Merriam Webster defines compliance as “the act or process of complying to a desire, demand, proposal or regimen or to coercion.”
It sounds pretty scary and intimidating when you put it like that, but it doesn’t have to be! To break it down, compliance is simply about doing what you’ve agreed to do.
Now, sometimes that can be easier said than done, especially when it comes to a complex set of grant requirements and regulations. In this article, we’ll help you navigate grant compliance, offering a well-thought-out grant compliance checklist that you can use to make sure your bases are covered through the grant management cycle.
By the end, the word compliance won’t sound so intimidating! Instead, you’ll be ready to tackle grant compliance head-on.
What Actually Is Grant Compliance?
Before we dig into how to navigate grant compliance, let’s start by defining what it is.
Grant compliance is the process of following the rules, requirements, and regulations outlined within the grant agreement.
Every grant will have different requirements, such as:
Funding allocation
Geographic restrictions
Financial tracking
Documentation
Data reporting
Success metrics
Rachel Werner, Owner & CEO of RBW Strategy, has a great analogy when it comes to grant compliance:
"I think of compliance as sort of the broccoli of the grants work, because a lot of people don't really want to talk about compliance, and policies, and reporting, and all of those things. But they're an important component if you want to keep that grant funding and sustain it for the future years."
Failure to adhere to grant compliance can have serious implications. You could lose the funding, miss out on future opportunities, damage your relationship, and harm your credibility in the community.
But don’t worry—later in the article we’ll be sharing a checklist to help you and your team stay compliant with your funding. Keep reading!
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What’s the Difference Between Foundation and Federal Grant Compliance?
Grant compliance varies not just from grant-to-grant but also based on the type of funder. Two of the most common are foundation grants and government grants. Let’s go over the common differences in their compliance requirements.
Federal
Federal grant requirements are often much more stringent than other types of grants. Because they are funded by tax-payer dollars to promote the public good, they have to be accountable to the public and the stakes are higher.
If you receive any funding from the state, local, or federal government, you must adhere to § 2 CFR 200, which is the part of the Code of Federal Regulations that outlines expectations around grants and agreements.
The § 2 CFR 200 outlines what is expected of you to maintain federal funding, especially the:
Grant funding reporting requirements
Administrative requirements
Cost principles
Audit requirements
In general, federal grants have more reporting requirements to show that you are achieving your program goals and objectives—but that’s not always a bad thing. These requirements are much more prescriptive, so it can make qualitative reporting easier to follow. The grant will often guide the process based on the requirements, so all you have to do is track it as outlined.
Foundation grants have generally less predictable and stringent compliance requirements, especially when compared to federal grants.
They vary from funder to funder, and their requirements can change year over year. It is critical that you have a clear understanding of their individual grant requirements before you start to allocate the resources.
A lot of times, compliance with foundation grants means showing your funders that their money was spent appropriately. They want to know you made an impact, and they may care less about the data and detailed reporting that describes how you achieved the outcomes.
We’ve broken down grant compliance into eight easy steps. You can use this grant compliance checklist to help you navigate the process at your own nonprofit.
1. Understand Grant Requirements
Congratulations on receiving your grant! What a fantastic opportunity for your organization, and while it may be tempting to jump right in and put those funds to work, resist the urge. You need to take a step back and understand what’s required of you, and that includes identifying all the grant regulations and requirements that are expected of your organization.
Review the agreement document and take detailed notes. Before you sign anything, share it with your legal team to ensure you’re not missing anything.
If it passes through legal review, you can present it to the board for their final sign-off. They likely approved the grant as part of your overall funding strategy, but now that you’ve landed it, they need to be aware of what comes next, including the time investment and resources you’ll spend fulfilling the grant obligations.
Once all the i’s have been dotted and the t’s have been crossed, you’re ready to go!
Pro Tip: If applicable, start by setting up a meeting with the grant auditor assigned to your grant to establish communication early on. This open dialogue will help set a good foundation for a strong working relationship.
2. Make a Compliance Plan
Next up, it’s time to develop a comprehensive grant compliance plan, outlining all the tasks, requirements, and deadlines that are expected of you.
Be sure to create a timeline for all your grant-related tasks. This plan should include:
Milestones
Program deliverables
Deadlines
Reviews
Approvals
Think of this like a project plan. The more comprehensive you can be, the better.
Consider everyone’s preferred working styles as you develop these shared resources for best results. For example, an Executive Director may require five days to review something, while a grant writer may only need 24 hours to make revisions. Be realistic with your deadlines so you don’t fall behind.
Pro Tip: Use a shared calendar, like the one in Instrumentl, to help foster collaboration and promote visibility. You can centralize your team’s grant work flow while driving efficiencies to ensure everyone is on the same page.
3. Assign Responsibilities Across Teams
Now that you have your overall plan and have mapped out specific deadlines and deliverables, it’s time to assign responsibilities within your team.
This step is critical to ensure all have role clarity. No one has the time or resources to do double work, so don’t skip this step.
Make sure there is a clear understanding on:
Milestone ownership
Implementation steps
Reporting processes
Approval procedures
It’s important that all the compliance requirements have clear ownership by assigning responsibilities upfront.
Pro Tip: Consider doing a RACI matrix. This planning tool ensures there is clarity on who is responsible, accountable, consulted, and informed on a project. It is a fantastic way to create an efficient and effective workflow, and then you can use Instrumentl’s task feature to assign specific responsibilities.
4. Documentation and Reporting
By now, the grant-funded program or initiative should be up and running—or at least well on its way to be! Once you begin to allocate the resources, you need to make sure that you keep accurate and detailed records of all your expenses.
Additionally, you want to have policies and procedures in place that help reinforce grant compliance, ensuring that you are operating in alignment with what is expected of you. These policies could include:
Cash management policies
Budget reconciliation policies
Procurement policies
Time and effort policies
Conflict of interest policies
Travel policies
Not all grants will require you to have these policies in place, but you definitely should be keeping track of things like:
Expenses
Budget allocation
Fund distribution
Impact stories
The more meticulous your records are, the easier it will be to meet grant compliance requirements.
Pro Tip: Ensure your team is aware of the grant funding reporting requirements. Assess if there are software solutions like Instrumentl that can help you better collaborate.
5. Monitor and Audit
You never want to be surprised when it’s close to a reporting deadline, so make sure that you conduct routine program audits.
These audits can help you:
Monitor program progress and impact
Address any discrepancies in the moment to help you maintain compliance
Discover opportunities for improvement
Identify any potential payment issues that could become a problem, including when funding is expected, anticipated amounts, and actual received by dates.
By being proactive, you can make sure that you have time to make adjustments and course correct to stay compliant and deliver results.
Pro Tip: Set a reminder for when to conduct monthly or quarterly audits. They don’t have to be formal, just a quick check-in to ensure everything is going according to plan.
6. Keep Your Finance Team in the Loop
Your finance team is going to be your secret weapon—they live and breathe numbers, policies, procedures, and data. Numbers don’t lie, so make sure that you keep them in the loop when it comes to maintaining grant compliance.
They can help review:
Expenses
Documentation
Quarterly reports
Annual reports
Final reports
Basically, anything that has finances attached to it, they should have visibility on.
Pro Tip: Stay proactive. Include your finance department in audits throughout the year for a second set of eyes, and don’t just involve them as the final step. Their functional expertise can help you stay compliant from a reporting perspective.
7. Keep Everything Filed and Organized
Organize, organize, organize. The best way that you can stay compliant is to keep all of your grant documentation organized in a centralized location.
Instrumentl offers a fantastic document library where you can store all of your grant-related documents in one place.
Examples of documents you should keep organized are:
Budgets
Mission Statement
Proposals
Final agreements
Reports
Policies
Anything related to the grant should be well organized and easily accessible to all to help drive collaboration and ensure compliance. This will make the tracking and data collection process more streamlined.
Pro Tip: Most federal and state grants come with an official grant compliance checklist to help with the reporting requirements. Use this document to help establish a paper trail. You’ll be able to clearly identify what documents you need and which still need to be updated.
8. Keep Funders Up to Date, Always
Throughout it all, you want to make sure that you maintain open communication with the grantor to help build and foster the relationship.
You can keep funders up to date by:
Providing necessary updates in line with grant compliance requirements
Sharing program updates and impact stories
Tagging them on social media to recognize their contributions
Sending an email just to check-in
Offering updates when faced with a challenge or issue
Mary Gladstone-Highland, partner at Spark Group Consulting, shares more about why these open communication opportunities are so critical:
“Often, nonprofits encounter challenges where their initial plans don't align perfectly with the reality of executing a project. It's common for nonprofit leaders to feel concerned about maintaining the trust of the funder. There's a worry about potential repercussions or even the need to return the funds. But it's essential to understand that unexpected changes happen, and it's okay to communicate openly with the funder.”
Transparency is key to fostering strong relationships, so make sure to be honest.
Pro Tip: Identify their preferred communication style. Some orgs like phone calls, while others prefer emails. How you communicate can vary from funder to funder.
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