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OMB Uniform Guidance

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Governments at all levels – local, state, and federal – that hire nonprofits to deliver services are required to reimburse nonprofits for the reasonable indirect costs (sometimes called “overhead” or “administrative” costs) they incur on behalf of governments when federal dollars are part of the funding stream. The mandate is embedded in grantmaking rules that the federal Office of Management and Budget (OMB) updated in 2024 and effective Oct. 1, 2024.

The OMB Uniform Guidance is the common set of rules governing most federal grantmaking to charitable nonprofits, state, local, and Tribal governments, and others..

Why It Matters

The newly revised OMB Uniform Guidance, effective Oct. 1, 2024,  corrects longstanding challenges in the government grants process that have limited nonprofit effectiveness, discouraged qualified organizations from seeking and performing under federal grants, and wasted billions of dollars and countless hours in needlessly complex reporting requirements.

Where We Stand

“The revisions to the OMB Uniform Guidance, which becomes effective Oct. 1, 2024, address longstanding problems in recovering actual costs, advance equity by removing bureaucratic barriers, and make other significant reforms that will reduce burdens and costs of seeking, performing, and reporting on federal grants.”

OMB Unform Guidance Final Rule: Significant Improvements to Federal Grants Rules for Charitable Nonprofits, National Council of Nonprofits, Apr. 4, 2024. 

Updated Indirect Cost Rates and Protections

Reimbursement for Indirect Costs. The Uniform Guidance expressly requires pass-through entities using any federal funds (typically states and local governments, as well as some larger nonprofits) and all federal departments/agencies to reimburse a nonprofit for the reasonable indirect costs it incurs in performing services on behalf of governments.

15% de minimis rate: The new version of the OMB Uniform Guidance raises the guaranteed de minimis rate for indirect costs from 10% to 15% of modified total direct costs. OMB states, “This change would allow for a more reasonable and realistic recovery of indirect costs, particularly for new or inexperienced organizations that may not have the capacity to undergo a formal rate negotiation, but still deserve to be fully compensated for their overhead costs.”

  • No Browbeating Allowed: Federal agencies may not compel recipients and subrecipients to use an indirect rate lower than the 15% de minimis rate, unless required by statute. Organizations may choose not to utilize the 15% minimum, but they can’t be forced to.
  • Notice of Indirect Cost Disputes: Recipients and subrecipients may notify OMB of any disputes with regards to a federal agency’s application or acceptance of a federally negotiated indirect cost rates (NICRAs). This major change means nonprofits can turn to OMB for help when agencies are not following the law.
  • Stronger Mandate: Pass-through entities – typically state and local governments – must accept all federally negotiated indirect cost rates (NICRAs) for subrecipients. This means that nonprofits with negotiated rates with one federal agency would have to be paid that same rate by other agencies.

Advancing Equity and Overcoming Barriers

Reforms to the Uniform Guidance are designed to advance equity and overcome barriers that many organizations have faced in accessing federal funding opportunities. These new provisions include:

  • The exclusive use of English language in notices, applications, and reporting will no longer be required. 
  • The revised rules encourage agencies to urge recipients to engage members of the community that will benefit from or be impacted by a federal financial assistance program.
  • Reforms to simplify and clarify Notices of Funding Opportunities, discussed below, are designed, according to OMB, “in consideration of applicants with less experience applying for federal financial assistance, such as applicants from underserved communities.”
  • OMB clarifies in the Uniform Guidance that a federal agency should consider diversity when developing policies and procedures for merit review panels. OMB also encourages federal agencies to develop programs in consultation with the communities that will benefit from or be impacted by a program.

Additional Significant Reforms and Clarifications

  • Notices of Funding Opportunities (NOFOs) must include basic information at the top of a grant announcement so that applicants can more easily make decisions about whether or not to apply. NOFOs, also called “requests for proposals” in some settings, will have to include an Executive Summary and use plain language (as opposed to jargon) that communicates program requirements specifically and clearly, as well as limit the length of program announcements.
  • Up-Front Payments: The recipient or subrecipient must be paid in advance provided financial and written procedures are met, and that reimbursement is preferred when the requirements cannot be met. This means governments can be urged to make advanced payments to nonprofits and not assume that reimbursable grants are their only alternative or default.
  • Audit Threshold is set at $1 million.
  • Reporting Requirements: Federal agencies are required to eliminate reports that are not necessary for the effective monitoring of the grant. In short, OMB is adopting the approach of only measuring things that matter.

More About OMB Uniform Guidance

Background and Analysis

Additional Resources

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