OMB Uniform Guidance Changes: What Not-for-Profits Need to Know

If you are a recipient of federal financial assistance, change is coming! The Office of Management and Budget (OMB) recently announced significant updates to Uniform Guidance, which will greatly impact how not-for-profits manage their federal awards. Now known as OMB Guidance for Federal Assistance, the regulatory revisions are designed to provide greater clarity in reporting practices and requirements, thereby reducing the burden on not-for-profits and improving transparency and efficiency in state and local government funding operations.

Here’s a brief rundown of the more notable revisions beginning October 1, 2024:

• The single audit threshold will increase from $750,000 to $1 million, which is expected to reduce a large portion of required audits each year, starting with fiscal years ending September 30, 2025.
• The threshold value for equipment will increase from $5,000 to $10,000. When equipment is purchased at the cost of $10,000 or under, it can be expensed and not capitalized.
• The de minimis rate will increase from 10% to 15%, which will allow for a more reasonable and realistic recovery of indirect costs.
• The threshold for unused supplies will increase from $5,000 to $10,000. If there is a residual inventory of unused supplies exceeding $10,000 in total aggregate value upon termination or completion of the project/program and the supplies are not needed for any other federal award, the non-federal entity must retain the supplies for use on other activities or sell them, but in either case, must compensate the federal government for its share.
• OMB has streamlined reporting processes, making it easier for nonprofits to comply with federal requirements. This change includes simplified formats and reduced documentation requirements.
• Some reporting requirements have been relaxed, allowing for less frequent submission of financial reports. This change is intended to reduce the administrative burden on nonprofits and improve efficiency.

Understanding these updates is crucial for ensuring compliance and optimizing financial management. As October 1 approaches, here’s how not-for-profits can best prepare for the implementation:

Audit Preparedness

With changes to audit requirements, not-for-profits will need to be proactive in preparing for audits and addressing findings. In some cases, a single audit may no longer be necessary. Organizations must be thorough in documenting internal controls and compliance issues. Enhanced transparency in audit reports may lead to increased scrutiny, making it essential for not-for-profits to maintain robust financial management practices.

Review Internal Controls

Organizations must be thorough in documenting internal controls and compliance issues. For instance, new regulations also include some new changes in the requirements of internal controls regarding cybersecurity and other measures to safeguard information, which includes all information and not just personally identifiable information.

Cost Principles

Recent updates provide clearer guidelines on the allowability of costs, including new categories related to sustainability and climate resilience initiatives. Organizations need to review these changes to ensure that their expenditures align with the updated cost principles.

While increased flexibility in financial reporting can reduce administrative burdens, the OMB Guidance for Federal Assistance requires careful attention and adaptation. Not-for-profits must stay informed about these changes, proactively adjust their practices, and invest in training and resources to ensure compliance and effective financial management. Ellin & Tucker’s Not-for-Profit Services Group is ready to work with your not-for-profit to navigate the updated guidance effectively and find the solutions that are right for you.