Sneak Preview: 2024 Uniform Guidance Raises De Minimis Rate
(The following was excerpted from a recent Thompson Grants Compliance Expert article.) The Office of Management and Budget (OMB), among its April 2024 revisions to subpart E of the uniform guidance, increased the de minimis indirect cost rate from 10% in the current 2020 guidance to “up to 15%” of modified total direct costs (§200.414(f)) “to 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.”
The increased de minimis rate was one of several subpart E updates made as part of the 2024 revisions to Title 2 of the Code of Federal Regulations, including the uniform guidance (2 C.F.R. Part 200), which become effective for awards issued on or after Oct. 1, unless federal agencies elect to implement them as early as June 21. In response to stakeholder comments, OMB took this action and revised language at §200.414(f) included in its October 2023 proposed revisions to the guidance.
While OMB maintained language originally included in the proposal stating that the de minimis rate must not be applied to cost reimbursement contracts issued directly by the federal government in accordance with the Federal Acquisition Regulations (FAR), it removed proposed language stating that “recipients and subrecipients are not required to use the de minimis rate and may submit an indirect cost proposal in accordance with the appropriate appendix referenced in §200.414(e),” changing it to simply read “recipients and subrecipients are not required to use the de minimis rate.”
OMB also removed language in the proposal at §200.414(e) stating that “a governmental department or agency that receives more than $35 million in direct federal funding during its fiscal year may not elect to use the de minimis rate (see Appendix VII, paragraph D.1.b.),” Instead, in the final guidance, it retained this language within Appendix VII rather than including it §200.414(e).
Among other changes within §200.414 — including removing the term “F&A” from the title of §200.414 and all similar references in subpart E — OMB added new language at §200.414(c)(2) stating that a recipient or subrecipient may notify OMB if it has any disputes with federal agencies regarding the application of its federally negotiated indirect cost rate. OMB clarified in §200.414(b) that “it is not always possible to specify the types of costs that may be classified as indirect costs for nonprofit organizations due to the diversity of their accounting practices. The association of a cost with a federal award is the determining factor in distinguishing direct from indirect costs.”
(The full version of this story has now been made available to all for a limited time here.)
Join us for our following Thompson Grants events:
Thompson Grants Workshop: Procurement | May 23, 2024 | Virtual Event
Federal Grants Forum | June 26-27, 2024 | Columbus, Ohio
