March 12, 2014

New Federal Grant Application and Award Guidance Released

Reformed Uniform Guidance: Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards was released in December 2013 by the US Office of Management and Budget (OMB) and the Council on Financial Assistance Reform (COFAR). The OMB is charged with oversight of agency performance, Federal procurement, financial management, and information/IT.

The new guidance:

  • Reduces administrative burden by eliminating duplicative/conflicting funding agency requirements;
  • Focuses accountability on performance and results as related to the outcomes each grantee intended to be achieved;
  • Encourages shared services and information technology among collaborating organizations; and
  • Supports family-friendly policies and fringe benefits allowances that strengthen the workforce.[1]

Federal agencies have through 2014 to bring their internal processes into line with the new guidance, which the OMB will review and approve on agency-by-agency basis. Once OMB approves each federal agency’s revised grant application, review, and audit protocols, the guidance will become effective for all federal award applicants and grantees.

The effective date for applicants and grantees is expected to be December 2014 or January 2015. Any awards and draw downs received prior to December 2014 will not be affected by the revised guidance. Audit requirements will apply to fiscal years beginning on or after December 26, 2014. A list of program-specific audit guides will be provided beginning with the 2014 Supplement later this year.

Grantees should expect that new organization-wide policies will be required to meet these new regulations. Grantees do not need to implement new cost principles prior to December 2014, but may begin to use them any time prior to announcement of the OMB’s final effective date to ensure a smooth transition.

Increased transparency among organizations is supported through the new internal control guidelines.

Grantees with strong internal controls and few audit findings will continue to fare best in application reviews and compliance audits. Outreach and support will be provided by COFAR throughout the year to assist agencies in adapting to the new OMB guidelines and during implementation.

Highest impact reforms:

Most notably, the single audit review threshold is raised from a total organization budget of $500,000 to $750,000. This reform requires that single audits be published online by the organization and available for review[2]. Proprietary business and personally identifiable information (PII) may be redacted from published audits. Programs will be grouped based on dollars by budget amount: Type A programs are those above the new threshold; and Type B are those below the new threshold. This threshold change affects a known 5,000 smaller organizations and saves $250 million inside federal agencies.

Other high impact reforms include:

  • Nonprofits gain greater reimbursement for indirect costs;
  • Consolidates use of for finding and applying for funds;
  • Government-wide standardization of application format and several post award reports, including financial and performance data collection forms;
  • Six clearly defined performance data goals[3] must be included in all Notices of Funding Availability;
  • Pre-award risk indicators[4] will be used to determine award-worthiness of grant applicants;
  • Grantees must monitor and perform due diligence for risk assessment on sub-recipients using the same four risk indicators as the government agencies will use for grant applicants;
  • Recipients must relate costs to performance accomplishments to demonstrate cost effective practices; and
  • Requirement for all grantees to track use and safeguarding of equipment that contains PII.

Significant Allowable Cost Changes:

  • More flexibility regarding how grantees construct and apply personnel and wage controls and recordkeeping practices within their own organization.
  • Costs will be allowed for a financial statement audit for a non-Federal entity that does not currently have a Federal award when audit is included in the indirect cost pool as part of a cost allocation plan or indirect cost proposal;
  • Costs of maintaining idle facilities may be allowable when due to fluctuating workloads, such as those which may be typical of developing shared service arrangements; and
  • Charges for publication of research results may now be allowable even when they occur after expiration of the award.

Changes to direct and indirect cost allowances eliminate a previously-exclusionary barrier by allowing 10% of modified total direct costs for any organization that has never had a negotiated indirect cost rate, such as institutions of higher learning. And federal agencies will have to accept an indirect rate negotiated prior to implementation of these revised guidelines with one time extensions of up to four years. COFAR expects that as a result of the changes being made in indirect cost reimbursement, nonprofits should be under less pressure to raise additional funds to subsidize government grant awards that previously did not include administrative costs and therefore competition for scarce philanthropic dollars will be lowered.

You can learn more at the Council on Financial Assistance Reform (COFAR) website.[5]

Additional Resources:


[1] For the research community, performance accountability can prove problematic, so COFAR is considering this being limited to Technical Progress Reports for research awards.

[2] Organizations may redact proprietary information and information that discloses PII.

[3] The specific required data points will not be finalized until Summer 2014.

[4] Risk indicators for pre-award due diligence are: Financial stability; Quality of management systems; History of performance; Reports and findings from audits performed under Subpart F; and Applicant’s ability to effectively implement statutory, regulatory or other requirements.

[5] The membership of the Council on Financial Assistance Reform consists of the Controller of the Office of Management and Budget and senior policy officials from eight Federal agencies that provide the largest amounts of financial grants assistance and one additional agency that serves a two-year term to represent the perspective of other agencies that administer grants and cooperative agreements. These are: Department of Agriculture; Department of Education; Department of Energy; Department of Health and Human Services; Department of Homeland Security; Department of Housing and Urban Development; Department of Labor; Department of Transportation; and the National Science Foundation.

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