Grantee Requirements

State and Federal Funding Compliance Conditions

The grant funds awarded by the North Carolina Arts Council (Arts Council) are public funds that require accountability.  Both the Office of State Budget and Management and the National Endowment for the Arts pass along certain regulations to which the Council, its grantees, and any subgrantees must adhere.  These regulations as well as Arts Council procedures are summarized below. Adherence to regulations is required even if they have changed during the contract period. 

Tax-exempt Status Changes and IRS Form 990

A grantee must notify the North Carolina Arts Council of any changes in its tax-exempt status with the Internal Revenue Service under Section 501(c)(3). It must also file the IRS Form 990 or 990-N annually.


The Arts Council and all of its grantees are contractually committed to abide by federal regulations which bar discrimination on the basis of race, color, national origin, disability, age, or sex and which require accessibility for persons with disabilities.

Grantees are required to conduct their operations in compliance with Title VI of the Civil Rights Act of 1964, Section 504 of the Rehabilitation Act of 1973, the Americans With Disabilities Act of 1990, the Age Discrimination Act of 1975 and, where applicable, Title IX of the Education Amendments of 1972. Grant recipients must also be in compliance with the Fair Labor Standards Act, which provides for minimum compensation to employees.

All Arts Council grantees must ensure that people with disabilities have access to both the location and content of all funded programs.

Fiscal Agents

In cases where a grantee is using a fiscal agent, the fiscal agent, as well as the grantee organization, is fiscally and legally responsible for all grant requirements.

A copy of the letter from the IRS stating that the application for tax-exempt status has been received or a copy of the application submitted to the IRS is required with your application support materials.

When the grant is awarded, the fiscal agent and grantee sign the grant agreement agreeing to all its terms. The fiscal agent receives the grant payment directly from the Arts Council. It is strongly recommended that the fiscal agent handle the accounting for the grant by receiving all income and paying all expenses for the project. It is allowable to charge the grantee for this service or have the cost included in the budget as a grant expense. The fiscal agent can transfer the grant payments to the grantee who would then handle the grant expenditures, but the fiscal agent would still be responsible for these expenditures.

The fiscal agent and the grantee sign the final report certifying its accuracy. The fiscal agent is liable for the repayment of any grant funds not spent or misspent. The fiscal agent should be aware that receiving these additional grant dollars may increase its audit obligations to the Arts Council and the Office of State Budget & Management.


Subgrantees are responsible for expenditure, reporting, and compliance procedures.  They are to file Conflict of Interest Policies and the “State Grant Certification – No Overdue Tax Debts” form with our grantee that awarded them the subgrant before they receive payment.  They are to file, with the grantee, the reports required by the Office of State Budget and Management according to the appropriate threshold of state funds they have received.  There can be no overlapping project costs between two or more awards.  Subgrantees must maintain reports and accounting records that support the allowable expenditure of state grant funds.  The Office of State Budget and Management, the North Carolina Arts Council, the National Endowment for the Arts, and the Comptroller General of the United States or any duly authorized representatives, shall have access to any report, books, documents, working papers, and records maintained to account for funds expended under the terms and conditions of this grant for oversight, monitoring, and evaluation purposes. The subgrantee agrees to abide by the standards in General Statute 143C-6.21-23 and the North Carolina Administrative Code Chapter 09, Subchapter 03M “Uniform Administration of State Grants” and to provide all information to allow the grantee to comply with these standards.

Grant Contracts

If the Arts Council determines that a grantee is not in compliance with its contract, then it shall give the grantee 60 days written notice to come into compliance.  After that period, the Arts Council shall terminate the contract if the grantee is still not in compliance and begin the process to retrieve unexpended funds or unauthorized expenditures and suspend payments pending negotiation of a plan of corrective action.  The grant contract can be terminated by mutual consent with 60 days written notice to the other party, or as otherwise provided by law.

Management of Grant Funds

Grant recipients are sent a grant contract and an instruction page, which must be agreed to as part of the grant contract. Grantees must manage any funds received in accordance with federal regulations for administrative requirements and applicable cost principles. (Applicants with concerns about their ability to fulfill governmental regulations may, prior to applying for funds, contact the Grants Office for referral to locations where the complete requirements can be obtained.)

The Grant Award Letter specifies the grant amount and any special stipulations. Grant funds will not be available to the grant recipient until the grant contract is signed and returned to the Arts Council.

Payment of state grant funds is made upon complete processing of the signed grant contract,  any necessary budget revisions, any other required forms, and according to the state payment schedule in place at the time. Payment of federal grant funds is made upon written request for funds that will be spent within 45 days or for reimbursement. The cash request form is found on our Website: under Grants then Manage Your Award.

Any payment is contingent upon the Arts Council’s receipt and approval of all prior grant reports, including the Office of State Budget and Management’s report due online A grantee must have matching funds in its possession before spending the grant funds.  It must match this grant according to the project budget shown in the application or any subsequent approved revision of that budget.  Neither grant funds nor their matching funds can be used to match another Arts Council grant.

If a grantee needs to revise the description of its funded project or revise its budget by more than 10% of the total, it must submit a written request in advance.

The grant recipient is obligated to maintain complete and accurate records of all activities connected with the grant, and these financial records must be available to state and federal officials for audit. The records are to be kept for five years from the date of submission of the final report or, if an audit is begun, for three years from the date when the audit is resolved, whichever is later. Also, the grantee must adhere to standard administrative and accounting practices.

Any grant money remaining unspent at the end of the grant period must be refunded.

By April 1 of the grant project period, the grantee must inform the staff if it will not be able to spend all of the grant funds. Refunds should be returned to the Arts Council as soon as possible and no later than May 31 of the grant project period. If unspent grant funds are returned after this deadline and are reverted to the state budget office, the grantee may not be eligible to receive grant funds for the next fiscal year or future grants may be paid on a reimbursement basis.

Final Reports

At the end of the grant period, the grantee must submit a complete and accurate final report on the Arts Council’s ARTS Grants Online report form describing the grant project, giving an accurate account of how grant and matching funds were spent.

The report will include any specific reporting requirements described in the guidelines for each grant category. It will also include Project Descriptors and Individuals Benefiting for national report statistics. Non-government organizations and individuals are required to submit the Office of State Budget and Management’s report online at in addition to the Arts Council’s final report.

Report Violations and Consequences

A late final report is a violation of the North Carolina Arts Council grant contract. A report is late when it is received after the report due date shown on the Grant Award Letter. Violations are taken into consideration when an organization applies for future grants. Funding may be denied or future grants may be paid on a reimbursement basis based on reporting practices.

An extension of the report due date may be requested in exceptional circumstances. Requests for final reporting exte nsions must be made in writing before the report due date. No funds will be paid until all previous reports due have been received and approved.

Any reports more than five weeks delinquent (not received or incomplete) may be turned over to the Attorney General’s office for collection. If a grantee’s grant contract must be turned over to the Attorney General’s Office for collection, the grantee will not be eligible for current or future grant funds for one fiscal year. Grantees must pay any collection agency costs involved in the North Carolina Arts Council’s obtaining a final report or grant refund.

Office of State Budget and Management

A grantee is subject to the requirements of General Statute 143C-6-23, “Use of State Funds by Non-State Entities,” and the rules for enforcing it, which are found in the North Carolina Administrative Code, Title 09, Chapter 03, Subchapter 3M for the “Uniform Administration of State Grants.” These requirements can be found in detail on the Office of State Budget and Management’s website,

If the grantee receives funds from the State of North Carolina, including state or federal funds, from any source including the North Carolina Arts Council grant, then the grantee must file the appropriate online forms required by the Office of State Budget and Management at

If the grantee receives less than $25,000, it must submit the online forms required under Level 1 Reporting. If the grantee receives at least $25,000 but less than $500,000, it must submit the online forms required under Level 2 Reporting. If the grantee receives $500,000 or more, it must submit the online forms and the “Yellow Book” audit required under Level 3 Reporting.

A grantee that receives less than $500,000 in state funds within any fiscal year of the grantee is not required to have an audit performed. However, the Arts Council encourages all organizations to have basic financial statements for each fiscal year prepared in accordance with generally accepted accounting principles. These basic financial statements should be audited in conformity with generally accepted auditing standards on a regular basis. All financial records, including the financial records of any subgrantees, must be furnished to the Office of State Budget and Management, if requested, to provide full accountability for the use and expenditure of state funds.

All grantees must also adhere to the following Federal regulations:

Fair Labor Standards

Part 505 (29 CFR) “Labor Standards on Projects or Productions Assisted by Grants from the National Endowment for the Arts and Humanities” provides that

a.  All professional performers and related or supporting professional personnel employed on projects or productions which are financed in whole or in part under the grant will be paid, without subsequent deduction or rebate on any account, not less than the minimum compensation as determined by the Secretary of Labor to be the prevailing minimum compensation for persons employed in similar activities.

b.  No part of any project or production which is financed in whole or in part under the grant will be performed or engaged in under working conditions which are unsanitary or hazardous or dangerous to the health and safety of the employees engaged in such project or production. Compliance with the safety and sanitary laws of the State in which the performance or part thereof is to take place shall be prima facie evidence of compliance.

(20 U.S.C. 954 and 956 et seq.)

Drug-Free Workplace

Grantees are required to execute projects, productions, workshops and programs in accordance with the requirements of the National Endowment for the Arts’ regulations implementing the Drug-Free Workplace Act of 1988.  This law requires a grantee to publish a statement about its drug-free workplace program.  A grantee must give a copy of this statement to each employee (including consultants and temporary employees) who will be involved in award-supported activities at any site where these activities will be carried out.  A grantee must maintain on file the place(s) that work is being performed under this award and notify the Endowment’s Grants & Contracts Officer of any employee convicted of a violation of a criminal drug statute that occurs in the workplace. (41 U.S.C. 701 et seq. and 45 C.F.R. pt. 1154)

Artistic Excellence and Merit

Grantees are required to include “artistic excellence and artistic merit” in criteria upon which grants are awarded in accordance with the National Endowment for the Arts’ enabling legislation.

(20 U. S. C. Sec. 954 et seq.)

Debarment and Suspension

Grantees must execute their projects in accordance with the National Endowment for the Arts’ regulations implementing Executive Order 12549, “Debarment and Suspension.” If grantees or their principals are suspended or debarred by one Federal agency, they are suspended or debarred by all Federal agencies. (45 C.F.R. pt. 1154)

Civil Rights

Title VI of the Civil Rights Act of 1964, as amended, provides that

“No person in the United States shall, on the grounds of race, color or national origin, be excluded from participation in, be denied the benefits of, or be subject to discrimination under any program or activity receiving Federal financial assistance.”  Title VI also extends protection to persons with limited English.

(42 U.S.C. 2000d et seq.)


Title IX of the Education Amendments of 1972 provides that

“No person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any education program or activity receiving Federal financial assistance.”

(20 U. S. C. 1681 et seq.)


Age Discrimination Act of 1975 provides that

“No person in the United States shall, on the basis of age, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance.”

(42 U. S. C. 6101 et seq. and 45 CFR Part 1156)


Section 504 of the Rehabilitation Act of 1973 provides that 

“No otherwise qualified individual with a disability in the United States, as defined in section 7(6)*, shall, solely by reason of his/her disability, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance.”  Grantees must have accessibility self-evaluations on file at their organizations.

(29 U. S. C. 794)

*For the purposes of Section 504 of this Act, the person with a disability is one who (A) has a physical or mental impairment which substantially limits one or more of such person’s major life activities, (B) has a record of such an impairment, or (C) is regarded as having such an impairment.

The Americans with Disabilities Act of 1990 prohibits discrimination on the basis of disability in employment (Subchapter I), state and local government services (Subchapter II), and places of public accommodation and commercial facilities. (Subchapter III) (42 U. S. C. 12101-12213)

Federal Debt Status

OMB Circular A-129 provides that you may not be delinquent in the repayment of any Federal debt.  Examples of relevant debt include delinquent payroll or other taxes, audit disallowances, and benefit overpayments.


Grantees are requested to note the following regarding lobbying activities:

a. Lobbying with appropriated moneys.

        Both Section 303, FY 1993 Appropriations Act for the Department of the Interior and Related Agencies, and 18 U.S.C. Section 1913 prohibit the use of Federally-appropriated funds, such as Endowment grant funds, to lobby Congress regarding the passage of legislation.

b. OMB Circular A-122 – “Lobbying” Revision.

        OMB Circular A-122, “Cost Principles for Nonprofit Organizations, Lobbying” Revision, published at 49 Fed. Reg. 18260 (April 27, 1984), makes clear that lobbying, as defined therein, is an unallowable cost. OMB Circular A-122 generally defines lobbying as conduct intended to influence the outcome of elections or to influence elected officials regarding pending legislation, either directly or through specific lobbying appeals to the public.  Grantees are urged to review OMB Circulars A-122, “Lobbying” Revision, and A-110 carefully.

c. Section 319 of Public Law 101-121.

        Grantees must comply with the requirements of Section 319 of Public Law 101-121, (31 U.S.C. Sec. 1352) certification regarding lobbying. This law prohibits the use of Federal funds to pay costs associated with lobbying members of Congress, employees of Congress, and employees of Federal agencies with respect to the award or amendment of any Federal grant, cooperative agreement, contract or loan. While applicants and grantees may use non-Federal funds for such activities, use of these funds must be disclosed to the Federal agency. The law exempts from the disclosure requirement the lobbying activities of long-term employees (those employed or expected to be employed for more than 130 days) of an applicant or grantee. The law also exempts from the definition of lobbying certain agency and legislative liaison activities and professional and technical services by applicants and grantees.

Native American Graves

Native American Graves Protection and Repatriation Act of 1990 applies to any organization which controls or possesses Native American human remains and associated funerary objects and receives Federal funding, even for a purpose unrelated to the Act.  (25 U.S.C. 3001 et seq.)

Historic Preservation

National Historic Preservation Act of 1966, as amended, applies to any Federal funds that would support either the planning or major renovation of any structure eligible for or on the National Register of Historic Places, in accordance with Section 106.  This law also applies to new construction that would affect such properties. (16 U.S.C. Sec. 470)

Environmental Policy

National Environmental Policy Act of 1969 applies to any Federal funds that would support an activity which may have environmental implications. (42 U.S.C. Sec. 4332)

Uniform Administrative Requirements

Grantees must adhere to the following administrative requirements for grants:

a.  Office of Management and Budget (OMB) Circular A-110: nonprofit organizations and institutions of higher education.

b. Government-wide Common Rule entitled “45 CFR Part 1157 – Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments”: state and local governments and Federally recognized Indian Tribal governments. 

Allowable Costs

The allowability of costs for work performed through a grant shall be determined in accordance with the applicable Federal cost principles and the terms and conditions of the grant award. The following OMB Circulars set forth the Federal cost principles that, in general, apply to grantees:

a. OMB Circular A-122, as amended: nonprofit organizations, exclusive of institutions of higher education

b. OMB Circular A-21, as amended: institutions of higher education

c. OMB Circular A-87, as amended: state, local, and Federally-recognized tribal governments 

Foreign Travel

When grantees are traveling outside the United States as part of their grant projects, this travel must be performed on a United States air-carrier or a foreign air carrier under an air transport agreement with the United States, when these services are available.


Title to equipment purchased shall be vested in the grantee organization with the understanding that the equipment will be used for the project, or similar activities, for which it was obtained. Consistent with 41 U.S.C. 10a-10c, “Buy American Act,” grantees are encouraged, whenever possible, to purchase American-made equipment and products when they make purchases under their grants.

Copies of Regulations

Grantees can obtain copies of the aforementioned regulations and circulars by contacting the following appropriate addresses:

a. Audit Requirements

        Local Government Commission
        Department of State Treasurer
        Albemarle Building
        325 North Salisbury Street
        Raleigh, NC 27603-1385
        (telephone: 919/807-2350)


        Auditor Manager
        Office of State Budget and Management
        116 West Jones Street
        Raleigh, NC 27699-0601
        (telephone: 919/807-4754)

b. OMB Circulars, Common Rule, and Fair Labor Standards

        Grants and Contracts Office
        National Endowment for the Arts
        1100 Pennsylvania Avenue, NW
        Washington, DC 20506-0001
        (telephone: 202/682-5403)

c. Nondiscrimination Regulations and Section 504 Program Evaluation Workbook

        (Civil Rights, Disability, Sex, and Age)
        Office of Civil Rights
        at the NEA address
        (telephone: 202/682-5454)

d. The Arts and 504 Handbook

        Office of Civil Rights
        at the NEA address
        (telephone: 202/682-5454)


        504 Coordinator
        North Carolina Arts Council
        Department of Cultural Resources
        Raleigh, NC  27699-4632
        (telephone:  919/807-6526)

e. Design for Accessibility: A Cultural Administrator’s Handbook

        National Assembly of State Arts Agencies
        1029 Vermont Ave., NW 2nd Floor
        Washington, DC 20005
        (telephone:  202/347-6352)


        Office of AccessAbility
        at the NEA address
        (telephone: 202/682-5532)

f. Debarment and Suspension, Lobbying, Drug-Free Workplace, and Artistic Excellence and Merit

        Office of General Counsel
        at the NEA address
        (telephone: 202/682-5418)

g. Native American Graves, Historic Preservation, and Environmental Policy

        Website of the National Endowment for the Arts