The Office of Management and Budget (OMB) has updated and revised its guidance for organizations receiving federal funds. It comes in the form of revisions to 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”), the federal regulations surrounding federal financial assistance, including single audit requirements.
The changes are intended to help recipients of federal funding “focus more on the people they serve and to deliver results for their communities,” and familiarity with these updates should help organizations comply with OMB requirements. However, although significant revisions were made to help reduce the administrative burden on recipients of federal funds, the transition has raised some implementation questions.
It is important to note that the revisions are effective for new federal awards issued on or after October 1, 2024, and in the case of audit revisions, for fiscal years beginning on or after October 1, 2024. Federal awards issued prior to October 1, 2024, should use the previous version of the Uniform Guidance unless an official amendment is issued stating otherwise.
Some of the key changes:
- Increased single audit threshold: The expenditure threshold requiring a single audit has been raised from $750,000 to $1,000,000. This change aims to reduce the compliance burden on smaller entities.
- Raised Type A program threshold: The threshold for Type A programs has also increased from $750,000 to $1,000,000. This adjustment affects the determination of major programs during audits.
- Higher equipment thresholds: The capitalization threshold for equipment has been increased from $5,000 to $10,000. It could potentially be a good time for organizations to consider revising their capitalization thresholds policies to match the federal increase.
- De minimis indirect cost rate: The de minimis indirect cost rate has been increased from 10 to 15 percent, providing greater flexibility for entities that do not have a negotiated indirect cost rate. Organizations may apply for rates lower than 15 percent at their own discretion.
- Fixed amount awards and subawards: The maximum amount for fixed amount subawards has been increased from $250,000 to $500,000, given prior written approval from the federal agency.
- Plain language and accessibility: The revisions emphasize the use of plain language in Notices of Funding Opportunities (NOFOs) to make them more accessible, particularly for organizations with limited capacity.
- Community engagement and public participation: The updated guidance encourages federal agencies and recipients to conduct community engagement activities and permits the use of federal funds for public participation and community engagement when related to an award.
- Labor Standards: The revisions address labor standards for federal grant awards, emphasizing the importance of supporting job growth in local communities.
The Uniform Guidance revisions also include noteworthy updates to procurement standards:
- Removal of geographic preferences prohibition: The previous prohibition against using geographic preferences in procurement evaluations has been eliminated. This change provides recipients with greater flexibility in their procurement processes.
- Emphasis on contracting with diverse businesses: The updated guidance continues to encourage recipients to provide opportunities for small businesses, minority-owned firms, women’s business enterprises, and labor surplus area firms. Recipients are urged to take affirmative steps to ensure these entities are utilized when possible.
Organizations should consider updating their procurement policies to ensure compliance and improve efficiency. Some key policy updates to consider:
- De minimis indirect cost rate:
- If applicable, update procurement policies to reflect the increase in the de minimis indirect cost rate from 10 to 15 percent.
- Geographic preferences:
- Remove references to the prior prohibition on geographic preferences in procurement evaluations.
- If geographic preferences are to be used, update policies to ensure that they comply with other federal and state laws.
- Fixed amount awards and subawards:
- Update procurement policies to reflect the increase in the fixed amount subaward threshold from $250,000 to $500,000.
- Ensure subaward monitoring procedures align with updated federal requirements.
- Sustainability and labor standards
- Integrate updated federal labor standards, especially if contracts involve job creation or economic development projects.
- Include sustainability considerations in procurement evaluation criteria.
- Small, minority, and women-owned businesses:
- Strengthen policies that encourage contracting with small businesses, minority-owned firms, women’s business enterprises, and labor surplus area firms.
- Include “veteran-owned businesses” in contract considerations of disadvantaged businesses
- Require affirmative steps, such as outreach efforts and subcontracting opportunities, to increase diversity in procurement.
Ultimately the Uniform Guidance updates are designed to streamline processes, reduce administrative burdens, and enhance the management and transparency of federal financial assistance.
HBK is here to help. Let us be your trusted advisor and resource as you navigate these changes and all the complexities of federal grants. If you have any questions, please contact me at 724-934-5300 or DSefick@hbkcpa.com.
"*" indicates required fields