Key Changes to the 2024 Uniform Guidance (2 CFR Part 200)

The Office of Management and Budget (OMB) issued the 2024 Uniform Guidance (Revised as of January 1, 2025) codified in 2 CFR which includes the “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” in Part 200 (commonly referred to as 2 CFR Part 200). Changes in the 2024 Uniform Guidance are effective for awards issued on or after October 1, 2024, and therefore, fully effective for fiscal years ended September 30, 2025, and thereafter. The following are some of the changes (but not all) for your consideration.

$1,000,000 Single Audit Threshold – Subpart F has changed the threshold that triggers the need for a compliance audit (i.e. Single Audit) from $750,000 to $ 1 million. Accordingly, if the recipient expends $1 million or more during its fiscal year, the entity is subject to a Single Audit. (§200.425 (a)(2) - Audit services)

Note: Accordingly, the threshold for determining a Type B (major) program has now increased from $187,5000 to $250,000.

$10,000 Equipment and Supplies Threshold – The classification of equipment and supplies has increased from $5,000 to $10,000. Therefore, the organization is not required to capitalize purchases of equipment or supplies that cost less than $10,000. (§200.1 - Definitions).

Note: One caveat is that if the organization’s GAAP basis capitalization policy is less than $10,000, then the organization is required to follow its lower GAAP basis capitalization policy rather than the $10,000 threshold established by the 2024 Uniform Guidance.

Recommendation: W&A recommends that if your organization has a capitalization policy threshold less than $10,000, you should consider changing your capitalization policy threshold to $10,000.

Subawards Threshold - $500,000 – The amount of fixed subawards that can be made without prior grantor agency approval has increased from $250,000 to $500,000. (§200.333 Fix amount subawards).

De Minimis Rule – 15% – This is a simplified rate option under the Uniform Guidance that allows eligible entities to recover indirect costs at a fixed percentage of modified direct costs. The rate increased from 10% to 15%. (§200.414 (f) – Direct Costs)

Whistleblower Rule – The organization is now required to provide written notice to its employees on its whistleblowing policy. The policy needs to provide written guidelines that include how the organization protects the whistleblower. (§200.217 – Whistleblower protections)

Questioned Costs – The 2024 Uniform Guidance encourages auditors to use their judgment to question costs and report as such as a part of the Single Audit compliance reporting. The federal agencies (not the auditors) are responsible for determining whether there is an actual improper charge to a program. The 2024 Uniform Guidance specifically outlines the following criteria to auditors in consideration of possible questioned costs (§2900.3 – Questioned cost):

• Expenditures that are not supported by adequate documentation
• What a prudent person would think is reasonable and necessary
• Noncompliance with statutes, regulations or terms and conditions of the award

Termination Costs - Vacation leave payouts upon employee termination are generally no longer allowable direct charges to federal grants.

Subrecipient

Subaward Responsibilities – The following outlines the effect on subrecipients that receive pass-through[1] Federal funds:

• Capitalization Threshold – Subrecipients are allowed to have a different capitalization threshold than the pass-through entity (granting organization) without jeopardizing the pass-through entity’s higher capitalization threshold
• $1,000,000 Single Audit Threshold - Subrecipients are required to follow the $1,000,000 Single Audit Threshold.
• De Minimis Rule - Subrecipients may use a higher negotiated rate rather than the de minimis rate of the pass-through entity. The pass-through entity cannot force a subrecipient to use an indirect cost rate that is lower than what the subrecipient has negotiated or that is lower than the de minimis rate.

[1] – Pass-through Federal Funds are Federal grant funds an organization receives from an entity that is not the Federal government (i.e. pass-through by the State, other governments, nonprofit organizations, etc.).

Source: Title 2 CFR Part 200

§200.1 Definitions

Capital assets means:

1. Tangible or intangible assets used in operations having a useful life of more than one year which are capitalized in accordance with GAAP. Capital assets include:
2. Land, buildings (facilities), equipment, and intellectual property (including software), whether acquired by purchase, construction, manufacture, exchange, or through a lease accounted for as financed purchase under Government Accounting Standards Board (GASB) standards or a finance lease under Financial Accounting Standards Board (FASB) standards; and
3. Additions, improvements, modifications, replacements, rearrangements, reinstallations, renovations, or alterations to capital assets that materially increase their value or useful life (not ordinary repairs and maintenance).
4. For purpose of this part, capital assets do not include intangible right-to-use assets (per GASB) and right-to-use operating lease assets (per FASB). For example, assets capitalized that recognize a lessee’s right to control the use of property or equipment for a period of time under a lease contract.

Capital expenditures mean expenditures to acquire capital assets or expenditures to make additions, improvements, modifications, replacements, rearrangements, reinstallations, renovations, or alterations to capital assets that materially increase their value or useful life.

Equipment means tangible personal property (including information technology systems) having a useful life of more than one year and a per-unit acquisition cost that equals or exceeds the lesser of the capitalization level established by the recipient (or subrecipient) for financial statement purposes, or $10,000.

Supply means all tangible personal property other than those described in the equipment definition. A computing device is a supply if the acquisition cost is below the lesser of the capitalization level established by the recipient (or subrecipient) for financial statement purposes or $10,000, regardless of the length of its useful life.