Projects do not always run exactly according to standard procedures. A supplier may be unavailable, an emergency may require faster procurement, or a field activity may need a travel exception. The risk is not only that an exception occurs; it is that the decision is poorly documented and cannot be explained later.
What is a grant exception?
An exception is a deliberate departure from a normal policy, procedure or donor requirement that is permitted only with appropriate justification and approval. It should not be confused with ignoring a rule. If the rule does not allow an exception, internal approval cannot make the action compliant.
Create one central exception log
Instead of leaving explanations inside scattered emails, keep a simple register of material exceptions. This gives leadership and auditors one place to understand what happened and why.
Useful fields to record
- Date of the exception.
- Grant and transaction reference.
- Policy or donor rule involved.
- Reason normal procedure could not be followed.
- Risk created by the exception.
- Alternative control used.
- Approver.
- Supporting evidence.
- Whether donor approval was required.
Use compensating controls
If a normal control cannot operate, ask what alternative control can reduce the risk. For example, if three quotations are impossible because only one supplier can provide a specialized service, document the market search, technical reason and independent approval rather than simply skipping competition.
The procurement thresholds guide provides a useful reference for documenting purchasing exceptions.
Do not normalize repeated exceptions
If the same exception appears every month, it may no longer be exceptional. Repeated emergency procurement, late approvals or travel-limit overrides may show that the underlying policy, budget or planning process needs to change.
Example
A project needs to replace a water pump urgently after equipment failure. The normal procurement process requires several quotations, but only one qualified supplier can deliver within the required timeframe. The organization documents the technical need, suppliers contacted, reason for urgency, price reasonableness and authorized approval. If donor rules require prior approval, it obtains that approval before proceeding.
Review the log periodically
Management should review the exception log quarterly or at another suitable interval. Look for patterns, high-value exceptions, repeated suppliers and cases where required donor approval was delayed or missing. This turns the log into a management tool rather than an archive.
What to do next
Use the Grant Evidence Inventory to confirm that approvals and supporting evidence for material exceptions are organized and accessible.
For structured grant documentation, GrantsWriterAI can help prepare working drafts that your team reviews against actual donor requirements.
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Separate approved exceptions from control failures
An approved exception has a documented reason, appropriate authority and any required donor consent. A control failure is different: the rule was simply not followed. Keep these categories separate so management does not use the exception log to legitimize noncompliance after the fact.
Where a control failure occurs, record the issue, corrective action and owner. This makes the log useful for learning and reduces the chance that the same weakness repeats.
Separate approved exceptions from control failures
An approved exception has a documented reason, appropriate authority and any required donor consent. A control failure is different: the rule was simply not followed. Keep these categories separate so management does not use the exception log to legitimize noncompliance after the fact.
Where a control failure occurs, record the issue, corrective action and owner. This makes the log useful for learning and reduces the chance that the same weakness repeats.
At closeout, review all exceptions that remained unresolved or depended on later donor approval. Confirm that the final grant file contains the justification, approval and evidence needed to explain each case. This avoids leaving behind unexplained deviations that may surface during a later audit.
Frequently asked questions
What is a grant exception?
It is an approved deviation from a normal organizational policy, donor rule, or standard control under specific circumstances.
What should an exception log include?
Record the rule, reason, risk, approving authority, start and end date, conditions, and any corrective action required.
Who can approve an exception?
Only the authority permitted by organizational policy and donor requirements. Staff should not create informal exceptions simply because a deadline is tight.
Should exceptions be permanent?
No. If the same exception keeps recurring, leadership should review whether the underlying policy, system, or staffing needs to change.
Why track exceptions separately?
A log makes unusual decisions visible and helps auditors, leadership, and donors distinguish controlled deviations from unmanaged noncompliance.
Conclusion
Exceptions should remain exceptional. Your organization should document why a deviation was necessary, who approved it, how long it applies, and what must change so temporary workarounds do not become the normal operating model.
