Understanding the 2024 OMB Guidance for Federal Financial Assistance: Key Updates You Can’t Miss

Created By : Urvee Parasramka

The Office of Management and Budget (OMB) has revised its guidance on Federal Financial Assistance, formerly referred to as the OMB Guidance for Grants and Agreements. These changes were made following a consideration of public comments and federal agency recommendations in reaction to the proposed guidance from October 2023. The revised guidance corresponds to the goals OMB is focused on today, which include process simplification, agency and recipient burden mitigation, and statutory requirement clarification. Whether you're an entity managing grants, cooperative agreements, or contracts, these changes will impact how you administer financial management, audits, and disclosures effective October 1, 2024.

Let’s break the key revisions which are critical for you.

Key Date Adjustments

The guidance would apply to awards starting from Oct. 1, 2024, except for the revisions to Subpart F – Audit requirements, whose effective date is for fiscal years beginning on or after Oct. 1, 2024. For instance, assume a recipient has a fiscal year-end of June 30, 2025. The recipient will then review their awards to see which ones were awarded on or after Oct. 1, 2024, and hence are revised under Subparts A-E. However, the revisions of Subpart F would have no bearing on reporting by the recipient’s year-end 2025 since their fiscal year began on July 1, 2024. The recipient would have to wait until June 30, 2026 year-end for the Subpart F provisions to apply.

Major Changes to the 2024 Uniform Guidance

1.        Subpart A – General Provisions: What’s New?

• Equipment Capitalization – The threshold increased from $5,000 to $10,000.

• Modified Total Direct Costs – Increased definitional threshold for up to $50,000 (previously $25,000) of each subaward (regardless of the period of performance of the subaward under the award).

• Questioned costs – Updated the definition to clarify and provide examples of what a questioned cost is/is not but no significant change from a policy perspective.

2.        Subpart B – Mandatory disclosures: Expanded Requirements

Modifications were made to the mandatory disclosure requirements. Previously, an entity was required to report violations of Federal criminal law involving fraud, bribery or gratuity violations. As revised, the requirement now reads that an applicant, recipient or sub-recipient of a federal award must promptly disclose whenever it has credible evidence of a commission of a violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations under the false claims act.

3.        Subpart C – Pre-Federal Award requirements and Use of Grants, Cooperative Agreements, Fixed Amount Subawards and Contracts

New guidance now clarifies certain requirements for fixed amount subawards. Examples include clarifying that unexpended funds may be retained if the program objectives and milestones have been achieved. Other minor revisions were made that do not have a significant impact on applicability or implementation.

4.        Subpart D – Federal Award Monitoring: Enhancements

• New Cybersecurity Requirement – 200.303(e) added a requirement that a recipient/subrecipient take “reasonable cybersecurity and other measures to safeguard information including protected personally identifiable information (PII) and other types of information”. OMB did not provide a relevant framework for “cybersecurity and other measures” as was suggested in various comments on this revision. OMB indicated that they would consider the need to implement a government-wide specific framework in the future but in the interim, will leave it to the Federal agencies to consider providing more specific guidance on the topic, as appropriate.

• Capitalization Thresholds – Section 200.313 – Increased capitalization threshold from $5,000 to $10,000 minimum for Federally funded equipment.

• Section 200.314 – Increased threshold from $5,000 to $10,000 regarding the requirement in 200.314(a) to remit unused supplies.

• Fixed-Amount Subawards – Section 200.333 – Increased the threshold for fixed amount subawards from the previous simplified acquisition threshold to $500,000.

5.        Subpart E – Cost Principles: Key Adjustments

• Increase in minimum rate to an amount “up to 15%”. An amount up to implies that an entity may not recover an amount greater than actual indirect costs incurred.

• Cost accounting standards – Section 200.419 – Removed the requirement for an Institution of Higher Education (IHE) that receives an aggregate total of $50 million or more in Federal awards and instruments subject to subpart E to submit a disclosure statement form (DS-2).

6.        Subpart F – Audit requirements (Effective for fiscal years beginning on or after Oct. 1, 2024)

• Audit Threshold – Increase the audit threshold from $750,000 to $1,000,000.
• Audit Reporting – Section 200.516 – When the amount of known questioned costs is “not determinable” or unknown, a description of why the dollar amount was undetermined must be reported.
• Major Program Determination – Section 200.518 – Increased the Type A threshold to $1,000,000 while also increasing the amount of awards expended for which it applies (from $25 million up to $34 million).

What Effect Will These Changes Possibly Have on Your Organization?

As we look ahead to these updates, recipients and subrecipients need to begin thinking about these changes well in advance of their effective date in October 2024. The 2024 OMB Guidance poses several challenges and opportunities, from revised capitalization limits to greater flexibility in the recovery of indirect costs.

What’s on the Agenda?

• Based on the effective dates, review the award details to identify the ones that will be impacted by the new guidance.
• Start preparing for audits by familiarizing yourself with the new thresholds and reporting requirements.
• Put your legal and financial teams to work to comply with new disclosure and cybersecurity protocols.

Are there issues or concerns you wish to address regarding the changes and how they affect your organization? Contact us at info@akmglobal.in, and let’s work together to ensure we’re fully prepared for the upcoming financial year!