Highlights of the revised Uniform Guidance
Federal agencies were required to adopt the U.S. Office of Management and Budget’s (OMB) latest revised Uniform Guidance (UG) by October 1, 2024. It affects organizations with a fiscal year ending September 30, 2025, and later. The revisions are being welcomed by many nonprofit organizations because the changes aim to help reduce the burden on recipients and subrecipients of federal grants and other financial assistance. Read on to learn about some of the ways OMB is trying to make life easier for nonprofits.
Raise the thresholds
The revised UG increases several important thresholds, such as the threshold for determining if your organization is subject to a single audit of its financial statements and programmatic compliance. The audit requirement now applies only to nonprofits that spend at least $1 million in federal financial assistance in the fiscal year, up from a previous $750,000.
It also amends the Type A/B threshold for entities with total federal expenditures of $34 million or less (an increase from $25 million). For these organizations, the threshold to determine if a program is Type A for purposes of the single audit major program determination rose to $1 million from $750,000. The threshold for Type B programs requiring risk assessment increased to $250,000. Additional changes have been made to the thresholds for organizations with total annual federal expenditures exceeding $34 million.
The thresholds for equipment and unused supplies doubled to $10,000. As a result, you can expense equipment purchased for less than $10,000 — rather than capitalizing it over time — and keep, sell or otherwise dispose of it with no further responsibility to the federal agency. In addition, if unused supplies exceed $10,000 in total aggregate value at the termination or completion of a project or programs (and the supplies aren’t needed for another federal award), you must retain them to use on other activities — or sell them. Either way, you’re required to compensate the federal government for its share.
Increase the de minimis cost rate
The de minimis indirect cost rate has increased from 10% to 15% of Modified Total Direct Costs (MTDC). You may apply for lower rates if desired, but you can’t be required to apply for lower rates, unless mandated by statute. The revised UG makes clear, too, that pass-through entities must accept federally negotiated indirect cost rates for subrecipients. This means that if your nonprofit has negotiated rates with one federal agency, it will receive the same cost rate from all other federal, state and local agencies.
Note, though, that the revised UG changes the exclusion amount for subaward costs in the MTDC computation. It jumps from $25,000 to $50,000. OMB has also indicated that it might permit recipients and subrecipients to use direct labor as the base for the de minimis rate (instead of the MTDC) at some point in the future.
Encourage community engagement
The UG includes several changes that recognize that the communities most in need of assistance often have trouble navigating the complex process of grant application. For example, it eliminates the requirement to use English in notices, applications and reporting. The revised UG also requires federal agencies to improve the official descriptions of their programs (referred to as “Assistance Listings”) in the Federal Program Inventory, a new searchable website with information on the spending associated with all federal assistance programs.
Further, it instructs federal agencies to simplify their Notices of Funding Opportunities. For example, agencies must now provide basic information at the top of a grant announcement and use plain language, not jargon, when describing program requirements.
Leverage opportunities
Although many of the UG’s changes are favorable for nonprofits, the changes may require some adjustments to policies within your organization. We can help you understand the changes and advise on ensuring compliance.
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