Does the idea of a bunch of new grant regulations make you feel unsettled? (Maybe even a little anxious?) Since the founding of the United States, federal grants have historically been seen as a gift with a few conditions thrown in Decoding Grant Management. The federal government didn’t seem to take the concept of performance and accountability too seriously. This is no longer the case.
We have entered a new time in the evolution of grant management, with the OMB Super Circular changes. Some are even calling it “The New Age of Accountability.” In the past, making an effort may have been good enough, but now it is performance that matters. And the regulations have a role to play in spelling out everyone’s roles and responsibilities.
Let’s take a look at the first step in managing grants-understanding what grant money can be used for and the main types of federal awards.
What Can Federal Grant Money Be Used For?
An “award” is financial assistance from the federal government that supports a public purpose. An award includes grants and other types of agreements Decoding Grant Management. Perhaps the “award” terminology will make more sense when I look at what an award is not:
- An award is not technical assistance. (Remember, an award must include financial assistance.)
- An award is not a loan, loan guarantee, subsidy, or form of insurance.
Here are some real-life examples of things that federal grant money is used to support:
- Establishing and sustaining Metropolitan Medical Response Centers, also called MMRCs, to support disaster relief
- Providing services to support and retrain displaced workers, such as those in the auto industry
- Lowering infant mortality rates by developing body warmers for pre-mature infants
These public purposes can be accomplished with different types of grants and federal award instruments.
What is a Federal Grant-Main Types of Federal Awards
The federal administrative requirements in the new Uniform Guidance covers three main types of award instruments:
- Cooperative Agreements
As a general rule, the awarding agency determines the type of award and the level of their involvement prior to releasing the request for proposal.
Let’s look at the similarities and differences between these award types.
Federal Grant vs. Cooperative Agreement
Both grants and cooperative agreements give federal financial assistance. Both have a principal aim to accomplish a public purpose of support or stimulation as authorized by federal statutes. But a cooperative agreement differs from a grant in that the awarding agency has far more involvement in the project or program funded by the cooperative agreement than it does the project or program funded by a grant.
Federal Grant vs. Contract
The area of contracts can be a confusing area for both agencies and recipients. In many respects an award contract could look very similar to a procurement contract but be managed under award rules rather than procurement rules. When a contract falls under award rules there are more stringent requirements to follow than when the contract falls under procurement rules.
Generally, contracts are used by a non-federal entity to purchase property or services needed to carry out the project or program under a federal award, such as purchasing a box of pens or servicing the office copier. But sometimes a contract is used by a pass-through entity for a subaward to carry out part of a federal award. And occasionally the funding agencies will use contracts to carry out what seems to be for all practical purposes a grant.
When a contract is used for carrying out a public purpose such as researching the effects of pollution or reducing the number of DUI drivers on the road, the contract would be managed under the higher standard of award rules instead of procurement rules.
Which Grant Rules to Follow?
Determining which rules to follow boils down to two things:
- First, how does the funding agency view the relationship?
- Secondly, is the contract providing just goods and services, or does it anticipate carrying out part of the scope of work of the award?
In other words, the nature of the work and the funding agencies view of that relationship are most important in how the work is managed. If you have questions about whether a contract is administered under the regulations for grants and cooperative agreements or under federal procurement law and regulations, please contact your contracting officer or agency representative.
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Lucy Morgan CPA, MBA
CEO, Compliance Warrior
Author of “Decoding Grant Management-The Ultimate Success Guide to the Federal Grant Regulations in 2 CFR Part 200” The 2nd Edition is now available on Amazon in Paperback and Kindle versions.