Federal Program Compliance: Protecting Grant and Contract Eligibility

A cost charged to a federal award must be allowable under the applicable cost principles, reasonable in amount, allocable to the federal program, and consistently treated across all of the organization's programs. Government contracts counsel must evaluate every significant cost category against these standards before the award is executed and periodically throughout performance.

The Uniform Guidance at 2 CFR Part 200 establishes the procurement standards, equipment management requirements, subrecipient monitoring obligations, and financial reporting deadlines that apply to all federal grant recipients. Regulatory compliance counsel must translate each requirement into specific organizational procedures and documentation protocols that produce an auditable record of compliance.

When an OIG investigation or a Single Audit produces findings, the organization must file a corrective action plan that acknowledges the finding, identifies its root cause, and describes the specific steps to correct the deficiency and prevent recurrence. Internal investigation services counsel must evaluate whether the finding is factually accurate, whether the auditor applied the correct legal standard, and whether immateriality arguments are available.

A material weakness in internal controls is the most serious category of audit finding because it indicates the organization's oversight system is not reliably preventing or detecting noncompliance. Corporate compliance counsel must identify whether the failure was a design deficiency or an operating failure and recommend a remediation approach that addresses the root cause.

The Cybersecurity Maturity Model Certification framework requires defense contractors to implement specific security practices from NIST SP 800-171 and maintain a current System Security Plan. Cybersecurity governance counsel must evaluate the organization's security posture against the applicable CMMC level, identify gaps requiring remediation, and ensure subcontract flow-down provisions require subcontractors handling covered information to meet the same requirements.

Federal contractors must comply with Buy American domestic content requirements, forced labor prohibitions requiring supply chain certifications, and subcontractor compliance obligations making the prime contractor responsible for its subcontractors' regulatory compliance, and export control law counsel must evaluate every tier of the supply chain against applicable domestic preference requirements and conduct due diligence on foreign suppliers incorporated into federal deliverables.

An organization that discovers a significant federal program compliance failure must act quickly to implement remedial measures, and suspension and debarment counsel must document the organization's remediation efforts, demonstrate that responsible individuals have been disciplined, and present a compliance reform plan to the debarring official establishing the organization's present responsibility.

An organization that discloses a federal program compliance failure before the government discovers it independently is in a dramatically better negotiating position than one that waits for an audit finding. Federal and state fraud defense counsel must ensure the disclosure is accurate, complete, and accompanied by a credible plan for remediation and repayment of any improperly spent funds.