2024 Uniform Guidance Changes: Requirements for Single Audits
If your organization receives federal financial assistance — directly from a federal agency or indirectly through entities like state or local governments or other not-for-profits — you’ll be interested to know the Office of Management and Budget (OMB) has released updated regulations for 2 CFR 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the Uniform Guidance), now termed OMB’s Guidance for Federal Financial Assistance. The final guidance was recently published in the Federal Register.
Organizations that expend federal financial assistance over the current threshold of $750,000 in their fiscal year are subject to a Single Audit. A Single Audit is an audit of the entity’s financial statements performed under Government Auditing Standards and a compliance audit. The compliance audit is based on the regulations in the Uniform Guidance.
The OMB originally codified the requirements for federal grants management in the Uniform Guidance in 2013, which provides guidance for thousands of federal financial assistance programs.
The OMB revised and updated the Uniform Guidance to incorporate recent federal policy priorities related to federal financial assistance and to reduce federal agency and recipient burden. The OMB also incorporated certain statutory requirements and clarified certain sections of the prior version of the Uniform Guidance that recipients or federal agencies have interpreted in different ways. In addition, it revised the use of plain language, improved flow, and addressed inconsistent use of terms within the Uniform Guidance text. Finally, the OMB made revisions to improve federal financial assistance management, transparency and oversight through more accessible and readily comprehensible guidance.
The final updated Uniform Guidance will become effective Oct. 1, 2024. Federal agencies may elect to apply the guidance to federal awards issued prior to that date, but they are not required to do so.
Significant Changes to the Uniform Guidance
The Uniform Guidance will now be referred to as the OMB Guidance for Federal Financial Assistance.
There are several sections of the Uniform Guidance that have significant changes. Some of those changes affect non-federal entities (Sections 300 and 400 of 2 CFR 200), and some affect auditors of the non-federal entities (Section 500 of 2 CFR 200) as follows. There are numerous other changes to all subparts of the Uniform Guidance.
Changes Affecting Non-Federal Entities
Section 2 CFR 200.303 – Internal Controls
Added a requirement that recipient and sub-recipient internal controls include cybersecurity and other measures to safeguard information.
Section 2 CFR 200.307 – Program Income
Clarified this requirement, allowing the use of program income for certain closeout costs.
Section 2 CFR 200.309 – Modifications to Period of Performance
Added additional clarification that when a federal agency decides not to continue an award with multiple budget periods, the period of performance should be amended to end at the completion of the currently authorized budget period.
Section 2 CFR 200.313 – Equipment
Revised the threshold value for equipment from $5,000 to $10,000. Therefore, when equipment is purchased at the cost of $10,000 or under, it can be expensed instead of capitalized when this change goes into effect.
Section 2 CFR 200.314 – Supplies
Revised the threshold for unused supplies from $5,000 to $10,000. Title to supplies will vest in the non-federal entity upon acquisition. If a residual inventory of unused supplies exceeds $10,000 in total aggregate value upon termination or completion of the project or program and the supplies are not needed for any other federal award, the non-federal entity must retain the supplies for use on other activities or sell them, but it must, in either case, compensate the federal government for its share.
Section 2 CFR 200.320 – Procurement Methods
Revised to clarify that a recipient or subrecipient must maintain documents to support its conclusion when awarding micro-purchase awards without soliciting competitive price or rate quotations. Also, removed the requirement that local and tribal governments open sealed bids in public. In addition, proposed changing “small purchases” to “simplified acquisitions” to further align with standard terminology.
Section 2 CFR 200.321 – Contracting with Small Businesses, Minority Businesses, Women's Business Enterprises, and Labor Surplus Area Firms
Revised to also include “veteran-owned business” to the types of businesses that recipients and subrecipients are encouraged to consider for procurement contracts under a federal award.
Section 2 CFR 200.332 – Requirements for Pass-Through Entities
Added a requirement for pass-through entities to confirm that potential subrecipients are not suspended, debarred or otherwise excluded from receiving federal funds.
Section 2 CFR 200.414 – Indirect Costs
Raised the de minimis rate non-federal entities can use for indirect costs from 10% to 15% allowing for a more reasonable and realistic recovery of indirect costs. Recipients and subrecipients that do not have a current federal negotiated indirect cost rate (including provisional rate) may elect to charge a de minimis rate of up to 15% of modified total direct costs when this change goes into effect.
Changes Affecting Auditors of Non-Federal Entities
Section 2 CFR 200.501 – Audit Requirements
Increased the Single Audit threshold from $750,000 to $1,000,000. Therefore, only entities that annually expend $1 million or more of federal funds in their fiscal year will be subject to a Single Audit when this change goes into effect.
Section 2 CFR 200.518 – Major Program Determination
Increased the threshold for determining Type A programs to $1 million if the total annual expenditures of all federal programs for a non-federal entity are $34 million or less (previously $25 million or less). Type B programs would then be programs with expenditures of less than $1 million. If the total annual federal expenditures of an entity are over $34 million, there are further changes to the Type A and B thresholds as outlined in the new guidance.
Further, there are changes throughout many sections of 2 CFR 200, removing the term “non-federal entity” and replacing it with either “recipient” and/or “subrecipient.” This change was made because using the term “non-federal entity” made it difficult to quickly understand which entity was being addressed.
Next Steps
Organizations subject to a Single Audit should review the changes applicable to them and revise their policies, procedures, and internal controls accordingly.
For more information, please connect with our not-for-profit finance team.
Published on April 23, 2024