Grants Compliance 101: Your Grant Project Is Moving Forward. Now What?

Last week, the U.S. Department of Energy (DOE) issued letters to hundreds of grant projects awarded during the Biden Administration stating the department's intent to "retain" (not terminate) the projects. The DOE's issuance of these letters marks the end of the Trump Administration's detailed review of the Biden-era grant projects and comes as a relief to grantees that have waited more than a year to learn whether their projects would move forward.

But – beware and rejoice – now grant compliance begins.¹

Extensive regulatory, program and project-specific compliance requirements are incorporated into a grant's terms and conditions. And the government almost always has the right to terminate a grant for noncompliance. It is critical to think both short‑ and long-term about how to stay in compliance and manage your award performance effectively and efficiently.

Establishing internal controls over grant compliance is not optional – it is mandatory. Federal grant regulations require each grant recipient and subrecipient to establish, document and maintain effective internal controls that ensure they are managing awards in compliance with all applicable legal and contractual requirements. 2 C.F.R. § 200.303.

Top 5 Recommendations for Grant Compliance

Establish an Internal Compliance Function to Track Your Award Requirements and Create Accountability

One of the easiest ways to lose sight of compliance is to not assign roles and responsibilities for managing compliance. Holland & Knight recommends setting up an internal compliance function fit for your business. For large businesses, this can mean a compliance team tasked with tracking deliverables and regulatory requirements. For smaller businesses, the compliance function may be dispersed throughout the business, with compliance obligations assigned based on the type of requirement. As with any compliance function, assignment of overall responsibility for federal grant compliance should be at a sufficiently high level within your organization with adequate resources to ensure the program's effectiveness.

Implement and Enforce Policies and Procedures Necessary to Comply with Your Federal Award

Both the federal grant regulations and DOE award terms and conditions contain mandatory policies that a recipient must put in place. In addition, there are a number of highly recommended policies and procedures that can demonstrate to an auditor that a recipient has internal controls set up to comply with the law. Implementing these policies and procedures before an incident is key to documenting long-term award compliance. Once policies and procedures are established, recipients and subrecipients should take reasonable steps to communicate periodically and in a practical manner with employees responsible for grant administration and performance, such as training programs and other dissemination of information appropriate to each individual's respective roles and responsibilities.

Think Short-Term About Compliance with Project Milestones, Deliverables, Federal Reporting Requirements and Other Project Deadlines

Award execution often involves numerous project milestones, deliverables, federal reporting requirements and other deadlines. These obligations are typically not located in one document and can quickly become complex if multiple projects are under award at the same time. A recommendation is to create a consolidated tracker to capture all reporting obligations. Then, along the lines of the first recommendation above, assign responsibilities and create accountability for meeting the deadlines.

Recipients and subrecipients should establish an internal reporting mechanism, such as a hotline, that allows for anonymity or confidentiality and by which employees may report suspected instances of improper conduct. Of course, any improper conduct uncovered through monitoring or internal reporting should be addressed through consistent disciplinary action.

Think Long-Term About Audit Risk

Grant awards typically require a specific type of audit when they exceed a certain funding threshold, and the government imposes varying levels of oversight depending on the agency and the award. With the long list of day-to-day award requirements, it can be easy to lose track of the long‑term audit risk posed by noncompliance. Executing the award each day with future audits in mind can ease later burdens associated with an audit. It is recommended to instill a culture of documentation, compliance and recordkeeping early.

Recipients and subrecipients should periodically evaluate the effectiveness of their compliance program and take appropriate steps to design, implement, or modify policies and procedures to fill gaps. The annual compliance audit is a helpful tool to support this best practice for effective compliance.

Have Compliance Counsel on Call to Support with Interpretation and Implementation of Your Award Obligations

Holland & Knight is familiar with the compliance needs of grant recipients across federal agencies, including DOE. Engaging counsel early to help interpret a compliance obligation or understand how it applies to your project can prevent compounding issues of noncompliance down the road. Counsel can also assist with preparing and delivering training on a recipient's policies, procedures and other compliance obligations to ensure employees understand their responsibilities.

Holland & Knight Can Help

For assistance supporting your award performance, please contact the authors.

Notes

¹ For this alert, "grant" refers to grants, cooperative agreements and other DOE financial assistance awards.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.