The Office of Management and Budget has crafted the first major rewrite of federal grant-making and oversight policies from more than 350 comments received since March.

The proposed guidance released in Friday’s Federal Register aims to simplify and streamline grant policy across the government.

“It is intended to both increase the efficiency and effectiveness of grant programs by eliminating unnecessary and duplicative requirements and strengthen the oversight of grant dollars by focusing on areas such as eligibility, monitoring of sub-recipients, adequate reporting, and other areas that are potential indices of waste, fraud or abuse,” wrote Danny Werfel, OMB’s controller in a blog post Friday.

Agencies oversee more than $600 billion in grants each year, but the rules surrounding how agencies oversee and award the money are far less standardized as compared to the acquisition of goods and services.

OMB and the Chief Financial Officer’s Council have taken several steps over the past year to bring more rigors to the grant-making process. In 2011, OMB and the White House Office of Science and Technology Policy convened meetings with federal and private sector experts to discuss potential reforms. In March 2012, OMB published a set of proposals and asked for comments on them.

This new proposed guidance is the outcome from those meetings and comments on the suggested changes.

OMB broke the document in to four major sections, each with as many as 19 subsections, detailing the initial proposals, a summary of what the commenters said and the new proposal based on those remarks.

“This proposal would streamline the language from eight existing OMB circulars into one document,” the proposed guidance stated. “This consolidation is aimed at eliminating duplicative or almost duplicative language in order to clarify where policy is substantively different across types of entities, and where it is not. As a result, the proposed guidance includes sections and parts of sections which are clearly delineated by the type of entity to which they apply. For federal agencies, auditors, and pass-through entities that engage with multiple types of entities in the course of managing grants, this consolidation is intended to clarify where policies are uniform across entities or differ, protecting variances in policy where required by the unique nature of each type of entity.”

Comments on the proposed guidance are due by May 2. OMB, the Council on Financial Assistance Reform and others will host a webinar on the new guidance on Feb. 8, at 11 a.m.

Audit rules changing

The most significant proposed changes deal with the auditing of and the reporting requirements by grantees.

OMB proposes to raise the requirements for a single audit to $750,000 from $500,000 to “allow agencies to focus audit-follow-up resources on higher risk entities. Further this provides administrative burden relief to the roughly 5,000 non-federal entities expending less than $750,000 in federal awards while maintaining single audit coverage over more than 99 percent of the funds that are currently covered.”

Agencies also would have a new method to determine which grantees are considered high risk. OMB stated a program would be considered high-risk only “when in the most recent period the program failed to receive an unqualified opinion; had a material weakness in internal controls; or had questioned costs exceeding five percent of the program’s expenditures. This change puts the focus of the risk determination on the most central questions of whether the program received a qualified opinion or had weak internal controls, as opposed to whether the program may have received any minor finding that may or may not have been essential to the financial integrity of the program.”

OMB also wants to limit the types of compliance requirements to improve how auditors look for potential cases of waste, fraud or abuse. The proposed guidance reduces the number of areas by half — to seven — including activities allowed or unallowed, cash management, eligibility and subrecipient monitoring.

Agencies would have more responsibilities under the new regulations as well. Among the suggestions that received positive feedback were having each agency name a senior accountable official to oversee the audit-resolution process and requiring agencies to implement audit-risk metrics, including the timeliness of report submission, number of audits that didn’t have a qualified auditor opinion on major programs and number of repeat audit findings.

Reaction mixed

The reaction to the proposed regulations is mixed so far. Judith Turner, vice president of TCG and a member of the National Grants Management Association’s board of directors, said she’s pleased with the proposal, but there are some concerns.

“OMB is asking for more oversight, more reporting, more information, and yet not providing or requiring more money to granting or recipient agencies for the additional work they will have to do,” she wrote in an email to Federal News Radio. “This is shortsighted and counterproductive. Especially in tough times, you get what you pay for.”

One of the biggest changes from the suggestions OMB presented in March is the idea that all grants be made public for at least 90 days. In the new proposed guidance, OMB said several commenters expressed concern that requirement would be difficult, especially toward the end of the fiscal year.

Instead, OMB is recommending a 30 day public requirement on Grants.gov, unless required by statute or because of other circumstances as determined by the agency head.

“OMB is working with federal agencies on the development of the Federal Program Inventory over the course of 2013-2014,” the proposed guidance stated. “The FPI uses a broader definition of federal program that the definition proposed in this guidance, which refers specifically to the Catalog of Federal Financial Assistance.”

After the comment period closes, OMB will review them and issue the final guidance over the next year.

“OMB is interested in receiving broad public feedback to further refine these ideas. Comments received will be considered as OMB develops a refined final guidance document,” the proposal stated. “Following the implementation of these reforms, OMB will continue to monitor their effects to evaluate whether (and the extent to which) the reforms are achieving their desired results, and will consider making further modifications as appropriate.”

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