The U. S. Office of Management and Budget (OMB) has proposed revisions to Title 2 U.S. Code of Federal Regulations, Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).
You can download the proposed changes and provide feedback before the public comment period closes on March 23.
Why is the OMB proposing an update?
The OMB is required to review the Uniform Guidance every five years. The proposed update has three main goals:
- Support implementation of the Grants CAP goal and other administration priorities
- Meet statutory requirements and align with other recent regulations
- Clarify areas of misinterpretation
The Uniform Guidance was originally created to reduce administrative burden on award recipients and guard against the risk of waste and misuse of federal funds.
The following proposed changes are among those most likely to affect a wide range of grant recipients:
Proposed changes would group methods of procurement into two separate categories: formal and informal.
For purchases that do not exceed the Simplified Acquisition Threshold (SAT), grantees may use informal procurement methods to expedite the process and reduce the associated administrative burden and cost. Micro purchases and small purchases will be considered informal.
For acquisitions that fall into the micro-purchase category, a change was made to the verbiage regarding equitable distribution among qualified suppliers. Under the current guidance grantees “must” make an effort to distribute purchases equitably among qualified suppliers. However, the OMB is proposing the language change to state grantees “should” make this effort.
Sealed bids, proposals and non-competitive methods will be considered formal.
These three methods fall over the SAT and require following formal documented procedures which differ at each level.
The proposed changes would allow nonfederal entities to request higher procurement thresholds from its cognizant agency for indirect cost. The requested thresholds must be based on internal controls, evaluation of risk and documented procurement procedures.
There’s also an addition in the proposed rules (2 CFR 200.321) that requires domestic procurement preferences. This means that grant recipients should try to purchase goods, materials and products produced in the U.S. to the greatest extent practical.
Merit reviews and notices
Proposed revisions to (2CFR 200.204) and (2 CFR 200.203) would require agencies to extend their merit review process for all grants when the federal agency has the discretion to choose the recipient.
These changes are in line with proposed changes to (2 CFR 200.202) and clarify the objective of the merit review process, which is to select recipients most likely to be successful in delivering results based on the programs objectives.
The additions to these sections also require the federal awarding agency to expand its program planning and design.
These changes state that agencies should establish program goals, objectives and indicators before drafting a Notice of Funding Opportunity. These program goals, objectives and indicators are required to align with the congressional intent of the program. Agency goal and metrics for measuring performance must be published in the assistance listing.
Expanded use of de minimis rate
Proposed changes to (2 CFR 200.414(f)) would allow grant recipients to apply the de minimis rate, even if they have previously received a negotiated rate. Extending the use of de minimis rate will reduce the administrative burden for both granting agencies and recipients. Additionally, revisions clarify that when a grantee is using the de minimis rate, documentation is not required to provide proof of covered costs.
And, for transparency purposes, this section also includes a requirement that all grantees’ negotiated agreements for indirect costs must be displayed on a public website – managed by a yet unnamed agency to be designated by the OMB.
Proposed changes under (2 CFR 200.331) clarify requirements for pass-through entities (PTE), establishing that a PTE is only responsible for addressing audit findings specifically related to their subaward.
Essentially, if audit issues arise, the PTE can focus exclusively on their relevant award area, relying on the subrecipient’s auditors and cognizant oversight to address entity-wide issues.
Additional proposed changes
In addition to the proposed changes summarized above, other proposed updates include the following:
- Standardization of terminology and implementation of standard data elements
- Aligning 2 CFR with the 2019 NDAA section 889 prohibition on certain telecommunications and video surveillance services or equipment
- Aligning 2 CFR with GAAP, specifically the GASB statement 68 and 45 related to pension costs and depreciation
- Codifying some FAQ related to the prior release in 2 CFR
How Wipfli can help
Wipfli provides compliance services and works with nonprofits and other recipients of federal funding. If you have any questions on the updates or wish to discuss how your organization can adjust to the proposed changes, please contact us.
We also offer in-depth training on OMB’s Uniform Guidance several times a year throughout the country. To learn more, explore our list of training events for nonprofits