Navigating Compliance in Federal Grants: What Local Governments Need to Know

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Over the past several years, federal grant funding has played a critical role in helping local governments respond to economic shifts, invest in infrastructure, and modernize essential services. From pandemic recovery programs to long-term investments through the Bipartisan Infrastructure Law and the Inflation Reduction Act, the federal government has made historic funding available to communities of all sizes. 

But with opportunity comes responsibility—and navigating compliance is more important than ever. 

For cities, counties, school districts, and special districts receiving federal support, understanding the rules tied to that funding is essential. Grant compliance isn’t just about checking boxes—it protects public dollars, builds trust, and ensures that agencies are eligible for future funding opportunities. 

Federal Grant Funding Is Still Going Strong 

As of mid-2025, funding from major programs like the Bipartisan Infrastructure Law, American Rescue Plan Act (ARPA), and Inflation Reduction Act (IRA) is still being distributed and spent. Many communities are moving from the planning stage into active implementation—and that means reporting, tracking, and oversight requirements are coming into sharper focus. 

Federal agencies are also increasing their scrutiny of how funds are being used, particularly with regard to single audits, internal controls, and procurement standards. For many local governments, staying compliant requires a proactive, well-documented approach. 

Key Compliance Considerations for Local Governments 

Whether your agency is managing a transportation project, expanding broadband access, or improving energy efficiency, there are several key areas to focus on when it comes to federal grant compliance: 

1. Understand the Uniform Guidance 

Most federal grant programs are governed by Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (commonly referred to as Uniform Guidance or 2 CFR Part 200). These regulations outline: 

  • Allowable and unallowable costs 
  • Procurement standards 
  • Subrecipient monitoring requirements 
  • Audit thresholds and expectations 

Staying familiar with these rules—and how they apply to your grant—is critical to staying in compliance. 

2. Implement Strong Internal Controls 

Federal grants require more than just solid bookkeeping. Agencies must demonstrate they have robust internal controls in place to manage funds, detect errors, and prevent fraud. This includes: 

  • Segregation of duties 
  • Approval workflows 
  • Documentation policies 
  • Risk assessments 

A well-designed internal control system not only supports compliance but also helps improve operational efficiency. 

3. Prepare for Single Audit Requirements 

Entities that spend $750,000 or more in federal funds in a single fiscal year are subject to a Single Audit, which includes both financial and compliance components. Note, this threshold has increased to $1,000,000 beginning with entities with fiscal year ends ending on or after September 30, 2025. Even if your organization has never undergone one before, you’ll need to: 

  • Track federal expenditures by Assistance Listing Number (ALN) 
  • Maintain detailed documentation of how funds are used 
  • Be ready to demonstrate compliance with applicable program requirements 

Failing a single audit can result in repayment of funds, grant ineligibility, or reputational harm—making preparation essential. 

4. Follow Procurement Guidelines 

One of the most common areas for noncompliance is procurement. Federal grant rules require that goods and services be procured fairly and competitively. This often includes: 

  • Soliciting bids or proposals 
  • Documenting selection processes 
  • Avoiding conflicts of interest 

Even well-meaning agencies can run into trouble if they don’t follow these rules exactly. 

5. Ensure Timely and Accurate Reporting 

Most grants come with reporting requirements—financial, programmatic, or both. Meeting deadlines and ensuring accuracy in reporting can help build credibility with funding agencies and reduce the risk of follow-up questions or audits. 

In some cases, failure to submit reports can delay reimbursements or jeopardize future funding. 

Federal grant funding continues to be a key source of support for local governments as they invest in infrastructure, community development, and modernization initiatives. With active funding still flowing from major federal programs—including the Bipartisan Infrastructure Law, the American Rescue Plan Act (ARPA), and the Inflation Reduction Act—cities, counties, school districts, and other entities are moving from planning to implementation. 

Looking Ahead 

Federal funding can be a powerful tool for community growth—but only when managed with care. As grant opportunities continue to evolve, so must the systems and strategies used to administer them. The Brady Martz team continues to monitor funding developments and compliance trends to help public sector organizations stay informed, prepared, and well-positioned for long-term success.