Uniform Guidance Update: A Plethora of Proposed Changes

Every five years, the Office of Management and Budget (OMB) completes a review and proposes changes to the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, commonly known as the "Uniform Guidance" or "2 C.F.R. Part 200.” In December of 2023, OMB issued an extensive list of proposed changes that you should be aware of. The most significant proposed revision would be the increase of the Single Audit threshold from $750,000 to $1,000,000. If this change is enacted, you may find that your organization gets a welcome break from Single Audit compliance if the federal funds you receive fall under the $1 million threshold. In addition to this key change, there are several other proposed revisions as detailed below:

• Defining "Equipment": For determination of an item as “equipment”, there is a proposed increase to the per unit acquisition cost threshold from $5,000 to $10,000; the proposed revision also specifies that agencies can allow the entity to keep equipment with no further obligation to the federal government as long as it is not prohibited by federal law.
• Defining "Supplies": Supplies are defined as tangible personal property that is not equipment with items valued at less than $10,000. The threshold for computers would increase from $5,000 to $10,000. The disposition requirements for unused supplies would apply to the aggregate value of all supply types, and not just like-item supplies.
• Lifting the Geographic Preference Prohibition: There is a proposal to remove the prohibition in the Uniform Guidance on using geographic preference requirements in the procurement process. However, use of geographic preferences or scoring mechanisms must be consistent with laws and regulations.
• Soliciting Veteran-Owned Business: "Veteran-Owned Businesses" are to be added to the types of businesses that recipients and subrecipients are encouraged to consider for award of contacts.
• No Public Bid Opening: There is a proposal to remove the requirement for local governments to open sealed bids in public.
• Prior Written Approval Requirements: To reduce the burden on federal agencies and recipients, the following items would be removed from the prior written approval requirements for the expenditure of funds: real property, equipment, direct costs, entertainment costs, exchange rates, memberships, participant support costs, selling and marketing costs, and taxes.
• Program Income Uses: There are clarifications regarding the use and expenditure of program income, including allowing program income for certain closeout costs. Also proposed is further clarifying guidance for each of the three methods for the use of program income.
• gov Registration: Second-tier subrecipients or contractors would not be required to obtain a Unique Entity Identifier (UEI) and register in SAM.gov, but this requirement would apply to recipients of loan guarantees and may apply to beneficiary borrowers.
• Suspension and Debarment Changes: There is a proposal to clarify the available administrative actions in lieu of debarment and that before initiating a suspension, officials may consider "other indicators of adequate evidence that may include, but are not limited to, warrants and their accompanying affidavits." OMB also proposes adding text to address factors influencing a debarment decision; and adding text on "whether your business, technical, or professional license(s) has been suspended, terminated, or revoked."

Other suggested changes that OMB sought comment for but are not in the included in the draft rules are:

• De minimis indirect cost: There is a proposal to increase the rate from 10 percent to 15 percent.
• Negotiation of Profit: A proposal to delete the existing paragraph (b) in 2 CFR 200.324, requiring the recipient to negotiate profit as a separate element of the price for each contract lacking price competition.
• gov Registration Delays: Federal agencies would give recipients an additional 90 day grace period if certain circumstances are delaying their ability to register in SAM. However, if this stipulation is included, OMB proposes that federal agencies not issue payments to a recipient who is unable to obtain a UEI or complete their registration in SAM.gov.
• Unexpended Funds: Recipients may be entitled to any unexpended funds under a fixed amount award if the required activities were completed in accordance with the terms and conditions of the award. OMB is considering requiring additional pre-award certifications for fixed-amount awards to address the potential increased risk of fraud under fixed-amount awards.

OMB also solicited comment on the following topics for future consideration:

• Audit Scope: There is consideration for expanding the guidance in Subpart F to include more specific requirements on the scope of an audit to assist with the resolution of audit findings.
• For-Profit entities: The establishment of specific audit requirements for for-profit entities which are not subject to the requirements of Subpart F is being considered.
• Indirect Costs: There is a proposal to address challenges related to negotiating indirect costs, working with cognizant agencies, and other topics related to indirect costs.
• Loans and loan guarantees: Additional guidance regarding loans and loan guarantees is being proposed.
• National Security Presidential Management (NSPM)-33: Incorporation of regulations regarding research security requirements is being considered.
• Prior Approval Requirements: There is consideration for the removal of additional prior approval requirements.
• Adjustment of Thresholds: A proposal to establish mechanisms to automatically adjust certain thresholds due to inflation or other triggering events (where permitted by law).

Please note, at this time, the Uniform Guidance changes that are being discussed are only proposed. We will continue to monitor the proposed changes to the Uniform Guidance and provide updates as they become available.