2 CFR Part 200, known as the Uniform Guidance, is the single set of federal rules that governs how state and local governments, tribes, universities, and nonprofits spend federal grant money. The Office of Management and Budget consolidated several older circulars into this framework, and a major revision took effect for awards issued on or after October 1, 2024. If you administer a federal grant in 2026, the current version of Part 200 controls almost everything about how you manage the award, from the first purchase order to the final audit.
Who Has to Follow It
The Uniform Guidance applies to non-federal entities that receive federal financial assistance through grants or cooperative agreements. That means state and local governments, Indian Tribes, colleges and universities, and nonprofit organizations.1eCFR. 2 CFR 200.101 – Applicability Federal agencies can extend the rules to for-profit and foreign entities through their own regulations, though for-profits often follow cost principles under the Federal Acquisition Regulation instead.
One distinction shapes everything else: recipient versus contractor. A recipient carries out a federally authorized program on behalf of the public. A contractor supplies goods or services for the recipient’s own use. Only recipients and their subrecipients are bound by Part 200. Ordinary commercial contracts fall under the recipient’s own procurement policies, subject to the procurement standards described further down.
Pass-through entities sit in the middle. They receive a federal award and then pass portions of it to subrecipients — a state education agency channeling funds to school districts is the standard example. Pass-throughs must monitor their subrecipients for compliance, so they need systems capable of overseeing spending downstream as well as their own.
What the 2024 Revision Changed
OMB finalized the update in April 2024, and the new rules apply to awards made on or after October 1, 2024.2U.S. Environmental Protection Agency. Whats New in the 2024 Revision to 2 CFR Part 200 Awards issued before that date generally continue under the prior version unless the agency says otherwise. The biggest shifts:
- The single audit threshold rose from $750,000 to $1,000,000 in federal spending during a fiscal year.
- The de minimis indirect cost rate increased from 10% to 15% of modified total direct costs.
- The equipment tracking threshold rose from $5,000 to $10,000 per unit.
- The cap on fixed amount subawards doubled from $250,000 to $500,000.
- Recipients must now notify employees in writing of their whistleblower rights.
- Recipients must take reasonable steps to safeguard sensitive information — a new cybersecurity obligation.
- The regulation replaced the term “non-Federal entity” with “recipient or subrecipient” throughout.
Financial Management and Internal Controls
Two Part 200 sections set the financial baseline. Section 200.303 requires recipients to maintain internal controls that give reasonable assurance the award is being managed in compliance with federal law and the grant’s terms, aligned with either the GAO Green Book or the COSO framework.3eCFR. 2 CFR 200.303 – Internal Controls Section 200.302 separately requires financial management systems that produce accurate reporting for each award and can trace funds from source through every obligation and expenditure.4eCFR. 2 CFR 200.302 – Financial Management
In practical terms, your accounting has to isolate each grant’s transactions and keep federal dollars from mixing with other funds. Organizations running several grants at once feel this most: a single ledger entry that blends two funding sources can generate audit findings years later.
Program Income
Money earned directly from a grant-funded activity — service fees, product sales, conference registrations — is program income. It has to be used for the original purpose of the award. Recipients can handle it three ways: deduct it from total allowable costs, add it to the project budget, or apply it toward cost-sharing.5eCFR. 2 CFR 200.307 – Program Income Unless the federal agency says otherwise, the deduction method applies by default.
Cost Sharing and Matching
When a grant requires you to contribute your own funds, those contributions have to be verifiable in your records, not already pledged to another federal award, necessary and reasonable for the project, allowable under the cost principles, and not funded by another federal source unless a statute specifically permits it.6eCFR. 2 CFR 200.306 – Cost Sharing or Matching Fail any one test and the contribution does not count toward your match.
Allowable Costs
Every expense charged to a federal award has to clear four tests under Subpart E. It must be necessary and reasonable, allocable to the award in proportion to the benefit received, treated consistently with how you handle the same expense on non-federal work, and in conformance with the guidance’s specific rules.7eCFR. 2 CFR Part 200 Subpart E – Cost Principles Miss any one and the cost is disallowable no matter how useful it was.
Some categories are flatly prohibited: alcohol, lobbying, entertainment, fines and penalties, and alumni activities. Advertising and public relations costs are generally prohibited except when specifically required by the award or tied to allowable activities like recruiting grant-funded staff.
Costs That Need Prior Written Approval
Between clearly allowable and clearly forbidden sits a category of expenses that can be charged only if the awarding agency approves them in writing before you spend the money. Section 200.407 lists more than a dozen, including equipment and capital expenditures, pre-award costs, travel, fundraising, and budget revisions.8eCFR. 2 CFR 200.407 – Prior Written Approval (Prior Approval) Spending in these categories without permission is one of the most common audit findings. Reviewing the list before your project starts, and building approval requests into your timeline, avoids most of the problem.
The De Minimis Indirect Cost Rate
Indirect costs — rent, utilities, IT, accounting — benefit multiple projects and can’t be assigned cleanly to a single grant. Organizations with significant federal funding negotiate a rate with their cognizant agency. Smaller organizations that have never done so can elect a de minimis rate of up to 15% of modified total direct costs.9eCFR. 2 CFR 200.414 – Indirect (F and A) Costs No documentation is required to justify it, and once elected it applies to all federal awards until you negotiate a formal rate. MTDC includes salaries, fringe benefits, materials, travel, and the first $50,000 of each subaward, but excludes equipment, capital expenditures, and participant support costs.
Procurement Standards
Buying with federal money takes more rigor than a normal purchase. States and Indian Tribes follow their own procurement laws.10eCFR. 2 CFR 200.317 – Procurements by States and Indian Tribes All other recipients and subrecipients must comply with sections 200.318 through 200.327, using methods tied to dollar thresholds:11eCFR. 2 CFR 200.320 – Procurement Methods
- Micro-purchases at or below the FAR baseline of $10,000 need no competitive quotes. An organization can self-certify a higher micro-purchase threshold up to $50,000 based on its internal controls and risk evaluation. Anything above $50,000 needs approval from the cognizant agency for indirect costs.
- Small purchases between the micro-purchase threshold and the simplified acquisition threshold (the FAR limit of $250,000) require price or rate quotes from an adequate number of qualified sources.
- Sealed bids are used for larger procurements, particularly construction, when a full specification exists and price will drive the award.
- Competitive proposals apply when technical evaluation factors matter more than price alone.
- Sole source is permitted only when one vendor can supply the item, during a genuine emergency, when the federal agency expressly authorizes it, or after competition has been attempted and failed.
Conflicts of Interest
You need written standards of conduct for anyone involved in procurement. No employee, officer, or board member with a real or apparent conflict — including financial interests held by immediate family — may participate in selecting, awarding, or administering a contract funded by the award. Gifts, favors, or anything of monetary value from contractors or potential contractors are off limits, though organizations may set a threshold for unsolicited items of nominal value.12eCFR. 2 CFR 200.318 – General Procurement Standards Every procurement action also needs documentation showing how the vendor was chosen and that the price paid was fair and reasonable.
The Single Audit
Any organization that spends $1,000,000 or more in federal awards during its fiscal year must undergo a single audit.13eCFR. 2 CFR 200.501 – Audit Requirements An independent auditor reviews financial statements, tests internal controls, and examines compliance for major federal programs, then issues a report that identifies any questioned costs. Organizations funded by only one federal program may qualify for a narrower program-specific audit instead, provided the program’s statutes and award terms don’t separately require a financial statement audit.
The reporting package goes to the Federal Audit Clearinghouse within 30 calendar days of receiving the auditor’s report, or nine months after the end of the audit period, whichever comes first.14eCFR. 2 CFR Part 200 Subpart F – Audit Requirements Missing that deadline, or failing to resolve findings, can trigger the noncompliance remedies below.
Closeout, Records, and Equipment
When the period of performance ends, you have 120 calendar days to submit all required financial, performance, and other final reports.15eCFR. 2 CFR 200.344 – Closeout Grant managers who wait until the last week to pull together three years of documentation usually find gaps they can’t fill.
After the final expenditure report goes in, you must keep all financial records, supporting documents, and statistical records for at least three years.16eCFR. 2 CFR 200.334 – Record Retention Requirements If litigation, an audit, or a claim is pending when the three years end, retention extends until the matter is resolved. Destroying records too early is one of the few mistakes that can’t be corrected.
Equipment bought with federal funds has its own end-of-project rules. When it’s no longer needed for the original grant or another federally supported activity, disposition depends on current fair market value. Items worth $10,000 or less per unit can be kept, sold, or disposed of with no further obligation. Items worth more than $10,000 per unit can also be retained or sold, but the federal agency is entitled to its proportional share of the current value or sale proceeds.17eCFR. 2 CFR 200.313 – Equipment
What Happens If You Fall Out of Compliance
When a recipient fails to comply with the guidance or the award terms, the federal agency has a graduated set of remedies. It usually starts with specific conditions on the award, then escalates:18eCFR. 2 CFR 200.339 – Remedies for Noncompliance
- Temporarily withholding payments until corrective action is taken.
- Disallowing costs tied to the noncompliant activity, forcing the organization to repay those amounts from non-federal funds.
- Suspending or terminating the award in part or in whole.
- Withholding future funding for the project or program.
- Initiating suspension or debarment proceedings, which can bar the organization from all federal awards government-wide.
Suspension and debarment are the most severe. An excluded organization is listed in SAM.gov, no executive branch agency may award it new grants or contracts, existing awards are not renewed, and the exclusion also restricts the organization from acting as an agent or subcontractor on other federal work.19General Services Administration. Suspension and Debarment FAQ
Recipients have appeal rights. When an agency imposes a remedy, it must give the recipient an opportunity to object and present information challenging the action, and it must maintain written procedures for objections, hearings, and appeals.20eCFR. 2 CFR 200.342 – Opportunities To Object, Hearings, and Appeals The specifics vary by agency, so the first step after any adverse action is pulling up that agency’s published procedures.