The Dual Compliance Framework
638 Compact Compliance
Compact compliance is governed by ISDEAA and the specific terms negotiated between the tribe and IHS in the compact and Annual Funding Agreement (AFA).
| Area | What's Required | How It Differs from 2 CFR 200 |
|---|---|---|
| Reporting | Negotiated between tribe and IHS. Typically includes annual program and financial reporting. | Less prescriptive than grant reporting. Terms are bilaterally agreed, not imposed. |
| Budget | Flexibility to reallocate across program lines within the compact. No prior approval needed for budget shifts. | 2 CFR 200 grants require prior approval for budget changes above thresholds (typically 10%). |
| Procurement | Tribal procurement code applies. Must meet basic standards but does not need to mirror 2 CFR 200.320 specifically. | 2 CFR 200 has specific competitive bidding thresholds and documentation requirements. |
| Property | Compact terms govern property management. Tribe may retain property purchased with compact funds. | 2 CFR 200 has specific disposition requirements for grant-purchased property. |
| Allowable costs | Defined by compact terms and ISDEAA. Broader flexibility than grant cost principles. | 2 CFR 200 Subpart E cost principles are more restrictive (e.g., specific rules on entertainment, lobbying, fundraising). |
| CSC/Indirect | Administrative overhead funded separately through Contract Support Costs. Not charged to program budget. | Indirect costs charged to grant budget as a percentage of direct costs (reducing program dollars). |
| Financial management | Must maintain systems adequate to manage federal funds. Standard is functional adequacy. | 2 CFR 200.302 specifies detailed financial management standards. |
| Audit | Single Audit applies if federal expenditures exceed $750K (same threshold). But compact funds and competitive grants have different compliance supplements. | Same threshold, but compliance testing for 638 programs uses the Indian Self-Determination Act compliance supplement, not the grant-specific supplement. |
Competitive Grant Compliance (2 CFR 200)
When a tribal government receives a competitive federal grant (e.g., SAMHSA TBHG, HRSA Section 330, CDC programs), the Uniform Guidance at 2 CFR Part 200 applies in full. The tribe is treated as a “non-federal entity” receiving a federal award.
Key 2 CFR 200 requirements:
| Requirement | What It Means for Tribal Programs |
|---|---|
| Financial management (200.302) | Must identify all federal awards, maintain adequate financial records, have effective internal controls, and compare expenditures to budget. |
| Payment (200.305) | Drawdown requests must minimize time between draw and disbursement. Advanced payments require proper cash management. |
| Internal controls (200.303) | Must maintain compliance with federal statutes, regulations, and terms. Written policies and procedures expected. |
| Procurement (200.317-326) | Written procurement procedures meeting competition, documentation, and conflict of interest standards. Specific thresholds: micro-purchase ($10K), simplified acquisition ($250K), sealed bids, competitive proposals. |
| Property management (200.310-316) | Equipment records, physical inventory, disposition procedures. Property purchased with grant funds has specific rules. |
| Cost principles (Subpart E) | Detailed rules on allowable and unallowable costs. Tribal programs treated as governmental entities (not nonprofits) under cost principles. |
| Subrecipient monitoring (200.331-332) | If the tribe sub-awards grant funds, must monitor subrecipients for compliance. |
| Performance reporting | Grant-specific reports on schedule defined in the NOFO (quarterly, semi-annual, or annual). |
| Financial reporting (SF-425) | Federal Financial Report filed per schedule. |
| Closeout (200.344) | Final reports and financial reconciliation within 120 days of end of period. |
Single Audit Requirements
When Single Audit Applies
The Single Audit requirement (2 CFR Part 200, Subpart F) applies to tribal governments that expend $750,000 or more in federal awards during their fiscal year. This threshold includes both 638 compact funds AND competitive grant funds — they are additive.
For most Washington tribal health departments, the threshold is easily exceeded. A single 638 compact often exceeds $750K.
Single Audit for Tribal Governments
| Aspect | Detail |
|---|---|
| Threshold | $750K in total federal expenditures (all sources combined) |
| Frequency | Annual, within 9 months of fiscal year end |
| Standard | Generally Accepted Government Auditing Standards (GAGAS), also called Yellow Book |
| Where filed | Federal Audit Clearinghouse (FAC) — publicly accessible |
| What's tested | Financial statements + compliance testing of major federal programs |
| Compliance supplement | Uses the OMB Compliance Supplement. 638 programs have a specific compliance supplement section (Indian Self-Determination Act). Competitive grants are tested under their own program-specific supplements. |
The Tribal Audit Challenge
Single Audit for tribal governments is more complex than for nonprofits because:
- 1.Multiple funding streams. A tribal government's financial ecosystem includes 638 compact funds, competitive grants, state contracts, tribal enterprise revenue (including gaming), per-capita distributions, natural resource revenue, and investment income. The auditor must navigate all of these to isolate federal award expenditures.
- 2.Dual compliance supplements. 638 programs and competitive grants are tested under different compliance supplement sections. A tribal health department with both must satisfy both sets of compliance requirements.
- 3.Auditor expertise. Finding audit firms with genuine tribal government experience is difficult, especially for rural tribes. Auditors unfamiliar with ISDEAA may apply grant-framework compliance expectations to compact funds — generating findings that reflect misunderstanding, not non-compliance.
- 4.Audit cost. Single Audits for tribal governments with complex funding portfolios can cost $50K–$150K+ annually. This is a significant burden for smaller tribes.
Indirect Cost Rates
The DOI Negotiation
Tribal governments negotiate their indirect cost rates with the Department of the Interior (DOI), Office of Inspector General — which serves as the cognizant agency for most tribes because of the BIA relationship.
The negotiated rate reflects the tribe's actual administrative costs:
- •Central government administration (tribal council operations, executive leadership)
- •Financial management (accounting, payroll, audit preparation)
- •Human resources
- •Information technology
- •Legal services
- •Facilities management
- •Insurance
Negotiated Rate vs. De Minimis
| Factor | Negotiated NICRA | De Minimis (10%) |
|---|---|---|
| Available to | All tribal organizations | Only organizations that have never had a negotiated rate |
| Rate | Reflects actual costs — typically 20–35% or higher for rural/remote tribes | Fixed at 10% of Modified Total Direct Costs |
| Approval required | Yes — negotiation with DOI OIG | No — self-election, documentation only |
| Cost recovery | Full administrative cost recovery | Likely undercovers actual costs significantly |
| Competitive impact | Higher rates mean more budget goes to “overhead” — can be scored negatively in reviews | Lower rate looks more “efficient” but leaves the tribe underfunded for administration |
The Indirect Rate as a Structural Scoring Disadvantage
This needs to be stated plainly: the DOI-negotiated indirect cost rate is not just a compliance item. It is a competitive scoring factor that structurally disadvantages tribal applicants in every competitive grant program that scores budget efficiency or cost-per-service metrics.
Every major tribal-eligible competitive grant program — SAMHSA Tribal Behavioral Health, HRSA Community Health Worker, CDC Good Health and Wellness, ACF Family Violence Prevention — lists the DOI-negotiated indirect cost rate as a requirement. The rate is mandatory: tribal applicants must use it. But the way competitive budgets are scored creates an inherent penalty.
Here is the math. A tribal health program with a DOI-negotiated rate of 28% and an urban nonprofit with a negotiated rate of 14% both apply for a $500,000 grant:
| Budget Line | Tribal Program (28%) | Urban Nonprofit (14%) |
|---|---|---|
| Total award | $500,000 | $500,000 |
| Indirect costs | $109,375 | $61,404 |
| Direct service dollars | $390,625 | $438,596 |
| Difference in service dollars | −$47,971 for tribal program | |
On paper, the tribal applicant delivers fewer services per grant dollar. A reviewer scoring “cost reasonableness” or “budget efficiency” sees a budget where nearly 22% goes to indirect costs vs. 12% for the competing nonprofit. Both rates are federally negotiated. Both reflect actual costs. But the tribal program looks less efficient because it costs more to operate a health system on a rural reservation than it does to run a clinic in a metro area.
Why tribal rates are higher is not a mystery. It is geography and governance:
- •Remote service delivery. Facilities maintenance, supply chain, IT infrastructure, and staff recruitment all cost more in rural and reservation settings. A tribe 150 miles from the nearest metro area pays more for everything from internet connectivity to building contractors.
- •Governmental overhead. Tribal governments are governments, not nonprofits. They carry the administrative burden of a governmental entity — elected leadership, legal counsel, intergovernmental affairs, treaty rights protection — that nonprofits do not. The DOI rate reflects this governmental structure because it is the actual cost of operating a sovereign government that also delivers health services.
- •Scale disadvantage. A tribe with 2,000 enrolled members bears the same categories of administrative costs as a nonprofit serving 50,000 patients, but spreads those costs across a much smaller program base. The per-unit cost of compliance, accounting, and HR is inherently higher.
The scoring problem no one names
Federal grant programs require tribal applicants to use their DOI-negotiated rate. They cannot voluntarily reduce it to appear more competitive — using a lower rate means under-recovering actual costs and subsidizing the grant from tribal funds. But the scoring rubrics used by many federal programs do not adjust for this. A reviewer comparing a tribal budget at 28% indirect to a nonprofit budget at 14% indirect sees a cost difference, not a structural inequity. Until scoring rubrics explicitly account for DOI-negotiated rates as reflecting trust responsibility costs rather than inefficiency, this remains a built-in disadvantage for every tribal applicant in every open competition.
What you can do: In the budget justification narrative, name the rate and its basis explicitly. Do not present the indirect cost line without context. Write: “The Tribe's DOI-negotiated indirect cost rate of [X]% reflects the actual administrative costs of operating a sovereign tribal government delivering health services in a [rural / remote / reservation] setting. This rate was negotiated with and approved by the Department of the Interior, Office of Inspector General, and represents full cost recovery for governmental administrative functions including [list 2–3 major cost drivers]. This rate cannot be reduced without creating unfunded administrative obligations that would jeopardize program delivery.” Force the reviewer to see the rate as a federal determination, not a tribal choice. See the first-time applicant guide for additional narrative framing strategies.
CSC vs. Indirect Costs
These are two different mechanisms for funding the same essential administrative functions:
| Feature | Contract Support Costs (638) | Indirect Cost Rate (Competitive Grants) |
|---|---|---|
| When it applies | 638 contracts and compacts only | Competitive grants and other non-638 awards |
| How funded | Separate line item — does not reduce program dollars | Charged within grant budget — reduces direct service dollars |
| Rate basis | Calculated based on the tribe's indirect cost rate applied to 638 program amounts, plus direct CSC | Tribe's negotiated rate applied to grant's direct cost base |
| Full funding | Required by law (since Cherokee Nation and Ramah Navajo rulings) | Not guaranteed — grant budget may not fully support the rate |
| Impact on competitiveness | None — CSC is separate from program budget | Direct — higher rate means fewer direct service dollars in the budget, potentially affecting scoring |
Procurement
Tribal Procurement Code
Under 638 compacts, tribes can use their own procurement codes. The requirement is that the tribal code meets basic standards:
- •Adequate competition for purchases above threshold amounts
- •Documentation of procurement decisions
- •Conflict of interest protections
- •Fair and equitable treatment of vendors
The tribal code does not need to mirror 2 CFR 200 procurement provisions. It needs to be a reasonable governmental procurement process.
2 CFR 200 Procurement for Competitive Grants
When a tribal health program operates a competitive federal grant, 2 CFR 200.317-326 applies:
| Threshold | Method | Documentation |
|---|---|---|
| Under $10,000 (micro-purchase) | No competition required | Record of purchase |
| $10,000 – $250,000 (simplified acquisition) | Price or rate quotations from adequate number of sources | Written documentation of quotes received |
| Over $250,000 | Formal competitive process (sealed bids or competitive proposals) | Full documentation of process, evaluation, and award decision |
The gap: A tribal procurement code that works perfectly for compact administration may not include the specific documentation and threshold language that 2 CFR 200 requires. This is the most common compliance finding for tribal programs transitioning from 638-only to competitive grants. The fix is typically documentation — adding the 2 CFR 200 thresholds and procedures to the existing tribal code rather than replacing it.
Financial Management
What Both Frameworks Require
Regardless of funding source, tribal health programs need:
- •Fund accounting — ability to track expenditures by funding source/cost center separately from general tribal government operations
- •Internal controls — segregation of duties, authorization procedures, reconciliation processes
- •Timely recording — transactions recorded in the accounting period they occur
- •Budget monitoring — actual vs. budgeted expenditures tracked and reviewed regularly
Where Competitive Grants Add Requirements
| Additional Requirement | What It Means |
|---|---|
| Time and effort reporting | Must document how employees allocate time across programs/grants. For personnel costs charged to federal grants, the system must reflect actual activity (not budgeted estimates). |
| Written financial procedures | Documented procedures for accounts payable, accounts receivable, payroll, and grant fund drawdown. Not just having the procedures — having them written down. |
| Cost allocation plan | If shared costs are allocated across programs, must have a documented methodology. |
| Cash management | Drawdown requests must minimize the time between receipt and disbursement. |
WA State Contract Requirements
State contracts from HCA, DOH, and DSHS add another layer:
- •State vendor registration (DES)
- •WEBS registration for competitive solicitations
- •State-specific reporting formats and timelines
- •BARS compliance for some DOH programs
- •State nondiscrimination requirements (RCW 49.60, EO 18-02)
Reporting Obligations by Funding Source
| Funding Source | Reporting Type | Frequency | Submitted To |
|---|---|---|---|
| 638 Compact | Annual program report | Annual (per AFA) | IHS Portland Area |
| 638 Compact | Financial report | Annual (per AFA) | IHS Portland Area |
| Competitive Federal Grant | Performance report | Quarterly or semi-annual (per NOFO) | Awarding agency (SAMHSA, HRSA, CDC) |
| Competitive Federal Grant | SF-425 Financial Report | Quarterly or semi-annual | Awarding agency |
| Competitive Federal Grant | Final report | Within 120 days of end date | Awarding agency |
| State Contract (HCA/DOH) | Program deliverables | Per contract schedule | Contracting agency |
| State Contract | Financial report/invoice | Monthly or quarterly | Contracting agency |
| Medicaid | Claims data | Per encounter/claim | HCA (fee-for-service or MCO) |
| Single Audit | Audit report | Annual (within 9 months of FY end) | Federal Audit Clearinghouse |
| IRS | Form 990 (if applicable) | Annual | IRS |
Note: Tribal governments are not required to file Form 990. Only tribally chartered 501(c)(3) organizations are 990 filers. This distinction matters for the readiness assessment — checking for a current 990 is relevant only if the entity is a nonprofit, not if it is a tribal government.
Areas of Compliance Tension
Governance Documentation
Federal grants request “governing body resolution” and “board-approved conflict of interest policy.” These templates assume a nonprofit board. Tribal councils are not nonprofit boards — they are legislative bodies with sovereign authority. Tribal programs can and do produce these documents, but the translation exercise is itself a compliance burden.
Entity Classification
SAM.gov entity type classification for tribal entities causes persistent confusion. “Indian/Native American Tribal Government (Federally Recognized)” and “Native American Tribal Organization (other than Federally Recognized)” have different implications for eligibility and scoring. A tribally chartered health authority may be classified differently than the tribal government itself — and reclassification is not a simple fix.
FTCA Coverage and Insurance Requirements
The general grant readiness checklist says “maintain current insurance — general liability, professional liability, workers comp.” For tribal health programs operating under 638 compacts, this overstates the requirement because of the Federal Tort Claims Act.
Under 25 U.S.C. § 5321(d), tribal health programs carrying out 638 contracts or compacts are covered by the FTCA for medical malpractice. The federal government — not the tribe — is the defendant in malpractice claims arising from services delivered under the compact. This means:
- •You do not need separate malpractice insurance for clinical services delivered under your 638 compact. FTCA coverage replaces it. This is a significant cost savings — malpractice premiums for a tribal health clinic can run $50K–$200K+ annually depending on services and staffing.
- •FTCA coverage extends to employees and contractors acting within the scope of the compact. This includes physicians, nurses, dentists, behavioral health clinicians, and Community Health Representatives performing services under the compact.
- •FTCA does not cover everything. General liability (slip-and-fall in facilities), auto insurance, workers' compensation, and property insurance are still required. Services delivered outside the scope of the compact — including services funded by competitive grants — may not be covered unless the competitive grant activity falls within the compact's scope of work.
The competitive grant gap
If you add a competitive grant program (e.g., SAMHSA TBHG) that delivers clinical services outside the scope of your 638 compact, FTCA may not cover malpractice claims arising from those grant-funded services. Before you start delivering clinical services under a new grant, confirm with your IHS Area Office whether the grant activities fall within your compact's scope. If they do not, you may need supplemental malpractice coverage for grant-funded clinical staff. This is a compliance and budgeting issue — if supplemental coverage is needed, it is an allowable grant expense and should be included in the application budget.
Program-Specific Compliance
Some programs add requirements that interact with tribal governance in non-obvious ways:
- •HRSA Section 330 requires a patient-majority governing board (51%+). Tribal health programs governed by elected tribal councils cannot satisfy this requirement without creating a separate governance entity.
- •CCBHC certification requires 24/7 crisis services, nine service categories, and staffing models calibrated for urban clinics — operational requirements that may not fit a rural reservation context.
- •Evidence-based practice (EBP) requirements in SAMHSA grants may not account for traditional healing practices that are effective but not part of the Western clinical evidence base.
Practical Recommendations
- 1.Maintain separate compliance documentation for 638 and competitive grants. The procurement policy for your compact can reference tribal code. The procurement policy for your SAMHSA grant must cite 2 CFR 200. Consider a master policy document with sections for each framework.
- 2.Know your indirect cost rate and its derivation. If reviewers question your rate, you should be able to explain what it covers and why it reflects actual costs. Have the DOI-approved NICRA readily available.
- 3.Engage audit firms with tribal government experience. Ask prospective auditors about their tribal client portfolio, their familiarity with the ISDEAA compliance supplement, and how they distinguish between compact and grant compliance requirements.
- 4.Track time and effort early. If you're transitioning from 638-only to mixed funding (compact + grants), implement time and effort reporting before you receive the competitive grant. Building the system under deadline pressure creates errors.
- 5.Build a compliance crosswalk. Create a document mapping your existing tribal policies and procedures to 2 CFR 200 requirements. Identify gaps before you apply for competitive grants — the gaps are typically documentation format, not capability.