Final Uniform Guidance Revisions Issued

On August 13, 2020, the federal Office of Management and Budget (OMB) released its final guidance (the Final Guidance) revising sections of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the Uniform Guidance), 2 C.F.R. Part 200. The Final Guidance is the first major revision of the Uniform Guidance since its publication in 2014, and contains numerous changes that will affect how federal grant recipients, including Community Action Agencies (CAAs), administer their federal funds. Many of the changes address the questions and concerns expressed in the comment letter that CAPLAW and the National Community Action Partnership submitted to OMB in response to the proposed version of the rule. While most provisions will not take effect until November 12, 2020, a few are effective immediately. Some of the major changes in the Final Guidance include:

• Indirect Costs: De Minimis Rate and Direct Cost Allocation (2 CFR § 200.414(f), 200.332(a)(4)). The Final Guidance allows CAAs that do not have a current federally negotiated indirect cost rate (or provisional rate) to elect to charge the de minimis rate of 10% of modified total direct costs without proof of costs, whether or not they previously had a negotiated rate. The rate may be used indefinitely until the CAA chooses to negotiate a rate. Prior to this change, only non-federal entities that had never received a federally negotiated indirect cost rate were eligible to use the de minimis rate. Certain public CAAs also still remain ineligible for the de minimis rate.
  
  Pass-through entities must continue to recognize a subrecipient’s federally negotiated indirect cost rate. For non-federal entities that do not have a federally negotiated rate, the Final Rule directs pass-through entities to work in collaboration with the subrecipient to determine the appropriate rate, which is either a negotiated indirect cost rate with the pass-through entity or the de minimis rate. Alternatively, the Final Guidance now explicitly states that a subrecipient can elect to use direct cost allocation “to account for indirect costs”.

• Micro-Purchase Threshold (2 CFR § 200.320(a)). The Final Guidance allows all non-federal entities that maintain a self-certification and certain documentation regarding financial risk management to adopt a micro-purchase threshold of up to $50,000 without the consent of their federal awarding agency. To establish a micro-purchase threshold over $50,000, non-federal entities must have a cognizant agency for indirect costs and must get approval from that agency.

• Non-Binding Guidance (2 CFR § 200.105). The Final Guidance departs from the proposed revisions with respect to prohibiting federal awarding agencies from including references to non-binding guidance in the terms and conditions of their awards. It clarifies that all administrative requirements, program manuals, handbooks, and other non-regulatory materials that are inconsistent with the Uniform Guidance are superseded by it, and that agencies may only impose legally binding requirements on recipients through the notice and comment process. This means that CAAs can continue to refer to non-binding guidance, such as the COFAR FAQs (last updated July 2017), to the extent that they do not conflict with the Uniform Guidance.

• Termination (2 CFR § 200.340). The Final Guidance retains a new basis for termination that OMB introduced in the proposed revisions. Specifically, this section gives federal agencies or pass-through entities the authority to terminate a federal award, “to the greatest extent authorized by law, if an award no longer effectuates the program goals or agency priorities.” CAPLAW and the Partnership expressed concerns that this provision gives federal agencies and pass-through entities too much leverage to arbitrarily terminate awards. Note that award-specific termination provisions, such as the CSBG requirement for states to provide notice, a hearing on the record, and a finding of cause, as well as the opportunity for federal review prior to reducing or terminating a CAA’s proportionate share of CSBG funding, continue to apply. This provision is effective immediately as of August 13, 2020.

• Telecommunications Equipment (2 CFR § 200.216). Non-federal entities are prohibited from using grant funds to purchase, or enter into contracts to purchase, equipment, services, or systems that use “covered telecommunications equipment or services” as a substantial or essential component of any system. The list of “covered telecommunications equipment or services” includes those produced by Huawei Technologies Company and other companies owned or controlled by the People’s Republic of China. This does not prevent CAAs from using covered telecommunications equipment, but CAAs may not use federal funds to purchase such equipment and services or include these costs in their allowable indirect cost pool. This provision is effective immediately as of August 13, 2020.

CAPLAW will continue to analyze the Final Guidance and will issue additional resources to help CAAs understand the changes and prepare to comply with the Final Guidance.

This News Flash is part of the Community Services Block Grant (CSBG) Legal Training and Technical Assistance (T/TA) Center. It was created by Community Action Program Legal Services, Inc. (CAPLAW) in the performance of the U.S. Department of Health and Human Services, Administration for Children and Families, Office of Community Services Cooperative Agreement – Grant Award Number 90ET0467-03-02. Any opinion, findings, conclusions, or recommendations expressed in this material are those of the author(s) and do not necessarily reflect the views of the U.S. Department of Health and Human Services, Administration for Children and Families.

The contents of this news flash are intended to convey general information only and do not constitute legal advice. Any communication through this publication or through CAPLAW’s website does not constitute or create an attorney-client relationship. If you need legal advice, please contact CAPLAW or another attorney directly.