Winning a grant is only the start. Funders have detailed requirements for how money is spent, what records are kept, and what progress reports are submitted. Poor compliance is one of the leading causes of grant clawback and damaged funder relationships. This guide covers what to expect and how to manage it properly.
Plenty of businesses put enormous effort into winning a grant and then treat compliance as an administrative afterthought. This is a mistake that regularly ends in expensive consequences - claw-back of grant payments, exclusion from future funding rounds, and in serious cases, reputational damage that extends to your entire sector. Grant compliance isn't bureaucracy for its own sake; funders are accountable for public money and they expect their grantees to be too. Understanding what's required from day one makes compliance manageable rather than chaotic.
Every grant comes with a grant agreement or contract that sets out the terms. Read it carefully before you sign it - not after. The key things to understand upfront are: the approved budget and what flexibility you have to move money between budget lines; what activities and deliverables are tied to each payment milestone; the record-keeping requirements (receipts, timesheets, procurement evidence); any restriction on other funding sources; and what constitutes a material change requiring funder approval. Most funders allow modest budget flexibility (often 10-15% between lines without approval) but prohibit changing the overall project scope without agreement.
Keep all financial records related to the grant separate from your general business accounts or at minimum traceable to a dedicated cost code. This means: invoices and receipts for every item of expenditure claimed; bank statements showing payments; for salary costs - payslips, timesheets, and employment contracts; for capital equipment - purchase orders, delivery notes, and asset registers. The minimum retention period is usually 6-7 years after the project ends for UK public funding; US federal grants typically require 3 years from the final expenditure report.
The most common compliance failures involve salary costs. Claiming staff time against a grant without adequate timesheet records is one of the most frequently cited problems in grant audits. Even if the time was genuinely spent, you can't prove it without contemporaneous records. Simple weekly timesheets noting time spent on each funded and unfunded activity, signed by the relevant person, are usually sufficient.
Most grants require periodic progress reports - quarterly or six-monthly is common, plus a final report. Reports typically cover: activities completed against plan, outputs achieved, financial summary (spend to date vs budget), issues and risks, and forward plan. Write reports as if the assessor has no memory of your original application - remind them what the project was, what you said you'd deliver, and show clearly what you've done against that. Funders use progress reports to assess whether to release the next payment tranche; vague reports create delays.
If the project is behind schedule or if something material has changed, tell the funder proactively - don't wait until the next report. Almost all funders have a process for agreeing changes to scope, timeline, or budget if there's a genuine reason. Hiding problems and hoping they resolve themselves, or revealing them only when forced, destroys funder confidence and is much more likely to cause difficulties than transparent early communication.
For larger grants - typically above £100,000 in the UK and above $150,000 for US federal awards - monitoring visits are routine. A funder representative will visit your premises, review records, and discuss progress. These are not inspections designed to catch you out; they're relationship-management events for the funder. Prepare by having your records in order, knowing your project status, and being able to show what the funded work has produced. If you've been running the project properly, a monitoring visit should be straightforward.
Audits - either by the funder or an independent auditor - are triggered when something flags a concern, or they're randomly selected as part of a programme audit. If you receive an audit notification, take it seriously and engage cooperatively. Having well-organised records from day one turns a potentially stressful audit into a manageable paper exercise.
Grant clawback - where the funder demands repayment of money already received - happens in a few specific scenarios. Ineligible expenditure: spending grant money on costs that weren't covered by the agreement or weren't incurred as described. Underdelivery: failing to deliver the outputs or outcomes the grant was contingent on. Breach of other conditions: selling the business, changing the project's purpose, or using grant-funded assets in ways not permitted. Poor record-keeping that means eligible expenditure can't be evidenced.
The best defence against clawback is a simple one: spend the grant as described, document what you spend it on, deliver what you said you'd deliver, and tell the funder promptly when anything changes. Grantscom includes guidance on compliance requirements for the specific funding programmes in your matched feed, so you know what you're signing up for before you apply.
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