Did you feel it? The seismic shift? No, it is not the leaves changing color letting us know fall is in full effect. The other shift? We’re talking about the change from federal grantmaking business-as-usual to potentially revolutionary nonprofit-friendly experiences.
October 1, 2024, was the day that a long-sought overhaul of the federal grantmaking rules goes into effect. The changes, if followed by governments and availed upon by nonprofits, will be transformative in communities. The more nonprofits know about this the more prepared they will be to participate in, and advance their missions through, the federal grantmaking process.
The federal Office of Management and Budget (OMB) Uniform Guidance is the set of rules governing most federal grantmaking to charitable nonprofits, state, local, and Tribal governments, and other entities. As a result of the revisions going into effect today, charitable nonprofits will now face lower barriers in accessing government grants and be able to secure higher reimbursement rates for their actual costs.
Acknowledging the challenges many nonprofits have faced in accessing federal funding opportunities, especially in historically underserved or minority communities, the revisions include new approaches to federal grantmaking. The new rules embrace clarity over jargon, reject a “measure everything” mindset, and recognize that people in communities served by programs (i.e., the clients) should be heard before programs are designed.
Advancing Equity in Federal Grantmaking
Federal agencies are directed to use the revised OMB Uniform Guidance to embrace the following to remove barriers to federal grantmaking.
- Engage members of the community who will benefit from or be impacted by a federal financial assistance program. This should help ensure the government tailors programs to the communities served rather than imposes a one-size-fits-all approach. [200.202]
- Consider diversity when developing policies and procedures for merit review panels. OMB also encourages federal agencies to develop programs in consultation with the communities that will benefit from or be impacted by a program. [200.205]
- No longer require the exclusive use of the English language in notices, applications, and reporting. [200.111]
- Simplify and clarify Notices of Funding Opportunities, discussed below, to accommodate “applicants with less experience applying for federal financial assistance, notably applicants from underserved communities,” such as nonprofits operating in rural communities or serving disadvantaged and often overlooked populations.
Improving Indirect Cost Rates
The revised OMB Uniform Guidance also ensures organizations are properly paid for performing federal grants by requiring more appropriate recovery of actual costs:
- Minimum Rate: From now on, federal grants must provide the guaranteed minimum (de minimis) rate for indirect costs of 15% of modified total direct costs. That is an increase from 10%. [200.414(f)]
- Mandated Application: Nonprofits remain free to negotiate a higher rate, known as a negotiated indirect cost rate agreement (NICRA). The Uniform Guidance clarifies that pass-through entities – typically state and local governments – must accept a grantee’s NICRA, subject to statutory and a few other limitations. This means that nonprofits with negotiated rates with one federal agency must be paid that same rate by all other federal, state, and local government agencies. [200.414(d)]
- Right of Appeal: Nonprofits and others are now empowered to notify OMB of any disputes over how a federal agency applies or accepts their federally negotiated indirect cost rates or fails to pay the minimum indirect cost rate. Nonprofits – for the first time – can turn to OMB for help when federal agencies are not following the law. [200.414(c)(2)]
Other Important Reforms and Clarifications
- Notices of Funding Opportunities (NOFOs) now must include basic information at the top of a grant announcement so that applicants can more easily decide whether or not to apply. NOFOs must include an Executive Summary and use plain language that communicates program requirements specifically and clearly. Putting essential information up front and removing jargon will ensure nonprofits spot the good fits for their organizations while saving employees thousands of hours of frustrating, but often futile, analysis of funding opportunities that are not right for their organizations. [200.204; Appendix 1]
- Up-Front Payments: Continuing current law (if not agency practice), the recipient or subrecipient of federal grants must be paid in advance provided financial and written procedures are met; reimbursable grants are preferred only when those requirements cannot be met. This means governments can be urged to make advanced payments to nonprofits and not assume that reimbursable grants are their only option or default. [Grants Reform Preamble]
- Single Audit Threshold: OMB raises the single audit threshold from $750,000 to $1 million. [200.501]
- Reporting Requirements: The new rules instruct federal agencies to eliminate reports that are not necessary for the effective monitoring of the grant. In short, OMB is encouraging agencies to only measure things that matter. [200.301]
As more information becomes available, charitable nonprofits are encouraged to participate and continue sharing their experiences or questions on how the revised OMB Uniform Guidance affects them.
From National Council of Nonprofits
