What should a nonprofit do when grant-funded employees work outside the grant scope?
Fix the charging, not the pay. The employee is owed for the time regardless of which budget line it lands on.
Last updated: August 02, 2026
Direct Answer
When grant-funded employees work outside the grant scope, nonprofits must promptly review and document the situation, adjust job duties or funding sources accordingly, and communicate clearly with all stakeholders. This approach helps protect compliance and operational integrity while addressing real-world staffing pressures.
Controlling authority: 2 CFR pt. 200 (Uniform Guidance) together with the FLSA. Award terms control and vary; the funder never displaces the wage obligation.
Fix the charging; the wages are owed either way
Grant agreements define specific roles and activities eligible for funding, so deviations can trigger compliance concerns and jeopardize future funding. In my experience, nonprofits often discover these scope issues only after payroll or reporting discrepancies arise. Addressing them swiftly ensures that the organization maintains a solid compliance foundation and avoids costly audits or funding clawbacks.
Beyond compliance, working outside the grant scope can create confusion among managers and employees, blurring accountability and expectations. A practical response aligns operational reality with the grant terms, either by adjusting duties, reallocating expenses, or seeking formal grant amendments. The goal is to keep work sustainable for people while preserving transparent, defensible records.
| Issue | What the grant governs | What employment law governs |
|---|---|---|
| Whether the work is allowable | Yes — scope, period and cost principles | Irrelevant to whether the employee must be paid |
| Time and effort records | Required, and must reflect actual activity rather than a budget allocation | The same records serve as FLSA hours-worked evidence, so they must reconcile |
| Working outside the grant scope | May be unallowable, and may have to be recharged | The employee is still owed for the time. Unallowable cost is a funding problem, not a wage problem |
| Reassignment to other duties | May require prior approval or a budget revision | Employment terms, notice and any contract obligations still apply |
| Funding ends | The award ends on its terms | The layoff still needs selection criteria, and the reduction analysis still applies |
| Overtime the grant will not cover | A cost cap | Not a wage cap. The FLSA obligation is unaffected by the award |
| Restricted or designated funds | Restrict the use of the funds | They do not restrict the employer’s obligations to the person |
Time-and-effort records must reflect actual activity
What I see employers miss is the assumption that minor role drift won’t matter if it’s ‘small’ or temporary. The risk is not usually the rule itself; it is the inconsistent process around it. Without clear tracking and communication, these deviations grow into bigger problems that surface during audits or employee grievances.
Another common gap is failing to involve HR or finance early enough. Managers often handle these issues informally, which increases exposure to payroll errors and compliance gaps. Documentation is not just paperwork—it’s a tool to clarify what work was done, why, and who authorized it. This protects both the employee and the nonprofit.
Where scope drift becomes a finding
Overlooking grant scope compliance puts nonprofits at risk across operational, financial, and reputational dimensions. Recognizing specific triggers helps leaders intervene before issues escalate.
- Unapproved changes to employee duties or work locations
- Inconsistent timesheet or payroll coding for grant-funded hours
- Lack of documented approvals for out-of-scope work
- Audit findings related to ineligible grant expenditures
- Employee confusion or complaints about job expectations
Reconcile effort records against the award monthly
Start by reviewing the grant agreement’s defined scope and comparing it to actual employee duties and time allocations. Cross-check payroll and timesheets for consistency with approved roles. This practical audit reveals gaps and informs whether adjustments or formal requests to the grantor are needed.
Next, evaluate internal communication and approval processes. Check if managers documented changes and sought necessary permissions. If policies don’t support managing scope changes in real time, now is the time to strengthen those frameworks. Documentation and clear workflows make compliance manageable under everyday pressures.
Finds unrecorded compensable time hiding in breaks, rounding and off-clock work.
When scope drift is systemic
If you uncover persistent or systemic out-of-scope work, it’s advisable to consult HR professionals experienced with nonprofit grants and Texas compliance. They can help craft corrective action plans, update policies, and provide manager training to prevent recurrence.
Also, seek HR support when employee relations issues arise from scope confusion, such as grievances or morale challenges. Addressing these operational and people risks early reduces long-term disruption and preserves trust between leadership and staff.
Ensure Grant Compliance with Expert HR Support
Navigating grant-funded employee issues requires practical HR expertise that balances compliance with real-world constraints. Contact Faulkner HR Solutions to develop sustainable processes that protect your nonprofit and your people.
Get HR HelpThis page provides general HR information for employers and is not legal advice. For legal interpretation or representation, consult qualified employment counsel.