Best Practices for Nonprofit Compliance

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May 13, 2024

Grant compliance can be daunting.

You know it’s important to maintain grant compliance, but there are so many different moving parts that it can be difficult to know where to start. As overwhelming as it may seem, you don’t have to feel this way!

In this article, we’ll provide an overview of grant compliance, what it involves, and how you can practically maintain it.

By the end, you should feel empowered with the resources and knowledge needed to tackle nonprofit compliance with confidence.

Sound good? Let’s dig in!

Nonprofit Compliance in the Context of Government Awards

Before we dive into the details, let’s start by defining what grant compliance is:

Grant compliance is the process of adhering to the requirements outlined in your grant agreement. This includes adhering to any federal and state regulations, as well as any additional responsibilities outlined by your funders.


No matter what type of funding you receive, you will need to deal with maintaining compliance—but it’s especially important when it comes to government grants.

Why?

Federal grants are funded by taxpayer dollars and must be used to promote the public good. There’s a higher need for transparency about how the funds are being allocated, which is why government grants often have much more labor-intensive compliance requirements.

Failure to follow these compliance requirements can have serious consequences, including:

  • Damage to your organization’s reputation with funders and partners
  • Lack of trust from the community you operate in
  • Loss of grant funding
  • Loss of nonprofit status

Here’s how Rachel Werner described grant compliance in her workshop, 5 Steps to Perfect Post-Award Grants Management:

“So 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, policies, reporting, and all of those things. But they're an important component if you want to keep that grant funding and sustain it for future years.”


The good news is that federal grants are often very prescriptive and detailed in their requirements. They outline exactly what is needed, which in many ways makes maintaining compliance easier to accomplish. There’s not as much guesswork involved.

Keep reading as we break down the basics of government awards and the most common compliance requirements.

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Understanding the Basics of Government Funds

Let’s start with the basics of government funding, breaking down its main elements.

What Are Government Awards?

In general, government awards provide financial assistance to nonprofits to help advance the public good.

The most common type of government assistance comes in the form of a grant.

Government grants are financial awards that support specific projects or initiatives. They have a set financial amount, which can be disbursed in a one-time lump sum or over time.


Nonprofits who receive any government funding must adhere to § 2 CFR 200, which outlines the expectations around grants and agreements in the Code of Federal Regulations.

Every government grant will also come with its own individual requirements, including things like:

  • Financial expenditure limitations
  • Geographic restrictions
  • Reporting requirements

Depending on the award, government grants can be offered on the national, state, city, or even local municipality levels. The U.S. Government offers a database on Grants.gov where you can search for government grant opportunities that are open for applications.

Pre-Award Requirements

For government grants, compliance starts before you even receive the award. Even if your nonprofit has successfully been awarded a government grant before, you still need to make sure that you continue to meet all the pre-award eligibility requirements.

These include:

  • Maintaining up-to-date business licenses. Check in with your state on specific requirements. They vary from state to state.
  • Keeping your insurance updated and active. At a minimum, nonprofits need general liability insurance to cover claims of bodily injury or property damage caused by accidents, and you can read more about that here.
  • Registering with SAM, which is the U.S. Government’s System for Award Management. You must register on SAM to do business with the U.S. Government.

To learn more about government grants and how to prepare your nonprofit for receiving one, check out this webinar: Government Grants 101: 5 Steps for Getting Government Grant Ready w/ Patrice Davis.

Interim and Final Reports

Because of the nature of the funding and the work being done, government grants are often multi-year, with funding dispersed over time. As a result, they may require more reports than a traditional grant.

This includes both interim (progress) reports and final reports.

The length and level of detail of these reports will vary based on the specific award you receive.

Grant Oversight

The United States Government offers a clear outline on the different types of oversight that could be involved in the grant funding process:

  • Progress reports, as mentioned above, reflect the ongoing progress of a project over time.
  • Site visits provide opportunities for the federal grantor agency to see the work in action, driving transparency and open communication.
  • Technical assistance offers the nonprofit opportunities to get help from the federal grantor to ensure they are in compliance with the grant requirements.
  • Audits can be conducted annually to ensure compliance with regulations. These may be required as a result of the Single Audit Act and should include an evaluation of finances and other grant requirements.

Grant oversight may vary depending on the type of grant you have and where the funding came from. For example, city and local grants may have a program officer you are in constant contact with, while state and federal grants may be more hands-off unless there is an issue in meeting compliance criteria.

The best way to understand what is expected of you in terms of grant oversight is to read your grant agreement carefully and set a meeting with the program officer to discuss it.

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Compliance Essentials for Nonprofits

It should be clear by now that grant compliance needs to be taken seriously. So where do you begin? Here are some practical strategies and best practices that can help your whole team stay compliant with your funding:

Get Familiar With Grant Portals

Once you receive government funding, grant portals are going to become your best friend.

A grant portal is a tool often used by federal, state, and local governments that provides a centralized location to share grant-related information.


A great example of a grants portal is FEMA. Nonprofits that receive funding from FEMA can access the portal for information related to their award.

Grant portals are often used for:

  • Communications: Funders often send messages via the portal, providing an easy way to centralize and track all communications.
  • Data/Document Repository: You may be required to upload your documentation to the grant portal.
  • Reminders: The portal may send reminders when reports are due and other important deadlines that are coming up.

Essentially, a grant portal is a hub for all your federal funding requirements, so it’s critical that your team is able to navigate it effectively. Make sure to click around and explore. Ask questions if something is not clear.

Pro Tip: Make sure you have at least one expert on the team who is assigned to check the portal regularly. Also, conduct routine audits on the platform to ensure information is accurate and up to date, including contact details, staff names, and more. That way, you’ll never miss an important update!

Create a Compliance Plan

Nonprofit compliance isn’t the most fun aspect of receiving a grant, but it is important. Just ask Jeannette Archer-Simons, President of Archer-Simons Consulting Group:

“Often, a nonprofit is so excited about receiving a grant or funding that they just start running. When the funding is accepted, take a breath. Look at what the reporting requirements are. Who should know that there is a reporting requirement and should be involved? Have a quick sit down or virtual meeting and outline who will be responsible for what elements of reporting and set the deadline for receiving the information. Be specific.”


This is great advice, especially when it comes to the complex nature of federal reporting requirements.

Here’s how you can go about developing a compliance plan:

  1. Write down all the grant requirements outlined in the agreement.
  2. List out any grant related tasks, including milestones, program deliverables, reporting requirements, audits, deadlines, reviews, and approvals. The more comprehensive you can be, the better. Consult key subject matter experts to ensure that all is accurately reflected.
  3. Assign responsibility for each task and ensure your team members know what they are responsible for. There should be alignment with all SMEs before you move forward.
  4. Execute the plan.

By laying it out in this manner, you can determine a workflow that works best for your team. Why is this important?

  • It can help you capacity plan, ensuring your team has the resources available to meet deadlines.
  • You can better identify gaps in your process that could lead to noncompliance.
  • The clear ownership of each task drives accountability for compliance within your team. There’s no confusion on who is responsible for what.

Pro Tip: Use a shared calendar like the one in Instrumentl to track your deadlines. You can also assign tasks to drive a clear workflow, upload documents, and more.

Create a Process for Keeping Accurate Records

To help make your plan go smoothly, you need to make sure your records are accurate and up to date.

What type of records should you be keeping track of?

  • Financial records, tracking the allocation and expenditure of federal award funds.
  • Program records, documenting all program activities, participant data, and progress.
  • Evaluation information, including how you are measuring the program’s success, outcomes, and any other metrics.

Accurate records make it easier to stay compliant because you know exactly where everything is located if you have questions or need information for reporting. Make sure that your team is clear on:

  • What to save.
  • Organization structure on where to save documentation.
  • Naming convention on how to save information.
  • Deadlines on when information should be saved.

Instrumentl has a fantastic document library feature where you can upload your information to keep everything centralized in one place.

Instrumentl’s document library makes organizing critical information a breeze.

Staying organized upfront can save you from scrambling close to the deadline.

It’s a Team Sport, So Make Sure Everyone’s a Compliance Expert

There may be an I in compliance, but it’s really not a single person’s responsibility. It’s up to everyone on your team to ensure you maintain compliance, especially when it comes to government grants.


Compliance requirements are complex, and everyone plays a critical role throughout the process. Having a strong compliance plan and documentation process is a great start. It provides transparency and advance notice, but what else can you do?

  • Consult with key stakeholders (SMEs, leadership, those who are doing the work) to get their expert opinions on if the plan and deadlines will work. If not, adjust as necessary.
  • Ask your team and partners how much notice they would like to pull data and other information together. If it’s not realistic, find a way to compromise.
  • Share updates if deadlines or requirements have changed with your team.
  • Send reminders about upcoming deadlines—Instrumentl can help with that!

Ultimately, you want to be proactive. You want your team to feel ownership over their piece of the puzzle and how it plays a critical part in the program’s overall success.

Pro Tip: Make sure each team member has a clear understanding of their compliance requirements. Cross-train team members as back-ups to support in the case of an emergency. Everyone needs to be able to step in to drive nonprofit compliance, and you can check out Instrumentl’s resources to help you learn more.

Account for Mishaps

Life happens.

Sometimes the program doesn’t go according to plan, or you face a roadblock. Maybe it costs more than you expected. Whatever the case may be, you need to be honest.

Mary Gladstone-Highland, from Spark Group Consulting, understands it’s scary to have to share mishaps with your funder. There’s a fear that you’ll lose funding or break their trust, but it’s actually the opposite:

“Most funders understand and are willing to collaborate on adjusting the project plan to something more feasible. Remember, you and the funder share the common goal of effecting positive change, and transparency is critical in maintaining a solid relationship. By taking a proactive approach and being honest about the project's status, you're more likely to strengthen your relationship with the granting agency rather than harm it. Remember, these situations are common, and openly addressing them demonstrates your commitment to accountability and success.”


If something happens, don’t panic.

  • Take a step back and assess what is happening objectively.
  • Create a plan to help address the issue and get the project back on track.
  • Communicate with funders on what you are facing in a timely manner. Ask for support or extensions if needed.
  • Partner with your team to get everything back on track.

At the end of the day, you want to set yourself up for success when something unexpected happens, and the best way you can do this is through honesty and transparency with your funders.

Pro Tip: Even though they often have more compliance requirements, government grants still have some degree of flexibility. They may be able to offer an extension with reasonable notice, so make sure to maintain open and transparent dialogue with your program officer.

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Wrapping Up

Grant compliance doesn’t have to be intimidating when you understand its basic components and follow our best practices:

  • Get familiar with grant portals
  • Create a compliance plan
  • Create a process for keeping accurate records
  • Make sure everyone plays a role in compliance
  • Account for mishaps

Instrumentl can help you at every step of the way, driving collaboration and compliance through its calendar tool, task management features, document library, and so much more.

Ready to get started? Sign up for a free, 14-day trial today to see how Instrumentl can change the grant compliance game.

Instrumentl team

Instrumentl team

Instrumentl is the all-in-one grant management tool for nonprofits and consultants who want to find and win more grants without the stress of juggling grant work through disparate tools and sticky notes.

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