Originally published in the March2024 issue of the NWPPA Bulletin.

Over the last five years, the federal grant and grant compliance landscape has undergone significant changes, notably affecting public utilities, specifically infrastructure improvement and buildout projects. This shift in federal funding is accompanied by increased focus on grant compliance requirements, new funding policies, and evolving regulations.

While federal grants are essential for financing infrastructure, making technological advancements, and maintaining and improving essential services, leveraging this funding relies on strong compliance readiness in your organization’s accounting, operations, and engineering personnel departments.

Whether your organization is new to federal funding, experienced managing federally funded programs or receiving funds from private foundations, furthering your grant compliance knowledge and reviewing your current compliance status can reduce compliance risks, identify potential issues, and improve future funding opportunities.

Key Focus Areas

Funders are primarily concerned with ensuring that grant funds are spent on allowable costs within the period of availability, while achieving the defined performance goals. Below are common considerations for improving or establishing a successful grant compliance program.

Budget Development

It’s increasingly important for utilities to ensure specific costs, such as engineering and operations, are budgeted for and covered as direct costs, where applicable, under the grant. When applying and planning for a new award, all associated project phases, such as preliminary engineering, design, construction or inspection, as well as any overhead costs, must be broken out within the budget. Close attention should be paid to defined unallowable cost prior the execution of grant agreements.

Investing time in the application process and budgeting at a granular level often leads to fewer disallowed expenses; the funder approves the detailed budget from the beginning. In cases where this time and attention isn’t made up front, organizations often incur justifiable costs related to a federally funded program that they’re unable to recoup against the award.

Allowable Costs

A consistent, well-controlled process for procuring goods and services and adequately supporting expenditures during the grant-specific period of performance and timeline is another key to success. This is achieved through well-defined procurement and expenditure policies and procedures built into your work order process, standard forms and templates, and internal monitoring of grant expenditures.

Grant expenditures must be supported through purchase requests or orders, invoices, receiving reports, inventory transfers, timecards, payroll registers, and internal approvals must be documented. Lack of documentation supporting expenditures, or the absence of defined policies and procedures, is a common audit finding.

Time and Effort

For many utilities, personnel salaries and benefits account for significant federal expenditures. To ensure that expenditures are supported, properly allocated to construction projects and programs, and ultimately deemed allowable under federal awards, a consistent process for collecting and reporting data on employees’ time and effort must be established.

Regardless of the employee’s role, personnel costs and benefit allocations charged to a federal award must have adequate documentation on file to support the time and level of effort attributed to a specific federal award.

Many time-keeping systems can track and report employee time by program, project or award. Initiating this capability at the beginning of the grants and establishing a documented review and approval process is required to substantiate the related expenditures to your awards.

Subrecipient and Subcontractor Monitoring

Organizations using federal funds must have a defined process for performing subrecipient versus subcontractor determination. Subrecipient relationships must be closely monitored, typically requiring regular performance and fiscal reporting, desk reviews and onsite visits, and other defined monitoring procedures.

Subcontractor monitoring, while typically less stringent, must still be performed to ensure services are performed in compliance with the grant agreement and that costs associated are allowable under the terms of the federal award.

Given the complexity of evaluating these relationships and carrying out related monitoring, it’s important to have related policies and procedures, and other tools, templates, and resources, in place to guide the process and promote compliance. Common single audit findings in this area are:

• Misclassification between subrecipient and subcontractors
• Lack of documented compliance monitoring
• Related agreements or contracts that don’t include required federal flow-down requirements

Ensuring new business relationships are correctly classified prior to contracting, is important in determining what level of compliance monitoring is required.

Monitoring and Reporting

Upon the award of each new grant, it’s important to identify specific reporting requirements as a collaborative team. Reporting requirements often require input from various departments at specific milestones during the grant life cycle to ensure timely reporting and document retention is achieved.

Award Closeout

As programs or projects wind down and organizations near the end of an award’s period of performance, certain award closeout procedures must be performed. Identifying these final steps early, such as conducting final inspections, completing final reporting, and monitoring final spend-down, helps prevent non-compliance at the finish line.

In testing compliance during a single audit, auditors often identify missing or late reports during the final closeout period, indicating that priorities and focus may have shifted elsewhere near the end of the project.

More Ways to Boost Compliance

In addition to being aware of and evaluating the key considerations, best practices in executing a successful grant compliance program include:

Know Compliance Requirements

Take inventory of your grant awards focusing on specific regulations and conditions included in those awards. Bring together members from your operations, engineering, and accounting teams to discuss and assign responsibility for specific requirements. Know the resources available to you including the Uniform Guidance in Title 2 of the Code of Federal Regulations (CFR) Part 200, the Office of Management and Budget (OMB) Compliance Supplement, and funder-specific resources.

Assess Risk Regularly

Regularly assess and identify areas within the organization that may be at risk for grant award noncompliance and identify strategies for mitigating those risks.

Deploy Employee Training and Education

Ensure individuals across the organization are adequately trained on compliance requirements and the importance of adhering to them. Whether you deploy a centralized or decentralized grant management function, it’s important to recognize that compliance is a collaborative effort. Everyone at the utility should be adequately equipped with compliance knowledge, as well as their defined roles and responsibilities in meeting related requirements.

Develop Comprehensive Grant Management Resources

Develop grant management and compliance policies and procedures, tools, and templates to support compliance reporting and closeout, and consistency of internal reporting platforms.

Establish Effective Communication Strategies

Establish and maintain open lines of communication, as it relates to grant compliance, within your organization. Ensure roles and responsibilities are well defined and that all employees know who to go to for questions or compliance concerns.

Set the Stage for Success

Set the stage for compliance success with a multi-faceted approach that includes:

• Identifiable and understandable requirements
• Meticulous records
• Trained employees
• Enforced standards
• Internal compliance monitoring

Establishing a grant compliance program internally and assigning key roles and responsibilities is important. Evaluating your grant compliance practices, and the knowledge sharing across your organization, can help strengthen your ability to carry-out federally funded programs or projects successfully and compliantly.

Proper compliance facilitates good funding stewardship while maintaining eligibility for future funding.

We’re Here to Help

To learn how to improve your utility’s compliance landscape and strengthen its ability to leverage federal funding, contact your Moss Adams professional.

Additional Resources

• Power & Utilities Practice
• Assurance Services