Why do public agencies need an outside Compliance expert?

Rural and small public agencies often face a hidden challenge. They are expected to compete for and manage the same federal and state funding as larger organizations, but usually have fewer staff, resources, and specialized skills. Many struggle to access funding because they lack the capacity to find opportunities, write strong applications, or handle the complex requirements of public grants.

 And when funding is awarded, the complexity only increases. Grant management, procurement, contract administration, and capital project delivery are no longer simple operational responsibilities. They are compliance-driven systems governed by detailed regulations, documentation standards, and audit expectations. The requirements accumulate quickly, and the reality is that compliance responsibilities often grow faster than staffing and expertise can keep up.

 Staff in many rural organizations do their best. They work hard, learn quickly, and care about their communities. But they often have to juggle many roles. Over time, the gap between what is needed and what is possible can become a real risk. That’s when bringing in an outside compliance expert is not just helpful, but necessary.

My Experience in Rural Public Funding Environments

From my own experience working in rural public transit, municipal government, capital purchasing, and federally funded equipment programs for over ten years, I have seen how many compliance tasks there are, how fast they add up, and how hard it is to make changes while keeping up with daily work.

 Staff members are often asked to handle grant reporting, procurement files, contract oversight, audit paperwork, and program delivery simultaneously. Most agencies do not have experts in each area, and in many rural areas, even if they could afford to hire specialists, those specialists may not be available locally.

 One of my previous supervisors, the CFO of a rural county, made a statement that has stayed with me for years:

 “You can have shallow knowledge in a lot of things, or you can have deep knowledge in one thing, but you can’t have deep knowledge in everything.”

 He was absolutely right. And yet, the cost of not having deep knowledge in federal compliance is high.

Regulatory Requirements Leave Little Room for Error

Federal and state governments provide critical funding, but they are not flexible when requirements are misunderstood or misapplied. Rules like 2 CFR Part 200 (Uniform Guidance) set standards for financial management, internal controls, procurement, and allowable costs.

These rules apply regardless of agency size, staffing, or location. A small rural agency is held to the same federal standards as a large organization, even though their internal capacity may be dramatically different. This is one of the strongest arguments for engaging an outside compliance expert: the regulations apply equally, even when capacity does not.

Practical Implications for Rural and Small Agencies

The practical reality for many rural agencies is that compliance work becomes reactive. Some agencies cannot access funding because staff lack specialized knowledge or do not have access to experienced advisors. Others successfully win grants but quickly discover that the post-award environment is far more complicated than anticipated.

 After funding is awarded, agencies must handle lots of reporting, paperwork, procurement rules, contract requirements, cost allocation, audit risks, and unexpected challenges. Instead of focusing on serving the community, staff often spend their time dealing with compliance issues, usually under tight deadlines and with little guidance.

 An outside compliance expert can help agencies move from reacting to problems to building organized, reliable systems.

Risk Exposure: Audit Findings and Repayment

The biggest risk of failing to comply is not just inconvenience. It is financial responsibility.

If agencies don’t meet federal compliance requirements, they can face serious consequences, including audit findings, repayment, and loss of future funding. Worse yet, it can damage their reputation with funders and lead to increased oversight or corrective action plans. These consequences further strain their already tight budgets, so paying back money already spent on real community needs or losing access to funding can be devastating.

 Even if agencies get advice from pass-through organizations, they are still responsible for compliance.

The Subrecipient Reality: Responsibility Without Full Support

Rural and small agencies are often subrecipients of federal funding. They work with a state agency or another group that manages the federal grant.

 In theory, this provides support. In practice, it can introduce another layer of complexity. Pass-through staff may be new or may not fully understand the nuances of the funding source’s compliance requirements, leading to inaccurate guidance.

 But even if the advice is wrong, the agency is still responsible. If there is a mistake, the subrecipient must repay the funds. This is why having an outside compliance expert, who works directly for the agency and focuses on protecting them, is so valuable.

A Real Example: The Cost of a Misapplied Cost Allocation Plan

A recent example clearly illustrates this risk.

 In 2023, a finance officer at a small agency was required to create a cost allocation plan and submit it to the state. A new employee at the state agency provided her with a sample template. She completed the plan, submitted it through the state’s online portal, and received simple instructions via email: begin using the plan if federal funds were received.

 The agency had received federal funds for many years, so she began allocating overhead expenses accordingly.

 In 2025, the agency’s 2024 Single Audit found a serious problem. They had been using an indirect cost rate that was not properly approved by the state. The template from the state employee was actually for an indirect cost rate, not a cost allocation plan. After it was submitted, the plan was never formally reviewed or approved, and it disappeared into the soup of compliance documents the state managed.

 The audit concluded that the agency owed nearly $40,000 to the grant.

 The state would not accept responsibility for providing incorrect guidance. The agency, despite acting in good faith, was fully liable.

 This is the cost of nuance and why an outside compliance expert matters.

Stewardship Requires Structure and Expertise

Bringing in an outside compliance expert is not meant to replace your staff. It is meant to support them.

 Rural agencies do important work with limited resources. They deserve access to experts who can protect public funds, improve compliance, and help ensure the success of important community projects.

 Do staff have the time to stop their work, write new policies, update old procedures, and handle implementation? Probably not, at least not without giving up other important duties.

 The cost of misunderstanding federal nuance is high. The cost of repayment is higher. And the cost of losing future funding opportunities is highest of all.

 Outside experts give agencies direction, protection, and confidence, so they can focus on serving their communities.

 Compass Rose Grants & Compliance supports rural and small public agencies navigating grants, compliance, and procurement with practical, audit-ready stewardship.

Article written by Abigail Wheeler, CGMS, PMP

Abigail has over 10 years in grant writing and management, public procurement, capital projects, and contract administration. She is a wealth of experience through her work as an employee of rural and small public agencies. she is the person who has worn many many hats to get the work done.