Significant updates to the Uniform Guidance have taken effect for all federal awards issued on or after October 1, 2024. These changes aim to simplify compliance and improve transparency for applicants, recipients and subrecipients.
Here is a concise look at five major updates that are likely to influence many nonprofit organizations:
1. REDUCTION OF COMPLEXITY IN FUNDING NOTICES
The new guidance emphasizes clarity and brevity in funding announcements. Expect shorter, less technical notices that are easier to understand, which will make it simpler for applicants to navigate the funding process.
2. INCREASE IN SINGLE AUDIT THRESHOLD
The single audit threshold will rise from $750,000 to $1 million. This means organizations with federal expenditures below this new threshold will not need to undergo a single audit. Additionally, the Type A threshold for determining major programs will also increase to $1 million for entities with total spending between $1 million and $34 million.
3. EQUIPMENT THRESHOLD ADJUSTMENT
The threshold for capitalizing equipment purchases will change from $5,000 to $10,000. This updated threshold aims to enhance the tracking and management of federal funds allocated for equipment.
4. EMPHASIS ON CYBERSECURITY
In recent years, there has been a heightened focus on internal controls and their assessment. Accordingly, one of the key updates to the Uniform Guidance includes enhanced measures for cybersecurity and other safeguards to protect information. As part of their internal controls, organizations and federal agencies are now required to implement "reasonable cybersecurity measures.” The guidance does not require a specific framework, but it calls for practical security measures that are in line with industry standards and best practices.
5. INCREASED DE MINIMIS RATE
The de minimis indirect cost rate will increase from 10 percent to 15 percent. This change provides greater flexibility for organizations with limited indirect costs and enables them to receive more funding for administrative expenses. Please note that this is only an option if an organization did not previously have a negotiated indirect cost rate agreement.
NAVIGATING THE PATH FORWARD
By understanding these updates, organizations can better prepare for the upcoming changes and streamline their operations in accordance with the new regulations. In addition to compliance requirements, understanding and applying these updates will also allow the organization to be audit-ready. For audits, these updates became effective for year-ends beginning after Oct. 1, 2024.
Staying informed is key to successfully navigating these changes and ensuring compliance with federal requirements. For any questions or clarification on these updates, please do not hesitate to reach out to GHJ’s Nonprofit Practice. GHJ’s Advisory Practice can also provide assistance with cybersecurity.
