Good News, Federal Grant Recipients: Relief Is on the Way!

Recipients of grants and other forms of federal financial assistance will soon get much-needed relief from the heavy access, administrative and compliance burdens currently imposed by the Office of Management and Budget's (OMB) Guidance for Federal Financial Assistance, commonly referred to as the "Uniform Grants Guidance." On April 4, 2024, the White House announced substantial updates to the Uniform Grants Guidance that set the baseline requirements for federal agencies in awarding grants and providing other financial assistance such as loans and cooperative agreements. The Uniform Grants Guidance is codified at 2 C.F.R. Part 200.¹

The updates, which are effective Oct. 1, 2024, are intended to streamline and clarify requirements for federal funding opportunities and materially reduce administrative burdens on recipients. They reflect input received from agencies across the federal government, as well as public input received in response to the OMB's Notification of Proposed Guidance published on Oct. 5, 2023 at 88 Fed. Reg. 69390. The updates aim to enable recipients to focus on the missions of their respective financial assistance awards, while also ensuring federal agencies can effectively safeguard taxpayer resources.

The updates focus on three areas: 1) reducing unnecessary compliance costs, 2) removing barriers to accessing federal funding opportunities and 3) ensuring financial assistance best serves intended beneficiary communities. To reduce unnecessary (and seemingly ever-increasing) compliance costs associated with federal grants and financial assistance vehicles, the updates will modify numerous Uniform Grants Guidance requirements in order to simplify recipients' compliance responsibilities. For example, the updates reduce the number of additional "prior approvals" that recipients must receive from awarding agencies before spending money on specific activities. The updates also clarify ambiguous terms so that recipients can comply with the same requirement in the same way, irrespective of funding source (i.e., grant vs. loan, etc.). This will enable recipients to focus on a single compliance effort, rather than having to adopt and manage multiple internal compliance regimes. Additionally, the updates increase the focus on the importance of data and evaluations in funding programs' development and implementation. This shift to further focus on readily measurable metrics in compliance efforts is intended to help recipients more easily collect the material (i.e., data) that will serve as the basis for compliance evaluations, while also adding transparency regarding the objective metrics against which recipients may be evaluated.

To promote greater access to federal funding opportunities, the updates to the Uniform Grants Guidance overhaul agencies' Notices of Funding Opportunities (NOFOs) requirements to make it easier for nonexperts and smaller organizations to apply for federal funding. Relatedly, the updates also require and emphasize the importance of using "plain language" in NOFOs and require NOFOs to include an "Executive Summary." These updates will help ensure essential information about program objectives and application requirements is maximally accessible to eligible applicants. To help ensure financial assistance programs best serve intended beneficiary communities, the Uniform Grants Guidance updates also eliminate the current requirement to only use the English language in NOFOs, applications and reporting.

The publication of the Uniform Grants Guidance updates raises several key points for recipients and prospective recipients of federal financial assistance. First, while the updates are not effective until Oct. 1, 2024, the pre-publication version of the final rule affords federal agencies discretion to apply the updates sooner. Recipients of federal financial assistance therefore must be prepared for the possibility of changes to their compliance obligations in the nearer term. Second, recipients should start planning to implement changes and/or new initiatives necessitated by the Uniform Grants Guidance updates no later than Oct. 1, 2024. Third, recipients should also regularly check for updates to agency-specific guidance incorporating the updates, or related updates to agency-specific supplements, that may take effect before the final effective date.

Fourth, recipients should plan not only for changes to their compliance regimes, but also to their operations. As noted above, a primary focus of the updates is to streamline compliance to enable recipients to focus more heavily on the missions underlying their financial awards. To the extent the updates will place more resources at recipients' disposal, they should start planning now to maximize a possible resources windfall in pursuit of the goals of their financial assistance instruments. Fifth, recipients and prospective recipients both must be aware of the possibility of new and/or more accessible federal funding opportunities based on the forthcoming updates to the Uniform Grants Guidance. To the extent the updates will allow greater access to federal funding opportunities, there will likely be ample opportunity for current recipients to diversify their portfolios and for prospective recipients to pursue new opportunities. Finally, prospective recipients who have as yet unsuccessfully pursued federal financial assistance must also familiarize themselves with the updates, and any forthcoming updates to agency-specific supplements, that may alter their current plans for pursuing opportunities, administering awards and implementing compliance programs during award life cycles.

In conclusion, the forthcoming updates to the Uniform Grants Guidance are intended to provide much-needed relief from the onerous compliance requirements that recipients of federal financial assistance must currently navigate. They also give rise to several considerations for which recipients and prospective recipients must start preparing. For as the saying goes, "Failing to prepare is preparing to fail."

If you would like assistance better understanding how these updates may affect your business, please contact the authors or another member of Holland & Knight's Government Contracts Group.

Notes

¹ There are also various agency-specific supplements to the Uniform Grants Guidance that codify individual agencies' processes and requirements associated with their respective financial assistance initiatives.