Cash Management for Federal Grants: Staying UGG Compliant


Federal grants play a vital role in supporting nonprofits and their operations. However, navigating the complex landscape of federal compliance, as outlined in the Uniform Grant Guidance (UGG), can be challenging. (You can read the full documentation of UGG in the Code of Federal Regulations here.)

In this article, we’re detailing three guiding principles for managing federal grants. Staying compliant with UGG is important so your nonprofit keeps eligibility for future funding and your public reputation stays intact.

Principle 1: Use Federal Awards in a Timely Fashion

With cash received from federal grants, put it to use for program purposes as quickly as possible. To do this, your organization should utilize federal money to cover program costs before requesting additional funds. Also, be sure to document each drawdown from your grant to show that the requested amount aligns with your immediate cash needs.

Principle 2: Safeguard Federal Cash Against Loss

According to the UGG, “Advance payments of federal funds should be deposited and maintained in insured accounts whenever possible.” It’s best practice for your bank(s) to be backed by the Federal Deposit Insurance Corporation (FDIC). Also note, a separate bank account for federal funds is not mandatory, but effective record keeping of fund receipts and disbursement are necessary.

Properly safeguarding federal funds is critical for cash management in nonprofits, and this principle is one more way your organization is a good steward of grant monies.

Principle 3: Be Careful with Interest or Investment Income

Nonprofits should be cautious when generating interest or investment income from federal cash balances. Admittedly, with rising interest rates, organizations can earn significant interest income on cash deposits. However, the UGG sets limitations on retaining interest earned on federal money. You must carefully review those requirements to ensure compliance and avoid penalties.

Morgan & Associates Understand UGG Compliance

At Morgan & Associates, we help nonprofits navigate the complexities of federal grant compliance and cash management. Our team of experts can provide accounting and advisory services so your organization better understands UGG requirements. Remember, compliance is key to unlocking the full potential of federal grants and advancing your organization’s mission.

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