On Tuesday, February 28, 2012 the Office of Management and Budget offered rules for federal grants for notice and comment in the Federal Register. The proposal grew from a request from the President for OMB to work with state and local officials to improve efficiency and lower costs in the grant process. As stated in the document, OMB, “. . . has developed a series of reform ideas that would standardize information collection across agencies, adopt a risk-based model for Single Audits and give new administrative approaches for determining and monitoring the allocation of Federal funds”. The overall goal is to standardize rules and regulations to reduce burdens on both the federal agency and the recipient.
While many of the proposals are financial in nature, several are interesting to anyone dealing with federal grants. They include
- Creating a uniform set of administrative requirements for all federal grants
- Requiring agencies to give 90 day notice of funding opportunities
- Provide a standard announcement format for all federal grants
The above proposals would certainly simplify the federal grant process and make them easier to understand. However, given the wide range of federal funding, a standard announcement format that completely conveys the aspects of the various opportunities may force federal agencies to significantly retool their grant making processes.
In terms of finances, the proposals made include:
- Raising the threshold for Single Audit from $500,000 to $1 million for grantees receiving and spending federal grants.
- For grantees receiving between $1 and $3 million dollars the Single Audit requirements would be reduced to two requirements. First, auditors would only have review allowable and non-allowable expenses, the grantee would choose the second audit requirement from an OMB approved menu. This would give needed flexibility for the wide variety of programs.
- Creating a flat rate for indirect costs. Currently, these rates are typically negotiated between grantees and the cognizant federal agency, i.e. the agency that provides the most federal funding.
- Allowing the budgeting of contingency funds for certain awards
Please note: indirect costs are simply those not directly associated with a federal grant program and/or those costs that are difficult to account for in a federal grant. These are typically not directly related to a grant program but are impossible for a grantee to work effectively without them (e.g. the cost of utilities, the cost of accounting and administrative costs that indirectly support the project, the maintenance of computer systems and networks etc.).
Anyone who has developed a negotiated rate with a federal agency understands the time and cost associated with this effort. Recently, it has become difficult to even get a federal agency to engage in this process.
There are a couple of proposals affecting non-profits as well, they include:
- Provide non-profits with an example of a required certification of indirect costs. This certification would be similar to information given to state and local agencies and would create more uniform requirements across different types of entities.
- Provide non-profits with an example of indirect cost agreement documentation requirements
The above proposals would create more uniform regulatory environment, reduce uncertainty, and lower costs for non-profits trying to set up indirect rates with the federal government. This costs and intricacies of this process have often proved too daunting for most non-profits. This approach may help level the playing field and help non-profits receiving grants better recover costs incurred. Not having an indirect rate often forces non-profits to eat a variety of otherwise reimbursable costs.
The above proposals are very interesting and encouraging. Any attempt by government to simplify overly complex and duplicative rules and regulations is welcome as it allows agencies to spend money more wisely. However, should these rules go into effect, a great many short-term difficulties are likely to occur. For example, while grants.gov has turned into a very useful tool, anyone using the system in the first few years understands that the transition process was not smooth.