What Single Auditors Actually Test on Participant Support Costs — Allowable Costs, Activities, and Eligibility (2 CFR 200.456)

Participant support costs sit in their own category for a reason. The federal government treats them differently from other direct costs, the 2024 Uniform Guidance revision changed how they’re administered, and auditors test them against specific compliance requirements that organizations sometimes overlook. If your federal awards include stipends, training allowances, or registration fees paid on behalf of program participants, your next Single Audit will spend real time here. For workforce boards, these requirements are most relevant when federal awards specifically classify participant payments as participant support costs.

How 2 CFR 200.456 Defines the Category

Participant support costs are direct costs paid to or on behalf of participants in a federally funded program. The regulation at 2 CFR 200.456 covers stipends, subsistence allowances, travel allowances, registration fees, temporary dependent care, and per diem amounts paid to participants in conferences, training projects, and similar activities. Employees of the recipient organization don’t qualify as participants. Subrecipients don’t either. The category generally applies to individuals receiving the service or training that the federal award was designed to deliver.

Not every payment made on behalf of a program participant qualifies as a participant support cost under Uniform Guidance. Workforce boards in particular should review award terms and program guidance to determine whether participant expenditures are classified as participant support costs, supportive services, training costs, or another allowable cost category. Payments such as tuition assistance, needs-related payments, and WIOA supportive services may look similar but carry different regulatory treatment depending on how the award defines them.

Three key requirements define how the category works. Participant support costs are excluded from modified total direct costs, which means indirect costs aren’t charged on them. They have to be documented in the recipient’s written policies and treated consistently across all federal awards. And funds budgeted for participant support costs can’t be moved to other budget categories without prior approval from the awarding agency under 2 CFR 200.308.

What the 2024 Uniform Guidance Revision Changed

The revision that took effect for federal awards issued on or after October 1, 2024 removed the requirement at 2 CFR 200.407 for recipients to obtain prior written approval before incurring participant support costs. The definition itself was also amended to expressly include temporary dependent care, and a definition of “participant” was added at 2 CFR 200.1. The Office of Management and Budget’s 2024 revisions to Uniform Guidance lay out the change in plain terms for recipients trying to figure out which version applies to which award. 

The revision didn’t eliminate the documentation requirement. It didn’t eliminate the MTDC exclusion. And it didn’t change the rule that moving budgeted participant support funds into other categories still requires agency approval. For awards issued before October 1, 2024, the prior approval requirement still applies under the version of the Uniform Guidance in effect when the award was made. Nonprofits running federal awards from both periods are operating under two slightly different rule sets at once, which is one of the reasons auditors pay close attention to this category in the current Compliance Supplement environment.

The Compliance Requirements Auditors Test

Participant support costs often intersect with Allowable Activities, Allowable Costs, and Eligibility requirements depending on the program. The OMB Compliance Supplement organizes testing around these defined compliance requirements, and auditors typically focus on some combination of all three when participant support costs are present.

Allowable Activities and Allowable Costs ask whether the federal award authorized the payment in the first place. Auditors pull a sample of participant payments and trace each one back to the award agreement and approved budget. Stipends paid where the award authorized only travel allowances may result in findings. Amounts that exceed budgeted per-participant caps may be questioned by auditors. Payments to people who don’t meet the regulatory definition of participant, including employees of the recipient organization, may be identified as noncompliant. The standard isn’t whether the cost is reasonable. It’s whether the award document permitted it. Most findings in this category come from spending that would have been allowable with a different award structure but wasn’t allowable under the one in effect.

Eligibility testing applies when the program restricts who can receive support. Income limits, barriers to employment, veteran status, age requirements, residency requirements, or other program-specific eligibility criteria. Whatever the federal program defined as participant eligibility, auditors expect to see contemporaneous documentation that the recipient verified it before issuing payment. Missing income verification, Selective Service documentation, right-to-work documentation, and barriers-to-employment documentation are among the most common gaps auditors find in workforce board participant files. Documentation collected from a third party without verification doesn’t satisfy the requirement. Auditors also evaluate whether management has controls in place to ensure participant payments are reviewed, approved, and supported before disbursement. Reviewing your grant policies before fieldwork helps confirm that the documentation matches the award terms.

Where Nonprofits Should Tighten Now

Documentation quality is often the determining factor in audit results for this category. The strongest participant files follow the same logic auditors use to test them: eligibility documentation collected before the first payment goes out, participation evidence tied to each disbursement, and a payment record that maps cleanly back to the approved budget line. Written policies governing participant support costs need to live in your manual before fieldwork starts, and they need to describe how the organization actually operates, not an idealized version of it.

Budget monitoring is the other recurring pressure point. Participant support costs can accumulate quickly across large cohorts, and depending on award terms and agency requirements, moving funds out of a participant support cost category may require prior approval under 2 CFR 200.308 even when total award spending stays within limits. Tracking participant support spending against the budget monthly, rather than discovering the overage at year-end, gives you time to seek approval or adjust before the variance becomes an audit finding. Working from the OMB Compliance Supplement as a year-round reference rather than an audit-season checklist tends to surface gaps while they’re still fixable.

Build the Documentation Before Fieldwork Starts

Single Audit testing of participant support costs follows a predictable framework, so the documentation that survives it is predictable as well. Eligibility verification before payment, participation evidence tied to disbursement, payments matched to the approved budget and written policies governing the category. The organizations that move through this portion of the audit efficiently are the ones that built the file structure before the auditor asked for it

James Moore’s nonprofit team works with federal grant recipients on Single Audit readiness, allowable cost documentation, and Uniform Guidance compliance. Contact us today to review your participant support cost documentation before your next audit.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.