The Office of Management and Budget (OMB) recently published its final rule revising the OMB Guidance for Grants and Agreements (now called the OMB Guidance for Federal Financial Assistance), which helps simplify and clarify the requirements for agencies providing grants or other federal financial assistance to local governments and not-for-profit organizations.
These changes will have significant implications for public sector entities receiving federal grants. Here’s a summary of some primary revisions and what they could mean for you:
- Pass-through entities utilizing federal funds and disbursing federal agencies are now required to reimburse subrecipients for reasonable indirect costs incurred. The guaranteed de minimis rate for indirect costs will increase from 10% to 15% of Modified Total Direct Costs (MTDC), allowing for a more reasonable recovery of indirect costs. This will especially benefit organizations that might lack the in-house capacity to effectively negotiate rates.
- The definition of Modified Total Direct Cost (MTDC) now includes subawards up to $50,000, which will increase the cost basis used for application of indirect cost rates for many grant recipients — especially those that make a substantial number of smaller subawards.
- Federal agencies and pass-through entities can’t encourage or require grant recipients or subrecipients to use an indirect rate below the 15% de minimis rate unless otherwise authorized or required by federal statute.
- To crack down on unlawful activity, grant recipients and subrecipients may directly notify the OMB of any disputes regarding a federal agency’s application or acceptance of federally negotiated indirect cost rates (NICRAs).
- Grant recipients and subrecipients will be required to take reasonable action regarding their overall cybersecurity and ensure that certain safeguards are in place to adequately protect personally identifiable information (PII) and other sensitive recipient information from potential threats.
The Takeaway
If your organization benefits from federal grant funding now or will seek financial support in the future, you may be able to significantly decrease the overall cost of securing, utilizing, and reporting federal financial assistance, but you could also face significant challenges in complying with the new guidance.
Rehmann’s public sector advisors are well-equipped to help you navigate these changes and set your organization up for success. Our team can help your organization manage grant compliance and take full advantage of upcoming changes in indirect cost standards. In many instances, the new de minimis rate is more than sufficient to cover the cost of the expertise you need to be successful.
Mark Your Calendar
The revisions to the OMB Uniform Guidance become effective Oct. 1, 2024, but federal agencies may elect to apply the guidance as early as June 21, 2024. As noted in the recently released 2024 Compliance Supplement, these standards will apply to auditees whose fiscal years begin on or after Oct. 1, 2024. If you need assistance with implementation of the new standards, please contact your Rehmann advisor or email us at [email protected].
Continue the discovery:
