OMB Releases Final Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Grants

By , , | Published On: January 19, 2014

On Thursday December 26, 2013, the Office of Management and Budget (“OMB”) released Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Grants (the “Supercircular;” also known as the “Omnicircular”).* The Supercircular sets standard requirements for financial management of Federal awards across the entire Federal government.

The Supercircular supersedes and streamlines requirements from eight OMB Circulars A–21, A–87, A–110, A–122, A–89, A–102, A–133, and A–50 that have been codified at different times for different types of organizations and by different parts of the Federal government. The Supercircular is part of a larger effort by the Federal government to focus resources more effectively on improving performance and outcomes while still ensuring the financial integrity of taxpayer dollars.

The Department of Health and Human Services (“HHS”) and other Federal agencies must implement the Supercircular’s changes for their grantees and subrecipients by December 26, 2014. It is our understanding that the Supercircular’s requirements will apply to your FY 2015 awards made after December 26, 2014.

Non-Federal entities receiving Federal awards should begin to prepare now for implementation of the Supercircular and its myriad changes. Based on changes to the Common Rules, Cost Principles and Audit Requirements in the Supercircular, non-Federal entities will likely need to alter policies, procedures, and operational systems.


As stated in the preamble to the Supercircular, OMB is committed to reforming the Federal financial assistance framework, including grant-making, by targeting overall approaches to financial management that focus on improving program outcomes. The Supercircular is part of this Administration’s attempts at developing more efficient and transparent government while still ensuring financial integrity. The Supercircular builds on two previous proposed rules and notice and comment periods. Previously, OMB worked with the Council on Financial Assistance Reform to publish a February 28, 2012 Advance Notice of Proposed Guidance and a February 1, 2013 Notice of Proposed Guidance. OMB received hundreds of written comments on each. The preamble to the Supercircular explains and responds to common comments and identifies broad themes within the comments. The preamble is followed by the final text of the Supercircular.

When HHS promulgates its implementing regulations, 45 C.F.R. Part 74, Uniform Administrative Requirements for Awards and Subawards to Institutions of Higher Education, Hospitals, and Other Nonprofit Organizations, and Commercial Organizations, and 45 C.F.R. Part 92, Uniform Administrative Requirements for Grants and Cooperative Agreements to State, Local, and Tribal Governments, will be superseded. The Cost Principles for Nonprofits (OMB Circular A-122, codified at 2 C.F.R. Part 230), State Local and Tribal Governments (OMB Circular A-87, codified at 2. C.F.R. Part 225), and Educational Institutions (OMB Circular A-21, 2. C.F.R. Part 220) are also being superseded by the new provisions of the Supercircular.

Additionally, the provisions of OMB Circular A-133, Audits of States, Local Governments and Non-Profit Organizations, are superseded by the Supercircular. Specifically, the audit provisions are effective for non-federal entities with fiscal years beginning on or after the effective date of the Supercircular (Dec 26, 2013). If grantees have biennial audits, if the biennial period started before December 26, 2013, then they are expected to follow A-133. If, however, the biennial period starts after December 26, 2013, then they are expected to follow the Supercircular.

Major Reforms in the Supercircular

The Supercircular includes a number of very significant changes for Federal grants administration including the following:

Time and Effort Reporting

The Supercircular makes significant reforms to time and effort reporting requirements that are intended to strengthen the requirements for internal controls over salaries and wages and provide some flexibility to grantees. The Supercircular requires non-Federal entities to comply with a new framework of internal control objectives rather than the previously-required prescribed personnel activity reports or periodic certifications. Part of the new framework expressly allows non-Federal entities to make interim charges based on budget estimates as long as final adjustments to charges are made to ensure that any amounts charged to Federal awards is accurate. The Supercircular preamble also notes that many non-Federal entities may find that existing procedures, such as personal activity reports and similar documentation, are the best method for meeting internal control requirements, but it does not specifically require them.


While many of the main aspects of conducting proper procurements (such as maximizing competition) remain the same as what is currently in existence, the Supercircular includes are some new and different elements. Among other things, if grantees plan to do sole source procurements, they must now fit into one of four limited circumstances. Additionally, non-Federal entities with parent, affiliate, or subsidiary relationships must maintain written standards of conduct covering organizational conflicts of interest. A micro-purchase threshold (for non-Davis Bacon purchases under $3,000) is also included. The simplified acquisition threshold is clarified at $150,000.

Indirect Cost Rates

The Supercircular changes how non-Federal entities can obtain indirect cost rates for Federal awards. The Supercircular allows non-Federal entities that have never had a negotiated indirect cost rate with the Federal government to use a de minimis, 10 percent of Modified Total Direct Costs amount for their indirect cost rates.

Additionally, the Supercircular requires that if a grantee has negotiated an indirect cost rate with a Federal agency, other Federal agencies should accept it unless there is a statutory, regulatory, or otherwise-approved deviation. It also allows for a one-time extension of a Federally-approved negotiated indirect cost for a period of up to 4 years. The Supercircular also instructs non-Federal entity grantees to recognize subrecipients’ negotiated indirect cost rates, if they have them with the Federal government.

Mandatory Disclosures

The Supercircular also requires grantees to timely disclose in writing to their Federal awarding agencies all violations of Federal criminal law involving fraud, bribery, or gratuity violations potentially affecting Federal awards. It does not, however, specify a particular approach to disclosure.

Audit Changes 

The Supercircular raises the Single Audit threshold from an annual amount of $500,000 to $750,000 in Federal awards per year.

Other Key Changes

The Supercircular makes a number of other significant changes to grants administration and the allowably of costs under grants:

It incorporates IRS terminology and frameworks for “lobbying.”

It eliminates the existing allowability of employee “morale” costs.

It requires all non-Federal entities to safeguard personally identifiable information and other sensitive information.

It clarifies when computing devices are to be characterized as supplies or equipment.

It extends the closeout period for Federal agencies for each award from 180 days to one year, and clarifies that non-Federal entities have 90 days from the end date of the period of performance to submit all final reports.

Many other changes are included throughout the Supercircular.
Preparing for Implementation

Non-Federal entities should begin now, with the assistance of counsel, to understand the nuances of the Supercircular and identify where changes will be required that affect them legally and operationally. Over the coming year, non-Federal entities will need to examine thoroughly the Supercircular’s new requirements and modify their systems, policies, and practices accordingly.

Feldesman Tucker Leifer Fidell LLP will be conducting a live training for all interested grantees, sub-grantees, and other interested parties on the legal implications of the Supercircular on November 6-7 in Orlando, Florida.  For more information and to register click here.  Also, you can view past webinars pertaining to the Supercircular by clicking here.

For further information on the Supercircular or Federal grant issues, please contact Ted Waters at (202) 466-8960.


**This Client and Field Alert is informational in nature and is not intended to provide advice or counsel to any Federal Grantees, Sub-Grantees or other interested parties.**

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