Basic Facts about Funding Agreements

So much attention is focused on the regulations that it is important to always remember that the agreement is the definitive statement of what the recipient must do - and what the funding agency will accept - with respect to the funded project or activity.

Submit your proposal.
Your first formal contact with your funding agency will be your written proposal. The proposal states your understanding of the project or activity you intend to conduct with award funds, but it also states your understanding of the terms and conditions you expect to agree to in the final award document. Use your proposal to get off to a good start with your funder. See About Proposals.

Get the terms right from the start.
If your proposal wins an award, you will receive a draft of the award agreement. You need to review this draft agreement with care. Once you sign the agreement, you have agreed to all the terms contained therein. If you feel you need to negotiate for different terms and conditions, you need to do that before you sign the agreement. See Negotiating the Agreement.

Maintain contact with the funder.
The funding agency's and the recipient's authorized representatives are identified in the agreement. For brevity, I refer to the funding agency's authorized representative as the Agreement Officer (AO). For more on funder negotiations, see Working with the Funding Agency.

Modify the terms and conditions of the agreement, when necessary.
Once it has been signed by both parties, the agreement governs how you implement the funded activity. An agreement can be modified, but only by authorized representatives of the parties, in writing. This includes all terms and conditions, budget, program description, and any attachments. (For more on agreement modifications, see Agreement Mods.

Resolve audit questions.
In the event of questioned costs, the Agreement Officer is the final determiner of cost allowability. Auditors may question costs, but questioned costs are referred to the AO for final determination on allowability. For more on how audits work, see Audit Basics.

Note on dealing with conflicts between the agreement and applicable regulations.
The regulations come into the picture when they are invoked by the funding agreement. Usually, the terms of the agreement and the regulations will be in perfect accord. But if these two are ever in conflict, the more-restrictive provision will take precedence.

Thus, if the language of the award agreement is more restrictive than the requirements of the applicable regulation, the more-restrictive term prevails. Since you've accepted the more-restrictive provision by signing the agreement, you are bound to comply with the more-restrictive agreement term.

This is not a two-way street. It's one-way, in favor of restriction.

That is, a more-restrictive regulation will prevail over a less-restrictive agreement term. The only exception to this more-restrictive-trumps-less-restrictive rule is if the less-restrictive agreement term explicitly waives the more-restrictive regulation.

What if the regulations/policies referenced in the agreement change during the life of the award?
The version of the regulation/policy that is referenced in the agreement prevails unless/until the agreement is modified. That is, the funding agency can't change the terms of the agreement unilaterally, simply by changing a document that is referenced in the agreement. You should comply with the version that is referenced in the agreement, until the agreement is formally changed.

For evidence that OMB takes this position, see QII-1 and QII-2 of the 12 FEB 2014 FAQ on 2 CFR 200.

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