In 2013, the Office of Management and Budget (OMB) released the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the “Uniform Guidance”), which consolidated and streamlined the various federal policies governing the award and administration of federal financial assistance (i.e., federal grants) into a single title of the Code of Federal Regulations: 2 C.F.R. Part 200. The Uniform Guidance is revised and updated every five years to clarify the existing requirements and meet changing needs.

In April 2024, OMB published its most substantial revision of the Uniform Guidance to date (“the 2024 Update”).  The 2024 Update makes the Uniform Guidance more user-friendly by using “plain language” to clearly describe the compliance requirements. It also clarifies, adds, and omits sections that were commonly misunderstood and/or overly burdensome.

The 2024 Update is effective October 1, 2024, and applies to awards of federal financial assistance made to a recipient or subrecipient on or after that date. However, federal agencies were given the option to adopt the new guidance earlier, but no sooner than June 21, 2024. (See the Final Rule). Accordingly, counties and municipalities that received a new federal grant between June 21 and October 1, 2024, should determine whether the award is subject to the earlier effective date of June 21.

The goal of this blog post is to highlight the most relevant and substantial changes related to the post-award compliance requirements. Accordingly, not every revision included in the 2024 Update is discussed. For a comprehensive overview of the 2024 Update, see the Final Rule or visit the Council of Federal Financial Assistance site to access the “Implementation Memo” and the view the redline edits to the Uniform Guidance.

Updated Definitions: Infrequently used definitions were removed and some definitions have been clarified and simplified.

• OMB transitioned away from using the term “non-Federal entity” and now primarily uses “recipient” and “subrecipient.”
• “Federal awarding agency” is now “Federal agency.”
• “Cost share and matching funds” is now “cost share.” (Cost share includes matching.)

Threshold Increases and other Cost-Related Changes

• Single Audit threshold now $1 million: The 2024 Update increases the threshold to trigger a federal single audit from $750,000 to $1 million of federal award funds expended during a single fiscal year. (The single audit threshold is based on the expenditure of federal financial assistance, not the amount of funds received.) [200.425(a)(2)].

• De minimis indirect cost rate now 15%: The de minimis rate for charging indirect costs to federal awards is now “up to” 15 percent (previously 10 percent). The recipient or subrecipient may elect a de minimis rate that is lower than 15 percent. There are no specific documentation requirements needed to justify the use of the de minimis rate and, once elected, the recipient or subrecipient must use the same de minimis rate for all federal awards (unless the entity receives a Negotiated Indirect Cost Rate Agreement (NICRA)). [200.414(f)].
• Acquisition value for equipment and supplies increased to $10,000: The acquisition value for equipment and supplies increased from $5,000 to $10,000. Now, equipment or supplies with a current fair market value of $10,000 or less (per unit) at the end of the grant period “may be retained, sold, or otherwise disposed of” with no further responsibility to the federal agency or pass-through entity. [200.313(e), -314(a)].

• Fixed amount subawards threshold increased to $500,000: The amount of fixed amount subawards that a recipient may provide with prior written approval from the federal agency increased from $250,000 to $500,000.  At the end of the fixed amount subaward, the recipient or subrecipient must certify in writing that the project was completed as agreed or identify those activities that were not completed. The amount of the federal award must be reduced by the amount that reflects the activities that were not carried out. [200-333; 200.201(4)].
• Fewer prior approvals for some costs:  Prior written approval from the federal agency is no longer required before costs may be incurred for use of grant agreements, entertainment, memberships, subscriptions, professional activities, participant support, and for some sales and marketing costs. [200.407]. The Update also clarifies that certain costs associated with data and evaluation are allowable. [200.455].

• Administrative close-out costs allowed until final report filed: Administrative closeout costs may be incurred until the due date of the final report(s). If incurred, these costs must be liquidated prior to the due date of the final report(s) and charged to the final budget period of the award unless otherwise specified by the federal agency. All other costs must be incurred during the approved budget period. [200.403(h)].

Procurement Updates

• Removal of prohibition on geographic preferences in bid evaluation: Recipients and subrecipients are no longer prohibited from using state and/or local geographic preferences in the evaluation of bids. [Requirement previously listed in 2 C.F.R. 200.319(c)].
• “Small purchase” procedures renamed to “simplified acquisition” procedures: The term “small purchase” or “small purchase procedures” has been replaced by the term “simplified acquisitions.” Now, “simplified acquisition” or “simplified acquisition procedures” describes the informal procurement method to enter contracts costing above the micro-purchase threshold but below the simplified acquisition threshold. [200.320(a)(2)].
• New evaluation criteria for determining “responsible” contractors: The 2024 Update requires recipients and subrecipients to consider certain factors when assessing whether a contractor is “responsible” (and documentation of such consideration should be retained.) In addition to existing factors, such as contractor integrity and financial and technical resources, a recipient or subrecipient must also consider a contractor or firm’s “public policy compliance” and “proper classification of employees” pursuant to the Fair Labor Standards Act. [200.318(h)].
• No more affirmative steps: The 2024 Update modifies the language about engaging small businesses, minority and women’s business enterprises (MWBEs), and labor surplus area firms. (Note that veteran-owned businesses have been added to 200.321, as discussed in the next paragraph). Instead of taking “affirmative steps” to engage these business types, recipients and subrecipients “consider” engaging such businesses, when possible. Generally, though, what constitutes the proper “consideration” of these businesses is very similar to “affirmative steps” that were necessary before the revision. [200.321].
• Veteran-owned businesses must be solicited for contracts: In addition to considering minority businesses, women’s businesses enterprises, and labor surplus area firms, the 2024 Update requires that veteran-owned businesses be considered, when possible, for contracts that will be funded with federal financial assistance. [200.321].
• Procurement of recovered materials: New language added to Section 200.323 encourages recipients and subrecipients to acquire or use products that are sustainable, including reused, refurbished, and recycled products; biobased or energy and water efficient acquisitions; and compostable items. [200.323(b)].
• Update to the cost and price analysis: In performing the required cost or price analysis for procurements in excess of the simplified acquisition threshold, the 2024 Update instructs recipients and subrecipients to tailor their method and degree of analysis to the facts surrounding the particular procurement transaction. For example, potential workforce impacts should be considered if the procurement transaction will displace public sector employees. In addition, the 2024 Update eliminates the requirement to negotiate profit as a separate element of the price when there is no price competition or whenever a cost analysis is performed. [200.324].

Miscellaneous Updates to Note

• Clarifies that second-tier subrecipients and contractors do not need UEI: The 2024 Update clarifies that subrecipients must obtain a Unique Entity Identifier (UEI), but subrecipients of subrecipient (second-tier subrecipients) and contractors are not required to obtain a UEI. In addition, a recipient may not make a subaward to a subrecipient unless the entity has obtained a UEI and provided it to the recipient. Subrecipients are not required to complete a full registration in Sam.gov to obtain a UEI. [25.105(b); 25.300]
• New whistleblower protections: Section 200.217 was added to the Uniform Guidance to clarify and strengthen protections for employees of recipients and subrecipients who disclose information that an employee reasonably believes is evidence of gross mismanagement of a federal contract or grant; a gross waste of federal funds; a substantial and specific danger to public health or safety; or a violation of law related to a federal contract (including competition for or negation of a contract). In addition, the recipient and subrecipient must inform employees in writing of employee whistleblower rights and protections under 41 U.S.C. 4712. [200.217].
• Record retention period starts upon submittal of final report: Federal award records must be retained for three years after the date of submission of the final financial report (previously the three-year period was tied to the date of final expenditure). For awards that are renewed quarterly or annually, the recipient and subrecipient must retain records for three years from the date of the submission of that quarterly or annual financial report. Records to be retained include but are not limited to, financial records, supporting documentation, and statistical records. [200.334].