How grant recipients can navigate federal and state compliance
For state and local recipients of federal funding, the news that you’ve received funds is both exciting and daunting. Now that you have dollars coming your way, it’s time to start thinking about how you’re going to implement it and remain compliant. The transition from securing an award to adopting an implementation mindset—ensuring that compliance and operational readiness are seamlessly integrated into every phase of the program—can be cumbersome.
To safeguard taxpayer dollars and prevent fraud, waste, and abuse, recipients need to focus on meeting project goals and objectives while also complying with funding agency and cross-cutting requirements. Building compliance into the project scope, schedule, and budget helps prepare the recipient for implementation.
Navigating grant compliance
To successfully implement grant-funded projects, start by thoroughly understanding your award agreement and all relevant agency and federal requirements. This means being well-versed in the specific conditions and regulations associated with the grant, such as compliance with federal agency guidelines, budget management, and reporting obligations.
Next, develop internal policies and procedures that align with these rules to ensure compliance is built into the project’s scope, schedule, and budget. Carefully plan your budget, including staff or contractor time for monitoring and administration, and account for all compliance-related expenses. Understanding the depth and breadth of federal requirements, including procurement, eligibility and reasonableness of costs, prevailing wage, and domestic preference for materials, is critical to leverage funding to support these tasks. This involves estimating costs accurately, considering all potential expenses and any internal policies and procedures that may impact labor costs.
When creating your project schedule, allocate enough time for key tasks such as reporting, reviews, and meeting regulatory obligations, using tools like project dashboards to track progress and avoid last-minute errors. This structured approach helps ensure smooth execution and maximizes the benefits of your grant. 
Common grant compliance requirements
Having managed more than 35,000 federally funded projects worth over $100 billion, our team knows the laws, regulations, and policies set forth by the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR 200), duplication of benefits, Office of Management and Budget circulars, Davis-Bacon and Related Acts, Uniform Relocation Assistance, Build America Buy America Act, environmental reviews, and other federal regulations.
Our approach starts with a closeout mindset, using federal agency guidance to guide program operations and regularly review implementation. Here are some common compliance requirements we frequently see:
Establish a grants management system
Every file needs to tell the story. This is what federal overseers will often tell funding recipients. But what does this mean in practice? Federal funding needs to be tracked closely to ensure program milestones and compliance requirements are met. Having a robust grant management system with tracking and reporting functionality is critical to program success. ICF works with our clients to select the right tools and solutions to meet their needs. Our team conducts a series of discovery sessions with key staff and product owners of existing systems to understand the following:
- Agency-wide grant management system requirements
- Grant sub-recipient registration, application intake, review and approval process
- Invoice generation and approval process and requirements for integration with existing systems
- File storage, retention and document management system requirements
- Program performance dashboards and reporting requirements
- Program/project budget tracking and forecasting requirements
Develop processes and procedures for grant management
We work closely with our clients to develop compliance matrices to track grant requirements, the source of the requirement, how it will be met, and who within the organization is responsible for managing this requirement. Building from the matrix, we develop standard operating procedures (SOPs) for financial and compliance reporting to ensure consistency and accuracy, which helps in maintaining transparency and accountability throughout the project. Additionally, SOPs provide a structured process for subrecipient award management and tracking progress for milestones—facilitating efficient program delivery and minimizing the risk of errors and non-compliance.
An SOP should include:
- Tracking financials to show that the grant funds are being used in accordance with the award.
- Documenting and identifying key internal controls associated with grant compliance requirements.
- Developing a process for subrecipient award management.
- Tracking progress for milestones included in the grant application.
- Including a standard approach to reviewing files, document management guidelines, and reporting process through a Quality Assurance/Quality Control (QA/QC) plan.
- Documenting management verification steps and checklists to support program staff in complying with the grant program, funding agency, and federal cross-cutting requirements.
- Developing a process, file structure, and naming conventions for document management and records retention.
While many grant requirements are uniform, grant management is not a one-size-fits all process. Establishing a grant management framework is essential for success, but adapting this for each new award is necessary since different federal agencies may set their own rules, states will have their own requirements, and, at all levels, these can change over time. It is important to monitor agency updates, keep processes current, and train staff on all changes. Designating staff members or consultants to track updates is a best practice that can ensure compliance from the start.
Cross-cutting requirements
Procurement: For contractor/vendor costs to be covered by grant awards, federal procurement and contracting requirements must be met. This means developing procurement policies that comply with 2 CFR 200. These principles outline requirements for procurement methodology based on size and scope of contract, conducting outreach to potential vendors, and provisions that must be included in contracts to be eligible for funding. Defining compliant procurement policies upfront will help keep the project on schedule and audit ready. We recommend:
- Developing and documenting procurement procedures, aligning with 2 CFR 200 policies and state, local, and tribal laws.
- Ensuring full and open competition.
- Identifying the intended purchase amount and using the appropriate procurement method (micro-purchasing, small purchasing, sealed bids, etc.).
- Maintaining detailed records around procurement process, rationale for procurement method, contractor selection, and basis for price.
- Including flow down provisions for cross-cutting and program-specific requirements.
The Build America, Buy America Act (BABA) establishes domestic procurement preference requirements for federally funded infrastructure projects for iron and steel, manufactured products, and construction materials. Considering the impact of BABA requirements on manufacturer selection, budget, and schedule impacts to accommodate lead times is critical for compliance. Waivers may be granted to exempt infrastructure projects when BABA compliance would be impractical or counterproductive, such as being inconsistent with public interest, unavailable in the U.S., or when the materials produced in the U.S. would increase the cost by more than 25%. We understand the nuances of the regulation and waiver processes, how and when to seek exemption, and how to properly document compliance with or without the exemption process.
Davis-Bacon and Related Acts (DBRA) requires contractors working on federally funded construction projects to pay workers no less than locally prevailing wages and benefits for similar work. The process starts with obtaining current wage decisions from the state’s Department of Labor. These wage decisions must then be included in construction bid packages as well as outlining contractor responsibilities to submit weekly payroll records and compliance certifications. Davis-Bacon requires ongoing review of contractor payroll records during the full performance of construction. Additionally, states may have requirements for prevailing wages beyond federal mandates, and these can extend beyond grant-funded programs to those funded by ratepayers, loans, public works, and more.
To monitor and report compliance with federal and local labor regulations, we recommend:
- Providing training, standard operating procedures, forms, and checklists to a designated Labor Compliance Officer (LCO). 
- Training the LCO for the initial weekly payroll review and employee interviews, as needed, and reviewing the payroll review until the LCO is confident. 
- Ensuring employee rights and safety posters are prominent at the work site. 
- Identifying and providing technical assistance for potential and real indicators of noncompliance, as well as issues of potential fraud, forgery, disputes, and restitution. 
Environmental and Historic Preservation: Compliance with the National Environmental Policy Act and National Historic Preservation Act must be addressed for all federally funded projects. This is done at the agency level, which means the timeline and the requirements can vary. In some cases, environmental or historical reviews may be waived upfront. In other cases, agencies may expedite and simplify the permitting process. It is important to review the rules of the specific agency providing funding each time an award is made. Environmental and historical reviews and permitting include evaluating the potential impact on environmental resources, such as floodplains, wetlands, and threatened and endangered species and historic and archeological resources, such as properties that are either listed or eligible to be listed on the National Register of Historic Places.
ICF has worked with state and local governments for more than two decades, delivering comprehensive technical assistance, staff training, policy development, and document preparation in support of environmental and historic compliance. We recommend:
- Conducting a desktop review of the project site as the first step to understanding potential impacts and mitigation strategies.
- Building time and budget into the project for potential fieldwork and inspections
- Coordination with state and local agencies.
- Incorporating permitting requirements, including identifying opportunities for accelerated review.
Flow down requirements: Understanding how a grant recipient is expected to navigate through, and adhere to, grant requirements are major components of successful implementation. However, it is a recipient’s responsibility to ensure that any subrecipients are also aware of the grant requirements and that compliance ownership falls on them as well. Grant recipients should establish robust processes for training, monitoring, and documenting subrecipient compliance.
Receipt of grant funds includes requirements to comply with numerous grant-specific and cross-cutting federal regulations. While the laws, regulations, and policies required for navigating grant compliance can seem overwhelming, this structured approach can help agencies track all costs as required by federal policies—resulting in maximum program impact.
Given evolving priorities, federal funding and compliance requirements may undergo changes, which grantees should closely monitor to ensure ongoing alignment with the latest regulations and directives. Please reach out to us if you would like to discuss the latest updates.