Grant compliance literature is dense with terms that have specific technical meanings that differ from their everyday usage. "Allowable" means something precise. "Period of performance" is a defined legal window. "Questioned cost" has audit-specific implications that go beyond "expense we looked at twice."
This glossary is not meant to be exhaustive. It covers the terms that come up most frequently in day-to-day grant management, particularly those that are relevant to how individual transactions get coded, documented, and reported.
Allowable Cost
A cost that complies with the terms and conditions of the federal award and the cost principles in 2 CFR Part 200 Subpart E. For a cost to be allowable, it generally must be: (1) necessary and reasonable for the performance of the federal award, (2) allocable to the award, (3) consistent with policies and procedures of the recipient organization, (4) not unallowable under any specific provision of the award or the Uniform Guidance, and (5) adequately documented.
Note that "necessary" and "allowable" are not the same. An expense can be necessary for your organization's operations and still be unallowable under a specific grant if the grant's restrictions do not cover that category. General administrative overhead is necessary for any nonprofit, but is typically not an allowable direct cost under program-specific grants unless explicitly included in the approved budget.
Allocable Cost
A cost is allocable to a federal award if it is incurred specifically for the award, benefits both the award and other work of the organization and can be distributed to each on a proportional basis, or is necessary to the overall operation of the organization and can be reasonably assigned to the award through an approved cost allocation methodology. The allocation basis must be consistent, documented, and proportional to the actual benefit received by each program.
Assistance Listings Number (formerly CFDA Number)
The unique five-digit identifier assigned to each federal assistance program in the Assistance Listings (formerly the Catalog of Federal Domestic Assistance, which is why you will still see "CFDA" in older grant documents and audit standards). Organizations receiving federal awards must report the Assistance Listings number for each award on the Schedule of Expenditures of Federal Awards (SEFA). The number format is XX.XXX, where the two-digit prefix identifies the federal agency and the three-digit suffix identifies the program.
Carryover
Unobligated funds remaining at the end of a grant budget period that are carried forward into the next budget period. Federal grants may allow automatic carryover of unobligated balances without prior approval, or may require prior approval from the awarding agency. The Notice of Award specifies which applies to a given grant. Carryover funds retain their original restrictions and must be expended within the terms of the award. Unexpended funds at the end of a grant period that are not approved for carryover typically must be returned to the awarding agency.
Cognizant Agency for Audit
The federal agency designated as responsible for implementing Single Audit requirements for a particular recipient organization. For most nonprofits, the cognizant agency for audit is the federal agency that provides the most funding. The cognizant agency reviews audit reports, follows up on audit findings, and coordinates audit resolution when multiple federal agencies are involved. Knowing which agency is your cognizant audit agency helps when you need to request audit extensions or respond to findings across multiple awards.
Cost Sharing
The portion of total project costs borne by the recipient organization rather than the federal awarding agency. Cost sharing can be required by the grant program (mandatory cost sharing) or offered voluntarily by the applicant. When cost sharing is committed in the grant application, it becomes an obligation and will be monitored by the awarding agency. Mandatory cost sharing must be documented with the same rigor as federally funded expenditures. Voluntary cost sharing included in a grant application cannot be withdrawn without the awarding agency's approval.
A practical caution: avoid committing to cost sharing beyond the minimum required, because it becomes a reportable obligation. An organization that commits to matching 25% of grant funds and then cannot document that match is in a worse compliance position than one that did not offer the match in the first place.
De Minimis Indirect Cost Rate
Under 2 CFR Part 200.414(f), organizations that have never had a negotiated indirect cost rate agreement with a federal agency may elect to use a de minimis rate of 10% of modified total direct costs (MTDC). This rate is intended for indirect costs (administrative overhead, facilities costs, etc.) that benefit all programs but cannot be directly attributed to specific activities. Organizations using the de minimis rate must use it consistently across all federal awards. The rate applies to MTDC, which excludes certain categories from the base (equipment, capital expenditures, subcontracts over $25,000, participant support costs, and others defined in 2 CFR Part 200.1).
Equipment
Under 2 CFR Part 200, equipment means tangible personal property having a useful life of more than one year and a per-unit acquisition cost of $5,000 or more. Organizations may establish a lower threshold if their internal policy is more restrictive. Equipment purchased under a federal award is subject to property management requirements including physical inventory at least every two years, insurance coverage, disposition procedures when the useful life ends or the property is no longer needed, and, in some cases, return of the federal share of residual value when equipment is no longer used for the originally authorized purpose.
Finding
A deficiency identified during a Single Audit. Findings are reported in the audit's Schedule of Findings and Questioned Costs. There are several types: material weaknesses in internal controls, significant deficiencies in internal controls, instances of material noncompliance with federal program requirements, and questioned costs. Each finding requires a formal management response and a corrective action plan. Findings are reported to the Federal Audit Clearinghouse and are publicly accessible. A history of repeated findings on the same issue is treated more seriously by awarding agencies than a single finding that was corrected and not repeated.
Modified Total Direct Costs (MTDC)
The base used to calculate indirect cost allocations under many cost allocation methodologies. MTDC includes all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and subcontracts up to the first $25,000 per subcontract. It excludes equipment, capital expenditures, rental costs for off-site facilities, subcontracts above $25,000 per subcontract, and participant support costs. Understanding your MTDC calculation is essential if you are applying the de minimis 10% indirect cost rate or negotiating an indirect cost rate agreement.
No-Cost Extension
An extension of the grant period of performance without additional federal funding. Organizations request no-cost extensions when they need more time to complete authorized activities and still have unobligated funds available. Some federal agencies allow one automatic no-cost extension of up to twelve months without prior approval if the organization has a legitimate programmatic need and the request is submitted before the original end date. Check the specific terms of each award and the awarding agency's policies before assuming automatic extension authority exists for a particular grant.
Period of Performance
The time period during which the recipient may incur new obligations to carry out the work authorized under the award. Costs charged to a federal award must be incurred within the period of performance unless the award specifically authorizes pre-award costs or a carryover of unobligated balances. The period of performance is stated in the Notice of Award and is one of the most straightforward compliance requirements: charges after the end date are unallowable. Managing card access relative to period of performance end dates is a concrete operational control that prevents one of the most mechanical categories of audit findings.
Prior Approval
Permission from the federal awarding agency to take a specific action before you take it. Federal grants require prior approval for various categories of changes: budget revisions above certain thresholds, changes in key personnel, changes in scope of work, no-cost extensions (in some cases), and acquisition of equipment not in the approved budget. Failing to obtain required prior approval before making a change creates a compliance finding even if the underlying activity was otherwise allowable. The Uniform Guidance has streamlined prior approval requirements somewhat compared to older OMB circulars, but program-specific requirements can still add to the list.
Questioned Cost
A cost that an auditor has questioned because it may not comply with federal requirements. Questioned costs can be found to be allowable after the organization provides adequate documentation and explanation, or they can be disallowed, in which case the organization must return the disallowed amount to the federal awarding agency. Not all questioned costs result in disallowances. The distinction between a questioned cost and a disallowed cost is important: a questioned cost is the auditor's flag, a disallowed cost is the final determination after review by the awarding agency.
Single Audit
An organization-wide audit required for organizations that expend $750,000 or more of federal awards in a fiscal year, covering both the organization's financial statements and its compliance with federal award requirements. The Single Audit Act and 2 CFR Part 200 Subpart F govern the requirements. The audit is conducted by an independent CPA firm, the results are submitted to the Federal Audit Clearinghouse, and the reports are publicly available. Submitting Single Audit results late (due date is the earlier of 30 days after the auditor's report or 9 months after the fiscal year end) is itself a finding that can affect the organization's risk classification for future awards.
Subrecipient
A non-federal entity that receives a subaward from a pass-through entity to carry out part of a federal program. As a pass-through entity, your organization has monitoring obligations over your subrecipients that include providing them with required award information, reviewing their financial and programmatic reports, and following up on audit findings from their own single audits or program reviews. Subrecipients are distinguished from contractors, who provide goods or services for your organization's use rather than carrying out a portion of the federal program. The distinction determines the compliance obligations that flow down to the other party.
Uniform Guidance
The shorthand term for the Office of Management and Budget's consolidated guidance for federal awards, formally codified in 2 CFR Part 200. It covers definitions, requirements for recipients, cost principles, and audit requirements. The Uniform Guidance replaced the older OMB Circulars A-21, A-87, A-110, A-122, and A-133, consolidating them into a single regulatory framework that took effect in December 2014. References to the "OMB Circulars" in older grant agreements or institutional policies typically refer to the standards that are now incorporated into the Uniform Guidance.