Welcome to Feldesman’s Grants Practice Shorts series where we discuss helpful tips and strategies in common areas of federal grant management. Be sure to check out our other installments on our Grants Practice Shorts page.

Property Standards and For-Profit Grantees

The Uniform Guidance sets forth use, management and disposition requirements applicable to federally funded real property, equipment and supplies in 2 C.F.R. §§ 200.310 through 200.316. A survey of HHS, NIH, NSF, DOL and DOE regulations shows that for-profit grantees must meet the same property standards as their non-profit counterparts, with a few notable exceptions. For example, NIH rules permit for-profit organizations to retain title to equipment, with no further obligation to NIH, subject to the agency’s right to order the equipment or title to the item transferred to NIH or another qualifying entity. Also, HHS does not require federal agency approval if a for-profit grantee assigns federally-funded invention rights to a third party.

Allowable Costs and For-Profit Grantees

The cost principles in the Uniform Guidance do not apply automatically to awards to for-profit entities. HHS, NIH, DOL, NSF and DOE use the cost principles for commercial organizations in the Federal Acquisition Regulation (“FAR”), 48 C.F.R. Part 31.2, to determine allowable costs under grants to for-profit organizations. See HHS, Grants Policy Statement, at II-120; NIH Grants Policy Statement, § 18.3.1 at I-17; 29 C.F.R. § 95.27 (DOL); 2 C.F.R. § 910.352 (DOE); and NSF, Proposal and Award Policies & Procedures Guide, at II-14.

Profits Restrictions

The Uniform Guidance prohibits most grantees, for-profit or otherwise, from earning or keeping any profit resulting from Federal financial assistance, unless explicitly authorized by the terms and conditions of the Federal award.  2 C.F.R. § 200.400(g). Consistent with this requirement, HHS, NIH, and DOE prohibit profit or fees in all grants to for-profit organizations except under Small Business Innovation Research and Small Business Technology Transfer (SBIR/STTR) grants.  Likewise, NSF and DOL (including ETA) prohibit earning or keeping profits resulting from grants unless explicitly authorized in the award.

Audit Requirements

Audit requirements in the Uniform Guidance do not apply to for-profit organizations.  See 2 C.F.R. § 200.501(h). Awarding agencies are authorized to implement such audit requirements as they deem appropriate, whether by applying full Subpart F coverage or requiring some lesser degree of audit or program review under grants to for-profit entities.

For questions concerning our Grants Practice Shorts series, please contact Phillip A. Escoriaza, Senior Counsel, at 202.466.8960 or pescoriaza@feldesman.com.