United States: Unique Issues Facing Nonprofit Recipients Of Federal Grants For Overseas Programs

As a condition to receiving federal funds, nonprofit federal grant recipients and subrecipients agree to comply with the applicable federal requirements, which include the prudent management of all expenditures. These requirements apply regardless of where the nonprofit federal grantee conducts its operations; however, working abroad presents unique challenges, which can create additional compliance issues. In this month's newsletter, we discuss some of the most prevalent issues facing nonprofit recipients of federal grants for overseas programs and provide tips for addressing and mitigating such issues and their risks.

Knowing Your Environment

Given the recent broad increase in activity by federal Inspectors General (IGs) and the identification of federal grant fraud as one of the top challenges that federal IGs must deal with in the years to come, recognizing fraud and other improprieties is critical for U.S.-based grantees operating abroad. However, detecting such misconduct can be particularly difficult if your organization does not have a physical presence in or is not familiar with the country, locality, or industry in which you are working. Indeed, as USAID has acknowledged in its fraud awareness handbook, it is difficult to detect "an aberration if you don't know the norm." Thus, it is important for grant recipients to be aware of general red flags, as well as red flags specific to the locale in which they are working. For example, appropriate due diligence may require you to consider the following:

  • Whether the particular country is prone to corruption (a number of organizations, including Transparency International, annually report such information).
  • Whether the U.S. government conducted a risk assessment in the country at issue (USAID publishes these reports on its website). If so, did the U.S. government find "patterns that would indicate possible bid-rigging, collusion...or other illegal activity" in the awarding of contracts or grants?

If the above inquiries yield evidence that a country is prone to or has a high degree of corruption or unethical conduct, your organization should approach work in the country and locale with a well-developed plan for ensuring program integrity. However, even if the results of the above inquiries are inconclusive or do not indicate corruption, your organization's diligence is not complete.

Conducting Due Diligence on Employees and Subrecipients

As a result of the increased enforcement mentioned above, it is also critical that nonprofit grant recipients ensure that any individual or subrecipient working on its behalf is properly vetted. In fact, the vetting of subrecipients is particularly important in light of the Super Circular's imposition of more stringent subrecipient monitoring requirements. Conducting this due diligence overseas can be challenging, particularly if your organization does not have a local office. In such cases, it may be helpful to obtain an opinion from local counsel or another reliable source, such as the local U.S. embassy or consulate, about the potential employee's reputation and qualifications.

It is also advisable to consider the following questions:

  • Did a government official recommend the potential employee?
  • Is the potential employee a former government official or related to a government official?

Federal grant recipients may want to consider the following additional questions:

  • Does the potential subrecipient have a code of conduct?
  • Has the subrecipient established an accounting system or a mechanism for creating financial reports?
  • What is the subrecipient's document retention policy, if any?

Note that while the U.S. government funds a number of programs in developing countries that do not have the same cultural norms or well-developed infrastructure or industry, USAID and other federal agencies require grant recipients to meet the ethical and cultural norms of the United States, and often expect administrative processes that are very similar to what would be found stateside. At times these requirements can be extremely difficult to meet in order to achieve programmatic success; however, they are, unfortunately, an obligation that is accepted with federal funds. Accordingly, it is imperative that your organization set the standard.

Setting the Standard

Though countries have increasingly adopted anti-corruption policies during the last several years, many countries' anti-corruption policies and ethics rules differ from those of the United States. Thus, it is important that your employees and subrecipients agree to abide by your code of ethics/conduct, the Foreign Corrupt Practices Act (FCPA), document retention policies, and any other applicable laws. Be certain that your code of ethics/conduct is current and that your employees understand important laws, such as the FCPA, and flags for identifying instances of potential noncompliance. Of course, consequences for noncompliance, whether applicable to employees or subrecipients, must be put in place to ensure accountability.

Ensuring Accountability

It is important not only that your employees, subrecipients and their employees agree to abide by your code of ethics/conduct and any applicable laws, but also that you ensure accountability through proper implementation of such policies, e.g., employee and subrecipient training/periodic retraining and compliance audits.

  • Training. To ensure compliance with applicable statutes and regulations, nonprofit federal grant recipients should ensure that their employees as well as their subrecipients are sufficiently trained and periodically retrained. It is worth inquiring whether the agency from which you receive funding offers country-specific training. For example, USAID offers training on fraud awareness in many countries (either in person or through video).
  • Audits. Subrecipients also should conduct periodic compliance audits and be aware of agency-specific regulations. For example, 2 CFR § 700.12, applicable to awards from USAID, explicitly requires all negotiated contracts above the simplified acquisition threshold (currently $150,000) to include a provision requiring pass-through entities, USAID, and the U.S. Comptroller General to have access to certain contract-related records. Because of this specific requirement, grantees working with USAID risk disallowance for such contract costs if these provisions do not exist contractually. Consequently, USAID grant recipients must ensure that their subrecipients abroad are maintaining adequate records.

Complying with All Grant Requirements

Nonprofit grantees should carefully review their grant agreement, be familiar with applicable laws and regulations, and prepare a compliance matrix to assist the organization in meeting all of its grant requirements. Some specific compliance issues include:

  • Discussing Exchange Rate Fluctuations. Nonprofit grantees must submit their reports in U.S. dollars; however, the country in which you work may operate only in the local currency. Because of the potentially rapid fluctuation of exchange rates, it is important to discuss the applicable exchange rate with your subrecipient, as well as the U.S. government, to avoid disputes over which party will bear the risk of exchange rate fluctuations.
  • Abiding by the Fly America Act (and other domestic preference requirements). The Fly America Act requires all travel funded by the federal government to use "U.S. flag" airlines, with a few exceptions.

While there are many opportunities for federal funding for work overseas, nonprofits must be mindful of the heightened enforcement and monitoring regime and the particular compliance challenges that accompany those opportunities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions