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In April 2024, the Federal Office of Management and Budget (OMB) published revised rules to implement the uniform administrative requirements, cost principles and audit requirements for Federal awards (i.e., the “Final Rule” as published in the Federal Register at 89 FR 30046). Following collaboration with Federal agencies and the conclusion of a public Request for Information period in 2023, OMB determined it was necessary to revise previous guidance and regulatory requirements for several purposes, including to reduce agency and recipient burden, clarify sections of the regulations recipients or agencies have interpreted differently, and re-write sections in plain language, while also addressing the inconsistent use of terms within the guidance.
2 CFR 200 and “Final Rule” Background
2 CFR Part 200, also known as the “Federal Uniform Guidance,” contains requirements for Federal grants and agreements and was developed to streamline requirements, reduce administrative burden on award recipients, guard against waste, fraud, and abuse of Federal funds, and improve program performance.
Part 200 is organized into six subparts (A-F) and applies to all Federal funding, including new awards, continuation awards, and supplements. In 2012 and 2013, OMB consulted with Federal agencies to revise and streamline existing guidance to develop part 200 and provided Federal agencies with nearly one year from the date of publication (Dec. 26, 2013) to implement the major changes contained in that guidance.
Nearly 10 years later and based on feedback received from its 2023 Notice of Request for Information, OMB determined revisions to several parts of subtitle A of 2 CFR were needed to streamline, clarify, and update the guidance, including raising certain thresholds—in recognition of inflation and other contributing factors. These amendments—summarized below—constitute the most substantial revision to the Uniform Grants guidance since December 2014. In this most recent set of revisions, Federal agencies had until October 1, 2024, to implement the “Final Rule” changes, but could apply them as early as June 21, 2024, if warranted.
Summary of “Final Rule” changes
In addition to part 200, OMB revised other parts of 2 CFR, including parts 1, 25, 170, 175, 180, 182, 183, and 184. The primary changes, however, are reflected in part 200. A summary of the most notable amendments to the six subparts of part 200 are below:
Acronyms and Definitions
General Updates and Definitions
For-profit organization and participant are two notable terms that OMB has added to the list of definitions in Section 200.1. A participant refers to an individual participating in or attending program activities (e.g., a student or conference attendee) under a Federal award, but who is not responsible for implementation of the Federal award (e.g., consultants, staff members of recipient).
OMB has clarified that for-profit organizations include (but are not limited to) an “S corporation” incorporated under subchapter S of the Internal Revenue Code, a corporation incorporated under authority, a partnership, a limited liability company or partnership, and a sole proprietorship.
And as an example of one of the “plain language” revisions referred to above, OMB transitioned from use of the term non-Federal entity to either recipient or subrecipient—except in subpart F (Audit Requirements)—in the regulations.
General Provisions
Language Requirements
Section 200.111 requires key documents and materials to be published in English but allows for translation of a Federal award or documents in another language. OMB clarified that it is providing agencies, recipients, and subrecipients discretion in terms of determining translation needs at the program level. Also, the allowability of translation costs is determined by multiple factors, including whether they are allocable to the award and are reasonable for the effective administration of the award.
Notification of Fraud or Other Criminal or Civil Violation
OMB notably revised the section (200.113) in subpart B requiring applicants, recipients, or subrecipients of a Federal award to “promptly” disclose when they have “credible evidence” of the commission of a violation relating to fraud, conflict of interest, bribery, or gratuity violations (under Title 18 of the United States Code, or the civil False Claims Act).
In these instances, the disclosure must be made promptly (i.e., not an open-ended investigation or one that extends over a long period of time) and must be made in writing to the Federal agency, the agency’s Office of Inspector General, and any pass-through entity—if a subrecipient made the disclosure. OMB revised this section to better align with the disclosure requirement under the Federal Acquisition Regulation (FAR), ensuring uniformity across Federal programs.
Subpart C
Pre-Federal Award Requirements and Contents of Federal Awards
Program Planning and Design
OMB clarified it encourages applicants for Federal assistance to engage with their respective communities, particularly those members who will benefit from or be impacted by a program, during the design phase of programs (200.202). OMB did not specify a preferred method of engagement, however, instead concluding individual Federal agencies are ultimately responsible for the design, innovation, and long-term development and sustainability of their programs.
Whistleblower Protections
OMB added a section (200.217) to require that recipients and subrecipients inform their employees in writing of Federal whistleblower protections provided by law. This new section expands on the protections and requirements recognized in part 200 for recipients of Federal financial assistance.
Subrecipient Monitoring and Management
Internal Controls
In Section 200.303, OMB added a requirement (in paragraph (e)) that recipient and subrecipient internal controls include reasonable cybersecurity and other measures to safeguard information, including personally identifiable information (PII). Recipients and subrecipients maintain some discretion to determine the framework needed to safeguard protected information.
Increased Dollar Thresholds
As an example of the increased monetary thresholds established in the “Final Rule,” OMB increased the limit on fixed subawards twofold—from $250,000 to $500,000—to provide agencies and recipients with increased flexibility in making programmatic and budgetary decisions; the increased threshold for subawards is contingent on approval from the Federal agency (200.333). The capitalization thresholds for equipment and supplies (in subpart D) also increased twofold—from $5,000 to $10,000 (200.313 and 200.314, respectively).
Procurement Standards
Labor and Employment Practices
OMB added to Section 200.318 examples of labor and employment practices recipients and subrecipients may use when procuring services (e.g., when evaluating proposals). Some of these include Project Labor Agreements (PLAs), use of high-unemployment census tracts with a region no smaller than the county where a federally funded construction project is located, and use of agreements intended to ensure uninterrupted delivery of services.
Competition
OMB removed the prohibition in Section 200.319 pertaining to the use of geographic preference requirements in competitive procurements. However, OMB clarified in the “Final Rule” that geographic preferences used under a Federal award must be consistent with Federal law outside of part 200. Federal agencies may still retain an important role in working with a recipient to determine the permissibility of geographic preferences under a Federal award.
Veteran-Owned Businesses
To promote equitable access, OMB added veteran-owned businesses to the list of preferred businesses (e.g., small business, women’s business enterprise, etc.) recipients and subrecipients should consider (200.321) when procuring services under a Federal award.
Cost Principles
Indirect Costs
For recipients and subrecipients that do not already have a current Federal negotiated indirect cost rate, OMB increased the de minimis rate they may elect to charge from 10 percent to 15 percent of modified total direct costs (MTDC) (200.414). OMB clarified that neither Federal agencies nor pass-through entities may require recipients and subrecipients to use a de minimis rate lower than this standard—unless required by Federal regulation or statute.
Audit Requirements
Audit Threshold
In the subpart containing Federal audit requirements, OMB increased the expenditure threshold (during the non-Federal entity’s fiscal year) that triggers a single or program-specific audit from $750,000 to $1 million (200.501). The 33 percent increase to the threshold aligns closely with the Consumer Price Index since the last increase in 2014.
Report Submission
OMB revised Section 200.512 to recognize that the cognizant agency for audit or oversight agency for audit (in the absence of a cognizant agency for audit) may authorize extensions for Single Audit submissions when the nine-month timeframe would place an undue burden on the auditee.
HORNE Uniform Guidance Experience
Having assisted clients with management of over $100 billion in Federal grants, HORNE’s experience with the “Federal Uniform Guidance” is extensive and covers a broad range of compliance areas and financial management services. The portfolio of programs and laws HORNE has provided oversight, program management, and implementation services for includes HUD’s CDBG-DR and -MIT programs ($47 billion), FEMA’s Individual Assistance (IA), Public Assistance (PA), and Hazard Mitigation Grant (HMGP) programs (combined $28 billion), and the U.S. Treasury’s Coronavirus Relief Fund and American Rescue Plan Act funds (combined $34 billion).
Notably, in Puerto Rico, HORNE supported the territory’s Department of Housing (PRDOH) through the financial certification process for the island’s $11.9 billion disaster recovery program, which following Hurricanes Irma and Maria in 2017, enabled the release of the largest-ever CDBG-DR funding award made to a single grantee. The firm helped establish the foundation for relationship management with HUD, FEMA, the Office of Inspector General, Congressional oversight entities, and various local agencies, eventually leading to HUD approval of PRDOH plans and financial capacity.
HORNE Technical Advisory Group
The Technical Advisory Group (TAG) within HORNE’s Government Services section consists of industry experts, including former HUD and grantee leaders, and program and financial management specialists that collectively have decades of experience implementing federally funded programs. HORNE’s TAG possesses the technical expertise needed to enable compliance with new OMB “Final Rule” requirements, including application of the regulatory updates to existing internal policies, procedures, and controls.
The TAG has managed over $47 billion in CDBG-DR funds, without significant findings or concerns relating to the programs having been issued by auditors or monitors. Additionally, the group has delivered training and technical assistance to more than 4,000 persons, including over 80 Federal agencies, 95 state and local governments, and non-profit organizations.
Please contact us to inform us of your organization’s specific grant management, implementation, or compliance needs and learn how our vast expertise can be leveraged to assist with application of all subparts of the updated “Federal Uniform Guidance.”
