NOTE (January 23, 2014): This page will be updated in the coming days with additional information. Please check back.
The White House Office of Management and Budget (OMB) released proposed guidance that, among other things, would explicitly require pass-through entities (typically states and local governments receiving federal funding) to either honor a nonprofit’s negotiated indirect cost rate, negotiate a rate in accordance with federal guidelines, or pay a minimum rate of 10 percent for up to four years while a nonprofit works to obtain a negotiated rate. The proposal would also consolidate and streamline eight OMB circulars, raise the Single Audit (A-133) threshold from $500,000 to $750,000, and eliminate duplication and unnecessary audit criteria.
The proposed reforms would help nonprofit organizations receive full (or at least, more) reimbursement of their indirect costs from states and local governments for services they perform under federal programs. As a result of the changes, nonprofits would be under less pressure to raise additional funds to subsidize governments, and charities without government funding would see less competition for scarce philanthropic dollars.
Additionally, applications and reporting will be streamlined to provide more consistency across various federal agencies. Furthermore, the amount of federal oversight will be adjusted based on level of risk for those who receive federal grants directly.
Reforms to Cost Principles
Reforms to Administrative Requirements
Reforms to Audit Requirements
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