How to Determine if Your Broadband Project Triggers a Grant Audit

Understanding audit triggers for federal and state broadband grants

This is Article 5 of 5 in of our series on navigating grant-funded broadband growth, covering grant audits, compliance triggers, and audit-readiness best practices. Upcoming articles focus on accounting challenges and scaling operations efficiently.

Not every broadband provider that receives federal or state funds needs a grant audit. Many companies are uncertain about their classification, which can lead to unnecessary work or, worse, compliance gaps.

A “grant audit” reviews whether your internal controls, documentation, and spending practices comply with federal rules. Depending on your entity type and funding source, you may be required to undergo an audit if your federal expenditures exceed certain thresholds or if specific compliance obligations apply.

Step 1: Review all agreements (including subawards)

Begin by reviewing your documentation. Review subawards, memoranda of understanding (MOUs), and contracts for language about:

• Reporting obligations
• Compliance requirements
• Audit references (e.g., “Uniform Guidance,” 2 CFR Part 200, or program-specific audits)

Summarize your interpretation in a short memo, and if needed, request clarification in writing from the grantor or primary recipient. This documentation will be invaluable if questions arise later or if your organization undergoes an audit.

Step 2: Confirm your entity’s status under federal grant rules

Before diving into compliance details, confirm whether your organization is treated as:

• For-profit (commercial) entity: Usually subject to specific grant agreement requirements but not a full “Single Audit.”
• Nonprofit or government subrecipient: Subject to the Uniform Guidance (2 CFR Part 200 Subpart F), including possible Single Audit requirements once federal expenditures cross the threshold. Read more for definitions and context around audit types and federal oversight.

This distinction can be unclear, especially in broadband programs where for-profit entities function similarly to subrecipients. Clarifying this early helps prevent future compliance issues.

Step 3: Identify your role

Building on Step 2, your responsibilities under the award determine whether audit requirements apply.

• Recipient: Receives funds directly from a federal agency or a pass-through entity.
• Subrecipient: Receives funds from a recipient and actively carries out part of the program.
• Contractor: Provides goods or services but does not implement the program.

For practical guidance, see “Are You a Subrecipient or a Contractor? What Broadband Providers Need to Know” for a discussion on how your actual responsibilities, not just your title, determine whether grant audit requirements apply.

Step 4: Strengthen internal processes

Even if current expenditures fall below applicable thresholds, early preparation prevents last-minute compliance gaps.

• Track grant-funded expenditures separately in your accounting system
• Maintain documentation tied to program objectives and deliverables
• Implement basic approval and reporting workflows

These steps make it easier to scale up if thresholds are crossed or if a partner’s audit scope includes your work. Learn more about practical tips on setting up documentation systems and internal controls that support audit readiness.

Step 5: Track federal spending

Audit thresholds are based on expenditures, not awarded amounts. For most new awards on or after October 1, 2024:

• Threshold: $1,000,000 in federal funds expended during a fiscal year.
• Earlier threshold: $750,000 may still apply for older awards.

Make sure you:

• Maintain separate tracking for each award
• Account for pass-through funds
• Document what counts toward the threshold (See 2 CFR §200.502 for details.)

Step 6: Engage experts early

Engaging your legal, accounting, or audit professionals early is essential and can:

• Confirm your role classification and whether an audit is required
• Recommend documentation strategies and cost-tracking approaches
• Identify whether a Generally Accepted Government Auditing Standards (GAGAS)-compliant or program-specific audit would apply

By clarifying these points early, your organization can plan more effectively and reduce the likelihood of compliance issues.

Bottom line: Why early compliance matters

Grant-funded broadband projects involve complex, evolving rules. Not every provider is subject to a grant audit, but misclassifying your role or overlooking spending thresholds can expose your organization to compliance risks and penalties.

Early preparation, separating expenditures, documenting decisions, and confirming your classification, positions your company to stay compliant while focusing on growth.

Looking ahead: What is next in the series

Next, we will turn to technical accounting challenges, including revenue recognition for grant funds, categorizing network costs, and documenting in-kind support. Building compliance discipline now lays the foundation for efficient scaling later.

How Keiter can help

At Keiter, we help broadband providers navigate federal award requirements with expert oversight and actionable guidance. Our team performs grant audits, evaluates financial reporting, and tests compliance with program rules so you can expand broadband access with confidence.

Contact your Keiter Opportunity Advisor | Email | Call 804.747.0000 to schedule a compliance consultation or learn more about our audit services.

Resources and Further Reading

• 2 CFR Part 200 – Uniform Guidance (eCFR)
  Governs administrative and cost principles for federal awards, including audit requirements. Key sections: §200.331 (Subrecipient and contractor determinations), §200.502 (Federal Awards Expended), and §200.507 (Program-Specific Audits).
• Office of Management and Budget (OMB) Compliance Supplement – Office of Federal Financial Management
  Official compliance guidance used by auditors and recipients of federal funding, including the most recent updates to federal grant audit thresholds.
• Federal Register – 2024 Uniform Guidance Revisions (PDF)
  Official announcement of the 2024 updates to 2 CFR Part 200, including the federal grant audit thresholds increase and effective dates.
• BEAD Notice of Funding Opportunity (NOFO) – Audit Requirements (Section G)
  Details audit requirements for recipients of BEAD funding, including when GAGAS-compliant or program-specific audits are required for for-profit recipients.