When a grant needs prior approval

Some grant costs are allowable only if you got the funder’s written yes before you spent the money or made the change. Get that yes and the cost is fine. Skip it and the very same cost — reasonable, necessary, well-documented — can be disallowed anyway, purely because the approval was missing. Prior approval is the quietest way to turn a good cost into a repayment.

The principle that makes it dangerous

2 CFR 200.407 sets it out plainly: the absence of prior approval on a cost does not, by itself, make that cost unreasonable — unless prior approval is specifically required for allowability. That exception is the whole game. For the items where prior approval is required, “we didn’t ask” is the end of the argument. The cost is disallowed, no matter how defensible it would otherwise have been.

What commonly needs it

200.407 points to a long list of sections, and your award’s own terms add more on top. The ones that come up most often in practice:

• Changes in the scope or objectives of the project.
• Budget revisions beyond a stated threshold — moving money between cost categories.
• Changes in key personnel named in the award.
• Equipment and capital expenditures.
• Participant support costs — and moving money into or out of them.
• Pre-award costs incurred before the start date.
• Certain travel, and foreign travel in particular.
• Subawarding or contracting out part of the work.
• A no-cost extension beyond the one-time self-service one (2 CFR 200.308).
• Counting unrecovered indirect costs as cost share.

Most of these conditions are already written into your award letter and the regulations it incorporates — they are just scattered and unflagged. This is one of the things Grantwell pulls out of the award when it reads it: the “requires prior approval” conditions become an explicit checklist tied to the grant, so the approval is something you request on time rather than something an auditor discovers you skipped.

This guide is general information about how grant compliance work is commonly organised, not legal, audit or accounting advice. Grant rules change, and terms vary by funder and award — always check your own award documents and the current regulation, and talk to your auditor about your specific circumstances.

This guide is general information about how grant compliance work is commonly organised, not legal, audit or accounting advice. Grant rules change, and terms vary by funder and award — always check your own award documents and the current regulation, and talk to your auditor about your specific circumstances.