Early next week, OMB is expected to publish an Advance Notice of Proposed Guidance in the Federal Register to solicit public comment on several ideas focused on increasing the effectiveness and efficiency of Federal programs by eliminating unnecessary and duplicative requirements, and strengthen oversight of Federal grant dollars. The document is available for review now here.
In the document, a number of ideas for reform are put forth for consideration. T Broadly, three areas are considered in this Notice: reforms to audit requirements, cost principles, and administrative requirements, which could ultimately result in wide ranging reforms affecting OMB Circulars A-21, A-87, A-110, and A-122 (which have been placed in 2 C.F.R. Parts 220, 225, 215, and 230); Circulars A-89, A-102, and A-133; the guidance in Circular A-50 on Single Audit Act follow-up; and the Cost Principles for Hospitals at 45 C.F.R. Part 74, Appendix E. Based on feedback to this Notice, OMB will propose formal adjustments as to some or all of those documents in coming months.
The specific ideas proposed include:
- Raising the threshold for requiring a Single Audit from $500,000 to $1 million in Federal awards.
- Reducing the scope of Single Audit requirements for entities with Federal awards between $1 million and $3 million
- Full Single Audit would still be required for entities with over $3 million in Federal awards, however modifications are considered that would: (1) streamline requirements to focus on stewardship of Federal funds specifically focusing on improper payments, waste, fraud, abuse, and program performance; (2) strengthen guidance to Federal agencies on audit followup; (3) reduce burden on pass-through entities and subrecipients through cross-agency coordination and having audit followup by agencies directly with subrecipients who receive most of their Federal funds as direct awards except in cases where the issues were with program delivery.
Cost Principle Reforms
- Consolidate cost principles for all recipient types into a single document, still allowing for variation by entity type where appropriate.
- Move to flat rates in lieu of negotiated rates for indirect costs. Two options are described for implementing this: establish a mandatory flat rate lower than the recipient’s in place negotiated rate, or allow institutions to choose between a flat rate and a negotiated rate. The goal is to reduce Federal indirect cost commitments and reduce the burden on entities for documenting their indirect costs for a negotiation process.
- Explore alternatives to time-and-effort reporting, including consideration of the project certification pilot currently in process with the Federal Demonstration Partnership, other ongoing pilots, or through new pilots to explore alternative methods to adequately document the allowability and allocability of salaries and wages charged to Federal awards.
- Extending the Utility Cost Adjustment to other institutions to make access to this option more equitable. This would likely come with a requirement for recipients to develop a plan to reduce utility costs over time for the adjustment to be approved.
- Allow directly allocable administrative support costs to be charged to direct costs on awards. This would include such costs as project-specific activities such as managing substances/chemicals, data and image management, complex project management, and security.
- Allow certain computing devices to be direct-charged to awards. This would allow computer equipment below the institution’s equipment threshold to be direct-charged to awards rather than managed as indirect costs.
- Harmonizing cost principles to clarify that $5,000 is the threshold for an allowable maximum inventory of unused supplies that may be retained for use on other Federal awards at no cost.
- Eliminate requirement for conducting studies of cost reasonableness for large research facilities.
- Eliminate restrictions on use of indirect costs recovered for depreciation or use allowances.
- Eliminate lease-purchase analyses to justify interest costs prior to relocating federally sponsored research programs from a debt-financed facility.
- Eliminate specific requirements for printed ‘help wanted’ advertising to reflect appropriate alternative media in use today.
- Allow for budgeting of contingency funds for certain awards.
- Request that the Cost Accounting Standards Board increase the minimum threshold to file a disclosure statement of cost accounting standards from $25 million to $50 million.
- Allow for excess capacity in anticipation of increased usage for certain facilities such as data centers.
- Allow costs for efforts to collect improper payment recoveries.
- Specify that gains and/or losses due to speculative financing arrangements are unallowable.
- Provide non-profit organizations with an example of the Certificate of Indirect Costs similar to that provided for state, local, and tribal governments.
- Provide non-profit organizations with an example of indirect cost proposal documentation requirements similar to that provided for state, local, and tribal governments.
Administrative Requirements Reforms
- Create a uniform set of administrative requirements for all grant recipients through consolidating the requirements in OMB Circulars A-102 and A110.
- Require agency consideration of each applicant’s financial risk in addition to the merit of the proposal prior to making an award. Agencies would be required to consider factors such as: financial stability, quality of management and internal control systems, history of performance, Federal award Single Audit reports and findings for previous awards, and other factors that might affect the applicant’s ability to comply with statutory, regulatory, or other requirements imposed on recipients.
- Require agencies to provide 90-day notice of funding opportunities to ensure applicants have sufficient time to prepare applications.
- Establish a standard format for funding opportunity announcements.
- Reiterate that information collection actives are subject to the Paperwork Reduction Act.
Specifically, OMB seeks responses to a list of provided questions derived from the ideas outlined above, although they welcome suggestion of additional ideas from the community as well. Comments will be accepted for 30 days after the Notice is published in the Federal Register.