OMB Grant Reforms: Key Issues for Tribes

After years of deliberation, the Office of Management and Budget has issued final guidance on federal grants. Titled Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, this comprehensive grant reform supersedes a number of existing OMB Circulars with the goal to streamline rules, reduce administrative burden on nonfederal entities, and strengthen oversight by federal agencies.

Let’s look at a few of the key changes tribes should become familiar with before the guidance becomes effective for all new federal awards, and new funding for existing awards, on December 26, 2014.

Single Audit

The new guidance requires grantees to authorize the Federal Audit Clearinghouse to post grantees’ annual audit reports, along with their Data Collection Forms, on its Web site. Tribes can opt out of this  requirement by agreeing to submit the reporting package to certain pass-through entities and make their audit reports “available for public inspection.” It’s not yet clear exactly what “available for public inspection” would entail. This opt-out election is available only to the 566 federally recognized tribes and not to separate tribal schools, housing authorities, clinics, and other organizations that file a separate Data Collection Form. However, recent discussions with the OMB indicate that those entities might be able to opt out as well.

The guidance also increased the Single Audit threshold, from $500,000 to $750,000, and it decreased the percentage of total federal expenditures required to be audited as major programs, from 25 percent to 20 percent for low-risk auditees and from 50 percent to 40 percent for non-low-risk auditees. These changes could reduce the effort associated with Single Audits for some tribes and eliminate the Single Audit requirement entirely for some others.

In addition, the guidance requires auditees to provide a Corrective Action Plan and requires auditors to provide more information on repeat findings, such as the fiscal year in which the finding first appeared, so federal agencies can more easily keep track of them.

Self-Determination Act

The guidance clarifies that the Indian Self-Determination and Education and Assistance Act’s provisions will govern if a conflict with the provisions of the new guidance arises.

Indirect Costs

These are some significant changes in indirect costs, now called “indirect facilities and administrative costs.” For example, tribes with a negotiated rate can apply for a one-time extension of up to four additional years, subject to approval by the cognizant agency. However, it’s unclear whether tribes with fixed-with-carryforward indirect cost rates will be allowed to participate in this provision because of the need to carry forward over- or under-recoveries. Further guidance is expected on this from the Department of the Interior’s Business Center.

Also, for tribes using a direct cost base of total direct costs less exclusions, exclusions are now defined to include, for the first time, “subcontracts in excess of $25,000” and “participant support costs.”

And finally, tribes that receive less than $35 million annually in direct federal funding and have never had a negotiated indirect cost rate can now choose to use a flat indirect rate of 10 percent of Modified Total Direct Costs (MTDC) as defined in the guidance. MTDC must exclude capital expenditures; the portion of subawards and subcontracts exceeding $25,000; patient care costs; rental costs; and tuition and scholarships costs.

Time and Effort Reporting

The OMB aims to decrease entities’ administrative burden of documenting time and effort and instead wants organizations to focus on having a control system in place to ensure personnel records are maintained and charges to federal awards are accurately reported. Records supporting time and effort expended must accurately reflect the work performed by employees so that the final amounts charged to federal grants are accurate and allowable. The Personnel Activity Reports and payroll certification forms required by OMB Circular A-87 will no longer be required, but can still be a part of an effective internal control system.


Tribes must maintain written procurement policies and use the procurement methods described in the guidance, which appear to be more stringent than the prior rules. The new guidance expands on conflicts-of-interest guidance, requiring tribes to have strong written policies, especially for employees involved in the contract selection process, to avoid organizational conflicts of interest.

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These are only a few of the many changes in the new guidance, and there are still some areas that will require further clarification; so stay tuned. In the meantime, for more information about how the new guidance could affect your tribe’s operations, contact your Moss Adams professional.