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.

In our last episode, I laid the groundwork by walking through 2 CFR 200, Sections 400 and 401, the policy guide and the application. This week I'm building on that foundation and getting into what I think is one of the most practical parts of Subpart E: composition of cost. We're covering Sections 402 through 406, and by the end of this episode you'll have a much clearer picture of how a cost actually gets built, not just whether it's allowable.

Every dollar you charge to a federal award can be questioned unless you can prove it's approved, appropriate, necessary, reasonable, and reimbursable. That's the lens I use for this whole episode.

What You'll Learn:

• The simplest formula in Subpart E: I break down Section 200.402: total cost equals direct costs plus applicable indirect costs, minus applicable credits. If it doesn't fit one of those categories, it doesn't belong in your award total.
• Why classification trips people up: Costs usually go wrong not because they're bad expenses, but because they're classified or calculated inconsistently.
• The allowability checklist in Section 200.403: Necessary, reasonable, consistent with award terms, consistent with your own policies, treated consistently as direct or indirect, GAAP-compliant, not double-charged, and documented. Miss one, and it's unallowable.
• What "reasonable" really means: I unpack the "prudent person" standard in Section 200.404 and why reasonableness is judged on what you knew at the time, not in hindsight.
• Allocable costs, explained simply: Section 200.405: a cost is allocable if it can be assigned to an award in proportion to the benefit received. I also cover why you can't shift costs between awards to fix a budget problem.
• Applicable credits and why they're so easy to miss: Section 200.406: discounts, rebates, refunds, and overpayment adjustments must be credited back to the award. Ignoring them is a common, avoidable compliance issue.
• How it all works as one package: These five sections aren't standalone, they work together to tell you how a cost is built, allowable, reasonable, allocated, and adjusted.

Key Quote:

"A cost is reasonable if it does not exceed what a prudent person would incur under the circumstances at the time the decision was made to incur that cost."

Connect with Jasmine & Markanday Consulting:

• Instagram: ⁠@markandayconsulting⁠

• LinkedIn: ⁠@markandayconsulting

• Website: www.markanday.consulting

If you found this episode useful, please subscribe, rate, and share it with your colleagues and networks. Next episode, we're taking a deeper dive into Sections 200.407 and 200.408, where we get into prior approvals and cost limitations, the rules that shape what you can and cannot charge to your award. Until then, stay informed and stay compliant.

Welcome to Season 3 of Grants Management Experts!

In this kickoff episode, I'm introducing the Uniform Guidance Subpart E, Cost Principles, starting with the foundational sections 200.400 (Policy Guide) and 200.401 (Application). These two sections are your compliance baseline, and they dictate exactly how you can and cannot spend your grant money.

I'm breaking down who's actually responsible for grant administration, why consistency is the golden thread running through compliance, and why documentation can make or break whether a cost is deemed allowable.

What You'll Learn

• Why Sections 200.400 and 401 matter: I explain how these sections establish accountability and provide the framework for applying cost principles and how they apply to every organization receiving federal funds, not just grant managers.

• Who's really responsible: I make the case that managing a federal grant is not the responsibility of the federal agency or your auditor, it sits with your organization, and specifically with your organization's leadership, through a fiduciary duty that runs top to bottom.

• Sound management practices: I walk through why recipients and subrecipients must adhere to laws, regulations, and award terms, and must keep grant funds and organizational funds consistently and well documented.

• Students as trainees and employees: I cover how, for research awards, students supporting the work may be classified as trainees or employees depending on the role they perform and why that dual role must be recognized.

• No profit from federal grants: I explain that unless the award terms explicitly allow it, unspent funds on a fixed award (like $10,000 left over from a $50,000 award) must be returned to the federal agency, not kept as profit.
• Direct vs. indirect costs: I talk through why every organization is different, what's a direct cost for one organization may be indirect for another and how the Uniform Guidance gives me room for management judgment, as long as that judgment is reasonable, allowable, documented, and consistently applied.

• Application isn't one-size-fits-all: I break down how Section 200.401 acts as a gatekeeper, translating cost principles into practice based on your organization's nature, the specific grant's terms, and your own written policies and procedures.

• The golden rule of compliance: I share why consistency between your written policies, your actual practices, and your accounting records is what auditors look for and how it's often inconsistency, not just an unallowable cost, that leads to audit findings.

• Document, document, document: I remind you that "if it isn't documented, it didn't happen", and I take it one step further: if it's undocumented, it didn't happen, and the cost won't be believed as allowable.

Key Quote

"That responsibility of managing the grant does not sit with the federal agency... and it doesn't sit with your auditor. It sits with your organization and it really sits with your organization's leadership."

Resources I Mentioned:

• 2 CFR 200, Subpart E - Cost Principles

• Section 200.400 (Policy Guide)

• Section 200.401 (Application)

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. Join me next time as I continue exploring important grants management topics. Until then, stay informed and stay compliant.

Register for my Free Upcoming Live Training on August 19th | Time: 1:00 - 2:00 PM CST | Grant Management Essentials: Avoiding Costly Compliance Mistakes Before Your Next Audit here!