Guidance for Federal Financial Assistance; Corrections

Guidance for Federal Financial Assistance; Corrections

Supplementary Information

This is a summary of the revisions to OMB's Guidance for Federal financial assistance published April 22, 2024 (89 FR 30046).

Section-by-Section Discussion

Title 2-Grants and Agreements

In the document published by OMB in the Federal Register in April, instruction 1 at 89 FR 30107 attempted to change the heading of title 2 from "Grants and Agreements" to "Federal Financial Assistance." However, unlike chapters, subchapters, and parts, which are under the direct control of an agency (1 CFR 21.8), each CFR title is arranged by subject matter and only the Director of the Federal Register can establish new or update existing titles (1 CFR 8.2). Therefore, instead of directly changing the heading and subject matter of title 2, the Director of OMB has communicated the request to change the heading of title 2 to the Director of the Federal Register.

Subtitle A of title 2 has been specifically assigned to OMB, so, in this case, the subtitle heading is treated as an OMB chapter or part heading. Therefore, instructions 2 and 4 in OMB's April document are both acceptable instructions, which will be implemented.

Appendix A to Part 170-Award Term

In paragraph I(a)(2)(i) of appendix A to 2 CFR part 170, OMB mistakenly stated that the "entity or Federal agency" must report subawards described in paragraph (a)(1) of the award term to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). OMB intended to state that the "recipient" is responsible for such reporting to FSRS. The technical correction is consistent with the prior version of the award term in appendix A to 2 CFR part 170, which is directed at recipients-but refers to them throughout as "you." In the revised version of the award term, OMB generally replaced the word "you" with "recipient" throughout for greater clarity, but inadvertently included the wrong terms in this particular instance. Consistent with 2 CFR 170.220(a), the award term is directed at recipients, and recipients are responsible for reporting subawards in FSRS. Thus, through this document, OMB replaced "entity or Federal agency" with "recipient" in paragraph (a)(1) of the award term.

Section 184.3-Definitions (Introductory Text)

In the introductory text for the definitions in part 184, which implements the Build America, Buy America Act (BABA), Public Law 117-58, OMB incorporated the meanings of acronyms and definitions from 2 CFR 200.0 and 200.1. 88 FR 57750, 57788. OMB did this to incorporate the meanings of terms such as "Federal award," "subaward," "Federal agencies," "recipient," and others, which are used in the same way in both parts 184 and 200. However, the document published by OMB in the Federal Register in April 2024 revising part 200 adjusted the meanings and thresholds for the terms "equipment" and "supply," which OMB does not intend to apply under part 184. 89 FR 30046, 30139-44. OMB has amended the introductory text before the definitions in § 184.3 to clarify that the definitions of "equipment" and "supply" are not incorporated under part 184.

Based on the use of "expenditures" at § 184.8 (Exemptions to the Buy America Preference), OMB has also amended the introductory text to exclude the definition of "expenditures" from part 200. The use of that term in § 184.8 ( i.e., "expenditures for assistance") refers to expenditures of funds by a Federal agency "for assistance," as opposed to the definition in § 200.1, which refers to expenditures "by a recipient or subrecipient to a project or program for which a Federal award is received." 89 FR 30046, 30139.

OMB is not providing revised definitions of the terms "equipment," "supply," or "expenditure" through this document, but merely clarifying that the definitions from § 200.1 do not apply under part 184.

Section 200.1-Definitions

In the document published by OMB in the Federal Register in August 2023 establishing 2 CFR part 184, which implements BABA, Public Law 117-58, OMB explained how the term Federal financial assistance, as defined at 2 CFR 200.1, should be applied under part 184. 88 FR 57750, 57774. The preamble explained that, through issuance of the final guidance, OMB did not modify the existing guidance in M-22-11 on the proper application of that term for the purposes of BABA. Specifically, OMB explained that the existing guidance in OMB Memorandum M-22-11 was based on the definition of Federal financial assistance at section 70912(4)(A) of BABA, providing that the term has the meaning given in "section 200.1 of title 2, Code of Federal Regulations (or successor regulations)." Based on certain forms of assistance listed in section 200.1, Memorandum M-22-11 established the policy that, for the purposes of BABA, Federal financial assistance means "assistance that non-Federal entities receive or administer in the form of grants, cooperative agreements, non-cash contributions or donations of property, direct assistance, loans, loan guarantees, and other types of financial assistance." (Emphasis added) Section 70912(4)(B) of BABA also provides that the term Federal financial assistance includes, but is not limited to, all expenditures "by a Federal agency to a non-Federal entity [for assistance] for an infrastructure project," except that it does not include certain specified expenditures relating to a major disaster or emergency. Based on the policy in Memorandum M-22-11, which applied BABA to loans and loan guarantees, the part 184 preamble explained how the definition from BABA 70912(4)(A) and 2 CFR 200.1 should be applied for the purposes of part 184. 88 FR 57750, 57774.

OMB subsequently rescinded and replaced Memorandum M-22-11 on October 25, 2023, by issuing Memorandum M-24-02. Memorandum M-24-02 continues to provide that, for the purposes of BABA, Federal financial assistance means "assistance that non-Federal entities receive or administer in the form of grants, cooperative agreements, non-cash contributions or donations of property, direct assistance, loans, loan guarantees, and other types of financial assistance."

To clarify how the term "Federal financial assistance" is applied for purposes of BABA under part 184, OMB has added a new paragraph to the definition at § 200.1 specifically addressing this topic based on the part 184 preamble and associated OMB guidance memoranda. This revision is intended to reduce any ambiguity in the 2 CFR text on which forms of Federal financial assistance are included for purposes of part 184. The revision is consistent with OMB's existing policy with respect to BABA applicability to loans and loan guarantees, which is reflected in the part 184 preamble and associated policy memoranda.

Section 200.431-Compensation-Fringe Benefits

In the document published by OMB in the Federal Register in April, OMB explained in the preamble at 89 FR 30095 that, in the proposed guidance, "OMB proposed revising section 200.431 on fringe benefits to require recipients and subrecipients to allocate payments for unused leave as general administrative expenses or include them in a fringe benefit rate with cognizant agency approval." In its response to comments at 89 FR 30095, OMB stated that it revised paragraph (b)(3)(i) of § 200.431 "to remove the requirement that agencies must include certain costs in fringe benefit rates only with the approval of the cognizant agency for indirect costs." (Emphasis added) OMB explained that it made this change in recognition "that some recipients might not have a cognizant agency for indirect costs." However, in removing the requirement to obtain cognizant agency approval, OMB also inadvertently removed the option to include these payments in a fringe benefit rate under any circumstances, which-as the preamble text reflected-was not its intent. Thus, through this document, OMB inserted the following text at the end of paragraph (b)(3)(i) of § 200.431: "or included in the fringe benefit rate."

In addition, OMB further revised paragraph (b)(3)(i) of § 200.431 through this document to replace the word "must" with "should" in the instruction to either allocate these payments for unused leave as a general administrative expense to all activities or include them in fringe benefit rates. This revision is consistent with prior OMB guidance on this topic in the "2 CFR Frequently Asked Questions" (2 CFR FAQ) published on May 3, 2021, which was a source of the text at paragraph (b)(3)(i) of § 200.431. See 2 CFR FAQ, at Q-104. All payments for unused leave must still be allocated in accordance with the cost principles in subpart E. See, e.g., 2 CFR 200.401(a). Paragraph (b)(3)(i), as revised, continues to describe the two options that will generally be used for these types of payments under subpart E.

Correction to Final Rule Published April 2024

In FR Doc. 2024-07496, appearing at 89 FR 30046 in the Federal Register of April 22, 2024, on page 30108, in the first column, remove instruction 1 for title 2.

For the reasons stated in the preamble, the Office of Management and Budget corrects 2 CFR chapters I and II by making the following correcting amendments:

Part 170 Reporting Subaward and Executive Compensation Information

Appendix A to part 170 [Amended]

Part 184 Buy America Preferences for Infrastructure Projects

Part 200 Uniform Administrative Requirements Cost Principles and Audit Requirements for Federal Awards