What new White House guidance on grants means for agencies that hand them out

Now that it have been 10 years since issuing them, the White House has updated what is known as Uniform Guidance on grants and federal assistance. One reason for the update: reducing regulatory burden on both agencies and grantees. For some highlights, the Federal Drive with Tom Temin spoke with Haynes Boone procurement attorney Dan Ramish.

Interview Transcript: 

Tom Temin Dan, the uniform guidance is a little bit outside of FAR and contracting concerns. But yet, something you felt is important to highlight here.

Dan Ramish Yes, Tom. So the federal government spends more than $1 trillion a year in grants and other federal financial assistance. So it’s a really important tool, and it’s important to taxpayers. And government contractors will sometimes participate in the federal grant space, either as contractors or as recipients or sub recipients. So there’s a lot of money. And increasingly, the federal grant in assistance space is becoming subject to more requirements that start to look like government contracts. But this latest change in the uniform guidance is really intended to make things easier on awarding agencies and recipients and sub recipients.

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Tom Temin So what are some of the big changes people can expect? I mean, this has been like a rulemaking, even though it’s not a rule per se, but there has been commentary and drafts and final versions. Fair to say?

Dan Ramish Yes. So the uniform guidance forms the basis for agency grant and federal financial assistance regulations. So even though it’s not a regulation itself, different agencies adopt it with a little bit of their own flavor. So the big things in this rulemaking, it was mostly changes in the margins. And there are some changes that are intended to improve access and the ability of recipients and some recipients to participate. So one of those changes is there’s a new template for the standard solicitation and notice of funding opportunity. And that’s in Appendix One of the Uniform Guidance. And there are some new guidelines contained in that appendix that tell federal awarding agencies to pull out their Strunk and White. They’re supposed to reduce word count and use plain language, leave out provisions that aren’t strictly necessary, and even include an executive summary 500 words that tells applicants the goals and objectives of the program, the target audience, and eligibility requirements.

Tom Temin Sure, and there are also some updated thresholds for what gets audited, what gets investigated by the government, and also for some of the provisions for equipment and ancillary costs associated with a grant. What are some of the top ones there? Let’s talk about maybe the threshold for what gets audited.

Dan Ramish Yes. So the Single Audit Act requires audits for state and local governments and nonprofit organizations under federal grants and assistance. And that threshold hasn’t been increased in many years. And now the updated guidance will raise that from $750,000 to $1 million in total expenditures of federal funds for a single fiscal year. So that’s directly intended to make it easier for recipients that aren’t receiving that higher volume of awards to not have to be subject to an audit.

Tom Temin So for an agency that’s giving awards, then if it gives a lot of them that are under a million, then its own burden is relieved if it doesn’t have to audit every one of them.

Dan Ramish That’s right. The auditing agency may be different from the awarding agency, but it’s certainly the burden on the auditors could also be reduced. And focusing on where the risk is,  and certainly the order of magnitude is part of that risk analysis.

Tom Temin Sure. Another big one is the de minimis rate adjustment. Tell us about that.

Dan Ramish Sure. So the de minimis rate is a default indirect cost rate that the uniform guidance allows for recipients to use instead of negotiating at an indirect cost rate. And the benefit to recipients there is that there’s no documentation requirement to justify the rate. And that rate also hasn’t been adjusted for many years, and it’s a pretty low indirect rate of 10%. And the updated guidance will increase that rate to 15%. And it also makes a related increase. So there’s a limit on the amount of sub award funds that count as part of the modified total direct cost. So the de minimis rate is applied against a base that is the modified total direct cost of the award. And one of the adjustments is sub awards over a certain value are excluded. And the result there is, of course, the recipients aren’t receiving as much of their indirect cost recovery as they otherwise would. And so that rate is also increasing from $25,000 to $50,000. So it will help recipients that use the de minimis rate to recover more of their actual indirect costs.

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Tom Temin We’re speaking with Haynes Boone procurement attorney Dan Ramish. So that’s the equivalent, well, the analog of when you look at a charity and what percent of the money actually goes to the charities and what percent is overhead. That’s kind of what the de minimis is all about.

Dan Ramish Yeah, it’s covering administrative and general expenses that aren’t directly tied to the award. But those are real costs that the recipients have to bear, and it’s fair for them to get compensated for them. And particularly for newer recipients or sub recipients, it’s more burdensome to have to go through the indirect rate negotiations with an agency. So this is a good option for many of them.

Tom Temin A couple of the provisions I wanted to make sure we covered. There are new whistleblower protections and new requirements for reasonable cybersecurity internal controls that seems to be like maple syrup covering everything the government is eating these days. But let’s talk about whistleblower protections in the context of grants.

Dan Ramish Well, so whistleblower protections have been a focus across the government, including, of course, in government contracts. And this is directly related to concerns about controls over waste, fraud and abuse, and ensuring that there are mechanisms to prevent that and to promote enforcement. And so there’s now a specific whistleblower protection that prevents recipients or sub recipients from reprisals against whistleblowers that report waste, fraud and abuse, and also requires them to notify employees of the whistleblower rights and protections.

Tom Temin All right. And that’s kind of making it a little bit more uniform with how whistleblowers are, in theory, protected elsewhere in other types of activities.

Dan Ramish Yes, I would say that’s one of the ways in which they’re aligning things with government contracts.

Tom Temin And then new requirements for reasonable cyber security, internal controls also kind of in alignment with what they’re asking contractors for in various ways across the government.

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Dan Ramish That’s right. Clearly cybersecurity has been a big priority for the administration. And I would say, though, that this requirement is pretty generic. They opted against imposing some of the more detailed rules that the Department of Defense has applied to government contracts. But it’s a movement in that direction and reflects kind of the priority for the government in this area.

Tom Temin And one more I wanted to ask you about, and that is the equipment threshold, because sometimes grants might be for laboratory work or for developing some kind of a new technology test and so forth. So there’s a hardware, if you will piece to the grant and not just brainpower.

Dan Ramish Yes. So there’s a threshold for what constitutes equipment under the uniform guidance as well. And that is another threshold that is increasing to reduce the burden from 5,000 to $10,000. And the reason that’s important is that there are special requirements for managing equipment. And so if an item that is purchased under an award doesn’t constitute equipment that reduces the burden.

Tom Temin All right. Anything else we need to know. And so agencies need to, I guess get this into their grant making apparatus and inculcate these guidance.

Dan Ramish Yes. So there will be relief in a number of ways, as we said, with the thresholds, with efforts to make notices of funding opportunity, more plain language and easily understood by prospective recipients. So the effectiveness date is established as Oct. 1, 2024. Agencies also have the discretion to implement the new guidance earlier, but it has to be no earlier than June 21, 2024, and so agencies will be coming up with their own plans in the coming weeks to roll out their implementation of the final guidance. So recipients and sub recipients should be tracking that. May 15 is the date for the new guidance, so we’ll see how this plays out.

 

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