On October 5, 2023, the Office of Management and Budget (OMB) published a Proposed Rule which contains the most sweeping changes to the Uniform Guidance since it was originally issued in December 2013. Consistent with OMB’s goals to reduce recipient burden and improve readability, the OMB proposes both policy improvements and clarifications to existing guidance, including plain language revisions. Simply put, the OMB is attempting to streamline the Uniform Guidance and ease recipient burden rather than making the regulation more restrictive.
The Rulemaking Process
We first want to point out the Proposed Rule is merely a draft of proposed changes issued for public feedback. The OMB has provided the public with a 60-day comment period. Following this period, the OMB will review public comments, make further revisions, and issue the Final Rule. What this means is these proposed changes are just that – proposed – and could be subject to change in the Final Rule.
Reading the Proposed Rule
In accessing the Proposed Rule, you will first notice OMB’s executive summary, background, and OMB’s commentary on key changes made to the various Parts of 2 Code of Federal Regulations. When you get to the revised language contained in the Proposed Rule, the strike-through version provided by the OMB seems the most helpful in understanding the breadth of changes, comparing the current version of the Uniform Guidance to the proposed document.
Highlights of Proposed Changes
When reading through the proposed changes, you will see revisions of all types, from minor wording changes to new sections of guidance being added. The following is meant to provide a highlight of key changes but also provide examples of nuanced changes that could have an impact on your administration of federal awards:
- The definition of “Modified Total Direct Costs” now proposes to exclude subaward costs above $50,000, as compared to $25,000 in the existing guidance.
- Various definitions have been revised/added to clarify existing concepts.
Subpart D – Post Award Requirements
- Equipment threshold increased from $5,000 to $10,000 and equipment retention section added.
- Similar to States, Indian Tribes would be guided to follow their own procurement policies. It’s only if the Indian Tribe does not have their own policies and procedures would they be required to follow the Uniform Guidance procurement standards.
- Adds “veteran-owned business” in the types of businesses that recipients are encouraged to consider for procurement opportunities.
- Pass-through entity or subrecipient (presumably if not clear in the agreement) is responsible for making the subrecipient vs. contractor determination.
- Fixed amount subaward limit of $250,000 removed (i.e., there is no longer a limit). Prior approval from grantor is still required.
Subpart E – Allowable Costs
- De Minimis rate increased from 10% to 15%. Language removed about the “consistent” use of the de minimis methodology.
- New certification that subrecipients must provide pass-through entities when applying for funds, submitting reimbursement requests, and submitting reports.
- Entities’ indirect cost rate details will not be made publicly available as previously planned.
- Direct administrative costs incurred during award close-out are now allowable up until the due date of the final report.
- New guidance added on the allowability of the cost of prizes.
- Changes in cost principles and removing some requirements for prior approval (entertainment costs, exchange rates, memberships, participant supporting costs, selling and marketing costs, and taxes).
Subpart F – Single Audit
- Single Audit threshold increased from $750,000 to $1M. Type A and Type B thresholds for major program determination remain unchanged.
- If multiple entities are included in the Single Audit, the Schedule of Expenditures of Federal Awards must identify the recipient entity.
- Finding language – if questioned costs are documented as “not determinable” an explanation would need to be provided as to why.
The listing above intended to be an exhaustive representation of all changes being made but is hopefully helpful in understanding the nature and breadth of changes included in the Proposed Rule.
Now is your chance to study the changes being proposed and provide the OMB with your thoughts (i.e., public comments). Comments are required to be submitted by December 4, 2023, following instructions provided in the Proposed Rule. The OMB does not provide a timeline of when the Final Rule is expected to be issued nor guidance on when the changes would become effective. Inevitably, there will be revisions to the Uniform Guidance requiring, at the least, a review of an entity’s existing federal grants management policies and procedures for any needed changes.
For further questions, reach out to your Clark Nuber team.
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