OMB Uniform Guidance Interim Final Rule Addresses Cost Reimbursement


By Patrick Armknecht

On December 18, 2014, The Office of Management and Budget (OMB) released the interim final rule for Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (referred to as the Uniform Guidance).  According to the Federal Register website, the purpose of the Uniform Guidance was to reduce administrative burden and risk of waste, fraud, and abuse for Federal financial assistance awards.   The Uniform Guidance rules apply to new agreements signed after December 26, 2014.   

One of the more significant items addressed in the guidance that affects a number of the clients I work with relates to the reimbursement of indirect costs.  Unless there is a federal statutory exception, the Uniform Guidance stipulates that federal, state and local governments that hire nonprofits to provide services funded by federal awards are required to reimburse the nonprofits for the reasonable indirect costs incurred in performing those services on behalf of governments.  These “pass-through entities” must reimburse these costs using the nonprofit's already-negotiated federal indirect cost rate or the de minimis indirect cost rate of 10% of modified total direct costs for nonprofits that do not have a federally approved indirect cost rate.  Depending upon the type of the award, the indirect costs may be advanced or subject to reimbursement on a monthly basis.

According to the Whitehouse.gov website, there are other significant policy reforms addressed in the guidance.

Signifcant Policy Reforms in the Uniform Guidance

  • Allow state, local, and tribal governments to work in partnership with universities and non-profits to design the programs that best meet their local communities’ needs and obtain flexibility and enhanced coordination from the Federal government.
  • Allow universities to hire staff to do the administrative work that directly benefits grants so that scientists can focus on science.
  • Publish Single Audit reports online, eliminating a burdensome paper-chase for reporting and providing the public with key information to strengthen oversight of Federal tax dollars.
  • Raise the threshold for required audits from $500,000 to $750,000 in Federal awards expended per year, maintaining oversight for 99% of dollars audited now, but focusing the resources to reduce risk of waste, fraud and abuse.
  • Emphasize the long-standing requirement for non-Federal entities to have strong internal controls that are appropriate to the organization, while relaxing overly prescriptive and obsolete procedural requirements.

When writing new grant requests funded by Federal Awards, make sure you don’t forget to include indirect cost reimbursement.    

A copy of the complete interim final rule can be downloaded from the Federal Register website.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

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