# Guidance for Grants and Agreements

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A2020-17468

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** August 13, 2020
- **Citation:** 85 FR 49506

## Text

OFFICE OF MANAGEMENT AND BUDGET
2 CFR Parts 25, 170, 183, and 200
Guidance for Grants and Agreements

ACTION:

Final guidance.

SUMMARY:

The Office of Management and Budget (OMB) is revising sections of OMB Guidance for Grants and Agreements. This revision reflects the foundational shift outlined in the President's Management Agenda (PMA) to set the stage for enhanced result-oriented accountability for grants. This guidance is reflects the Administration's focus on improved stewardship and ensuring that the American people are receiving value for funds spent on grant programs. The revisions are limited in scope to support implementation of the President's Management Agenda, Results-Oriented Accountability for Grants Cross-Agency Priority Goal (Grants CAP Goal) and other Administration priorities; implementation of statutory requirements and alignment of these sections with other authoritative source requirements; and clarifications of existing requirements in particular areas within these sections.

DATES:

These revisions to the guidance are effective November 12, 2020, except for the amendments to §§ 200.216 and 200.340, which are effective on August 13, 2020.

FOR FURTHER INFORMATION CONTACT:

Nicole Waldeck or Gil Tran at the OMB Office of Federal Financial Management at
GrantsTeam@omb.eop.gov
or 202-395-3993.

SUPPLEMENTARY INFORMATION:

Background and Objectives

In 2013, OMB partnered with the Council on Financial Assistance Reform (COFAR) to revise and streamline guidance to develop the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) located in title 2 of the Code of Federal Regulations (2 CFR part 200) (79 FR 78589; December 26, 2013). The intent of this effort was to simultaneously reduce administrative burden and the risk of waste, fraud, and abuse while delivering better performance on behalf of the American people. Implementation of the Uniform Guidance became effective on December 26, 2014 (79 FR 75867, December 19, 2014) and must be reviewed every five years in accordance with 2 CFR 200.109.

Based on feedback and ongoing engagement with the grants management community, the Administration established the Results-Oriented Accountability for Grants Cross Agency Priority Goal (Grants CAP Goal) in the President's Management Agenda on March 20, 2018 (available at:
https://www.performance.gov/CAP/grants/
). The Grants CAP Goal recognizes that grants managers report spending a disproportionate amount of time using antiquated processes to monitor compliance. Efficiencies could be gained from modernization and grants managers could instead shift their time to analyze data to improve results. To address this challenge, the Grants CAP Goal Executive Steering Committee (ESC), which reports to the Chief Financial Officer's Council (CFOC), has identified four strategies to work toward maximizing the value of grant funding by developing a risk-based, data-driven framework that balances compliance requirements with demonstrating successful results for the American taxpayer.

1. Strategy 1: Operationalize the Grants Management Standards

2. Strategy 2: Establish a Robust Marketplace of Modern Solutions

3. Strategy 3: Manage Risk

4. Strategy 4: Achieve Program Goals and Objectives

The revisions to 2 CFR support these four strategies. In support of Strategies 1 and 2, OMB is implementing changes throughout 2 CFR to modernize reporting by recipients of Federal grants by requiring Federal agencies to adopt standard data elements for the information recipients are required to report (available at:
https://ussm.gsa.gov/fibf/
). This adoption will enable technology solutions to better manage the data the recipients report to the Federal government. These changes also support implementation of the Grants Reporting Efficiency and Agreements Transparency Act of 2019 (GREAT Act). OMB is also implementing revisions to strengthen the governmentwide approach to performance and risk, to support efforts under Strategies 3 and 4 by encouraging agencies to measure the recipient's performance in a way that will help Federal awarding agencies and non-Federal entities to improve program goals and objectives, share lessons learned, and spread the adoption of promising performance practices.

OMB is also revising 2 CFR to implement relevant statutory requirements. These revisions include requirements from several National Defense Authorization Acts (NDAAs) and the Federal Funding Accountability and Transparency Act (FFATA), as amended by the Digital Accountability and Transparency Act (DATA Act).

Finally, OMB is implementing revisions to 2 CFR to clarify areas of misinterpretation. The revisions are intended to reduce recipient burden by improving consistent interpretation. OMB consulted and collaborated with agency representatives identified by the Grants CAP Goal ESC to support the implementation of these revisions. OMB also solicited feedback from the broader Federal financial assistance community by publishing the proposed changes to 2 CFR in the
Federal Register
for a sixty (60) day public comment period (
https://www.federalregister.gov/d/2019-28524
). OMB received 215 submissions with over 1,200 comments from the public, around 1,200 comments from Federal agencies, and around 100 comments from the Council of the Inspectors General on Integrity and Efficiency (CIGIE) Grant Reform Workgroup for a total of over 2,500 comments. OMB reconvened agency representatives to review the comments and make changes to the proposed revisions as appropriate.

In summary and as discussed further in the sections below, OMB is revising 2 CFR parts 25, 170, and 200. Additionally, OMB is adding part 183 to 2 CFR to implement Never Contract with the Enemy. The sections are revised within the following scope. Comments received that were out of scope for the revision were not accepted by OMB.

I. To support implementation of the President's Management Agenda Results-Oriented Accountability for Grants CAP Goal and other Administration priorities;

II. To meet statutory requirements and to align with other authoritative source requirements; and

III. To clarify existing requirements.

I. Support Implementation of the President's Management Agenda and Other Administration Priorities

A. Emphasizing Stewardship and Results-Oriented Accountability for Grant Program Results

The President's Management Agenda, Results-Oriented Accountability for Grants CAP goal is working toward shifting the balance between compliance and performance while reducing burden. Agencies are encouraged to promote promising performance practices that support the achievement of program goals and objectives. Many Federal agencies are working together to innovate and develop a risk-based approach that incorporates performance to achieve

results-oriented grants (where applicable). By shifting the focus to the balance between performance and compliance, agencies may have the opportunity to streamline burdensome compliance requirements for programs that demonstrate results. To support this goal, OMB is publishing revisions in multiple sections of the guidance that together emphasize the importance of focusing on performance to achieve program results throughout the Federal award lifecycle.

The provisions that were revised to improve the governmentwide approach to performance and risk emphasize stewardship and results-oriented grant making. Revisions to 2 CFR 200.102
Exceptions
encourages Federal awarding agencies to apply a risk-based, data-driven framework to alleviate select compliance requirements for programs that demonstrate results. 2 CFR 200.202
Program planning and design
highlights the importance of developing a strong plan and design to set the stage for demonstrating program results. 2 CFR 200.205
Federal awarding agency review of merit proposals
strengthens the merit review process which is linked to 2 CFR 200.301
Performance measurement
requiring Federal awarding agencies to measure recipient performance, which is derived from program planning and design (§ 200.202). Performance information focused on results must be made available to recipients in the solicitation and in the award, which is reflected in 2 CFR 200.211
Information contained in a Federal award.
Award recipients must also be aware of termination provisions in 2 CFR 200.340
Termination
and reinforced in 2 CFR 200.211
Information contained in a Federal award,
which are linked to performance goals of the program (§ 200.301). Revisions to 2 CFR 200.413
Direct costs
were also made to include evaluation costs as an example of a direct cost, which demonstrates program results.

Revisions to 2 CFR 200.202
Program planning and design
develops a new provision. This section formalizes a requirement that are already expected of Federal awarding agencies to develop a strong program design by establishing program goals, objectives, and indicators, to the extent permitted by law, before the applications are solicited. The development of 2 CFR 200.202 emphasizes the importance of sound program design as an essential component of performance management and program administration. Ideally, program design takes place before an agency drafts related projects. This enables Federal agency leadership and employees to codify program goals, objectives, and intended results before specifying the goals and objectives of in a solicitation. A well-designed program has clear goals and objectives that facilitate the delivery of meaningful results, whether a new scientific discovery, positive impact on citizen's daily life, or improvement of the Nation's infrastructure. Well-designed programs also represent a critical component of an agency's implementation strategies and efforts that contribute to and support the longer-term outcomes of an agency's strategic plan. OMB encourages Federal awarding agencies to reference the “Managing for Results: The Performance Management Playbook for Federal Awarding Agencies” for promising performance practices throughout the Federal award lifecycle, including steps to develop a strong program plan and design (
www.performance.gov/CAP/grants/
).

Program design elements may include a problem or needs statement, goals and objectives; a logic model depicting the program's structure; program activities; a theory or theories of change and the evidence supporting them; performance and other indicators to measure program accomplishments and find ways to improve, set priorities, and identify targets of opportunity. In addition, it may include use or intended use of independently available sources of data, development and support of learning communities which may benefit from a shared understanding of promising practices and collaboration on common challenges and opportunities, and a system to periodically review award selection criteria.

OMB is revising to 2 CFR 200.205
Federal awarding agency review of merit proposals,
2 CFR 200.203
Requirement to provide public notice of Federal financial assistance programs
and § 200.204
Notices of funding opportunities
to strengthen merit review, public notice of Federal financial assistance programs, and the notices of funding opportunities to further the goals of results-oriented grantmaking. These changes require Federal awarding agencies to extend their merit review process to discretionary Federal awards, unless prohibited by Federal statute, the Federal awarding agency must design and execute a merit review process for applications.

Additional language was included to articulate an explanation of the merit review process that Federal awarding agencies are expected to follow. Further, Federal awarding agencies are required to periodically review their Federal award merit review process. These changes support the Administration's priority to ensure a fair and transparent process for the selection of award recipients and supports efforts under the President's Management Agenda to ensure that Federal awards are designed to achieve program goals and objectives.

Changes to 2 CFR 200.206
Federal awarding agency review of risk posed by applicants
allow Federal awarding agencies to adjust requirements when a risk-evaluation indicates that it may be merited. Changes are included in 2 CFR 200.211
Information contained in a Federal award
and 2 CFR 200.301
Performance measurement
further emphasize existing requirements for requiring Federal awarding agencies to provide recipients with clear performance goals, indicators, targets, and baseline data. OMB is adding language to § 200.102
Exceptions
to emphasize that Federal awarding agencies are encouraged to request exceptions to certain provisions of 2 CFR part 200 in support of innovative program designs that apply a risk-based, data-driven framework to alleviate select compliance requirements and hold recipients accountable for good performance. OMB recognizes that Federal financial assistance program goals and their intended results will differ by type of Federal program. For example, criminal justice grant programs may focus on specific goals such as reducing crime, basic scientific research grant programs may focus on expanding knowledge, and infrastructure projects may fund building or infrastructure projects.

Related to the above changes that aim to strengthen program planning and Federal award terms and conditions, OMB is revising §§ 200.211
Information contained in a Federal award
and 200.340
Termination
to strengthen the ability of the Federal awarding agency to terminate Federal awards, to the greatest extent authorized by law, when the Federal award no longer effectuates the program goals or Federal awarding agency priorities. Federal awarding agencies must clearly and unambiguously articulate the conditions under which a Federal award may be terminated in their applicable regulations and in the terms and conditions of Federal awards. The intent of this change is to ensure that Federal awarding agencies prioritize ongoing support to Federal awards that meet program goals. For instance, following the issuance of a Federal award, if additional evidence reveals that a specific award objective is ineffective at achieving program goals, it may be in the government's interest to terminate the Federal award. Further, additional

evidence may cause the Federal awarding agency to significantly question the feasibility of the intended objective of the award, such that it may be in the interest of the government to terminate the Federal award. OMB is also eliminating the termination for cause provision because this term is not substantially different than the provision allowing Federal awarding agencies to terminate Federal awards when the recipient fails to comply with the terms and conditions.

In addition, OMB is expanding the definition of fixed amount awards in § 200.1 to allow Federal awarding agencies to apply the provision to both grant agreements and cooperative agreements.

The revisions in 2 CFR 200.301 emphasize that agencies are encouraged to measure recipient performance to improve program goals and objectives, share lessons learned, and spread the adoption of promising practices. While understanding that grant program goals and their intended results will differ by type of program, the Grants CAP Goal is working to shift the culture of Federal grant making from a heavy focus on compliance to a balanced approach that includes a focus on the degree to which grant programs achieve their goals and intended results. To provide clarity and consistency among Federal awarding agencies, a revision to include program evaluation costs as an example of a direct cost under a Federal award has been included in 2 CFR 200.413
Direct costs.
Please refer to OMB Circular A-11 for a definition on program evaluation. Evaluation costs are allowed as a direct cost in existing guidance. This language is intended to strengthen this intent and ensure that agencies are applying this consistently.

Agencies are reminded that evaluation costs are allowable costs (either as direct or indirect), unless prohibited by statute or regulation. The work under the Grants CAP goal performance work group emphasizes evaluation as an important practice to understand the results achieved with Federal funding.

200.102 Exceptions

OMB received several comments on this section asking for clarification on the proposed revisions. Some commenters also noted that the addition of the “or less restrictive requirements” in 2 CFR 200.102(c) and 200.208 is confusing, redundant and not needed because Federal awarding agencies already have the discretion to impose conditions on the recipient. OMB deliberated upon these comments and ultimately agreed to replace the language “or less restrictive requirements” with “adjust requirements” within the final guidance. OMB strongly encourages Federal awarding agencies to add or remove requirements by applying a risk-based, data-driven framework to alleviate select compliance requirements and hold recipients accountable for good performance. One commenter felt that the inclusion of the requirement for agencies to “apply more restrictive terms and conditions when merited as indicated by a risk evaluation” did not warrant an exception from OMB and thus did not belong in the exceptions section. OMB concurred with the commenter and moved this language to 2 CFR 200.206
Federal awarding agency review of risk posed by applicants.

200.202 Program Planning and Design

Many commenters were supportive of this new section and the other revisions related to results-based grant making. Some commenters also thought the proposal could go further to better utilize federal grantees' activities to build and disseminate evidence of what works. One commenter expressed concern that revisions to the performance sections would lead to the unintended consequence of making research look like a contract agreement. OMB provided explicit language to state that performance measures for each program will be different. One commenter expressed concern that this new requirement would add burden. OMB respectfully disagrees, as this requirement is not new and does not add burden. This section reflects activities that were previously implied within 2 CFR and not explicitly included in its own section.

OMB appreciates the commenters who challenged OMB to go even further with the proposal with regards to evidence-building. OMB looks forward to furthering this discussion with stakeholder sessions in fall 2020 and will also consider these proposals in future revisions of 2 CFR. This provision is designed to operate in tandem with evidence-related statutes (
e.g.,
The Foundations for Evidence-Based Policymaking Act of 2018, which emphasizes collaboration and coordination to advance data and evidence-building functions in the Federal government) and related OMB implementation guidance (
e.g.,
OMB Memorandum M-19-23: Phase 1 implementation of the Foundations for Evidence-Based Policymaking Act of 2018. Learning Agendas, Personnel, and Planning Guidance).

200.203 Requirement To Provide Public Notice of Federal Financial Assistance Programs

There were several comments provided in response to the changes made to 2 CFR 200.203. One comment inquired as to why no similar requirements exist within the Uniform Guidance and is applicable to pass-through entities within 2 CFR 200.332. OMB notes that the Federal awarding agency does not have a direct relationship with the subaward recipient; that is the role of the pass-through entity. Mandating application of this requirement would require additional public comment as it would add burden to the process. Further, comments asked for OMB to develop guidance to help ensure that Federal awarding agencies have the appropriate controls in place with respect to their processes for making awarding decisions. OMB rejects this change for this iteration of 2 CFR as it would be a significant change that would require an opportunity for public comment based on the language and requirements imposed. Additionally, some commenters requested for language to be added regarding how often updates are expected. OMB rejects these suggestions as the language references guidance provided by General Services Administration (GSA) in consultation with OMB. That is where the requirement to update each Assistance Listing on an annual basis is specified, and it is not necessary to include this level of detail in 2 CFR 200.203.

200.204 Notice of Funding Opportunities

Commenters observed that the change in terminology from “competitive” to “discretionary” appears to broaden the requirement of these notices to not just competitive announcements, but also sole source discretionary announcements. Some commenters suggested for the language to be changed back to “competitive” and questioned the value of this revision. One commenter requested clarification as to whether or not this new requirement is intended to apply when the discretionary award is non-competitive. Another commenter suggested that it would be burdensome and inefficient to require agencies to have notices of funding opportunities for noncompetitive awards. OMB deliberated these comments and subsequently decided to change this language to reflect discretionary awards that are competed.

200.205 Federal Awarding Agency Review of Merit Proposals

Some of the comments received were from Federal agencies who wanted to know the purpose and the benefits behind the proposed revisions to justify the added burden. There were also concerns about the efficiency of the awarding process if these changes are made. Some commenters asked for clarity on what a systematic review meant and what would classify as “effective.” OMB considered all comments and made further revisions to specify that the merit review process should be periodically reviewed as a point of clarity on the process review.

OMB disagrees with the commenters that expressed these revisions will add burden. The purpose of these revisions is to add clarity to the merit review process which should already be occurring and is not a new requirement.

200.206 Federal Awarding Agency Review of Risk Posed by Applicants

As stated in the above section describing the comments received for § 200.102, one commenter felt that the inclusion of the requirement for agencies to “apply more restrictive terms and conditions when merited as indicated by a risk evaluation” did not warrant an exception from OMB and thus did not belong in the exceptions section. OMB concurred with the commenter, moved this language to 2 CFR 200.206
Federal awarding agency review of risk posed by applicants,
and provided revisions to the language to read “. . . adjust requirements when a risk-evaluation indicates that it may be merited either pre-award or post-award.” One commenter requested pass-through entities to have access to enter information into the FAPIIS system and require a pass-through entity review as part of the risk assessment process. OMB deliberated this comment and while it is an important topic for discussion, OMB feels the scope of this revision would be too substantial for finalization without receiving additional comments from the public. Thus, OMB respectfully declines this comment. Some commenters requested for OMB to include the requirement for Federal awarding agencies to leverage commercially available data management tools. OMB declines this comment and does not specify tools required for use.

200.208 Specific Conditions

As stated above in 2 CFR 200.102, some commenters were not supportive of the requirement of the language “or less restrictive requirements” in 2 CFR 200.102(c) and 200.208. Some commenters described this new language as confusing, redundant and not needed because Federal awarding agencies already have the discretion to impose conditions on the recipient. One commenter applauded OMB's decision to further emphasize the flexibilities afforded to Federal awarding agencies revise or remove certain requirements based on a risk analysis. After deliberation, OMB replaced this language with “the Federal awarding agency may adjust requirements to a class of Federal awards or non-Federal entities when approved by OMB . . . .”

200.211 Information Contained in a Federal Award

Some comments asked for clarity on the revisions that were proposed. One clarifying question was the difference between the data point for the “Total Approved Cost Sharing or Matching, where applicable” and “Total Amount of the Federal Award including approved Cost Sharing or Matching.” These are two completely separate data points which call for the approved cost sharing or matching to be identified, and then the total amount of the Federal award that is approved cost sharing or matching. OMB did not recommend that these were removed. Further, in response to various comments, the language in (a) was streamlined and users are referred to the relevant performance sections for additional information. The data points previously proposed in paragraph (b) related to performance were already captured in paragraph (a), and thus removed from (b). The proposed language for (e) was revised and moved to § 200.105(b) within the guidance. Many comments received suggested revisions that would make the language more prescriptive. Title 2 CFR was written as guidance for a large array of users. If the language is too prescriptive, it doesn't provide sufficient flexibility for use by the large array of users. Additional technical corrections were made for clarity throughout this provision. Revisions were made to § 200.211(c)(1)(iv) to clarify that if the underlying legal authority for a program changes, that may be a reason why there would be no future budget periods under an award.

200.301 Performance Measurement

Some commenters were in support of the revisions to this section. Many commenters provided suggestions for further revisions to the guidance. Several commenters provided suggestions with regards to the use of “should” and “must” throughout this section. Some commenters wanted the language to be written strongly and use the word “must” throughout, others preferred “should” and many suggested the use of these words should be consistent throughout this section. Some commenters also expressed the need for OMB to include data quality within this section. OMB concurs with the comments that consistent use of “must” and “may” should be used in this section. Some commenters also pointed out discrepancies between various performance sections and a few commenters pointed out that there are discrepancies between what is required in 2 CFR 200.211 and 200.301. In response to commenters, OMB re-wrote this section for clarity and consistency.

200.340 Termination

There were several comments received in response to the revisions proposed to this section. The comments can be group into the following discreet categories:

• Concern over arbitrary Federal award termination;

• Adding or editing language for clarity;

• Concern over how Federal awarding agencies will evaluate awards with long-term outcomes;

• Request further OMB guidance; and

• Not relevant.

The largest number of commenters expressed a concern that the proposed language will provide Federal agencies too much leverage to arbitrarily terminate awards without sufficient cause. Several commenters requested OMB reinstate the language,
for cause,
to address this issue. Some commenters requested additional clarity and examples. OMB deliberated upon these requests and decided as written agencies are not able to terminate grants arbitrarily and that it was not appropriate to include examples in 2 CFR for this section. OMB made a technical correction to provide additional clarity. Some commenters expressed concerns over how Federal awarding agencies will evaluate awards with long-term outcomes. One example from the commenter was an environmental program where the performance will require years to measure. The example from the commenter should be determined in coordination with the Federal awarding agency. OMB respectfully declines this comment. Title 2 CFR is intended to be written and used by a large array of stakeholders and thus the language is not intended to be prescriptive, as the commenter has requested. Some commenters requested further OMB guidance on this provision. OMB appreciates the request for additional

guidance and notes that guidance beyond what has been provided in the proposed rule is out of scope for this revision effort. Other comments provided were not relevant to the revisions proposed and thus OMB has rejected these comments.

200.413 Direct Costs

Most comments received for this 2 CFR 200.413 were in agreement of the revisions. The remaining comments were out of scope. Therefore, OMB did not make changes to the revised language. Some commenters requested OMB include additional examples for clarity that the activities are direct costs such as planning and program coordination, data technology, analytics, staff training, data collection, storage, communication of evaluation and analytics, and more. OMB appreciates the request to clarify additional examples as direct costs and would like to expand on this further in future revisions of 2 CFR. OMB does not think it is appropriate to include specific examples within the guidance because it could be unintentionally interpreted to be limited to only that list of items. However, as we think of ways to encourage promising performance practices, OMB would like to discuss this further during stakeholder sessions in the fall 2020.

200.328 Financial Reporting

There were some comments received in response to the revisions made to this provision. One commenter requested that the collection of information be no more frequently than semiannually to reduce burden. OMB declines this comment and notes that it was out of scope because there were no proposed changes to the frequency of financial reporting. One commenter requested that OMB add language to discourage pass-through entities from the practice of requiring more frequent and more detailed financial reporting. After discussion, OMB declines this comment as it is out of scope for this revision but will consider the comment for a future revision of 2 CFR. Several commenters sought clarification on the use of the term “OMB-designated standards lead.” Pursuant to the Grant Reporting Efficiency and Agreements Transparency Act of 2019 (GREAT Act), the OMB Director is required to designate a standard-setting agency (
i.e.,
the Executive department that administers the greatest number of programs under which Federal awards are issued in a calendar year). The Executive department designated by OMB as the standard-setting agency assists OMB with execution of the requirements of the GREAT Act.

In response to commenters' requests for clarity on the performance sections of the guidance, OMB moved the financial reporting requirement noted currently in 2 CFR 200.301
Performance measurement
to 2 CFR 200.328
Financial reporting.

200.329 Monitoring and Reporting Program Performance

Several commenters requested clarity regarding the “OMB-designated standards lead” and notes that this terminology has been used throughout the guidance. As mentioned above, one commenter also suggested a technical correction to reference the Grant Reporting Efficiency and Agreements Transparency (GREAT) Act for clarity on this designation. One commenter suggested that this provision should be tied together with the closeout provision with regards to the timeframe to submission of reports. OMB concurred with this commenter and made revisions accordingly. One commenter noted concern and confusion regarding the requirement that “costs must be charged to the approved budget period in which they were incurred.” The commenter also suggested edits to clarify this requirement. OMB concurred with the commenter and accepted the edits for incorporation into the package.

Appendix I to Part 200—Full Text of the Notice of Funding Opportunity

A number of commenters suggested edits to this section. One commenter suggested including the term “outcome” to indicate the end result and also include terms for tracking and determining if that end result is being or has been achieved. OMB agreed with this commenter and made the revisions accordingly. Another commenter suggested that OMB include the requirement for Federal awarding agencies to ensure SAM registration is current before making any advanced payments and/or issuing any reimbursements. OMB disagrees with this recommendation, as this requirements is already stated in 2 CFR 25.205.

B. Expanded Use of the De Minimis Rate

The revision to 2 CFR 200.414(f) expands use of the de minimis rate of 10 percent of modified total direct costs (MTDC) to all non-Federal entities (except for those described in Appendix VII to Part 200—State and Local Government and Indian Tribe Indirect Cost Proposals, paragraph D.1.b). Currently, the de minimis rate can only be used for non-Federal entities that have never received a negotiated indirect cost rate. The use of the de minimis rate has reduced burden for both the non-Federal entities and the Federal agencies for preparing, reviewing, and negotiating indirect cost rates. Since the publication of 2 CFR in 2013, both Federal agencies and non-Federal entities have advocated expansion of the de minimis rate for non-Federal entities that have negotiated an indirect cost rate previously, but for some circumstances, the negotiated rates have expired. The expiration may be due to breaks in Federal relationships and grant funding, or lack of resources for preparing an indirect cost proposal. This change will further reduce the administrative burden for non-Federal entities and Federal agencies and shift more resources toward accomplishing the program mission.

Another revision adds language to 2 CFR 200.414(f) to clarify that when a non-Federal entity is using the de minimis rate for its Federal grants, it is not required to provide proof of costs that are covered under that rate. The 10 percent de minimis rate was designed to reduce burden for small non-Federal entities and the requirement to document the actual indirect costs would eliminate the benefits of using the de minimis rate. Lastly, for transparency purposes, another revision adds a new paragraph (h) to § 200.414 to require that negotiated agreements for indirect cost rates are collected and displayed on a public website.

200.414 Indirect (F&A) Costs

200.414(f)

OMB received several comments that were concerned with awarding a de minimis rate that is higher than a Negotiated Indirect Cost Rate Agreement (NICRA). OMB concurs with the concerns regarding applying a higher de minimis rate in cases where a NICRA rate is lower than 10 percent. However, the regulation states in paragraph (c)(1) that Federal agencies must honor negotiated rates. Additionally, some commenters expressed concern that guidance will be misinterpreted to allow provisional rates to be considered as expired. OMB intends to include provisional rates and added clarifying language to the section in response to these comments. Further, commenters were concerned with a lack of required documentation. OMB concurs with concerns that the language implies source documents rather than the indirect cost rate agreement and altered the language accordingly. There were

several comments that suggested that the Modified Total Direct Cost (MTDC) be used as the base. However, this suggestion is out of the scope of this revision. Additionally, OMB would like to note that Federal agencies must accept the negotiated rate even if it is lower than the de minimis rate.

200.414(h)

OMB appreciated the many comments that supported the proposed requirement to post NICRAs to a public website. There were several comments that cited concerns over the sharing of proprietary information through the posting of NICRA information on a public website. To address these concerns, OMB clarified that the requirement is not for the entire rate agreement and added language to specify the exact information that is requested be provided for a non-Federal entity; the indirect negotiated rate; distribution base; and the rate type. In addition, the Indian tribes or tribal organizations, as defined in the Indian Self Determination, Education and Assistance Act, 25 U.S.C. 450b(1)) are excluded. Further, there were several comments that inquired about the applicability of this section. Lastly, there were comments that inquired about who is responsible for making sure this information is publically posted. OMB recognizes this concern and notes that the responsibility of the Federal government will be communicated appropriately.

C. Eliminate References to Non-Authoritative Guidance

To support implementation of E.O. 13892 of October 9, 2019 (Promoting the Rule of Law Through Transparency and Fairness in Civil Administrative Enforcement and Adjudication) and to prohibit Federal awarding agencies from including references to non-authoritative guidance in the terms and conditions of Federal awards, OMB proposed changes to § 200.105
Effect on other issuances.
The proposed change was intended to reduce recipient burden and prevent Federal awarding agencies from imposing non-binding guidance as award requirements for recipients that has not gone through appropriate public notice and comment. The proposed revisions related to eliminating references to non-authoritative guidance were included in 2 CFR 200.211(e)
Information contained in a Federal award.
Some commenters suggested for this requirement to be moved within the guidance to 2 CFR 200.105(b)
Effect on other issuances
for clarity of the policy intent. OMB concurred with the commenter's suggestion and moved the requirement accordingly.

200.105 Effect on Other Issuances

There were several commenters in strong support of this new provision while other commenters expressed concerns regarding the implementation. One commenter mentioned that finalizing this proposal would cause significant difficulties in effective implementation and effectively overseeing programs. OMB appreciates the comments received. To address concerns, the language was re-written to better align with E.O. 13892 and provide clarity.

D. Promoting Free Speech

Several provisions within 2 CFR are revised to align with E.O. 13798 “Promoting Free Speech and Religious Liberty” and E.O. 13864 “Improving Free Inquiry, Transparency, and Accountability at Colleges and Universities.” These sections include 2 CFR 200.300
Statutory and national policy requirements,
200.303
Internal controls,
200.339
Remedies for noncompliance,
and 200.341
Notification of termination requirement.
These E.O.s advise Federal awarding agencies on the requirements of religious liberty laws, including those laws that apply to grants and provide a policy for free inquiry at institutions receiving Federal grants. The revision to 2 CFR underscores the importance of compliance with the First Amendment.

200.209 Certifications and Representations, 200.300 Statutory and National Policy Requirements, 200.303 Internal Controls, 200.339 Remedies for Noncompliance, 200.341 Notification of Termination Requirement

OMB received several comments in response to this policy proposal. Some commenters supported compliance with the Constitution while other commenters questioned the need to include a reference to the Constitution. OMB appreciates all comments received and after consideration has decided to retain the proposed language within these sections. One comment suggested the removal of the word “statutory.” OMB concurred with this recommendation and made the change.

E. Standardization of Terminology and Implementation of Standard Data Elements

OMB is standardizing terms across 2 CFR part 200 to support efforts under the Grants CAP Goal to standardize the grants management business process and data. OMB is replacing the term “obligation” to either “financial obligation” or “responsibility” within the guidance as appropriate, to ensure alignment with DATA Act definitions. OMB is adding changes across the entirety of 2 CFR to ensure consistent use of terms across parts 25, 170, 183, and 200 where possible, relying on 2 CFR part 200 as the primary source. As reflected in the changes, there are instances where the terms within 2 CFR cannot be made consistent. For example, the term “non-Federal entity” cannot be consistently defined across 2 CFR: Parts 25 and 170 apply to Federal awards to foreign organizations, foreign public entities, and for-profit organizations, while part 200 only applies to these type of non-Federal entities when a Federal awarding agency elects for part 200 to apply. For definitions that are consistent across 2 CFR parts 25, 170, and 200, revisions have been made to parts 25 and 170 to refer definitions to part 200 as the authoritative source.

The definitions “Catalog for Federal Domestic Assistance (CFDA) number” and “CFDA program title” have been replaced with the terms “Assistance Listings number” and “Assistance Listings program title” to reflect the change in terminology.

OMB is also revising several definitions for clarity. For example, the term management decision is revised to emphasize that it is a written determination provided by a Federal awarding agency or pass-through entity.

To promote uniform application of standard data elements in future information collection requests, OMB is also revising 2 CFR 200.207 and 200.328 to reflect that information collection requests must adhere to the standards available from the OMB-designated standards lead. This change further supports OMB Memorandum M-19-16 Centralized Mission Support Capabilities for the Federal Government, which requires that future shared service solutions must adhere to the Federal Integrated Business Framework standards (available at:
https://ussm.gsa.gov/fibf/
).

Further, OMB is revising 2 CFR part 200 to replace the term “standard form” with “common form.” Some commenters submitted feedback with concerns that the change in terminology would allow agencies to create unique forms with a lack of standardization. OMB did not make any changes to the final language based on these comments. Existing forms widely adopted by Federal awarding agencies that are regularly referred to as standard forms are in fact common forms. For instance, the SF-424 series, SF-425,

and research performance progress report are all common forms/formats. OMB acknowledges that this is a significant change in how the community refers to these forms and will ensure that any future guidance on the adoption of standard data elements clarifies the use of common forms. More information regarding common forms and flexibility under the Paperwork Reduction Act is available at:
https://www.whitehouse.gov/omb/information-regulatory-affairs/federal-collection-information/.
Finally, OMB is reformatting the definitions section of 2 CFR part 200, subpart A—Acronyms and Definitions, by removing the section numbers to facilitate future additions to this section.

Subpart A—Acronyms and Definitions

New Defined Terms

Several commenters sought to clarify existing parts within 2 CFR and grant processes and procedures through the addition of several defined terms under 200.1
Definitions.
Examples of recommended terms to include were formula grant, program beneficiary/recipient, procurement, administrative costs, for-profit organization, conflict of interest, covered technology, architectural/engineering professional services, Federally-owned property, and demonstration.

In certain cases OMB agrees that additional terms may provide greater clarification to the regulation and the management of Federal financial assistance. OMB may consider the recommended definitions for the suggested terms in future updates to 2 CFR. In other cases, the terms are either not used in 2 CFR or are only applicable to a small number of Federal awarding agencies. OMB declined these recommendation either due to scope, or because they do not align with the intent of this regulation.

Inserting Programmatic Instruction in Definitions

Several commenters recommended inserting programmatic instruction for specific terms, which would provide more guidance for Federal agencies, non-Federal entities, auditors, or others.

OMB considered these comments, but determined that it was inappropriate to include programmatic guidance in the definition of terms for the regulation. The purpose of 2 CFR 200.1
Definitions
is to provide meaning for specified terms within the regulation; guidance and instruction is more appropriate other parts of 2 CFR.

Modification to Existing Definitions

Several commenters sought to clarify existing definitions by providing technical corrections or clarification statements.

In several cases, OMB agrees that technical corrections are necessary. The updates to these definitions are minor and did not affect the intent of the term. In other cases, the recommendations were either too substantive or did not align with the intent of this update to the regulation. OMB may consider these recommendations in future updates to 2 CFR.

Formatting

Several commenters disagreed with the removal of the numbering of the definitions. The commenters were concerned about the overall changes to the numbering of 2 CFR part 200, which would add burden to updating the non-Federal entities' policies and procedures.

OMB appreciates these concerns, but does not believe that the removal of the definition numbering will generate any significant additional burden on non-Federal entities, because these groups already should regularly review and update their policies and procedures to ensure compliance with Federal, state, and local laws and regulations. This revision is expected to limit future burden for non-Federal entities in the event of new terms are added to this section of part 200, which would change the section's numeration.

Subpart A—Specific Definitions

Compliance Supplement

A number of commenters recommended clarifying the definition of compliance supplement and offered revised wording for the definition. OMB concurred and adapted the definition in consultation with members of the interagency working group. One commenter recommended revising the definition to frame the compliance supplement as the sole source of information for auditors. OMB did not include this recommendation because the compliance supplement is one of the authoritative sources that auditors can use when auditing Federal programs. Other sources include Federal awarding agency and program specific documents.

Contract

One commenter noted that the definition of contract was confusing, while another recommended cross-referencing the Subrecipient and Contractor Determinations subsection (§ 200.331). OMB agreed with this assessment and updated the definition to make it easier to read, understand, and use. Another commenter recommended the addition of mutual aid or intergovernmental agreements to the definition of contract. This change was not considered because it would substantively alter the definition without providing the public the opportunity to comment on the revision.

Cooperative Agreement, Grant Agreement

One commenter recommended specifically explaining “transfer anything of value” in the definitions of cooperative agreement and grant agreement. OMB opted to keep the existing language because both definitions cite 31 U.S.C. 6101(3), which provides the scope of the “transfer of anything of value.” A commenter recommended further describing substantial involvement in the definition of cooperative agreement. This change was not considered because the Federal awarding agency and the recipient are given the discretion to negotiate this relationship. Another commenter stated that there was a conflict §§ 25.306 and 200.1 associated with the transfer of land or property. OMB disagrees as the two definitions align and are also in alignment with the associated legislation. Through the review of the definitions of cooperative agreement and grant agreement, OMB and members of the working group clarified that the relationship was between the Federal awarding agency and a recipient or a pass-through entity and a subrecipient.

Discretionary, Non-Discretionary Award

Technical edits were made to the definitions of discretionary award and non-discretionary award to provide clarity to the intended definitions.

Federal Interest

Two commenters recommended correcting the formula for determining
Federal interest,
noting that reliance on the Federal share of the total project costs does not appropriately account for the Federal interest in real property, equipment, or supplies. OMB agreed with this recommendation and amended the definition to appropriately rely on the percentage of Federal participation in the total cost of the real property, equipment, or supplies as part of the formula.

Recipient

One commenter recommended amending recipient be inclusive of entities that are not necessarily non-Federal entities such as for-profit and

foreign entities as well as Federal agencies. OMB agreed with this assessment and updated the definition appropriately.

Subsidiary

One commenter recommended replacing non-Federal entity with entity, while another recommended adding “or controlled” after owned to be more inclusive of a diversity of organizations that may have subsidiaries. Several other commenters were confused by the reference to the FAR or found it to be redundant, recommending that it be removed from the definition. OMB agreed with these recommended changes to the definition and incorporated them, as appropriate.

Period of Performance, Budget Period, and Renewal

OMB also revised the proposed definitions of period of performance, budget period, and renewal in 2 CFR part 200, as there were a significant number of comments from varying stakeholders indicating that the proposed revised definitions of period of performance, budget period, and renewal created more confusion than clarity. In response, the final rule revises the definitions for these terms to clarify how period of performance, budget period, and renewal operationally relate. Additionally, the final rule revises 2 CFR 200.309 to better describe how the period of performance is modified if there is an extension or termination of a current award. Some commenters expressed concern about the removal of pass-through entities' authority to allow pre-award costs to subrecipients. It was not OMB's intention to remove the pass-through entities' authority to allow pre-award costs to subrecipients. OMB recognizes these concerns and added language to 2 CFR 200.458 for clarification in response to commenters. Further, there were many comments that expressed concern about removing 2 CFR 200.309 from the guidance due to burden with other entities that reference 2 CFR within their own rules and regulations. Including 2 CFR 200.309 in the final publication will eliminate that concern from commenters.

The definition of period of performance and renewal was revised to help clarify that the term period of performance reflects the total estimated time interval between the start of an initial Federal award and the planned end date, and that the period of performance may include one or more budget periods, but the identification of the period of performance does not commit funding beyond the currently approved budget period. The definition of budget period was edited to clarify that recipients are authorized to expend the current funds awarded, including any funds carried forward or other revisions pursuant to 2 CFR 200.308. Further, recipients may only incur costs during the first year budget period until subsequent budget periods are funded based on the availability of appropriations, satisfactory performance, and compliance with the terms and conditions of the award. The definition of renewal was edited to help clarify that a renewal award begins a distinct period of performance that starts contiguous with, or closely following, the end of the expiring award. This change also ensures consistent use of the term for purposes of transparency reporting as required by FFATA.

200.403 Factors Affecting Allowability of Costs

To maintain consistency within the guidance regarding the definition of
Budget Period,
2 CFR 200.403(h) has been added to clarify that costs must be incurred during the approved budget period and the Federal awarding agency may waive prior written approval to carry forward unobligated balances to subsequent budget periods.

Improper Payment, Questioned Costs

Based on some confusion expressed in comments, the definition of improper payment was revised to accurately reflect how questioned costs, including costs questioned costs identified in audits, are not improper payments until reviewed and confirmed as such.

Internal Controls

Based on some confusion expressed in comments, minor modifications to the definition of internal controls were made to provide greater clarity on the internal controls requirements for non-Federal entities and Federal agencies.

Oversight Agency for Audit

Several commenters expressed confusion with the revision to this definition. Some commenters provided suggested edits for clarity. After deliberation and in response to the commenters, OMB made further edits to this definition for clarity.

Simplified Acquisition Threshold, Micro-Purchase

Multiple commenters were confused by the second paragraph proposed to be added to the definition for
simplified acquisition threshold.
Revisions were made to this paragraph to alleviate confusion and accurately reflect how the simplified acquisition may be determined. Minor technical edits were made to the definition for
micro-purchase,
based on comments, to clarify that the cognizant agency for indirect costs may approve a higher micro-purchase threshold if requested by the non-Federal entity.

F. Support for Domestic Preferences for Procurement

As expressed in Executive Order (E.O) 13788 of April 18, 2017 (Buy American and Hire American) and E.O. 13858 of January 21, 2019 (Executive Order on Strengthening Buy-American Preferences for Infrastructure Projects), it is the policy of this Administration to maximize, consistent with law, the use of goods, products, and materials produced in the United States, in Federal procurements and through the terms and conditions of Federal financial assistance awards. In support of this policy, OMB is adding a new section 2 CFR 200.322
Domestic preferences for procurement,
encouraging Federal award recipients, to the extent permitted by law, to maximize use of goods, products, and materials produced in the United States when procuring goods and services under Federal awards. This Part will apply to procurements under a grant or cooperative agreement.

200.322 Domestic Preferences for Procurement

OMB appreciates the many comments were very supportive of this section. Several comments suggested including language in Appendix II because the proposed new 2 CFR 200.322 includes the requirement that such term be flowed down to all contracts and purchase orders. OMB accepts this change and has made the appropriate edits to the final language. Several comments asked for clarification regarding how preference is given. OMB rejects this change as the language gives Federal awarding agencies the flexibility to adjust their guidance accordingly. Further, another comment suggested to exempt purchases below the micro-purchase threshold from requirements in this section to reduce the burden on non-Federal entities. OMB rejects this suggestion as OMB does not agree with the assessment that an additional burden is being placed. The language did not set a dollar threshold and instead states that domestic preference should be used as appropriate and to “to the maximum extent practicable.” One commenter suggested a reference to this section should also be included in

Appendix II to Part 200—Contract Provisions for Non-Federal Entity

Contracts Under Federal Awards

. OMB concurred with this commenter and made the revision accordingly.

G. Changes to the Procurement Standards to Better Target Areas of Greater Risk and Conform to Statutory Requirements

To better target 2 CFR requirements on areas of greater risk consistent with the intent of the Grants CAP Goal, and to align with legislation related to procurement standards, OMB is revising the guidance to increase the micro-purchase threshold from $3,500 to $10,000, raising the simplified acquisition threshold from $100,000 to $250,000, and allowing non-Federal entities to request a micro-purchase threshold higher than $10,000 based on certain conditions. The NDAA 2017 increased the micro-purchase threshold from $3,500 to $10,000 for institutions of higher education, or related or affiliated nonprofit entities, nonprofit research organizations or independent research institutes (41 U.S.C. 1908).

The NDAA 2017 also established an interim uniform process by which these recipients can request, and Federal awarding agencies can approve requests to apply, a higher micro-purchase threshold. Specifically, the NDAA 2017 allowed a threshold above $10,000, if approved by the head of the relevant executive agency and consistent with clean audit findings under chapter 75 of title 31, internal institutional risk assessment, or State law. The NDAA for FY 2018 (NDAA 2018) increased the micro-purchase threshold to $10,000 for all recipients and also increased the simplified acquisition threshold from $100,000 to $250,000 for all recipients. The revisions to § 200.320 outline a permanent process by which non-Federal entities may establish a micro-purchase level above the $10,000 threshold.

A proposal to increase the micro-purchase and simplified acquisition thresholds in the Federal Acquisition Regulation (FAR) was published in the
Federal Register
on October 2, 2019 (84 FR 52420), FAR Case 2018-004. The FAR Rules at 48 CFR part 2, subpart 2.1, were finalized on July 2, 2020 (85 FR 40060, 85 FR 40064) with the effective date of August 31, 2020. In addition, the American Innovation and Competitiveness Act of 2017 (AICA), section 207(b) required that 2 CFR part 200 be revised to conform to the requirements concerning the micro-purchase threshold.

In response to these statutory changes, OMB issued OMB Memorandum M-18-18, Implementing Statutory Changes to the Micro-Purchase and the Simplified Acquisition Thresholds for Financial Assistance (June 20, 2018) which is now incorporated in 200.320. With the final procurement guidance now implemented, OMB Memorandum M-18-18 is rescinded.

200.320 Methods of Procurement To Be Followed

There were nearly 100 comments received relating to this section. Many expressed confusion with the proposed revisions and provided recommendations for clarity. In response, the section was rewritten to incorporate many of the suggestions from commenters.

The following revisions were made to 2 CFR 200.320:

• The procurement types were grouped into three categories: (1) Informal (micro-purchase, small purchase); (2) formal (sealed bids, proposals) and (3) Non-Competitive (sole source)

• The micro-purchase threshold was raised from $3,500 to $10,000

• All non-Federal entities are now authorized to request a micro-purchase threshold higher than $10,000 based on certain conditions that include a requirement to maintain records for threshold up to $50,000 and a formal approval process by the Federal government for threshold above $50,000; and

• The simplified acquisition threshold was raised from $150,000 to $250,000

200.321 Contracting With Small and Minority Businesses, Women's Business Enterprises, and Labor Surplus Area Firms

Several comments were made regarding this section that were out of scope for the current set of revisions. As such, no changes to the proposed language will be made at this time.

200.317 Procurements by States

One commenter suggested that 2 CFR 200.317 should reference the procurement requirements in 2 CFR 200.322 Domestic preference for procurements, as it is applicable to all non-Federal entities. OMB concurred with the commenter and made revisions accordingly.

200.318 General Procurement Standards

One commenter expressed strong support for the revisions proposed for this provision. Most commenters provided suggested edits for clarity. One commenter provided suggested edits to clarify that the “. . . non-Federal entity must use its own documented procurement procedures which must conform to applicable State, local, and tribal laws and regulations; and Federal law. In addition, procurements for goods and services that are directly charged to a Federal award must conform to the standards identified in this part.” OMB agreed with this clarifying revision and incorporated it within 2 CFR 200.318.

200.319 Competition

One commenter expressed support for the revisions to 2 CFR 200.319. Other commenters provided suggested edits for clarity. One commenter asked for clarity of the meaning “section” and expressed the entire subpart D should be referenced. OMB declines this comment and notes that the term “section” should not be interpreted to mean the entire subpart D and the proposed revisions to 2 CFR 200.319 only adds a new reference to 2 CFR 200.320. This new language in no way infers that the other procurement provisions do not apply. One commenter expressed that it is unclear what “required” under an award means. OMB notes that this language is used throughout the document as no such change was made.

H. Emphasis on Machine-Readable Information Format

OMB aims to clarify the methods for collection, transmission, and storage of data in 2 CFR 200.336 to further explain and promote the collection of data in machine-readable formats. A machine-readable format is a format that can be easily processed by a computer without human intervention while ensuring no semantic meaning is lost (44 U.S.C. 3502(18)). The clarification reinforces the machine-readable requirements in
the Foundations of Evidence-Based Policymaking Act of 2018
(Pub. L. 115-435) and accompanying OMB guidance. This requirement also reflects the need to continually evaluate which formats (and structures) maximize accessibility and usability for all stakeholders. Machine-readable formats will also help support the Leveraging Data as a Strategic Asset Cross-Agency Priority Goal (CAP Goal #2) and efforts under the Grants CAP Goal to Build Shared IT Infrastructure.

200.336 Methods for Collection, Transmission, and Storage of Information

OMB received some comments on 2 CFR 200.336 requesting the inclusion of PDFs in the language. OMB declined this suggestion since prescribing a specific format in official guidance was deemed inappropriate.

I. Changes to Closeout Provisions To Reduce Recipient Burden and Support GONE Act Implementation

Based on lessons learned from the implementation of 2 CFR part 200 and the Grants Oversight and New Efficiency Act (GONE Act), OMB is revising 2 CFR 200.344
Closeout
to support timely closeout of awards, improve the accuracy of final closeout reporting, and reduce recipient burden.

The final language will increase the number of days for recipients to submit closeout reports and liquidate all financial obligations from 90 days to 120 days. This change takes into consideration the challenges faced by pass-through entities with respect to awards that contain a large number of subawards. These recipients must reconcile subawards and submit final reports to Federal awarding agencies within the same 90 day period. Recognizing the need for pass-through entities to receive timely reports from subrecipients to report back to Federal awarding agencies, OMB will continue to require subrecipients to submit their reports to the pass-through entity within 90 days. The intent of this change is to support financial reconciliation, help ease the burden associated with submitting reports for closeout, and promote improved accuracy. However, OMB recognizes that providing additional time may increase the likelihood that non-Federal entities will not submit their final closeout reports. To mitigate this risk, OMB is requiring Federal awarding agencies to report when a non-Federal entity does not submit final closeout reports as a failure to comply with the terms and conditions of the award to the OMB-designated integrity and performance system. Finally, OMB is publishing the requirement of Federal awarding agencies to make every effort to close out Federal awards within one year after the end of the period of performance unless otherwise directed by authorizing statute. The language is intended to promote timely closeout of awards, assist with reconciling closeout activities, and hold recipients accountable for submitting required closeout reports.

200.344 Closeout

Many of the comments in response to revisions to 2 CFR 200.344 were in support of the proposed revisions. The two sections listed below received the highest volume of comments.

200.344(a)

OMB is appreciative of the many commenters who supported the proposed extension of deadlines for the submission of reports. Due to the significant amount of support for the changes, OMB is keeping the language published in the proposed version. OMB also received comments to permit pass-through entities to establish earlier dates, in accordance with existing practice. OMB accepts this recommendation. OMB also received comments relating to final indirect cost rates after the end of the period of performance. OMB rejects these suggestions, as a revised final Federal financial report can be submitted after closeout. Therefore, lengthening the deadline would not have an impact. OMB is making several small changes based on received comments, such as changing “non-Federal entity” to “recipient” and adding “or an earlier date as agreed upon by the pass-through entity and subrecipient.”

200.344(i)

OMB received several comments that recommended making the Federal Awardee Performance and Integrity Information System (FAPIIS) entries optional. The intent of the added regulation was to hold recipients accountable and share performance across Federal agencies, which promotes results-oriented grantmaking. Therefore, OMB is finalizing the language that makes entry into FAPIIS mandatory. Further, it should be noted that entry into FAPIIS does not constitute a termination, which OMB has clarified in the final language.

200.345 Post-Closeout Adjustments and Continuing Responsibilities

Some commenters expressed concerns that the language proposed for this provision was too open-ended and the period could extend beyond record retention. OMB concurred with the commenters and made revisions to address these concerns.

J. Changes to Performing the Governmentwide Audit Quality Project

Revisions to 2 CFR 200.513 include a change in the date for the requirement for a governmentwide audit data quality project that must be performed once every 6 years beginning with audits submitted in 2018. This date has been changed to 2021, given the significant changes to the 2019 Compliance Supplement in support of the Grants CAP Goal.

200.513 Responsibilities

Comments in response to the change regarding the assignment of the cognizant agency for audit responsibilities based on the direct funding and total funding were positive and thus OMB did not make changes to the language for the final publication. We clarified that the determination for funding is based the federal award expenditures as reported in the recipient's Schedule of expenditures of Federal Awards (see § 200.510(b)). Commenters in response on the governmentwide project to determine the quality of single audits suggested a delay on such project by a few years due the changes in the 2019 Compliance Supplement regarding the maximum of review for compliance areas. Commenters also suggested the use of current and on-going quality review performed by agencies on single audits to substitute or complement the governmentwide project. We agreed on the suggested timing of the project and have removed the specific date listed in the proposal. OMB will work with the agencies and the single audit stakeholders to determine a future date for the project that is more optimal. OMB added language to address that current quality control review work performed by the agencies can be leveraged for the governmentwide project.

II. Meeting Statutory Requirements and Aligning 2 CFR With Other Authoritative Source Requirements

A. Prohibition on Certain Telecommunication and Video Surveillance Services or Equipment

OMB revised 2 CFR to align with section 889 of the NDAA for FY 2019 (NDAA 2019). The NDAA 2019 prohibits the head of an executive agency from obligating or expending loan or grant funds to procure or obtain, extend or renew a contract to procure or obtain, or enter into a contract (or extend or renew a contract) to procure or obtain the equipment, services, or systems prohibited systems as identified in NDAA 2019. To implement this requirement, OMB is adding a new section, 2 CFR 200.216
Prohibition on certain telecommunication and video surveillance services or equipment,
which prohibit Federal award recipients from using government funds to enter into contracts (or extend or renew contracts) with entities that use covered telecommunications equipment or services. This prohibition applies even if the contract is not intended to procure or obtain, any equipment, system, or service that uses covered telecommunications equipment or services. As described in section 889 of the NDAA 2019, covered telecommunications equipment or services includes:

Telecommunications equipment produced by Huawei Technologies Company or ZTE Corporation (or any subsidiary or affiliate of such entities).

For the purpose of public safety, security of government facilities, physical security surveillance of critical infrastructure, and other national security purposes, video surveillance and telecommunications equipment produced by Hytera Communications Corporation, Hangzhou Hikvision Digital Technology Company, or Dahua Technology Company (or any subsidiary or affiliate of such entities).

Telecommunications or video surveillance services provided by such entities or using such equipment.

Telecommunications or video surveillance equipment or services produced or provided by an entity that the Secretary of Defense, in consultation with the Director of the National Intelligence or the Director of the Federal Bureau of Investigation, reasonably believes to be an entity owned or controlled by, or otherwise connected to, the government of a covered foreign country.

200.216 Prohibition on Certain Telecommunication and Video Surveillance Services or Equipment

Commenters expressed widespread concerns on the impact and implementation of the statutory requirement. OMB sought to address commenter concerns by re-writing this section to align closely with the law, add a new definition for telecommunications and video surveillance costs, and add a new section 2 CFR 200.471. The final language provides guidance describing the meaning of covered telecommunications as explained in the statute. The language also aligns with the requirements in the statute affecting the financial assistance community to include the prohibition of non-Federal entities from obligating or expending loan or grant funds to (1) procure or obtain, (2) extend or renew a contract to procure or obtain, or (3) enter into a contract (or extend or renew a contract) to procure or obtain, equipment, services, or systems that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as a critical technology as part of any system.

Federal awarding agencies are also required by the law to work with OMB to prioritize available funding and technical support to assist affected businesses, institutions and organizations. In addition, the funds must be prioritized as reasonably necessary for affected entities to transition from covered communications equipment and services, to procure replacement equipment and services, and to ensure that communications service to users and customers is sustained. Further, OMB added a new 2 CFR 200.471
Telecommunication and video surveillance costs
to provide clarity that the telecommunications and video surveillance costs associated with 2 CFR 200.216 are unallowable. A new definition for
telecommunication and video surveillance costs,
which is described in 2 CFR 200.471, has also been added to 2 CFR for clarity.

B. Never Contract With the Enemy

To meet statutory requirements, OMB is adding part 183 to 2 CFR to implement Never Contract with the Enemy, consistent with the fact that the law applies to only a small number of grants and cooperative agreements. Never Contract with the Enemy applies only to grants and cooperative agreements that exceed $50,000, are performed outside the United States, including U.S. territories, to a person or entity that is actively opposing United States or coalition forces involved in a contingency operation in which members of the Armed Forces are actively engaged in hostilities.

To implement Never Contract with the Enemy and to reflect current practice, OMB requires Federal awarding agencies to utilize the System for Award Management (SAM) Exclusions and the FAPIIS to ensure compliance before awarding a grant or cooperative agreement. Federal awarding agencies are prohibited from making awards to persons or entities listed in SAM Exclusions (NDAA 2017) pursuant to Never Contract with the Enemy and are required to list in FAPIIS any grant or cooperative agreement terminated due to Never Contract with the Enemy as a Termination for Material Failure to Comply. The revisions also require agencies to insert terms and conditions in grants and cooperative agreements regarding non-Federal entities' responsibilities to ensure no Federal award funds are provided directly or indirectly to the enemy, to terminate subawards in violation of Never Contract with the Enemy, and to allow the Federal Government access to records to ensure that no Federal award funds are provided to the enemy.

The law allows Federal awarding agencies to terminate, in whole or in part any grant, cooperative agreement, or contract that provides funds to the enemy, as defined in the NDAA for FY 2015 (NDAA 2015). This statute applies to procurement as well as to grants and cooperative agreements. OMB coordinated with the procurement community as appropriate before issuing this final guidance, including the roles and responsibilities of the covered combatant command and Federal awarding agencies.

Part 183 Never Contract With the Enemy

Many of the comments focused on aligning the regulation with the authorizing legislation and streamlining and using consistent terms in the regulatory language. OMB concurred with these comments and made the necessary changes to the language. OMB also agreed with several comments suggested the use of “recipient” rather than “non-Federal entity.” In addition, OMB revised part 183 to include a reference to void covered grants or cooperative agreements, and updated specific parts of the legislative authority that were set to expire by aligning with recently passed legislation for the extension of dates.

A couple commenters noted the potential burden associated with checking
SAM.gov
on a monthly basis. OMB concurred with these comments and revised the language accordingly.

C. Requirement for the FAPIIS To Include Information on a Non-Federal Entity's Parent, Subsidiary, or Successor Entities

To meet statutory requirements, OMB revised 2 CFR parts 25 and 200 to implement Sec. 852 of the NDAA for FY 2013 (NDAA 2013), which requires that the FAPIIS include information on a non-Federal entity's parent, subsidiary, or successor entities. OMB requires financial assistance applicants to provide information in SAM on their immediate owner and highest-level owner and subsidiaries, as well as on all predecessors that have been awarded a Federal contract, grant, or cooperative agreement within the last three years. In addition, OMB requires that prior to making a grant or cooperative agreement, agencies must consider all of the information in FAPIIS with regard to an applicant's immediate owner or highest-level owner and predecessor, or subsidiary, if applicable. These revisions are consistent with the Federal Acquisition Regulation (FAR) final rule regarding this law published at 81 FR 11988 on March 7, 2016.

Part 25 Universal Identifier and System for Award Management

OMB received a significant number of comments concerning subrecipient requirements and registration with the

SAM database. These commenters expressed concern with requiring subrecipients to fully register with the SAM database. The commenters thought this requirement would be overly burdensome and was unnecessary.

It was not OMB's intention to require subrecipients to fully register with the SAM database. To address this concern, OMB added a new “Subpart C-Recipient requirements of subrecipients” and a note to the terms in appendix A to clearly state that subrecipients do not need to fully register with the SAM database.

Further, several commenters thought the addition of the requirement for subrecipients to register with the SAM database, Federal agencies applying for or receiving Federal awards register in the SAM database made sections of part 25 confusing. The commenters thought that using the term “Federal agency” could be misunderstood. Some commenters thought this was particularly true with regard to section 100.

OMB agreed that the addition of the term “Federal agency” in part 25 made the requirements in part 25 less clear. OMB and the interagency work group also thought that there was a need for additional clarity on who the requirements actually apply to and in what situation. As a result, OMB added definitions for “applicant” and “recipient” in part 25 and removed “non-Federal entity” and “Federal agency” where appropriate throughout part 25.

25.200 Requirements for Notice of Funding Opportunities, Regulations, and Application Instructions

Several commenters stated that their organizations do not have a higher level owner or subsidiaries and they may not have predecessors. OMB recognizes that not all entities will have the same organizational structure. The purpose of providing this information is for greater transparency in the awarding of Federal financial assistance. The regulatory language requires that applicants and recipients must provide the information “if applicable.” If the requested information is not applicable, an applicant or recipient would not be required to report it.

D. Increase Transparency Through FFATA, as Amended by the DATA Act

OMB made several revisions to increase transparency regarding Federal spending as required by FFATA, as amended by the DATA Act, which mandates Federal agencies to report Federal appropriations received or expended by Federal agencies and non-Federal entities. OMB has revised the reporting thresholds to further align financial assistance requirements with those of the Federal acquisition community.

To increase transparency, OMB extended the applicability of Federal financial assistance in 2 CFR part 25 and 2 CFR part 170 beyond grants and cooperative agreements so that it includes other types of financial assistance that Federal agencies receive or administer such as loans, insurance, contributions, and direct appropriations.

OMB also made changes throughout 2 CFR to make it clear that Federal agencies may receive Federal financial assistance awards. This will increase transparency for Federal awards received by Federal agencies.

To further align implementation of FFATA, as amended by DATA Act, between the Federal financial assistance and acquisition communities, OMB revises the Federal awarding agency and pass-through entity reporting thresholds. For Federal awarding agencies, OMB revises 2 CFR part 170 to require agencies to report Federal awards that equal or exceed the micro-purchase threshold as set by the FAR at 48 CFR part 2, subpart 2.1. Consistent with the FAR threshold for subcontract reporting, OMB will raise the reporting threshold for subawards that equal or exceed $30,000.

OMB proposed to revise 2 CFR part 25 to allow agencies the flexibility to exempt a foreign entity applying for or receiving an award for a project or program performed outside the United States valued at less than $100,000. Currently, Federal awarding agencies have the flexibility to exempt this requirement for awards valued at less than $25,000. The exemption applies to cases where the Federal agency has conducted a risk-based analysis and deems it impractical for the entity to comply with the requirements(s). OMB proposed to make this revision after receiving feedback from the international community that requiring certain foreign entities to register in SAM introduces substantial burden with no significant value for the Federal awarding agency. Federal awarding agencies will continue to remain responsible for reporting these awards for transparency purposes.

Finally, OMB will require Federal awarding agencies to associate Federal Assistance Listings with the authorizing statute to make listings more consistent. This supports implementation of the DATA Act which requires agencies to report award level Federal Assistance Listings information for display on
www.usaspending.gov.

Part 25 Universal Identifier and System for Award Management

Some commenters expressed concern regarding the proposal to expand SAM registration requirements to all type of Federal financial assistance as required by FFATA. Specifically, commenters requested clarity on who is considered the applicant or recipient in cases when the intended recipient does not have a direct relationship with the Federal awarding agency. For instance, for certain loan and loan guarantee programs, a third-party administers the program on behalf of the Federal awarding agency. One organization specifically expressed concern that these third-party administers may not participate in loan guarantee programs, if they are required to register in SAM. OMB disagrees that it is overly burdensome for third-party administrators to register in SAM, however, OMB agreed that it would be inappropriate to have the intended recipient who does not have a direct relationship with the Federal awarding agency to register in these instances. In response to these comments, OMB revised the definitions of applicant and recipient to clarify that SAM registration requirements apply to those entities that receive Federal awards directly from a Federal awarding agency and that applicants and recipients also include those entities that administer Federal awards on behalf of Federal awarding agencies.

25.110 Exceptions to This Part

Some commenters supported raising the threshold for foreign organizations or foreign public entities to $100,000 in 2 CFR 25.110. Other commenters expressed concerns that a thorough pre-award Federal review would not be conducted for foreign entity recipients under this higher threshold and it would be a disservice to the American taxpayer to raise the threshold. OMB also received comments that requiring Federal awarding agencies to only grant exemptions to foreign organizations or foreign public entities on a case-by-case basis to be overly burdensome.

OMB does not think that requiring Federal awarding agencies to determine whether to grant exemptions to foreign organizations or foreign public entities on a case-by-case basis is overly burdensome. Considering the comments received, OMB decided to retain the current threshold of $25,000.

Based on feedback provided by agencies and in light of the COVID-19 emergency and past emergency

situations where this requirement has been waived, OMB added an exception in § 25.110 allowing agencies to waive the requirement to register in SAM when there are exigent circumstances that would prevent an applicant from registering prior to the submission of an application. Federal awarding agencies are responsible for the determination on whether there are exigent circumstances that prevent an applicant from registering in SAM and are no longer required to request a waiver from OMB in these instances.

Part 170 Reporting Subaward and Executive Compensation Information

170 Definitions

Several commenters mentioned the difference between the term non-Federal entity in part 170 and part 200 and requested that part 170 reference part 200 for this definition. Related comments also were provided to the definitions of foreign organizations and foreign public entity. The definition of non-Federal entity in part 170 intentionally includes foreign organizations, foreign public entities, and for-profit organizations, which is not included in the definition of non-Federal entity in part 200. Part 200 only applies to these organization types when a Federal awarding agency chooses to apply the requirements in their adoption of part 200. Part 170 applies to foreign and for-profit organizations because of the Federal Funding Accountability and Transparency Act (Pub. L. 109-282, hereafter cited as “Transparency Act”) requirements. Thus, the definition for non-Federal entity in part 200 and part 170 will remain different.

170.110 Types of Entities to Which This Part Applies

Several commenters requested clarification on the language surrounding “non-Federal” and “Federal agencies.” OMB concurred with these comments and made the corresponding changes to ensure clarity. Further, OMB also agreed with comments that suggested clarification to § 170.110(b) in relation to Title IV funds and made the subsequent edits in the final language.

170.115 Deviations

OMB concurred with comments asking to define “deviation” to differentiate between exceptions by removing “deviation” and adding paragraph (c) to “Types of Exemptions.”

170.200 Federal Awarding Agency Reporting

OMB received several comments suggesting that a reference to the definition for micro-purchase in § 200.1 be added to the end of the section. OMB concurred and made this change in the final language. Further, OMB received comments relating to the grammatical structuring of this section. After further review, OMB retained the existing language.

170.210 Requirements for Notices of Funding Opportunities, Regulations, and Application Instructions

OMB concurred with a comment that suggested including the information on the requirements for Notice of Funding Opportunity found in 2 CFR 200.204 and appendix I to part 200. OMB made the suggested changes to appendix I to include these references. Further, comments inquired if OMB has considered collecting the assurance from applicants when they register and renew in
beta.SAM.gov.
OMB would like to note that this is already part of the requirements for award terms and conditions, and the needed assurance should go into the Compliance Supplement for auditors to check that the assurance is received from the recipient. Therefore, no changes related to obtaining assurances were made to the language in this section.

170.220 Award Term

Several commenters referenced the thresholds discussed in part 25. OMB would like to point out that the thresholds in part 25 are unrelated to the threshold in § 170.220. Additionally, several comments suggested changes that were outside of the scope of this revision. OMB concurred with a suggestion to remove a reference to the Recovery Act in appendix A. Further, a comment suggested the deletion of the insertion of “and Federal agency” in paragraph (a) of this section. OMB notes that some agencies can make awards to other agencies, dependent on the authority. Therefore, it is necessary to keep the language that was used in the proposed version. One commenter noted that raising the subaward reporting threshold from $25,000 to $30,000 is unlikely to result in greater efficiencies or ease administrative requirements and recommended for the threshold to be increased to at least $75,000 or $100,000. OMB disagrees with this commenter's recommendation, as the purpose of this change was to further align implementation of FFATA, as amended by DATA Act, between the Federal financial assistance and acquisition communities.

170.305 Federal Award

Commenters had questions relating to how this definition differs from part 200. OMB would like to note that the definition differs because this section is discussing Federal awards in the context of “direct” federal awards. Federal award in part 200 includes is more expansive to include caveats depending on which section it is applied to, so the definition cannot be the same. As such, the proposed language remains.

170.315 Executive

One comment suggested clarifying this definition as many recipients of Federal awards are state and local governments with elected officials. OMB rejected this change as this is already covered within the “Exceptions” to this section. Further, one comment requested that this definition be included in part 200. OMB aims to eliminate duplicative definitions and thus respectfully declines this comment to also include the definition in part 200.

170.320 Federal Financial Assistance Subject to the Transparency Act

A commenter noted that the term Federal financial assistance subject to the Transparency Act is not defined in part 200. OMB concurred with this comment and made edits to the definition in § 170.320 to clarify that the term includes Federal financial assistance as defined in part 200, with some limited exceptions.

170.325 Subaward

Commenters recommended deleting the definition for “Subaward” and including a reference to the definition used in part 200 to reduce duplication. OMB concurred with this recommendation and made the subsequent change.

E. Aligning 2 CFR With Authoritative Sources

OMB revises 2 CFR 200.431 to allow states to conform with Generally Accepted Accounting Principles (GAAP), specifically Governmental Accounting Standards Board (GASB) Statement 68, and to continue to claim pension costs that are both actual and funded. OMB has made this revision because GASB issued Statement 68,
Accounting and Financial Reporting for Pensions
which amends GASB Statement 27 and allows non-Federal entities (NFE) to claim only estimated pension costs in their financial

statements. OMB's revision will allow non-Federal entities to continue to claim pension costs that are both actual and funded.

200.431 Compensation

OMB appreciated the comments in support of the proposed changes. In response to several comments that asked for clarification, OMB is revising the final language to require state and local governments to be compliant with GASB #68 for pension costs. OMB would like to note that the cost associated with each fiscal year should be determined in accordance with GAAP.

The definition for “Improper Payment” has been revised to refer to the authoritative source for clarity, OMB Circular A-123—Management's Responsibility for Internal Control in Federal Agencies, Appendix C—Requirements for Payment Integrity Improvement. See above Section I for additional information on the changes to “Improper Payment.”

Some commenters expressed that the reference to OMB Circular A-123 for the definition of “Improper Payment” added confusion and suggested retaining the original language. OMB considered this request and respectfully declined the comment in keeping with the practice to align the guidance with source documents, if possible.

III. Clarifying Requirements Regarding Areas of Misinterpretation

Following the publication of 2 CFR part 200, OMB received a substantial amount of questions from stakeholders requesting clarifications about key aspects of the guidance. In other instances, it has come to OMB's attention that the interpretation of certain provisions was not consistent with the intent of 2 CFR part 200. In response, OMB is publishing clarifications that are aimed at reducing recipient administration burden and ensuring consistent interpretation of guidance.

A. Responsibilities of the Pass-Through Entity To Address Only a Subrecipient's Audit Findings Related to Their Subaward

To clarify requirements regarding responsibility for audit findings, OMB revises 2 CFR 200.332
Requirements for pass-through entities
to clarify that pass-through entities (PTE) are responsible for addressing only a subrecipient's audit findings that are specifically related to their subaward. For example, a PTE is not required to address all of the subrecipient's audit findings. In addition, the PTE may rely on the subrecipient's auditors and cognizant agency's oversight for routine audit follow-up and management decisions. These changes reduce the burden for PTEs by allowing a PTE to rely on the cognizant agency to address a subrecipient's entity-wide issues.

200.332 Requirements for Pass-Through Entities

OMB received substantial feedback relating to the changes made in this section. The two main changes for this section are related to the clarification of the pass-through entities responsibilities toward the establishment of the subrecipient indirect cost rates and the pass-through entities responsibilities for resolving the sub recipient's audit findings (§ 200.332(d)).

Although most commenters approved of the proposed changes regarding the pass-through entities responsibilities for the subrecipient indirect cost rates, some requested clarification on specific situations:

• Where the subrecipient has a federally approved indirect cost rate

• where the subrecipient receives funds from multiple pass-through entities from which it may be already established an indirect cost rate with one of the pass-through entity; or

• where the subrecipient decides to use the direct allocation method instead of the use of indirect cost rate for cost reimbursement.

OMB provides clarifications in the final language for all of the three situations above.

Most commenters supported the proposed changes to clarify the pass-through entities responsibility in the resolution of audit findings reported by the subrecipients and the required management decision letters to address the audit findings. Some commenters questioned the use of the term “systemic findings” to describe the findings that impact the whole organization. This section has been revised to streamline and clarify the original intent of the revision which limits the pass-through entity to review and resolve the audit findings that are specifically related to the subaward. OMB replaced the term “systemic findings” with “cross-cutting findings.” OMB also added that written confirmation by the subrecipients for corrective actions on audit findings can be used as a means for follow-up and monitoring of the subrecipient's performance.

B. Reducing Burden on Universities by Clarifying Timing of the Disclosure Statement

OMB is adding language to the timing of submission of the disclosure statement (DS-2), which is only required for institutions of higher education that meet certain thresholds as defined in 48 CFR 9903.202-1(f). This revision reduces burden while maintaining the requirement for institutions of higher education to implement policies that are in compliance with 2 CFR.

200.419 Cost Accounting Standards and Disclosure Statement

OMB received several comments in response to 2 CFR 200.419 that focused on concerns with the legal instruments that were subject to this part. In response to these concerns, the language was revised to provide clarification.

C. Response to Frequently Asked Questions Related to the Prior Release of 2 CFR

In July 2017, OMB developed and posted Frequently Asked Questions (FAQs) on the Chief Financial Officers Council website in response to stakeholder requests for clarification on the first publication of 2 CFR
(https://cfo.gov//wp-content/uploads/2017/08/July2017-UniformGuidanceFrequentlyAskedQuestions.pdf)
. Due to the volume of questions related to these topics, OMB is including revisions to clarify the following: The meaning of the words “must” and “may” as they pertain to requirements; applicability and documentation requirements when a non-Federal entity elects to charge the de minimis indirect cost rate of MTDC; PTE responsibilities related to indirect cost rates and audits; and applicability of 2 CFR to FAR based contracts. These proposed revisions are intended to improve clarity and reduce recipient burden by providing guidance on implementing 2 CFR.

The Words “must” and “may” as They Pertain to Requirements

All commenters that provided feedback on this section were in favor of incorporating the meaning of “must” and “may” within the guidance. One commenter suggested that the location for this change within the guidance could be within its own section. After consideration, OMB disagrees with the commenter and has determined that this change should remain in the applicability section of the guidance under the stated sub title.

De Minimis Indirect Cost Rate of MTDC Applicability and Documentation

See Section I (K) for additional information on the comments received.

PTE Responsibilities Related to Indirect Cost Rates and Audits

See Section III or additional information on the comments received.

Applicability of 2 CFR to FAR Based Contracts

Many commenters expressed confusion regarding the changes to this section. The intent of the changes to this section are to make clear that the FAR applies to Federal contracts awarded to non-Federal entities, and that these requirements supersede the requirements of 2 CFR part 200 in a Federal contract. Clarification was requested from a commenter to confirm if an audit conducted for a Cost Accounting Standards (CAS) applicable contract will take the place of a Single Audit and how an entity with multiple grants and only one CAS-contract would meet the requirements of the Single Audit Act.

The language clarified in § 200.101(c) to state that for CAS covered contracts, the CAS requirements regarding audit would supersede the audit requirements in subpart F. In addition, in the case where an entity receives many grants and one CAS covered contracts, the entity must comply to both the Single Audits for its grants and the CAS audit requirements for the CAS covered contract.

D. Applicability of Guidance to Federal Agencies

OMB is making changes to 2 CFR 200.101
Applicability
to clarify that Federal awarding agencies may apply the requirements of 2 CFR part 200 to other Federal agencies, to the extent permitted by law. This change recognizes that there are instances when Federal awarding agencies or pass-through entities have the authority to issue Federal awards to Federal agencies and in these instances, the provisions of 2 CFR part 200 may be applied, as appropriate. This change is consistent with how for-profit entities, foreign public entities, or foreign organizations are treated in the Uniform Guidance.

200.101 Applicability

Several comments expressed concerns as to whether or not it is appropriate to include awards to Federal agencies in the scope of 2 CFR. It was determined that it was appropriate to include Federal agencies in the scope of 2 CFR as some Federal agencies are authorized to receive grants or cooperative agreements as direct recipients or subrecipients. This addition clarifies that subparts A through E of 2 CFR part 200 is applicable when determined by the Federal awarding agency. There will be no change from the proposed version.

E. Other Clarifications

Parts 25 and 170

Many commenters expressed concerns that parts 25 and 170 were confusing, inconsistent and needed to be edited for clarity. In response to these comments, parts 25 and 170 have been revised throughout with many technical corrections to add clarity and consistency.

200.110 Effective/Applicability Date

A number of comments, particularly from Federal agencies, expressed concern about the effective date for negotiated indirect cost rate agreements (NICRAs) in paragraph (b). The intent of this section is to retain the existing NICRAs until they are renegotiated and incorporate the requirements from the revision to 2 CFR upon renegotiation. Non-Federal entities with a NIRCA are expected to work with their cognizant agency for indirect costs as appropriate. OMB clarified the intent for 2 CFR 200.110(b). One Federal agency commenter stated that OMB should specify if the applicability date is for the entire guidance or for the revisions. OMB accepted this comment and made revisions accordingly.

200.200 Purpose

All commenters provided recommendations to revise this section to better align the terms “competitive” and “non-competitive” with the new terms “discretionary” and “non-discretionary.” OMB concurs with the recommendation to revise this section to align with other changes within the guidance. In response to commenters, OMB has removed 2 CFR 200.200(b) and made other technical corrections accordingly.

200.207 Standard Application Requirements

OMB received one comment on this section that was out of scope for the current set of revisions, and therefore the proposed language remains the same.

Out of Scope Comments

Many commenters submitted comments that were either not part of the scope of the effort, were not relevant to the revisions proposed, pertained to sections of the guidance that were not proposed to be revised, or would be a change too drastic that would warrant a need for the public to have an opportunity to provide input before finalizing. All comments within these categories were not accepted by OMB.

Changes From the Proposed Revisions Not Recommended

Comments received for several provisions within 2 CFR were reviewed, deliberated, and determined that no changes were needed from the proposed revisions. Some of these provisions within 2 CFR include the following:

• 200.201 Use of grant agreements (including fixed amount awards), cooperative agreements, and contracts

• 200.207 Standard application requirements

• 200.311 Real property

• 200.312 Federally-owned and exempt property

• 200.313 Equipment

• 200.314 Supplies

• 200.331 Subrecipient and contractor determinations

• 200.430 Compensation—personal services

• 400.458 Pre-award costs

200.402 Composition of Costs

Some commenters requested clarity and noted that the use of “approved budget period” is specific to Federal financial assistance when 2 CFR 200.402 would apply to both contracts and Federal financial assistance awarded to non-Federal entities. Another commenter suggested that further clarification is needed for what “cost principle” and “budget period” mean. Based on the vast array of comments received and the revised definitions for finalization, OMB decided to remove the language proposed for 2 CFR 200.402.

200.449 Interest

One comment was received for this provision. The commenter suggested that OMB provide a different example within 2 CFR 200.449 because lease contracts that transfer ownership are essentially debt financing. The commenter explains that the example is comparing debt financing to debt financing, which doesn't work for the intent. The commenter provided a suggested edit that would enable the example to remain and retain the original intent. OMB concurred with the commenter and made the suggested edit accordingly.

200.461 Publication and Printing Costs

All commenters requested clarity and suggested revisions to this provision. One commenter objected to specifying that costs must be charged to the last budget period, citing that printing costs

are historically charged at various stages of the award. One commenter noted that these costs have historically been allowable up until the closeout of the award. Edits were suggest to provide additional clarity in § 200.461(b)(3) to specify that The non-Federal entity may charge the Federal award during closeout. OMB concurs with this suggested revision and made the change accordingly.

200.507 Program-Specific Audits

One comment was received for 2 CFR 200.507. The commenter requested a clarification on the first phase to indicate “in some cases” rather than “in many cases” because Appendix VI of the 2019 Compliance Supplement only shows two current program specific audit guides. OMB concurred with the commenter and made the revision accordingly. The commenter provided a second recommendation to remove the 2014 beginning date and instead include the current reference to the Compliance Supplement appendix. OMB also concurs with this suggestion from the commenter and made the revisions.

200.515 Audit Reporting

The comments submitted for 2 CFR 200.515 provided suggestions for clarity. One commenter suggested reviewing this subsection against what the Federal Audit Clearinghouse is collecting in Part III: Information from the Schedule of Findings and Questioned Costs, Item 2. Financial Statements, to ensure an appropriate alignment between the regulation and the Form. Another commenter inquired about the intent of the revisions to this provision. OMB considered and discussed all the comments for clarity and made revisions accordingly.

Executive Orders 12866 and 13563

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). The revision of 2 CFR is not a significant regulatory action under Executive Order 12866.

Regulatory Flexibilities Act

The Regulatory Flexibility Act 5 U.S.C. 601,
et seq.,
requires a regulatory flexibility analysis or a certification that the rule will not have a significant economic impact on a substantial number of small entities. OMB expects this guidance to have a significant economic impact on a substantial number of such entities. There are some proposed revisions that may impose burden, however, there are more proposed revisions that reduce burden to small entities. When reviewing all the revisions, the burden that will be reduced for recipients is much greater than the burden imposed.

The revisions to 2 CFR are not applicable to Federal financial assistance awards issued prior to the effective dates provided in the
Dates
section of this Notice of Final Guidance, including financial assistance awards issued prior to those dates under the Coronavirus Aid, Relief, and Economic Support (CARES) Act of 2020 (Pub. L. 116-136). OMB plans to consult with applicable agencies to provide regulatory flexibility analyses in future revisions to 2 CFR and its subcomponents.

The applicability of Federal financial assistance in 2 CFR part 25 will be expanded beyond grants and cooperative agreements to include other types of financial assistance such as loans and insurance. This revision ensures compliance with FFATA, as amended by the DATA Act, and will impact small entities that voluntarily seek financial assistance. It will not have a significant impact on a substantial number of U.S. small entities as approximately 69,185 small entities who received awards for other types of financial assistance did not have a unique entity identifier in FY 2019, while the Small Business Administration's Office of Advocacy reported 30.7 million U.S. small businesses in that same calendar year. Currently, 2 CFR part 25 requires all non-Federal entities that apply for grants and cooperative agreements to register in the SAM. In alignment with FFATA, the guidance provides that all entities that apply directly to a Federal program for financial assistance such as loans and insurance must register in SAM, which requires the establishment of a unique entity identifier. Individuals who receive Federal financial assistance as a natural person remain exempt from this requirement. In practice, some Federal awarding agencies already require SAM registration for all types of Federal financial assistance and the change would make this practice consistent among agencies. OMB recognizes that this new requirement may be burdensome to small entities and there may be instances where it is appropriate for Federal awarding agencies to request an exception or delay implementation of this requirement for their programs. In response, Federal awarding agencies may exercise the flexibility provided in 2 CFR 25.110 to either exempt an applicant or recipient from this requirement or request an exception from OMB on a case-by-case for a class applicants or recipients, particularly in situations of national emergency such as natural disasters and pandemics.

As noted in the Paperwork Reduction Act section, as of July 1, 2020, there were 159,477 unique Federal financial assistance registrants in the SAM. According to data accessed from
USASpending.gov,
in FY 2018, approximately 2,952 small entities who received awards for other types of financial assistance did not have a unique entity identifier. Assuming that non-Federal entities with a unique entity identifier reported to
USASpending.gov
are already registered in SAM, this change will impact approximately 2,952 small entities annually. SAM registration is estimated to take 2.5 hours per response, which results in 7,380 burden hours annually.

The guidance also provides consistency among definitions and terms and proposes several provisions to increase transparency regarding Federal spending. These revisions are intended to reduce recipient burden and will not have a significant economic impact on a substantial number of small entities because they will affect Federal awarding agencies; they do not include any new requirements for non-Federal entities.

The guidance introduces a new provision to align with section 889 of the NDAA 2019, prohibition on certain telecommunication and video surveillance services or equipment. This statutory requirement will introduce burden to small entities that are prohibited from obligating or expending grant or loan funds to procure or obtain, extend or renew a contract to procure or obtain, or enter in a contract with, as identified in the NDAA 2019. Since this is a new legal requirement, the burden estimate is difficult to calculate. It will impact all unique entities awarded Federal financial assistance, of which 69,185 are small entities.

The guidance implements a new statute that requires applicants of Federal assistance to provide information on their owner, predecessor and subsidiary, including the Commercial and Government Entity (CAGE) Code and name of all predecessors, if applicable. This will not have a significant economic impact on a substantial number of small entities because small entities typically do not have a complex corporate structure requiring them to report information on their owner, predecessor, and

subsidiary. Further, the burden is minimal for a non-Federal entity to provide the name of its immediate owner and highest-level owner.

The NDAA for FY2018 increased the micro-purchase threshold from $3,500 to $10,000 and increased the simplified acquisition threshold from $100,000 to $250,000 for all recipients. OMB's revisions reduces burden and will not have a significant economic impact on a substantial number of small entities because it is likely to reduce burden for all non-Federal entities.

Paperwork Reduction Act

Consistent with the Regulatory Flexibility Act analysis discussion, the Paperwork Reduction Act (44 U.S.C. chapter 35) applies. The guidance contains information collection requirements and will impact the current Information Collection Requests approved under OMB control number 3090-0290 managed by GSA. Accordingly, GSA will submit a request for approval to amend the existing Information Collection Requests for SAM registration requirements for Federal financial assistance recipients.

Annual Reporting Burden

The estimated annual reporting burden includes all possible entities for Federal financial assistance that may be required to register in SAM. The estimated annual reporting burden also includes entities that receive Federal financial assistance reported in
USASpending.gov
and either may or may not be required to register in SAM.

Previously, SAM only requires that applicants and recipients of Federal financial assistance in the form of grants register in the system. However, applicants and recipients are required to maintain accurate SAM registration at all times during which they have an active Federal award, an application, or a plan under consideration by a Federal awarding agency.

The burden estimates are approximations based on the best available data.

As of July 7, 2019, there were 159,477 unique Federal financial assistance registrants in SAM. However, not all registrants ultimately apply for, or receive, Federal financial assistance. OMB aggregated SAM data with Federal financial assistance recipient data from
USASpending.gov,
excluding grants, to determine the anticipated number of additional Federal financial assistance in SAM. OMB ran reports in
USASpending.gov
to identify the number of unique recipients of Federal financial assistance other than grants to isolate the total number of potential registrants in SAM as a result of the updates to the proposed guidance.

OMB removed duplicate recipients based on recipient Data Universal Numbering System Number (DUNS) numbers, from Dun & Bradstreet (D&B). At this time all Federal financial assistance recipients are required to register for DUNS numbers.

In FY 2019 there were 1,751 loan and 8,915 other Federal financial assistance recipients with unique DUNS numbers reported in
USASpending.gov.
Therefore, based on the number of entities with unique DUNS numbers that are registered in SAM (159,477), plus entities that receive loans (122) or other Federal financial assistance (8,915) reported in
USASpending.gov
that may not be reflected in SAM, the total number of entities that may be impacted by the proposed guidance associated Information Collection Requests under OMB control number 3090-0290 could be 172,084 registrants.

Public reporting burden for Information Collection Requests under OMB control number 3090-0290 is managed by the GSA and estimated to average 2.5 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information.

The annual reporting burden is estimated as follows:

Respondents:
172,084.

Responses per Respondent:
1.

Total annual responses:
172,084.

Hours per Response:
2.5.

Total response Burden Hours:
430,210.

The guidance also requires that registrants for Federal financial assistance provide information on their owner, predecessor, and subsidiary, including the CAGE code and name of all predecessors, if applicable. This information is required to implement Sec. 852 of the NDAA of FY 2013, which requires that the FAPIIS include information on a non-Federal entity's parent, subsidiary, or successor entities. Non-Federal entities are already required to obtain a CAGE code for purposes of SAM registration. It is anticipated that including this information as part of SAM registration or for a renewal should not result in significant additional time. Public reporting burden for this collection of information is estimated to average 0.1 hours per response. Based on the burden estimates for the total number of SAM registrants indicated in the previous section, the annual reporting burden for this proposal is estimated as follows:

Respondents:
172,084.

Responses per respondent:
1.

Total annual responses:
172,084.

Preparation hours per response:
0.1.

Total response Burden Hours:
17,208.

List of Subjects

2 CFR Part 25
Administrative practice and procedure, Grant programs, Grants administration, Loan programs.

2 CFR Part 170
Colleges and universities, Grant programs, Hospitals, International organizations, Loan programs, Reporting and recordkeeping requirements.

2 CFR Part 183
Foreign aid, Grant programs, Grants administration, International organizations, Reporting and recordkeeping requirements.

2 CFR Part 200
Accounting, Colleges and universities, Grant programs, Grants administration, Hospitals, Indians, Nonprofit organizations, Reporting and recordkeeping requirements, State and local governments.

Timothy F. Soltis,
Deputy Controller.

For the reasons stated in the preamble, the Office of Management and Budget amends 2 CFR chapters I and II as set forth below:

PART 25—UNIVERSAL IDENTIFIER AND SYSTEM FOR AWARD MANAGEMENT

1. The authority citation for part 25 continues to read as follows:

Authority:

Pub. L. 109-282; 31 U.S.C. 6102.

2. Amend § 25.100 by revising the introductory text and paragraph (a) to read as follows:

§ 25.100
Purposes of this part.
This part provides guidance to Federal awarding agencies to establish:

(a) The unique entity identifier as a universal identifier for Federal financial assistance applicants, as well as recipients and their direct subrecipients, and;

3. Revise § 25.105 to read as follows:

§ 25.105
Types of awards to which this part applies.
This part applies to a Federal awarding agency's grants, cooperative agreements, loans, and other types of Federal financial assistance as defined in § 25.406.

4. Revise § 25.110 to read as follows:

§ 25.110
Exceptions to this part.

(a)
General.
Through a Federal awarding agency's implementation of the guidance in this part, this part applies to all applicants and recipients of Federal awards, other than those exempted by statute or exempted in paragraphs (b) and (c) of this section that apply for or receive agency awards.

(b)
Exceptions for individuals.
None of the requirements in this part apply to an individual who applies for or receives Federal financial assistance as a natural person (
i.e.,
unrelated to any business or nonprofit organization he or she may own or operate in his or her name).

(c)
Other exceptions.
(1) Under a condition identified in paragraph (c)(2) of this section, a Federal awarding agency may exempt an applicant or recipient from an applicable requirement to obtain a unique entity identifier and register in the SAM, or both.

(i) In that case, the Federal awarding agency must use a generic unique entity identifier in data it reports to
USAspending.gov
if reporting for a prime award to the recipient is required by the Federal Funding Accountability and Transparency Act (Pub. L. 109-282, hereafter cited as “Transparency Act”).

(ii) Federal awarding agency use of a generic unique entity identifier should be used rarely for prime award reporting because it prevents prime awardees from being able to fulfill the subaward or executive compensation reporting required by the Transparency Act.

(2) The conditions under which a Federal awarding agency may exempt an applicant or recipient are—

(i) For any applicant or recipient, if the Federal awarding agency determines that it must protect information about the entity from disclosure if it is in the national security or foreign policy interests of the United States, or to avoid jeopardizing the personal safety of the applicant or recipient's staff or clients.

(ii) For a foreign organization or foreign public entity applying for or receiving a Federal award or subaward for a project or program performed outside the United States valued at less than $25,000, if the Federal awarding agency

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2020-17468. Public record. Not legal advice.