Welcome to our three-part series on federal grants. From application and matching to reporting, we’ll walk you through what you need to know about your grant.
- Part 1: (You are here!) Understanding Your Federal Award Requirements
- Part 2: How to Build Your Federal Award Budget
- Part 3: Reporting on Your Federal Award
This first part will give you an overview of how federal grants differ from non-federal grants and the steps that go into successfully applying for one.
What’s a Federal Grant?
Federal grants (also called “federal awards”) are funds that come from federal agencies, such as the National Endowment for the Arts (NEA), the National Endowment for the Humanities, or the Institute of Museum and Library Sciences. Federal grants can also be offered by other entities—including State, Regional, and Local Arts Agencies—that receive federal money.
If grant money flows from a federal organization, it’s a federal grant . . . and it has strings attached.
All federal grants follow the same rules for how that money can (and can’t) be spent. That means small nonprofits are held to the same standards as grantees receiving much larger grants in fields like defense, agriculture, and technology. This can make the requirements that come with federal funding feel overwhelming, especially for small organizations. But take heart—we’re here to help.
In this guide, you’ll get a breakdown of what’s required of federal grant applicants and grantees, and some tips on staying in compliance. Because your arts project deserves its best shot at success.
Disclaimer: This is not legal advice, and these requirements are subject to change. Be sure to consult your attorney for the most up-to-date interpretation of federal law.
So . . . Is the Grant I’m Applying for a Federal Grant?
If you’re applying for a grant from a Regional, State, or Local Arts Agency, it might be a federal grant. The simplest way to check: if you see a federal agency name attached to it in the name or the description, it’s a federal grant.
Arts Midwest is a United States Regional Arts Organization. We offer two kinds of grants: federal and non-federal.
Federal Grant Opportunities
All of these programs are funded by the NEA, a federal agency established by an Act of Congress. Federal law applies to any money disbursed by a federal agency, so there are specific things that these grants cannot be spent on, no matter what.
Arts Midwest is a pass-through entity, which means we accept applications and administer grants on the NEA’s behalf. By making sure all federal laws are being followed, we help grantees avoid unintentionally misappropriating their grant money and triggering consequences like an audit.
Here’s what we do to keep the grant money flowing:
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Coordinate the application process.
We send out a call for applicants, answer applicants’ questions, and manage the grants portal on behalf of the NEA.
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Assemble the review panel.
These are external experts, independent of Arts Midwest and the NEA, who review the application pool and recommend applicants for funding.
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Conduct risk assessments.
Conduct risk assessments of all applicants recommended by the review panel. We’ll dig into the nitty gritty of risk assessments later.
Before You Apply
There are a few key steps to check off your list before starting your federal grant application.
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Make sure your organization is eligible.
NEA grants support nonprofits, tribal government organizations, colleges and universities, or divisions of local government. They cannot support fiscally sponsored organizations or for-profit organizations. If you’re a 501(c)(3), you’re good to go.
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Review ALL guidelines.
Not all federal grants have the same requirements, and it’s important to read the fine print. (For example, does your grant require applicant organizations to have annual budgets under $2 million?)
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Get your UEI.
Your organization will need a Unique Entity ID (UEI) to be eligible for a federal grant. Register for one through the System for Award Management at SAM.gov. Do this as soon as possible, as there can be delays. (Thankfully, it’s free!)
If you’ve received more than $1 million in federal grants before, have a single audit—a standard financial compliance review—ready to go. You’ll need to provide that if you’re recommended for a grant.
The NEA outlines how federal awards can be disbursed and spent. Be sure to check the uniform compliance guidelines with your attorney, as these requirements are subject to change.
Need Help Getting Your UEI?
Download our step-by-step UEI guide or find a local APEX Accelerator for no-cost counseling through the SAM.gov process.
While You’re Applying
Once your nonprofit has its UEI, it’s time to apply! A big part of that process involves creating your budget. We have a whole resource on How to Build Your Federal Award Budget, but here are some highlights to keep in mind:
- NEA grants are meant to support a specific arts project, not general operating costs.
- Some common “unallowable” costs (that you can’t spend federal dollars on) include:
- Food (except in an artist’s per diem)
- Alcohol
- Concessions or merchandise
- Prizes, gifts, or awards
- Fundraising activities (e.g., receptions or galas)
- These restrictions apply to your matching budget as well.
For more details, check our handy (non-exhaustive) summary of eligibility requirements. You can also go in-depth with the NEA’s General Terms & Conditions to get a fuller sense of federal funds compliance.
After You’ve Applied
First, pat yourself on the back. A finished federal grant application is no small feat!
At this point, the review panel will go through each application and recommend candidates for funding. If your organization is recommended, Arts Midwest will conduct a risk assessment.
What is a risk assessment?
Risk assessments look at organizational health. But don’t worry: being “higher risk” doesn’t necessarily mean your organization won’t get a grant. It may just mean more oversight or touchpoints to set you up for success.
Has your organization applied for federal grants before? (Specifically with Arts Midwest?) Receiving a past grant is a good indicator that your organization is set up to succeed with a new grant. Still, new applicants are always welcome!
This involves looking into your organization’s Form 990 (your nonprofit’s annual tax filing). It’s always good to have your financials assembled and ready to go in case they’re requested.
If you’ve received a grant in the past, have you submitted reports and fulfilled requirements on time? Being timely and accurate makes every grant experience smoother and positions you well for future ones, too.
How much is on your plate? Do you have the support in place to accomplish your goals? Will your proposed project overwhelm your staff and resources? Understanding your capacity is key for a successful grant.
If you have submitted an audit, are there any findings, material weaknesses, or deficiencies (issues an auditor might flag) within that audit? Those can impact your risk level for a federal grant.
If the review panel recommends your organization and the risk assessment confirms it, congratulations . . . you’re officially a federal grantee!
Subject to Change
The U.S. Office of Management and Budgets (OMB) has proposed changes that, if adopted, would affect the requirements for federal awards beginning October 1, 2026. If those changes go into effect, we will share next steps directly with all applicants and on our website.
Next Steps: Building Your Budget
Federal funding comes with requirements that can feel daunting, but none of them are designed to trip you up. Every step in this guide—from getting your UEI to sitting through a risk assessment—exists to help your project succeed with federal grant dollars in hand.
Next up in this series: How to Build Your Federal Award Budget, where we’ll walk through what to include (and what to leave out) as you build your budget.