Any entity receiving more than $750,000 in federal grants or awards is generally required to receive a single audit, which encompasses an audit of the financial statements, as well as an audit of the Schedule of Expenditures of Federal Awards (SEFA). In auditing the SEFA, a few federal awards will be selected for testing. This testing is performed according to 2 CFR 200, and the Office of Management and Budget (OMB) Circular A-133 Compliance Supplement for the year being audited.

The OMB has defined 12 compliance requirements that the auditor should test for each program selected. Not every requirement is applicable to every grant. This series of posts is a brief overview of the 12 compliance requirements, and is designed to aid a grant recipient know what their responsibilities are and what the auditors are going to be looking for.

A. Activities Allowed or Unallowed

Each federal program has a unique set of activities which are allowed to be charged to the grant. A grant from the Department of Transportation for Highway Planning and Construction cannot be used to build a day-care. How do you determine what activities are allowable for a specific grant? First, check the grant agreement, notice of availability, and even the grant application. Generally an organization receiving a grant should have a pretty good idea of what the grant can be used for before they get the award.

Where this can get sticky is when a project doesn’t go according to plan.  Change orders and expansions in a project’s scope can sometimes lead to federal awards being spent on activities that are not allowable under that specific grant. Check with the granting agency before adding unplanned costs. And if the granting agency says to go ahead with the additional costs, keep a copy of the email for your auditors.; it will save everybody a lot of time and reduce stress.