Understanding OMB Uniform Guidance

2 CFR Part 200 — known as the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, or simply 'Uniform Guidance' — is the consolidated set of rules governing how organizations that receive federal funding must account for, manage, and report on those funds. If your nonprofit receives any form of federal financial assistance, Uniform Guidance applies to you. Here's what every nonprofit leader needs to understand.

Who Must Follow Uniform Guidance?

Uniform Guidance applies to all non-federal entities (nonprofits, state and local governments, institutions of higher education, and Indian tribes) that receive federal awards as recipients or sub-recipients. If your nonprofit receives a federal grant directly from a federal agency, or receives pass-through funds from a state or local government that originated from a federal agency, Uniform Guidance applies to your use and reporting of those funds.

The Three Core Areas of Uniform Guidance

Uniform Guidance is organized around three areas that nonprofit leaders encounter most frequently:

  • Administrative Requirements: Rules about how to set up and manage grant programs, including financial management standards, procurement procedures, record retention, and reporting obligations.
  • Cost Principles: Rules about what expenditures can be charged to a federal grant (allowable costs) and how costs must be documented and allocated between programs.
  • Audit Requirements: The Single Audit requirements discussed separately — applicable to organizations expending $750,000+ in federal awards annually.

Allowable Costs: The Biggest Day-to-Day Challenge

The cost principles in Uniform Guidance define whether a specific expenditure can be charged to a federal grant. To be allowable, a cost must be: necessary and reasonable for program performance, allocable to the federal award, consistent with organizational policies, and adequately documented.

Indirect costs — overhead expenses not directly tied to a specific program — require careful management. Organizations must have a federally negotiated indirect cost rate agreement (NICRA) or elect to use the 10% de minimis rate if they have never had a negotiated rate.

Common compliance error: Charging costs to a federal grant that lack adequate documentation. Every expense charged to a federal program should have supporting documentation that clearly demonstrates it was necessary for program performance.

Procurement Standards Under Uniform Guidance

When using federal funds to procure goods and services, nonprofits must follow specific procurement standards including written procurement policies, competition requirements based on purchase thresholds, and restrictions on conflicts of interest. Many nonprofits fail compliance testing in this area because their procurement practices were established for internal purposes — not with federal requirements in mind.

Preparing for Uniform Guidance Compliance Year-Round

Uniform Guidance compliance is not an audit-season task — it's a year-round operational responsibility. Organizations that maintain compliance throughout the grant year experience far fewer findings at audit time. Key practices include tracking federal expenditures by program in your accounting system, documenting the allowability of each cost at the time it is incurred, maintaining written procurement policies that meet federal standards, and conducting periodic internal reviews of grant compliance before the auditor arrives.