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Grant Ready: A Compliance Readiness Framework for Federal Award Recipients

POST 10 of 10

Series - Grant Ready: A Compliance Readiness Framework for Federal Award Recipients


Introduction

We have covered a lot of regulatory ground in this Grant Ready Compliance Framework series, from the HHS transition that changed the governing compliance framework for the largest grant-making agency in the federal government, to the AI tools reshaping how proposals are written and reviewed. Posts 2-9 have addressed a distinct compliance area, and this final post brings them together into a practical tool: a readiness framework for assessing where your organization stands before your next federal award arrives.


The framework revolves around the same question that has appeared in every post in this series: Who is responsible for what and under what authority? When applied to your organization's current structure, policies, and practices, this question will reveal the gaps that need attention now while there is still time to address them.


HHS Grantee Note: The regulatory citations throughout this series refer to 2 CFR Part 200, which fully replaced 45 CFR Part 75 as the governing framework for HHS awards effective October 1, 2025. If your organization's compliance policies still mention Part 75, see Post 1 of this series for what has changed and what steps your organization needs to take.


How to Use This Framework

Work through each area honestly. The goal is to identify where your organization's compliance posture is strong, where it is developing, and where it has genuine gaps that create audit exposure. The areas where you answer "we do not have this" or "we are not sure" are the ones that deserve attention before September.


If your organization receives HHS funding, the first crucial question is: has your compliance infrastructure been updated to reflect the transition from 45 CFR Part 75 to 2 CFR Part 200?

Ask yourself:


Have all policies, procedures, and training materials been reviewed and updated to replace 45 CFR Part 75 citations with the current 2 CFR Part 200 and 2 CFR Part 300 references?


Has your organization recalculated indirect cost recovery to reflect the updated de minimis ceiling of up to 15% for eligible awards under the 2024 revisions and confirmed whether your specific awards qualify?


Have subaward agreement templates been updated to reflect current regulatory citations?


Has your organization reviewed the updated HHS Grants Policy Statement effective October 1, 2025?


For active awards predating October 1, 2024, has your organization confirmed which regulatory provisions apply based on the specific award's terms and conditions?


If your organization does not receive HHS funding, this section does not apply and you can move to Area 2. If it does, answer these questions before proceeding with anything else in this framework.


The fundamental question here is: does your organization have a dedicated grant compliance function separate from development that is responsible for compliance outcomes rather than fundraising goals?

Ask yourself:


Is there a specific person or role in your organization whose main responsibility is post-award compliance (not grant writing, not program delivery)?


Does that person have the authority and bandwidth to own procurement documentation, financial tracking, reporting deadlines, and closeout, or are those tasks distributed informally across multiple roles?


Are your grants management policies and procedures documented, up-to-date, and actively implemented, or are they only stored in someone's institutional knowledge?


If your grant compliance function is entirely within your development office or if compliance responsibilities are secondary duties assigned to other roles, this will create a structural problem. The solution requires clarifying accountability.


Area 3: Procurement Policies and Documentation (Post 4)

If a federal auditor asked to see the procurement history for every contractor paid from your current or most recent federal award, what could you provide?

Ask yourself:


Does your organization have written procurement procedures that reflect the standards at 2 CFR §§ 200.317–200.327?


For each contractor or consultant paid from a federal award, can you produce documentation of the method used, the basis for selection, the cost or price analysis, and the SAM.gov verification?


For any subcontractor named in a current or pending proposal, does your organization have a plan for conducting a compliant post-award procurement before a contract is executed?


Do your contracts with federal award-funded vendors include the required provisions from Appendix II to 2 CFR Part 200?


If your procurement records include signed agreements and invoices but lack the underlying selection documentation, you have the key pieces in the wrong order. The contract marks the end of a procurement process and is NOT a substitute for one.


Area 4: Budget Development and Cost Allowability (Post 5)

If an auditor reviewed every line item in your most recent federal award budget, could you demonstrate that each cost meets the three-part test of allowable, allocable, and reasonable?

Ask yourself:


Does your organization have a process for reviewing proposed budget costs against the cost principles in 2 CFR Subpart E before a proposal is submitted?


Are the people responsible for building federal budgets familiar with the specific categories of unallowable costs (entertainment, lobbying, fundraising, profit) and are those categories actively screened out during budget development?


Are costs charged consistently across your awards? Are items treated as direct costs on one award treated the same way on all others?


Does your organization have a process for identifying costs that require prior written approval under 2 CFR § 200.407 before they are incurred?


Budget errors are among the most correctable compliance failures, but only when they are caught before the award is made.


Area 5: Indirect Cost Rate (Post 6)

Is your organization properly recovering indirect costs on its federal awards, and is the rate and base being applied correctly?

Ask yourself:


Does your organization have a current Negotiated Indirect Cost Rate Agreement (NICRA), or is it using the de minimis rate?


If using the de minimis rate for awards issued on or after October 1, 2024, is your organization applying the updated ceiling of up to 15% of Modified Total Direct Costs under 2 CFR § 200.414(f)?


Is your MTDC base calculated correctly, excluding equipment, subawards over $50,000, rental costs, participant support costs, and other excluded items, before the rate is applied?


Is your indirect cost approach applied consistently across all current federal awards?


Organizations that have never evaluated their indirect cost recovery might be leaving valuable funding unused with each award. Those applying the rate to an incorrect base could be overclaiming and increasing their audit risk with every draw request.


Area 6: Subcontractor and Subaward Classification (Post 7)

For every entity receiving federal funds through your organization, has a documented determination been made regarding whether that relationship is a subrecipient or contractor, and are the obligations appropriate to that classification being fulfilled?

Ask yourself:


Has your organization made and documented a case-by-case determination under 2 CFR § 200.331 for every lower-tier entity receiving funds from your federal award?


For any entity performing a required program function (evaluation, training, and direct services specified in the award terms) - has that relationship been correctly identified as a subaward with the full documentation and monitoring requirements that follow?


For any intermediary in your funding chain, can you clearly articulate what program value that intermediary adds and is its fee documented as reimbursement of actual costs rather than a markup that constitutes profit?


If your organization is itself a subrecipient that has engaged lower-tier entities, does it understand and have systems to meet its pass-through entity obligations under 2 CFR § 200.332?


Misclassification in this area produces some of the most consequential audit findings, both because the costs associated with misclassified relationships may be disallowed in their entirety, and because the compliance failure is structural rather than transactional.


Area 7: Closeout Readiness (Post 8)

Does your organization view closeout as a planned part of award management, or as something that occurs only when the funder sends a notice?

Ask yourself:


Does your organization have a closeout checklist that covers final reports, obligation liquidation, unobligated fund return, equipment disposition, and supply reporting — built around the 120-day deadline under 2 CFR § 200.344?


Are your financial records reconciled regularly throughout the award period, so that final financial reporting does not require a scramble to reconstruct months of transactions?


Does your organization have a record retention schedule that tracks the three-year retention requirement from the date of final expenditure report submission — and accounts for extensions when audit findings or litigation are pending?


For current awards approaching their end dates, has closeout planning been initiated — or is it still being treated as a post-expiration task?


Closeout failures are disproportionately consequential because they are the last thing an agency sees from your organization before it makes decisions about your next award. A negative performance record on SAM.gov, including a missed closeout deadline, follows your organization into every subsequent application.


Area 8: AI Use and Proposal Integrity (Post 9)

Does your organization have a clear and consistent approach to AI use in federal grant work that adds efficiency without creating compliance exposure?

Ask yourself:


Does your organization verify every citation, data point, and regulatory reference generated by AI tools before it appears in a federal submission?


Is AI use in your proposal process limited to structural and mechanical tasks like formatting, organizing, editing rather than generating the substantive organizational content that federal reviewers are evaluating?


Does your pre-submission checklist include a review of the funding opportunity announcement for AI disclosure requirements or restrictions?


Does your organization have a policy governing what organizational data can and cannot be uploaded to public AI platforms?


Are staff who use AI tools in grant work aware of the current federal policy environment, including the NIH prohibition on substantially AI-developed applications?


AI use in grant work is progressing faster than most organizational policies. The organizations that will succeed are the ones that view AI as a tool with specific and limited applications — not as a substitute for the subject matter expertise and compliance judgment that federal awards demand.


Putting It Together: Where to Start

If you worked honestly through this framework, you have probably identified a mix of areas where your organization is strong, areas where you have some measures in place but they are underdeveloped, and areas where the honest answer is that the work hasn't been done.


Focus on the gaps with the highest regulatory risk for your situation.


If you're currently preparing proposals, prioritize Areas 3, 4, and 5 as these are where compliance decisions become part of your award before it is finalized.


If you're managing active HHS awards, Area 1 is the most urgent unless you've already done a regulatory review of your compliance documents.


For awards ending this year, Area 7 cannot be delayed.


No organization builds a complete compliance infrastructure all at once. What matters is that the gaps are visible, the priorities are clear, and the work is happening in the right sequence, and happening before the monitoring visit and not after.


Use This Tool

👉 📂 Download the HiQuity Federal Grant Compliance Readiness Self-Assessment to support your decision-making across the full life-cycle of your sustaining funds.


A Note on This Series

The Grant Ready Compliance Framework series was created to meet practitioners exactly where they are in the federal funding cycle: starting with the regulatory context every HHS grantee needs right now, then moving through the proposal stage, and continuing through award, implementation, and closeout.


Compliance failures rarely stem from bad intentions; they instead begin with structures that weren't designed for what federal awards demand, decisions made without understanding the regulatory context, and obligations that arrive before organizations have the systems to meet them.

Each topic in this series is based on the regulatory framework of the Uniform Guidance at 2 CFR Part 200, updated in 2024, and for HHS grantees, 2 CFR Part 300. Every practical recommendation reflects patterns observed in real organizations managing federal awards, and each post aims to provide practitioners with the information they need to establish effective compliance infrastructure before the award requiring it arrives.


HiQuity Solutions provides grant research, writing, and compliance services for nonprofit and public sector organizations receiving federal awards. If this series surfaced gaps you want to address before your next award cycle, we are available for compliance readiness reviews, policy development, and post-award support. 



Are you having these conversations with your consulting teams? If not, let us know. www.hiquitysolutions.com | ask@hiquitysolutions.com




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