Federal grants are a cornerstone of higher education funding—supporting everything from research innovation to student access initiatives. Yet for many institutions, managing these grants can feel like traversing a legal and regulatory maze. In a recent Thompson Coburn webinar, our Higher Ed attorneys broke down the essentials of federal grants, offering guidance on both foundational processes and emerging legal threats.
This two-part REGucation© blog series outlines the key takeaways, starting with the grant lifecycle and compliance obligations.
Understanding the Lifecycle and Legal Obligations of Grants
Whether you're at a small community college with a Workforce Innovation and Opportunity Act ("WIOA") grant or a major research university managing multi-million-dollar National Institutes of Health ("NIH") awards, understanding federal grant mechanics is essential. Administrators, general counsel, and compliance officers alike benefit from knowing how these funds are issued, regulated, and—importantly—monitored.
The Federal Grant Lifecycle
The lifecycle of a federal grant starts well before the agency makes an award. Much of the pre-award activity can be relevant for shaping the grant award and disputes after award. The typical lifecycle of a grant is as follows:
- Authorization and Appropriation
- Congress authorizes the grant program through legislation.
- Congress then appropriates funds for the program, either in the same bill or through annual (or other periodic) appropriations.
- Agency Planning
- The Federal agency develops an implementation strategy based on statutory mandates and executive orders, memoranda, or other guidance.
- The agency develops policies, goals, and eligibility criteria.
- Notice of Funding Opportunity (NOFO)
- The Federal agency announces and publishes the funding opportunity on grants.gov. The announcement contains information for applicants to apply for the funding, including the criteria for eligibility, key dates, total amount of funding expected, number of awards, and the goals and objectives of the program.
- Potential applicant institutions evaluate their eligibility for award, register their entity on SAM.gov and grants.gov (if necessary), and prepare and submit their applications.
- Award Selection
- The Federal agency reviews applications for completion, technical and programmatic substance, and cost. The agency then makes recommendations for award.
- The applicants may communicate with the agency to track application status during this phase.
- Award Finalization
- The agency issues a notice of award.
- The institution provides assurances and certifications required by the grant award or the NOFO.
- The Federal agency assesses recipient risks and the need for specific conditions before issuing the final award.
- The selected institution and the agency clarify and negotiate the proposed budget and the terms and conditions of the award.
- Grant Performance
- The institution performs grant activities, including complying with relevant obligations, drawing down funds, submitting the required reports, and participating in audits.
- The agency oversees the institution's compliance and performance of the award.
- Closeout of the Grant
- As dictated by the grant, after the period of performance is completed, the institution completes the activities required for closeout, including submitting final reports, liquidating remaining funds, and completing any other closeout actions listed in the award. Financial reconciliations, which may be payment or collection (both of which may happen after closeout as well) occur.
- A failure to complete required closeout activities can result in adverse actions against the institution.
Grant Budget and Relationship to Legal Considerations
Budgeting is often viewed as something that does not require the legal department's input, but it is important for legal departments and, when legal staff is limited, administrators to be involved in and understand. Attorneys and senior administrators at institutions should understand:
- How indirect cost rates and budgets' inclusion of staff or faculty members' time or effort impact compliance and internal controls and institution-wide policies and procedures.
- That the budget may impact the institutions' and Government's interest in real, physical, and intangible property.
- What costs are recoverable compliance costs.
Baseline Regulatory Compliance Obligations
Regulations such as 2 CFR Part 200 and 45 CFR Part 75 outline common responsibilities of grant recipients and subrecipients. Key compliance areas that institutions should pay particular attention to include:
- Property standards
- Procurement standards
- Subrecipient monitoring and management
- Cost principles, including time/effort reporting
Subrecipient vs. Contractors vs. Program Beneficiaries
Under Federal awards, in addition to the grant recipient, there may also be subrecipients, contractors, program beneficiaries, and participants. Institutions that receive Federal awards and then award lower-tier funding must distinguish between these groups because different requirements will apply based on the category of the lower-tier entity. For example, institutions must use full and open competition to procure services or goods from contractors, but may not necessarily have to use the same competition requirements to select subrecipients.
Requirements for Compliance
In addition to the regulations overseeing federal grants (such as 2 CFR Part 200 or 45 CFR Part 75), institutions may need to look at the NOFO, their application/proposal, and award documents to determine what compliance obligations they have.
But not all obligations will be spelled out—some are incorporated by reference or found in statutes or in agency guidance policies, such as the NIH Grants Policy Statement.
Potential Impacts of Non-Compliance or Perceived Non-Compliance
Non-compliance (whether actual or just perceived) can result in hassle, loss of money, and prosecution.
Some things that can happen when non-compliance occurs or is believed to have occurred:
- Agency inquiry, review, investigation, audit, subpoena
- Conditions on award, more oversight
- Costs deemed unallowable (not reimbursed or must be repaid)
- Award is terminated
- Suspended or debarred from receiving Federal funds
- Potential risks to non-grants funds
- U.S. Department of Justice investigation, subpoena, prosecution
- Congressional investigation, hearing
- Media coverage
Read More in Part II:
In Part II of our REGucation blog series, you'll find insights into the current litigation storm surrounding federal grants. With recent terminations tied to DEI policies and Title VI concerns, the legal landscape is shifting quickly. Thompson Coburn's Higher Education team explores what schools can do if a grant is terminated—and what trends they need to watch now.
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.
