Mistake 1: Charging Costs to the Wrong Period of Performance
This is the most common disallowed cost finding in federal audits. Organizations incur costs before the grant start date or after the end date and charge them to the award. Under 2 CFR §200.403 and §200.309, costs are only allowable if they fall within the authorized period of performance — regardless of when the invoice is paid. The 120-day liquidation period after the end date (2 CFR §200.344) is for paying obligations incurred during the performance period, not for incurring new ones.
An organization hires a project coordinator two weeks before the grant start date and charges the salary to the grant from day one. Or they continue charging staff time to the grant after the period of performance ends because the final report hasn't been filed yet. Both result in disallowed costs and potential repayment.
Set up grant accounting codes with hard start and end dates. Train program staff on the difference between "obligation" and "expenditure." Build a 90-day closeout timeline that flags when new obligations must stop.
Mistake 2: Procurement Without Required Competition
Federal procurement standards under 2 CFR §200.317–327 require different levels of competition based on dollar thresholds: micro-purchases up to $10,000 require only that the price is reasonable; small purchases from $10,001 to $250,000 require quotes from an adequate number of sources; and anything above $250,000 requires full competitive procurement with documented evaluation criteria. Most organizations have internal procurement policies — but those policies often don't meet federal thresholds.
A nonprofit uses a vendor they've always used for a $75,000 technology contract without getting competing quotes. The auditor flags it as a procurement violation. The cost isn't automatically disallowed, but it triggers a finding that can cascade into broader compliance reviews.
Update your written procurement policy to explicitly reference 2 CFR §200.317–327 thresholds. Document every procurement decision — even micro-purchases. Include conflict-of-interest disclosures for anyone involved in vendor selection.
Mistake 3: Missing or Inadequate Time-and-Effort Documentation
Under 2 CFR §200.430, compensation for personal services charged to federal awards must be based on records that accurately reflect the work performed. If an employee splits time between a federal grant and other activities, the organization must have a system to track how much time is spent on each. "Budgeted percentages" are not the same as "actual time worked."
A program director is budgeted at 50% on a federal grant and 50% on general operations. The organization charges exactly 50% every pay period without any time tracking. An auditor asks for time-and-effort records. There are none. The entire salary charged to the grant — potentially hundreds of thousands of dollars — becomes questionable.
Implement a time-and-effort tracking system (even a simple timesheet or certified effort report). Require staff charged to federal grants to document hours by funding source every pay period. Conduct semi-annual certifications at minimum.
Mistake 4: Failing to Monitor Subrecipients
If your organization passes federal funds to another organization (a subrecipient), you become a pass-through entity under 2 CFR §200.332 — and you are responsible for that subrecipient's compliance. This includes conducting a risk assessment before the subaward, including all required federal terms in the subaward agreement, reviewing financial and performance reports, and verifying that the subrecipient obtains a Single Audit if they spend $750,000+ in federal funds.
A lead organization in a multi-site grant distributes funds to three partner organizations. They sign subaward agreements but never review the partners' financial reports, never verify SAM.gov registration, and never check whether the partners completed required audits. Two years later, one partner has $200,000 in unsupported costs. The lead organization — not the partner — is responsible to the federal agency.
Build a subrecipient monitoring plan before you issue the first subaward. Include risk assessment criteria, reporting requirements, desk review schedules, and conditions for site visits. Don't treat subrecipient monitoring as optional.
Mistake 5: Spending Grant Funds on Unallowable Costs
2 CFR §200.420–475 lists specific cost categories that are always unallowable under federal awards. The most common: entertainment, alcoholic beverages, lobbying, fundraising, alumni activities, and goods or services for personal use. But the less obvious ones catch organizations too: fines and penalties, bad debt expense, contingency reserves, and costs already paid by another federal award.
An organization hosts a "community engagement event" with a grant-funded budget line for food and venue rental. The event includes a cash bar. The entire event cost is charged to the grant. The auditor flags the alcohol as unallowable — but also questions whether the event qualifies as a legitimate program activity versus entertainment.
Train every staff member who has purchasing authority on the unallowable cost categories in 2 CFR §200.420–475. Before approving any unusual expenditure, ask: Is this allowable under the Uniform Guidance? Is it allowable under the specific terms of this award? Would a reasonable person consider this a necessary program cost? If you can't confidently answer yes to all three, don't charge it.
These five mistakes account for the majority of audit findings, disallowed costs, and grant clawbacks across federal programs. The underlying issue is almost never intentional fraud — it's organizations that don't have the internal systems, policies, and training to manage federal compliance. If any of these scenarios feel familiar, a proactive review is significantly less expensive than a corrective action plan after an audit finding.
G1VE Advisory offers fixed-price 2 CFR 200 Compliance Checks starting at $400. We review your policies, procedures, and grant files against Uniform Guidance requirements and deliver a gap analysis with a remediation roadmap. View Services →