a reliable system for regular data collection based on reporting questions and categories required by the award conditions. Recipients should also determine which staff will be responsible for writing, approving and submitting reports to the agency.

When implementing federal awards, recipients can work with subrecipients, contractors or both. However, recipients remain responsible, to different degrees, for monitoring these parties to ensure proper use of funds, reasonable progress toward promised milestones and compliance with applicable federal standards. Unlike contractors, who provide goods and services in alignment with their regular business, subrecipients are active partners and participants in the grant award. As such, subrecipients are subject to many of the same compliance requirements as recipients, and recipients are responsible for monitoring adherence to those requirements, much like federal agencies are responsible for monitoring them. Subrecipients should be required to submit regular progress and financial reports to the recipient on an agreed upon schedule, and additional oversight strategies such as site visits might also take place with set criteria for evaluation in place. Contractor progress and deliverables should also be routinely monitored by recipient project management to ensure the grant remains on track.

As with accounting systems, there are also clear federal standards in place for property management systems, when applicable to the federal grant in question. Recipients should have a property management system that maintains records of property including description, source, identification number, where the title vests, acquisition date, federal share of property cost, location and condition, acquisition cost and ultimate disposition information. Physical inventory and reconciliation of property holdings should take place at least once every two years. Recipients should also conduct a prior review of each proposed property acquisition to ensure the property is needed and the need cannot be met with property the organization already possesses. This will help with the grant close-out process, when many federal agencies require you report on property acquired through the grant funds.

Finally, currently recipients that receive more than $750,000 in federal funds during a single year are required to undergo a single audit to review their compliance. Having many of the internal controls, including written policies and procedures, discussed above will set you up for a successful audit and resulting audit findings. However, record retention is also vital for ensuring a smooth review process, whether by your auditor or by the program office if an issue arises. These records should include: 

  • Grant documents, such as notice of award, approved grant application documents (e.g., budget, work plans), program office communications 
  • Grant reports, including internal monitoring and submitted financial and programmatic reports, for each period 
  • Procurement records, including competitive RFPs, received bids, conflict of interest statements, selection rationales and executed contracts 
  • Expenditure records, including contracts, invoices, receipts, drawdown records, cancelled checks and internal grant reconciliations 
  • Time and attendance records and payroll registers 
  • Fringe benefit rate and federally approved indirect cost rate documentation 
  • Travel authorization forms 
  • Inventory records 
  • Subaward documents including subaward application, award notice, reports and monitoring findings 
  • Audits, audit findings and documentation of actions to address any findings 

All records should be retained for, at minimum, three years after the close out of a federal award. If there’s an ongoing audit or litigation, make sure to keep this documentation on hand until it is resolved. Creating checklists and filing systems for project and grant management staff will prevent any gaps in your records and clearly document your track record successfully meeting compliance standards.

Next steps

The Code of Federal Regulations and other key resources are living documents undergoing changes constantly; in the past few months, major proposed updates have been under review and open for public comment, and others are released on a quarterly basis.  

With these eight key areas for federal grant compliance in mind, the next step is to assess your organization’s internal capacity to manage grants. In many cases, you may want to consider hiring dedicated staff or outsourcing grant management and compliance efforts.

Baker Tilly can help you navigate this complex terrain, develop plans and systems to ensure compliance, and help you manage federal grants with confidence.

Throughout this on-demand webinar, Baker Tilly’s Miranda Wojciechowski explains how utilities can set up for successful post-award management of federal grants through best practices that ensure compliance, develop rapport with federal agencies, and maintain eligibility for further funding pursuit. An overview of the Code of Federal Regulation’s uniform standards for grant management and recent legislation’s impact on post-award requirements for governmental utilities is also covered. 

Key takeaways 

  • Understand the fundamental compliance standards for federal grants in the Code of Federal Regulations, also known as 2 CFR section 200  
  • Prepare utilities for successful grant implementation and management by sharing best practices, including internal controls and written compliance policies, record retention, accounting and drawdown, evaluation metric tracking and reporting, and more  
  • Discuss how recent legislation has impacted post-award management requirements 


Miranda Wojciechowski, Ph.D., Grant Writer, Baker Tilly 

Baker Tilly annual event

Utility University

Explore other Utility University sessions

People in crosswalk in busy city
Next up

Strategic planning for results: 8 key steps