By Elizabeth Evans, Manager of Research and Consultation
Last month marked the start of the U.S. federal Office of Management and Budget’s (OMB) new set of rules directing the majority of federal grantmaking to nonprofits; education institutions; state, local, or tribal government agencies; and others. These rules, colloquially known as the Uniform Guidance, were first established in December 2013. Originally a consolidation of several federal rulemaking circulars, the Uniform Guidance’s policies have been periodically adjusted over the last 20 years. The most recent of these updates took effect on October 1, 2024.
Broadly speaking, these latest revisions aim to reduce barriers to federal grant seeking – a historically complex and convoluted process. The OMB had 4 objectives in support of this goal:
- Incorporation of new statutory requirements and administrative priorities,
- Reduction of burden for grant seekers and the funding agencies,
- Clarification of language to prevent misinterpretation by agencies and grant seekers, and
- Simplification of language to increase comprehension among the general public.
After much internal debate and time for public comment, in April of 2024, the OMB released the final set of rules for what the new Uniform Guidance would entail. Highlights include:
- Simplification of NOFOs. The language and structure of the content in any Notice of Funding Opportunity will be simplified to be more accessible to those without extensive grant experience. Eligibility lists will include examples of eligible applicants (e.g., labor unions as a type of nonprofit organization). Basic information about the grant must be listed at the top of the announcement and the overall length of NOFOs has been limited.
- Emphasis on Community Engagement & Inclusivity in Grantmaking/seeking. Both grant makers and grant seekers will be encouraged to solicit stakeholder input in the design of programs and projects. Grant-making agencies have been encouraged to diversify their cadre of proposal reviewers when selecting merit-based projects. Further, grantmakers can no longer restrict applicants to only submitting their narrative requests in English.
- Explanation of Roles. The “Non-federal Entity” designation has been replaced with the newly defined “Recipient” and “Subrecipient” roles. Clear definitions for what constitutes a “Pass-Through Entity” and confirmation that they must accept any subrecipient’s federally negotiated indirect cost rate.
- Clarified Cost Principles & Increased Budgetary Thresholds. The de minimus (guaranteed minimum) rate for indirect costs has been raised from 10% to 15% and the threshold for modified total direct costs has been doubled to be $50,000 for each subaward. Further, the capitalization threshold for equipment has been increased from $5,000 to $10,000 minimum per item. Minor revisions for what is considered an allowable cost towards employee fringe benefits, travel costs, and entertainment expenses have been made. It has also been confirmed that costs for project evaluation (i.e. data collection, storage, and security) are allowable as an organizational cost either directly or indirectly.
- Revised Award Payment Practice & Grantee Procurement Standards. Grant-making agencies are only to leverage reimbursement mechanisms for the distribution of funds when financial requirements for advanced payment are unable to be met. Instead, the upfront payment of grant awards is encouraged. Updates for awardee procurement practices, including conflict of interest provisions have also been made. The requirement of specific steps to affirm consideration of socioeconomic factors in purchasing decisions has been removed, although review is still encouraged.
- Specified Requirements for General Reporting, Audits, & Monitoring of Sub-awardees. Additional details on the required documentation, frequency, and scope of reporting expectations have been provided. Agencies are to eliminate reports or requests for data that are not necessary for determining project efficacy. The value threshold for grantee retention of unused supplies upon project completion has increased from $5,000 to $10,000 before they are required to sell the unused items and return those funds to the federal government. Further, the minimum dollar requirement for a single audit has been raised from $750,000 to $1,000,000.
Going forward, the OMB’s new version of the Uniform Guidance may be found within Title 2 of the Code of Federal Regulations (CFR). Federal agencies are now required to follow these rules for any new awards granted from October 1, 2024, forward. That said, some agencies may be slow to update wording on their NOFOs or otherwise institute these changes, particularly if they are host to thousands of opportunities.
In the interim, the best thing grant seekers can do is to triple-check the NOFO for any grant they are applying to over the next calendar year and respectfully contact the program officer at the funding agency if they notice any discrepancies. Grant-seeking organizations will also need to ensure their own internal policies are amended to account for these changes. Whether you’re a veteran or a novice grant professional – a grant writer or award administrator – it might be time to revisit Title 2 of the CFR (https://www.ecfr.gov/current/title-2) to review the latest changes in greater detail.