Your For-Profit Organization Received a Federal Grant – Now What?

While not-for-profits such as schools, housing agencies and local charitable organizations commonly receive federal grants in many capacities, these dollars are available to many types of entities, including for-profit entities.

Often, grants are made to for-profit organizations from agencies such as the National Institutes of Health and Department of Energy under the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. These programs “encourage small businesses to engage in federal research and development with the potential for commercialization,” although allocations to for-profit entities under ARPA are also common.

If your entity receives any federal dollars — through SBIR, STTR, ARPA or otherwise — you must understand the applicable requirements. Below are three items you should address prior to or immediately upon acceptance of the award:

1. Read and fully understand the requirements of the agreement.

• Be cognizant of the period of performance, which may span your entity’s fiscal year.

• The type of agreement may be listed as “Cooperative Agreement” versus a “Grant.” In a Cooperative Agreement, the entity can expect more substantial involvement from a federal agency.

• Total amount may include a cost share, which is the amount expected to be covered by the entity directly for the project.
• If there is an Assistance Listing Number (formerly CFDA Number) listed, you can search for that specific grant’s audit requirements in the current Compliance Supplement.
• Review attachments to the award, which may provide additional insight into compliance requirements, including if expenditures need prior approval.

2. Ensure your accounting system is set up properly to track direct grant expenditures separately. 

This is imperative, as your organization is likely working on other items outside of the project funded by the grant.

3. Put into place and document your entity’s internal controls over grant expenditures. 

This would include areas that are applicable to the specific grant, such as:

• Procurement – Entities must follow standards that are in the Code of Federal Regulations. Your processes must be documented and include areas such as written standards of conduct covering conflicts of interest, competition requirements and methods of procurement your organization must follow. 
• Payroll – If your entity has employees who split their time between projects, you should document the way in which time is tracked by project, including approval of the time by a supervisor.
• Reporting – Understand the grant’s specific reporting requirements, including what and how to file and how often you must do so. This will help ensure you meet all required expectations and deadlines to avoid jeopardizing any future finding. One significant area to understand is if your grant requires an audit.

Navigating the complexities of federal grants demands a thorough understanding and meticulous management of the funding process. From grasping the specific requirements of the grant agreement to setting up robust internal controls and accounting systems, each step is crucial to ensure compliance and maximize the benefits of the funding. 

By diligently following these guidelines and maintaining a clear focus on both the obligations and opportunities that federal grants provide, you can effectively enhance your organization’s operations.

Contact Marie Brilmyer or a member of your service team to discuss this topic further.

Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law with your professional advisers.