OMB Final Rule Rewrites the Uniform Guidance for Grants, Cooperative Agreements, and Other Federal Financial Assistance

On April 22, 2024, the Office of Management and Budget (OMB) issued a Final Rule significantly revising the Uniform Guidance for grants, cooperative agreements, and other federal financial assistance.  The Final Rule (titled “OMB Guidance for Federal Financial Assistance”), and OMB’s accompanying memorandum to agencies and reference guide, state that the revisions aim to streamline and clarify the grant rules and improve management, transparency, and oversight of federal financial assistance.  Agencies must implement the Final Rule by October 1, 2024; however, agencies may apply it to federal awards as early as June 21, 2024.

Highlighted Changes

The Final Rule makes changes throughout the OMB Guidance for Federal Financial Assistance (hereinafter, “Revised OMB Guidance”).  Changes to 2 CFR Parts 25, 170, 172, and 175 incorporate newer statutory requirements and make certain plain-language revisions.  The Final Rule also makes many changes to 2 CFR Parts 180 and 200, including, but not limited to, increasing the threshold for audits, clarifying the requirements for fixed amount awards, and implementing a mandatory disclosure rule.  Some highlights of the Revised OMB Guidance include:  

Part 25 – Unique Entity Identifier and System for Award Management

• Section 25.300 clarifies that first-tier subrecipients must obtain a Unique Entity Identifier (UEI) but are not required to complete a full System for Award Management (SAM) registration. The section also clarifies that the UEI requirement does not extend beyond first-tier subawards. 
• Contractors that have a procurement relationship with a recipient are not required to obtain a UEI.

Part 175 – Trafficking in Persons

• Part 175 now aligns with the amended Trafficking Victims Protection Act (TVPA) of 2000, 22 U.S.C. 7101 et seq., including requirements for certifications and a compliance plan consistent with the law. Section 175.105(c) requires recipients to inform the federal agency and the inspector general immediately if there are credible reports that the recipient (or any subrecipient, contractor, subcontractor, or agent of the recipient) has engaged in prohibited activities.

Part 180 – OMB Guidelines to Agencies on Government-Wide Debarment and Suspension (Non-procurement)

• Part 180 implements recommendations from the Interagency Suspension and Debarment Committee to clarify available administrative actions in lieu of debarment.
• Section 180.705 includes additional evidence for officials to consider before initiating a suspension, e.g., “other indicators of adequate evidence that may include, but are not limited to, warrants and their accompanying affidavits.”
• Section 180.860 adds as a factor influencing a debarment decision, “whether [an entity’s] business, technical, or professional license(s) has been suspended, terminated, or revoked.”

Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards

Updated Mandatory Disclosure Rule

• • Section 200.113 now aligns with the disclosure requirements under FAR 3.1003 and 52.203-13. Section 200.113 requires an applicant, recipient, or subrecipient to promptly make a written disclosure to the agency and the agency’s inspector general whenever, in connection with the federal award (including any activities or subawards thereunder), it has “credible evidence of the commission of a violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations” or a violation of the civil False Claims Act.  Subrecipients must also submit a copy of any written disclosure to the pass-through entity.

Requirements for Fixed Amount Awards and Subawards

• • Section 200.201(b)(1) states that fixed amount awards must be negotiated using the cost principles (or other pricing information) as a guide, and may be used if accurate cost, historical, or unit pricing data is available to establish a reasonable estimate of actual costs. After award, financial reporting of actual costs incurred by the recipient or subrecipient generally is not required, but recipients and subrecipients must still comply with record retention requirements and must make records available for review during an audit.
  • Section 200.201(b)(4) makes clear that, at the end of an award, the recipient or subrecipient must certify that the project was completed in order to retain the full award amount. If activities required by the award are not completed, then the recipient or subrecipient must identify those activities, and the award will be reduced by the amount reflecting the activities that were not completed.  In contrast, if the required program activities are complete in accordance with the terms of a fixed amount award, unexpended funds can be retained by the recipient or subrecipient and are not considered profit.  See, e.g., 2 CFR 200.400(g).
  • Section 200.333 increases the maximum value of a fixed amount subaward from $250,000 to $500,000.

Additions to the Post-Award Requirements Regarding Sourcing

• • 2 CFR 200.317 allows Tribal Government recipients to use their own internal procurement standards rather than complying with federal procurement standards prescribed in 2 CFR 200 200.318 through 200.327.

Addition of Cybersecurity Internal Controls

• • 2 CFR 200.303 adds “reasonable” cybersecurity internal control requirements to the information protection internal control requirements at 2 CFR 200.303(e). The Final Rule also clarifies that the cybersecurity and information safeguarding controls apply to all information, not just personally identifiable information and “other types of information” deemed sensitive.  While the Final Rule does not prescribe a specific framework for cybersecurity controls, OMB may specify guidance in the future.

Changes to Procurement Standards Regarding Labor Standards and Conflicts of Interest

• • 2 CFR 200.318(c) adds board members to the list of subrecipient or contractor personnel who can create conflicts of interest.
  • 2 CFR 200.318(h) now requires recipients or subrecipients to consider, as part of a responsibility determination, whether contractors properly classify employees under the Fair Labor Standards Act.

Threshold Increases and Changes to 2 CFR 200 Subpart E, Cost Principle, and 2 CFR 200 Subpart F, Audit

• • Sections 200.313 and 200.314 each increase the thresholds, from $5,000 to $10,000, for the value of equipment and supplies a recipient may retain, sell, or dispose of at the end of the grant.
  • Section 200.414 (Subpart E) increases the standard de minimis indirect cost rate from 10 percent to 15 percent (while still permitting election of a lower rate), which may allow for a more realistic recovery of indirect costs, especially for new or inexperienced organizations that may not have the capacity to undergo formal rate negotiations.
  • Section 200.455 (Subpart E) expands allowable organization costs to include: (1) evaluation costs, e.g., evidence reviews, feasibility assessments, conducting evaluations, sharing evaluation results, and other personnel and material costs related to using evaluations for program design, administration, or improvement; and (2) data costs, e.g., the costs of personnel, building integrated data systems, data dashboards, and cybersecurity associated with using data to administer or improve the program.
  • 2 CFR 200.501 (Subpart F) raises the annual threshold of expenditures triggering a single audit or program-specific audit from $750,000 to $1 million.   

Key Takeaways

The Final Rule’s changes may help reduce some burdens on recipients, subrecipients, and contractors under federal assistance awards.  These changes and clarifications in the Final Rule are a welcome development given the increasing number of federal awards from the Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act, among others.  That said, recipients and subrecipients should be mindful that agencies have some flexibility as to when and how they implement the Revised OMB Guidance in federal awards.  Accordingly, recipients, subrecipients, and subcontractors must closely monitor their federal awards in the coming months to understand the specific compliance obligations for each award, recognizing also there may be different compliance challenges with awards from different federal agencies. 

Crowell will continue to monitor and report on developments as agencies implement the new OMB Guidance for Federal Financial Assistance.