Updates to Uniform Guidance: Key changes to know
Elizabeth Barchenger, CPA | August/September 2024 Footnote
It is hard to believe it has been more than a decade since the
Office of Management and Budget (OMB) issued the
Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).
The Uniform Guidance is a framework for managing federal financial assistance (formerly grants and agreements), which first became effective on Dec. 26, 2014, to serve as an authoritative set of rules and requirements for federal awards, consolidating and superseding guidance from earlier OMB circulars. Uniform Guidance received its first set of comprehensive updates in 2020 and the
second round of updates were released on April 4, 2024.
The 2024 revisions are intended to reduce agency and recipient burden, incorporate policy changes and priorities, and improve federal financial assistance management, transparency and oversight by rewriting the section using plain language, improving flow and addressing inconsistent use of terms. The revised Uniform Guidance is effective Oct. 1, 2024.
To prepare for that effective date, here are changes of note in Uniform Guidance:
2 CFR 200, Subpart A — Acronyms and definitions
- Removed infrequently used acronyms and definitions, and moving these to the appropriate sections of the guidance where they appear.
- Revised the definition of “Modified Total Direct Costs,” which now excludes subaward costs more than $50,000, compared to $25,000 in the previous guidance.
- Replaced the term “non-federal entity” with the terms “recipient,” “subrecipient” or both.
2 CFR 200, Subpart B — General provisions
- Requires an applicant, recipient or subrecipient of a federal award to promptly disclose whenever, in connection with the federal award, it has credible evidence of the commission of a violation of federal criminal law involving fraud, conflict of interest, bribery or gratuity violations.
2 CFR 200, Subpart C — Pre-federal award requirements and contents of federal awards
- Revised to clarify certain requirements for fixed amount awards.
- Revised guidance on the Notice of Funding Opportunities (NOFO) to encourage federal agencies to focus on communicating requirements to the public in an accessible and comprehensible manner.
- Revised the section regarding risk to clarify agency requirements for reviewing eligibility.
- Revised to require that the terms and conditions of loans and loan guarantee programs must specify whether there are continuing compliance requirements.
- Included several additions on the prohibition of certain telecommunications and video surveillance services or equipment to be consistent with other existing requirements.
- Included a new section to expand on the whistleblower protections and requirements for recipients of federal financial assistance.
2 CFR 200, Subpart D — Post-federal award requirements
- Revised the section on cost sharing to clarify that “matching” is one category of cost sharing overall, thus eliminating the need to repeat the term “matching” throughout.
- Revised the section on program income by providing clarifications regarding use and expenditure of program income (including clear guidance on program income earned after the end of the period of performance).
- Added language regarding appraisals to introduce additional guidance on standards for conducting independent appraisals when required under the federal award.
- Increased the threshold values for equipment and supplies from $5,000 to $10,000 and the amount of proceeds to cover expenses associated with selling and handling of the equipment and supplies from $500 to $1,000.
- Reinforced the responsibility of recipients to maintain updated records regarding equipment.
- Clarified that the requirements for unused supplies apply to the aggregate value of all supply types — not just like-item supplies — and clarified the definition of “unused supplies.”
- Required that contractors appropriately classify employees consistent with the Fair Labor Standards Act.
- Removed the prohibition on using geographic preference requirements.
- Included that subpart D does not prohibit recipients and subrecipients from incorporating a scoring mechanism that rewards bidders committing to specific numbers and types of U.S. jobs, as well as certain compensation and benefits.
- Changed “small purchases” to “simplified acquisitions” to further align with standard terminology.
- Added “veteran-owned business” to the types of businesses that recipients and subrecipients are encouraged to consider for procurement contracts under a federal award.
- Added language encouraging federal award recipients, to the extent permitted by law, to purchase, acquire or use products and services that can be reused, refurbished or recycled; contain recycled content, are biobased or are energy and water efficient; and are sustainable.
- Deleted the paragraph requiring the recipient to negotiate profit as a separate element of the price for each contract in which there is no price competition.
- Provided additional clarity on required deadlines for financial reporting and performance reporting requirements.
- Included the requirement for pass-through entities to confirm that potential subrecipients are not suspended, debarred or otherwise excluded from receiving federal funds.
- Increased the threshold for fixed amount subawards from $250,000 to $500,000.
- Added language to allow an agency and recipient to mutually agree upon a final indirect cost rate for an individual award when the indirect cost rate has not been finalized and would delay closeout of the award.
2 CFR 200, Subpart E — Cost principles
- Clarified that any funds remaining upon conclusion of a fixed amount award is not considered profit.
- Clarified that the cost principles in subpart E do not apply to grants and cooperative agreements for food commodities or any capitation awards.
- Clarified when allowable administrative closeout costs may be incurred.
- Removed items from the prior written approval requirements to reduce federal agency and recipient burden; revisions include no longer requiring prior written approval for such items as, real property, equipment, direct costs, entertainment costs, memberships, participant support costs, selling and marketing costs, and taxes.
- Increased the deminimis rate from 10% to 15%.
- Removed the DS-2 filing requirement for IHEs that receive an aggregate total of $50 million or more in federal awards.
- Revised the section on fringe benefits to require recipients and subrecipients to allocate payments for unused leave as general administrative expenses for all activities.
- Clarified guidance on the allocability of pension plan costs and post-retirement health plan costs.
2 CFR 200, Subpart F — Audit requirements
- Raised the audit threshold and the Type A program threshold from $750,000 to $1 million.
- Revised compliance requirements to specify that compliance testing must include tests of transactions or other auditing procedures necessary to provide the auditor with sufficient appropriate audit evidence to support an opinion on compliance.
- Revised the definitions of known questioned costs and likely questioned costs and provided further clarity on how they are identified in an audit report.
Staying compliant
While federal agencies may elect to apply the final guidance to federal awards issued prior to Oct. 1, 2024, the 2024 Compliance Supplement made it clear the revised Uniform Guidance is only effective for audits of years beginning after Oct. 1, 2024 — which means that entities will not be able to take advantage of the increase in threshold until Dec. 31, 2025, and June 30, 2026, fiscal year ends.
Elizabeth Barchenger, CPA is an audit services director at Mahoney. Elizabeth’s primary area of practice is providing audit and accounting services to clients in the real estate and not-for-profit industries, including those with Uniform Guidance and HUD reporting requirements.
