Grant Regulations are Going to be Updated Soon – Get Your Comments Ready

Suppose your company is working on a grant or cooperative agreement or planning to submit a proposal in response to a funding opportunity announcement. In that case, the regulations that apply will be Code of Federal Regulations (CFR) Title 2 Grants and Agreements. The problem is, when you receive a grant, generally, the award agreement says to comply with 2 CFR. There are no specific clauses or wording; basically, you are responsible for reading the entire regulation to see what applies to your award. 2 CFR includes inconsistent language and terms.

Well, there is some good news. The Office of Management and Budget has published a pre-publication of proposed guidance on September 21, 2023, that will be included in the Federal Register. Once it is published in the Federal Register, public comments can be submitted within 60 days of the publication. OMB did include a qualification that as they finalize the proposed guidance for publication, there may be additional changes.

Generally, OMB reviews regulations on average every five years and makes revisions. OMB states the proposed revisions in the pre-publication guidance were made to:

• Incorporate statutory requirements.
• Reduce the burden on agencies and recipients.
• Clarify sections that have been interpreted in different ways.
• Update sections in plain language (i.e., address inconsistent use of terms).

Based on our review, the proposed revisions appear to be positive by either increasing thresholds, reducing approvals, or using more consistent language throughout the regulations. The document includes many changes, but listed below are some of the proposed changes:

• Increase the single audit threshold from $750,000 to $1,000,000.
• Increase the threshold for equipment and supplies from $5,000 to $10,000.
• Raise the de minimis rate from 10 percent to 15 percent.
• Update “Modified Total Direct costs” to exclude sub-award costs above $50,000 from $25,000.
• Use the terms “recipient” and “subrecipient” in place of “non-Federal entity.
• Revise OMB designated “government-wide systems” to mention the appropriate systems (SAM.gov, USASpending.gov, The Contractor Performance Assessment Reporting System (CPARS), or Grants.gov.
• Revise other sections of regulations to align with the specific act or expand guidance:
  • Part 170 Reporting Subaward and Executive Compensation to align with the Transparency Act.
  • Part 175 Award Term for Trafficking in Persons to align with authorizing statutes and adding provisions related to a compliance plan and requiring notification to Inspector Generals.
  • Part 180 OMB Guidelines to Agencies on Government-wide Debarment and Suspension (Non-procurement) addresses factors influencing a debarment decision, including whether a business, technical, or professional license has been suspended, terminated, or revoked.
  • Part 182 Government-wide Requirements for Drug-Free Workplace to include plain language revisions.
  • Part 183 Never Contract With the Enemy to include plain language revisions.
  • Section 200.215 Prohibition of certain telecommunications and video surveillance services or equipment to expand the guidance.
  • Add a new section 200.217, to expand on whistleblower protections and requirements.
• Proposed changes to revise or add definitions:
  • Change “Federal awarding agency” to Federal agency.”
  • Include new definitions:
• Continuation funding
• For-profit organization
• Key personnel
• Participant
• Prior approval
  • Change “small purchases” to “simplified acquisitions.”
• Removes ten items from the prior written approval requirements to reduce Federal agency and recipient burden.
• Remove the requirement in 419 for an Institute of Higher Education that receives an aggregate total of $50 million or more in Federal awards subject to subpart E to submit a disclosure statement form (DS-2) on cost accounting standards – IHEs would still be required to comply with the CAS standards just not submit a DS-2.

OMB is requesting comments on these revisions once it is published as a proposed rule on the Federal Register. In addition, OMB also welcomes additional comments from the public on the following topics for consideration in possible additional revisions in the future:

• Establishing specific audit requirements for for-profit entities, which are not subject to the requirements of Subpart F.
• Incorporating the requirements of National Security Presidential Management (NSPM) 33 on research security requirements.
• Providing additional guidance in 2 CFR concerning the relationship of specific aspects of the guidance to loans and loan guarantees.
• Establishing mechanisms to automatically adjust certain thresholds due to inflation or other triggering events (where permitted by law).
• Removing additional prior approval requirements.
• Challenges related to negotiating indirect costs, working with cognizant agencies, or any other topics related to indirect costs.
• Expanding the guidance in Subpart F to include more specific requirements on the scope of an audit (“proper perspective”) so that agencies have additional contextual information to guide them in resolving audit findings.

Takeaway

If you have a grant or cooperative agreement, you understand how complicated the 2 CFR regulations are. While OMB’s pre-proposal guidance addresses some of the common problem areas, we recommend companies review the changes and submit comments to further clarify any of the proposed changes and request additional guidance in areas you have had issues with. Companies will have 60 days to submit comments once the proposed rule is published in the Federal Register.

Redstone GCI assists contractors throughout the U.S. and internationally with understanding the Grant requirements under 2 CFR 200. This includes assisting with accounting policies and procedures, classification of contracts/sub-awards, risk assessments, invoice processing, or training. We would be happy to be part of your team.