In this episode I skip the read-through of the regulations and instead walk through a real audit scenario, the kind I see with clients, to ask what went wrong, which requirements apply, and how it could've been prevented.

The setup: a nonprofit with a health grant and a capital improvement grant gets audited. Findings: a $45,000 payback ($4,000 from the health grant, $41,000 from the capital improvement grant) and a much bigger issue, $1.5 million in health grant costs the nonprofit must either refund outright or work with the agency to prove were allowable. We use that to walk through Sections 407 through 411.

What You'll Learn:

• 407, prior written approval: Having money in a budget category doesn't mean you have authority to move it. Get approval in writing before you spend, not verbally.
• 408, cost limitations: A federal statute can cap what the award will pay even if you spent more. What you spend and what the award reimburses aren't always the same number.
• 409, special considerations: Direct versus indirect looks different by entity type, and it's why the $1.5 million was in question, the nonprofit couldn't show payroll costs were properly tied to the grant without solid time-and-effort documentation.
• 410, unallowable costs: The section behind the $45,000 finding, once a cost is unallowable, it must be resolved according to the agency's instructions, often a refund.
• 411, indirect cost rate adjustments: If you credit a grant back for an unallowable direct cost, don't forget the indirect costs charged against it too, that's real money at your negotiated rate.

Key Quote: "Documentation is not a clerical exercise. It could be the main thing that is going to make a cost allowable."

Bottom line: know the rule, know the award, know the cost, document your decision, and check before you spend.

Connect with Jasmine & Markanday Consulting:

• Instagram: @markandayconsulting

• LinkedIn: @markandayconsulting

• Website: www.markanday.consulting

If you found this episode helpful, please subscribe, rate, and share it with your colleagues and network. Join us next time as we continue exploring important grants management topics. Got a question? Send it my way at hello@markanday.consulting, I'd be happy to help. Until next time, stay informed and stay compliant.