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In July, there were several notable changes to federal regulations impacting nonprofits, including a final rule issued by the U.S. Agency for International Development (USAID) to update its acquisition regulations, a final rule by the U.S. Office of Government Ethics (OGE) to update rules relating to executive branch personnel seeking outside employment, and a proposed rule issued by the U.S. Department of Health and Human Services (HHS) to make changes to its adoption of the U.S. Office of Management and Budget's (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).

USAID Updates Its Acquisition Regulations

On July 26, 2016, the USAID issued a final rule amending the U.S. Agency for International Development Acquisition Regulation (AIDAR) to maintain consistency with federal and agency regulations and incorporate current and new USAID clauses into the regulation.

The highlights of the changes are as follows:
  • Sections 722.810 and 752.222-71 are added to encourage all USAID contractors performing and recruiting entirely outside the United States to develop and enforce employment nondiscrimination policies with regard to race, color, religion, sex (including pregnancy and gender identity), sexual orientation, marital status, parental status, political affiliation, national origin, disability, age, genetic information, veteran status, or any other conduct that does not adversely affect the performance of the employee.
  • New part 729, subpart 729.4, sections 729.204-70 and 752.229-70 require contractors to report the amounts of foreign taxes assessed by a foreign government on commodities financed with U.S. Foreign Assistance funds. The reporting is used to require the countries to reimburse the taxes or duties imposed on U.S. foreign assistance funds and for certain reporting to Congress.
  • Sections 731.205-43 and 752.231-72 are added to mitigate the risk of inappropriate spending, as mandated by Executive Order 13589, "Promoting Efficient Spending," dated November 9, 2011. Contractors are required to obtain USAID written approval prior to committing costs related to USAID-funded conferences that meet the criteria provided in section 731.205-43.
  • New section 752.7036 directs contractors to register with the Implementing Partner Notices (IPN) Portal, where USAID uploads contract modifications that affect multiple awards and provides notices to contractors.
  • Section 752.7037 is added to promote child safeguarding when implementing USAID programs. The clause complements the USAID Counter Trafficking in Persons (C-TIP) Code of Conduct by expanding the range of actions prohibited by USAID to include abuse, exploitation, or neglect of children.

It is critical for USAID contractors and subcontractors to review and analyze these changes and, importantly, examine new contracts, renewals and modifications to determine whether these provisions are included.

Changes to the Standards of Ethical Conduct for Employees of the Executive Branch Revise Rules for Executive Branch Employees Seeking Other Employment

On July 26, 2016, the OGE issued a final rule amending portions of the Standards of Ethical Conduct for Employees of the Executive Branch regarding seeking other employment. The final rule incorporates past interpretive advice, updates examples, improves clarity, and makes technical corrections. In addition, the final rule implements the statutory notification requirements that apply to individuals required to file public financial disclosure reports under section 101 of the Ethics in Government Act of 1978 when they negotiate for or have an agreement regarding future employment or compensation.

The proposed rule was published on February 17, 2016 with a 60-day comment period, which ended on April 18, 2016. The OGE did not receive any comments, but it made nine changes in the final rule, the most notable of which include:

  • Adding the phrase ''personally and substantially'' in several places within the regulation. OGE explains that the use of this phrase is consistent with the statutory language at 18 U.S.C. 208(a) and is parallel to the language that is currently within the regulation.
  • Adding the citation for the Foreign Gifts and Decorations Act, 5 U.S.C. 7342, to 5 CFR 2635.602(b)(3).
  • Clarifying in 5 CFR 2635.604, Example 2 to paragraph (b) that the employee is reviewing an application from the same pharmaceutical company, which is seeking FDA approval for a new drug product. This language parallels the discussion in the recusal section of the previous regulation and corresponds to 5 CFR 2635.604(b) in the proposed rule.
  • Replacing the word ''should'' with the word ''must'' in 5 CFR 2635.604, Example 2 to paragraph (b): "Once the employee makes a response that is not a rejection to the company's communication concerning possible employment, the employee must recuse from further participation in the review of the application." This language corresponds to 5 CFR 2635.604(b) in the proposed rule.

Given these updates and the wind-down of the Obama administration, during which it would not be unusual to see many federal officials move to the private sector, it is critical that nonprofits review and familiarize themselves with these rules prior to recruiting and/or hiring executive branch officials.

HHS Proposes Changes to Department's Adoption of the Uniform Guidance

On July 13, 2016, the HHS issued a notice of proposed rulemaking (NPRM) seeking to make various changes to its adoption of the Uniform Guidance. These changes, in sum, are as follows:

  • A proposal to add language to 45 CFR 75.102, clarifying that the audit requirements and cost principles applicable to contracts and compacts awarded pursuant to the Indian Self Determination and Education Assistance Act (ISDEAA) are governed by subparts E and F, including § 75.505 Sanctions, enforceable through § 75.371 Remedies for noncompliance, and that certain other sections and subparts of these regulations do not apply to the ISDEAA contracts and compacts.
  • Two proposed changes to 45 CFR 75.300:
    • First, codifying a prohibition, in the provision of services, against discrimination on the basis of age, disability, sex, race, color, national origin, religion, sexual orientation, or gender identity.
    • Second, codifying its implementation of the decisions in U.S. v. Windsor, 570 U.S. _ (2013) and Obergefell v. Hodges, 576 U.S. _ (2015), the codification of which ensures that same-sex spouses, marriages, and households are treated the same as opposite-sex spouses, marriages, and households in terms of determining beneficiary eligibility or participation in grant-related activities.
  • A proposal to clarify the language currently codified in 45 CFR part 75 regarding the applicability to states of certain payment provisions. Because the current language applies the provisions of Treasury—State Cash Management Improvement Act agreements and default procedures codified at 31 CFR part 205 and TM 4A–2000, and such agreements may not contain specific provisions addressed by 45 CFR 75.305, the HHS seeks to modify the language to ensure clarity.
  • A proposed amendment to 45 CFR 75.365, related to restrictions on public access to records, in order to implement the President's Executive Order 13,642 (May 9, 2013) and corresponding law.
  • A proposal to amend 45 CFR 75.414(c) to add a provision to restrict indirect cost rates for certain grants. This conforms with HHS's long-standing policy of restricting training grants to a maximum 8 percent indirect cost rate. The HHS proposes additionally to impose this same limitation on foreign organizations and foreign public entities, which typically do not negotiate indirect cost rates.

As is clear from the above summary, these proposed changes alter the HHS's grant programs (and thus grant recipients) in varying ways. Some are narrow in the application, while others may have a far broader impact, such as the restriction on indirect cost rates. Therefore, nonprofits should review each of the changes closely to determine the potential impact on their organization. Comments on the proposed rulemaking are due August 12, 2016.



Upcoming Nonprofit Luncheon Programs/Webinars:

Key Trademark and Copyright Developments Around the World: Implications for Nonprofits in China, Europe, Cuba, and Beyond

Wednesday, August 17, 2016 | 12:00 - 2:00 p.m. ET

The operations of so many U.S.-based nonprofits extend far beyond our borders these days, often all around the globe. Among other things, this means that U.S.-based nonprofits' trademarks and copyrights are being used in foreign countries where the systems and methods for protecting and licensing this intellectual property are very different from those in the United States. This program will focus on some of the latest developments in trademark and copyright law and procedures around the globe, and their impact on nonprofits. This will be an invaluable program for nonprofit executives and staff who are tasked with creating, marketing, and/or managing brands and original products worldwide.

Click here for more information and to register.

How to Protect Nonprofits' Federally Funded Programs with Global Anti-Corruption Controls, co-sponsored by Venable LLP and InsideNGO

Tuesday, September 20, 2016 | 12:00 - 2:00 p.m. ET

In the wake of recent headlines concerning corrupt use and handling of U.S. funds, nonprofits relying on federal grants, cooperative agreements, and contracts must take away key lessons to protect their program funds and revenue. It's more than bribery. During this program, our panelists—including a key representative from USAID's Inspector General's Office—will examine the characteristics of several recent events as well as findings regarding fraudulent payments to vendors and corrupt employment practices in the Middle East impacting the work of U.S. nongovernmental organizations (international NGOs). This program will take you beyond the four corners of the federal False Claims Act and Foreign Corrupt Practices Act to provide participants with legal and practical solutions to protect your nonprofit's program integrity and revenue.

Click here for more information and to register.


To view our prior publications on nonprofit government grant and contract issues, please click here.