Grant Noncompliance Policy

Version: 4.0

Effective Date: 05/27/2026

Approval: Board Decision #26-27

Grant recipients are responsible for managing State grant funds in compliance with statutes, rules, grant agreements, BWSR grant management procedures and other applicable laws and requirements. BWSR has developed the following policy to define levels of noncompliance and establish expectations for grantees and BWSR staff to address these concerns. BWSR staff has the discretion to consider factors not covered in this policy. 

Levels of Noncompliance

Level 1: Failure to follow required administrative procedures 

These instances are often addressed with training. Repeated instances of Level 1 noncompliance may be categorized as Level 2 noncompliance. Failure of grantee to follow its own established grant policies or procedures may also be noted as Level 1 noncompliance. 

Level 2: Failure to follow grant agreement or other statutes or rules applicable to grant management 

Level 3: Evidence of fraud or misuse

Requirements

Addressing Level 1 and 2 Noncompliance

When noncompliance is found, grantees will be notified and BWSR staff will follow agency procedure to address the noncompliance. Procedure will depend on the level of noncompliance involved. Often, mistakes in grants management result from simple misunderstandings and can be brought back into compliance. Grantees may be required to develop a corrective action plan or repay grant funds. During this time, grantees may temporarily have payments withheld. If a corrective action plan is required, BWSR must approve the plan and may require implementation of the plan for the grantee to be considered back in compliance.  

For noncompliance or if work under the grant agreement is found by BWSR to be unsatisfactory or performed in violation of federal, state, or local law, BWSR has the authority to cancel payment or require repayment of grant funds. If repayment of grant funds is required, the grantee must either repay the grant funds directly or agree to a payment arrangement.

BWSR has the authority to withhold payments on any or all grants or hold execution of pending grants. Minnesota Department of Administration’s Office of Grants Management (OGM) Policies 08-08 and 08-09 require that grant payments not be made on grants with past due progress reports, unless the state agency has given the grantee a written extension. OGM Policy 08-13, Grant Closeout Evaluation, requires state agencies to evaluate and consider a grant applicant’s performance on prior grants before awarding subsequent grants or making a new grant award to them. Holds on grant payments and execution of pending grants will be maintained until the grantee is considered back in compliance.

Alternatives may also be considered and used at the discretion of BWSR. 

Addressing Level 3 Noncompliance (Fraud or Misuse)

When a concern is identified regarding grantee potential fraud or misuse, BWSR must protect the interests of the State, including the possibility of withholding payments according to Minnesota Statutes, Section 15.013.

BWSR will preliminarily investigate the potential fraud or misuse. If the initial review of the evidence indicates Level 3 noncompliance has occurred, payments on all grants will be held and pending grants will not be executed. BWSR will notify the appropriate agencies including but not limited to the Office of the Legislative Auditor (OLA), the Bureau of Criminal Apprehension (BCA), or the Department of Administration’s Office of Grants Management (OGM), in accordance with OGM Policy 08-05, Managing Fraud Risk and Reporting Responsibilities.

In consultation with these agencies, BWSR may conduct or cooperate in additional investigation that may result in compliance actions, including termination of the grant agreement and repayment of grant funds.

Appeal

A grant recipient may appeal a finding of noncompliance. The appeal must be in writing, include all supporting evidence, and be sent to the BWSR Regional Manager within 30 days of receiving the noncompliance communication from BWSR. The Regional Manager and Assistant Director of Regional Operations will review the appeal and supporting evidence and render a decision on the merits of the appeal. The Assistant Director of Regional Operations may stay any required repayment of grant funds until the appeal is resolved. 

If no resolution can be achieved between the grant recipient and the Assistant Director of Regional Operations, the grant recipient may request in writing to the Executive Director and chair of the Board for the appeal to be heard by the appropriate Board Committee. The Committee will make a recommendation to the Board to dismiss, amend, or uphold the appeal. 

Level 3 noncompliance may follow an alternative appeal process. If applicable, this will be communicated to the grantee.