September 04, 2020

Revisions to the Uniform Guidance Include Welcome Changes and New Areas of Risk

6 min

On August 13, 2020, the Office of Management and Budget (OMB) issued its Final Guidance on amendments to the OMB Guidance for Grants and Agreements (Uniform Guidance). The revisions incorporate current goals and initiatives of the Administration, statutory requirements, and clarifications of existing requirements. Considering that these are the first major changes to the Uniform Guidance since they were first promulgated in 2013, the revisions are extensive. The impact of these revisions may range from minor and unique circumstances to large-scale changes that affect all recipients.

Consequently, we strongly encourage recipients to review OMB's revisions and commentary in their entirety. Nonetheless, we address several of the overarching concepts and noteworthy changes herein. Please note that citations to the Code of Federal Regulations (CFR) reflect changes described in the OMB's Final Guidance. With two exceptions that are effective August 13, 2020, these revisions are effective November 12, 2020, and so are not currently reflected in the CFR.

Implementing Administration Goals and Initiatives

Perhaps the lion's share of the changes reflects goals and initiatives from the Administration. Such revisions are designed "to measure recipient performance to improve program goals and objectives, share lessons learned, and spread the adoption of promising practices." For the most part, these revisions grant agencies flexibility in designing and monitoring programs and encourage the use of data collection and reliance on data to identify best practices. Of particular notes for grant recipients, the revisions make the following changes:

  • 2 C.F.R. § 200.102 Exceptions. In limited circumstances, this provision grants agencies the flexibility to make exceptions to Uniform Guidance requirements. In OMB's revisions to this section, OMB states that it "strongly encourages Federal awarding agencies to add or remove requirements by applying a risk-based, data-driven framework to alleviate select compliance requirements and hold recipients accountable for good performance." This revision recognizes that the Uniform Guidance is not a one-size-fits-all approach, and in some circumstances deviations may be reasonable. We would certainly like to see agencies more willing to grant exceptions and deviations; perhaps this will provide the impetus to that going forward.
  • 2 C.F.R. 200.340 Termination. OMB revised an agency's ability to terminate to "strengthen the ability" of the awarding agency to terminate federal awards when the program goals or agency priorities are no longer met. OMB received but dismissed several comments questioning whether the changes to the termination provision granted agencies too much leverage to arbitrarily terminate awards. While OMB does not expect agencies to arbitrarily terminate awards, there appears to be room for disagreement. The practical impact of this change remains to be seen.
  • 2 C.F.R. § 200.414(f) De Minimis Rate. This expanded the use of the de minimis rate of 10 percent of modified total direct costs. Prior to the revisions, the only non-federal entities that could use the de minimis rate were ones that had never received a negotiated indirect cost rate agreement (NICRA). This created a problem for some entities whose NICRAs had expired and were prohibited from using the de minimis rate. Under the revisions, those entities with expired rates may now use the de minimis rate. This is a welcome change that provides added flexibility to those organizations who may have previously had a NICRA but did not want to continue with the exorbitant expense of establishing a new NICRA.
  • 2 C.F.R. § 200.414(h) Publication of NICRAs. Also, recipients should be aware that new paragraph (h) to 200.414 requires that certain information relating to NICRAs are collected and displayed on a public website. To avoid publishing proprietary information, OMB limits the type of information to the indirect negotiated rate, distribution base, and the rate type.
  • 2 C.F.R. § 200.105 Effect on other issuances. OMB modified this section "to prohibit Federal awarding agencies from including references to non-authoritative guidance in the terms and conditions of Federal awards." OMB's intent is to reduce recipient burden by preventing the imposition of non-binding guidance.
  • 2 C.F.R. § 200.322 Domestic preferences for procurement. In this new section, OMB implements several executive orders relating to domestic preferences in government procurement. Specifically, this section encourages recipients to "maximize use of goods, products, and materials produced in the United States." Of note, OMB rejected a comment suggesting that OMB exempt purchases under the micro-purchase threshold. It will be important to see how agencies enforce and/or pressure organizations, if at all, to "maximize" this effort.
  • 2 C.F.R. § 200.320 Methods of procurement to be followed. OMB revised this section to reflect statutory changes. Specifically, it raised the micro-purchase threshold from $3,500 to $10,000 and the simplified acquisition threshold from $150,000 to $250,000. Furthermore, recipients may request micro-purchases higher up to $50,000 based on certain conditions such as maintaining records and receiving agency approval. These are welcome and much-needed updates that should significantly reduce the burden on procuring goods and services.
  • 2 C.F.R. § 200.344 Closeout. OMB revised the time period for recipients to submit closeout reports and liquidate all financial obligations from 90 days to 120 days. To avoid the risk that recipients may not closeout awards, OMB directs agencies to report failures to submit final closeout reports as a "failure to comply with the terms and conditions of the award."
Incorporating Statutory Requirements

As previously reported here, one of the most significant changes for recipients is the revisions incorporating section 889 of the National Defense Authorization Act (NDAA) for FY 2019, which prohibits the obligation or expenditure of federal funds and awards for the use of "covered telecommunications equipment or services." These revisions are reflected in new sections 2 C.F.R. §§ 200.216, 200.471. For additional guidance, please see our previous article. Please note that unlike the majority of revisions, the prohibition in 2 C.F.R. § 200.216 is effective August 13, 2020.

There have also been additional changes including adding 2 C.F.R. Part 183 to implement "Never Contract with the Enemy," revising Part 170 relating to reporting subaward and executive compensation information, and revising Parts 25 and 200 to implement statutory changes to the Federal Awardee Performance and Integrity Information System (FAPIIS).

Clarifying Existing Requirements

The third and final bucket of OMB revisions addresses "clarifying requirements regarding areas of misinterpretation." Of note here, OMB made the following revisions regarding a pass-through entity's responsibility relating to its subrecipients under 2 C.F.R. § 200.332.

Requirements for pass-through entities:

  • Clarifying that pass-through entities are responsible for addressing only a subrecipient's audit findings specifically related to its award. In other word, pass-through entities are not responsible for addressing a subrecipient's entire audit findings. Instead, the cognizant agency is responsible for addressing a subrecipient's entity-wide issues.
  • Concerning a subrecipient's indirect cost rate, OMB directs pass-through entities to use a subrecipient's NICRA but, if none exists, the parties are to either negotiate a rate, use the de minimis rate, or the subrecipient may use the cost allocation method to account for indirect costs.

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The Final Guidance makes a large number of revisions that could have substantial impact on grant recipients' operations. These revisions range from expanding flexibility under Uniform Guidance requirements, clarifying current responsibilities, and imposing new obligations. While there are a number of areas that recipients will likely welcome, there are several that may become burdensome. Again, we strongly encourage stakeholders to review the Final Guidance as some revisions may not have been discussed above.