Understanding the OMB's Major Update to Federal Financial Assistance

ARTICLE | June 25, 2024

The Office of Management and Budget (OMB) has recently finalized significant revisions to the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, otherwise known as the Uniform Guidance. Officially termed as the OMB's Guidance for Federal Financial Assistance, this revised guidance will take effect from October 1, 2024, and applies to organizations that receive federal financial assistance either directly or indirectly.

This comprehensive update, which represents the most extensive revision since its inception a decade ago, aims to streamline and clarify the requirements for federal funding. The modifications are designed to incorporate recent federal policy priorities, reduce the burdens on federal agencies and recipients, and enhance the overall management, transparency, and oversight of federal financial assistance. 

Key Changes Affecting Non-Federal Entities

The revised guidance includes significant modifications affecting non-federal entities. Importantly, the threshold for equipment, as outlined in Section 2 CFR 200.313, has been revised. Previously set at $5,000, the new threshold is now $10,000. This means that any equipment purchased for $10,000 or less can be expensed rather than capitalized once the new rules take effect.

Additionally, the guidance also adds a requirement for recipient and sub-recipient internal controls to include cybersecurity measures to safeguard information. This addition demonstrates the importance of digital security in the operations of entities receiving federal funds.

The de minimis rate that non-federal entities can use for indirect costs has been increased from 10% to 15%, allowing for a more realistic recovery of indirect costs. Moreover, the Uniform Guidance now includes "veteran-owned business" as an entity type that recipients and sub-recipients are encouraged to consider for procurement contracts under a federal award. 

Changes Pertaining to Auditors of Non-Federal Entities

The changes also affect auditors of non-federal entities. The Single Audit threshold has been increased from $750,000 to $1,000,000. This implies that only entities that expend $1 million or more of federal funds annually will be subject to a Single Audit once the changes take effect.

Moreover, the threshold for determining Type A programs has also been increased to $1 million if the total annual expenditures of all federal programs for a non-federal entity are $34 million or less. The changes also remove the term “non-federal entity” and replace it with either “recipient” or “subrecipient” for better clarity.

Conclusion

The Uniform Guidance revisions are a significant milestone in federal financial assistance management, marking a shift towards clearer language, simplified processes, and enhanced transparency. Entities that receive federal funding should take the time to thoroughly review the changes and adjust their policies, procedures, and internal controls accordingly.

While these changes are substantial, they should ultimately make it easier and more equitable for eligible recipients to submit applications for federal funding. As we approach the effective date of these changes, recipients of federal funding must remain diligent in preparing for this transition. As always, please connect with our team for more detailed information and guidance on how these changes may impact your organization.