Participant Support Costs in a Single Audit: What Auditors Look For

Federal grants are divided into different budget categories, and each one comes with its own compliance requirements. Participant support costs are one of those categories. The Uniform Guidance includes rules about which costs qualify, what activities they can support, and who can be treated as a participant (2 CFR 200.456). Not every federal award includes participant support costs, but when they do, auditors usually spend time reviewing them during a Single Audit. Organizations that understand the requirements before the audit are generally in a much better position to show that the funds were used appropriately. To help clients, prospects, and others, Wilson Lewis has summarized the key details below.

Federal Grant Budget Categories

Federal awards generally divide project costs into several budget categories, such as personnel, fringe benefits, travel, equipment, supplies, contractual services, participant support costs, other direct costs, and indirect costs. Each category has specific requirements for how funds may be used.

Participant support costs are unique because they are intended to help individuals participate in a grant-funded activity rather than administer the program.

What Are Participant Support Costs?

Under the Uniform Guidance, participant support costs are direct costs paid to or on behalf of participants in connection with conferences, training programs, workshops, or similar activities. Common examples include:

• Stipends
• Travel allowances
• Registration fees
• Per diem or subsistence allowances
• Temporary child care or dependent care

A participant is someone attending or participating in the grant-funded activity, not someone responsible for carrying it out. Employees, instructors, consultants, and other project staff are generally not considered participants.

For example, suppose a nonprofit receives a federal grant to provide workforce training for unemployed veterans. Participant support costs depend on the award criteria, but they may include mileage reimbursements, hotel accommodations, registration fees, a completion stipend, among other expenses. Each allowable cost needs proper documentation and must be linked directly to each participant. 

Participant support costs are specifically defined, without room for loose interpretation. It’s important to note that the instructor’s salary and any other supporting wages must be charged to other budget categories. Office supplies purchased for the program are also usually charged to another budget category. As a general rule, if it does not support the participant being able to simply attend the allowable event, it is not considered a participant cost. 

How Organizations Manage Participant Support Costs

It’s best practice to have a participant support policy approved by leadership and the board. It should be written down and accessible to anyone who interacts with federal grant administration or program planning and execution. It should plainly list definitions of both participant and participant support costs, along with compliance requirements. It is helpful to have examples of allowable and disallowable participant costs in the policy.

In addition, the organization receiving the grant must maintain information related to each participant’s eligibility, records of participant attendance, and receipts or expense reports clearly tied to the event. This might include having proof of eligibility for each participant or keeping detailed sign-in sheets.

For this reason, many organizations maintain individual participant files that include registration information, attendance records, reimbursement requests, payment records, and any documentation needed to demonstrate compliance. This is a common point of failure during Single Audits, so it’s recommended that a system is developed and communicated to everyone responsible for administering the grant.

As an accounting note, participant support costs should be tracked separately from other grant expenses and excluded from indirect cost rate calculations.

It may be possible to charge costs that fall outside the standard definition of participant support costs. The 2024 Uniform Guidance changed some of the rules around prior written approval, meaning the absence of written approval does not automatically make a cost unallowable in every situation. When there is uncertainty, though, it’s prudent to obtain written approval from the awarding federal agency. Examples of expenses that may require additional evaluation include t-shirts, completion certificates, and other small items intended to support participation.

What Single Auditors Review

During a Single Audit, auditors generally select several random individual participant files. Then they review transactions and supporting documentation. In most cases, they are trying to answer three questions.

1. Were the participant support costs allowable? The first question is whether the expenses were permitted under the federal award and met the requirements for participant support costs. Auditors review whether the costs were reasonable, properly documented, and charged to the correct federal award. Any expense must have proper documentation to be considered an allowable cost at the time of the audit. Supporting documents may include reimbursement requests, receipts, payment records, invoices, and general ledger entries. 
2. Did the costs support an approved grant activity? Auditors also verify that the participant support costs were connected to an activity authorized by the grant. For example, travel reimbursements should relate to the exact conference, workshop, or training event funded by the award. Auditors may review program agendas, registration records, attendance logs, schedules, or other documentation showing the activity took place as planned. Funds may not be transferred from the participant support costs line item to fund other expenses, unless written permission from the funding source is granted prior to taking the action. 
3. Were the participants eligible? Finally, auditors determine whether the individuals receiving participant support met the eligibility requirements established by the federal program. Those requirements vary by award and may include factors such as income, residency, student status, veteran status, or other program-specific criteria.

Documentation often includes applications from participants or other detailed records showing that the organization followed the grant’s eligibility requirements. 

Contact Us

If an organization receives federal funding, being proactive is key to a successful audit. Leaders who understand the compliance requirements for the various categories, including participant support costs, can help reduce risk, improve grant management, and stay focused on the mission. If you have questions about the information outlined above or need assistance with another tax or accounting issue. Wilson Lewis can help. For additional information call 770-476-1004 or click here to contact us. We look forward to speaking with you soon.