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OTHER NEWS
New OMB Uniform Federal Grants Guidance
Below is a summary of OMB’s new federal grant guidance and its impact on nonprofits. For specifics, please see the additional resources provided at the end.
On December 26, 2014, OMB’s new guidelines for federal grants management went into effect through the guidance entitled “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards”. This “Uniform Guidance” is intended to streamline the language from eight existing OMB circulars into 2 CFR 200 outlining the structure, scope, and terms of the cost principles and administrative requirements governing federal grants and cooperative agreements for all grant recipients and subrecipients and institution types, except hospitals. This consolidation is directed at reducing the administrative burden on recipients and subrecipients of federal funds as well as the risk of waste, fraud, and abuse.
According to OMB “the Administration is implementing measures to significantly overhaul and strengthen Federal grant-making regulations to improve outcomes for the American people. The culmination of a three-year collaborative effort across Federal agencies, the rule released by the cross-agency Council on Financial Assistance Reform (COFAR) will effectively implement OMB guidance on grant-making across Federal agencies. These measures will reduce the total volume of financial management regulations for Federal grants and other assistance by 75%, and reduce administrative burdens and risk of waste, fraud, and abuse for the approximately $600 billion in Federal grants expended annually.
The National Council of Nonprofits has been extremely involved in this effort and summarizes the new guidance as follows, “The federal Office of Management and Budget (OMB) has issued new rules that require governments at all levels – local, state, and federal – that hire nonprofits to deliver services to reimburse those nonprofits for their reasonable indirect costs (sometimes called “overhead” or “administrative” costs) when federal dollars are part of the funding stream. In addition, the new OMB Uniform Guidance streamlines and clarifies cost allocation and other rules related to government grants and contracts, removing some areas of confusion and inconsistency while treating more of a nonprofit’s expenses as direct (reimbursable) costs.
The most significant changes that directly impact nonprofits relate to direct and indirect costs. The National Council of Nonprofits provides an overview Nonprofits and the New OMB Uniform Guidance Know Your Rights … and How to Protect Them of these two most relevant pieces of guidance:
Reimbursement for More of Your Direct Costs. The OMB Uniform Guidance clarifies numerous cost allocation rules and specifies more costs that are reimbursable as direct costs. For instance, in certain circumstances, program administration (e.g., secretarial staff dedicated to a specific program) can be reported as direct, rather than as indirect, costs, and therefore are fully recoverable.
Reimbursement for Your Indirect Costs. The Uniform Guidance expressly requires pass-through entities using any federal funds (typically states and local governments, as well as some larger nonprofits) and all federal departments/agencies to reimburse a nonprofit for the indirect costs it incurs in performing services on behalf of governments. Nonprofits that have never had a federally approved indirect cost rate can elect either the de minimis rate of 10 percent of their modified total direct costs (MTDC) or negotiate a higher rate in accordance with the federal cost principles. Nonprofits that have already negotiated a federal indirect cost rate must be paid that amount. Generally, the mandate to pay indirect costs applies to grants, subgrants, and subcontracts using federal discretionary funds and certain entitlement funds. The mandate does not apply in cases where a federal statute expressly caps the rate at which indirect costs can be reimbursed.
The uniform guidance is effective for awards made after December 26, 2014 that includes federal funds.
To learn more about what the new guidance means for nonprofits, the National Council of Nonprofits has prepared overviews that can be viewed through the links below. In addition, federal government resources are also provided.
Additional Resources
National Council of Nonprofits
Office of Management and Budget
Other Federal Resources
COFAR | The Chief Financial Officers Council (includes short webcast training videos and FAQ’s)
COFAR's FAQs on Uniform Guidance (UPDATED 11/26/2014)