Nonprofit Blog

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Monday, May 12, 2014

Understanding recent OMB grant reform

Posted by Armanino Nonprofit Team

After urging by grant recipients and two presidential directives, the Office of Management and Budget (OMB) has issued more than 100 pages of revised regulations governing administrative requirements, cost practices and audit procedures that take effect Dec. 26. And yes, it’s as big of a  deal as it sounds.

From an audit perspective, the shift in focus from a focus on procedures to a focus on program performance and measurable outcomes is one of the largest changes. There was also a $250,000 increase in the threshold that requires an audit—up from $500,000 to $750,000— and a decrease in the amount of sampling required by auditors.

From a consulting perspective, the OMB’s effort to streamline years of often confusing guidance into one uniform document was key, along with the changes that make accounting for indirect costs easier and less time consuming for grantees.

In addition, there are many technical changes that will require some additional training for accountants but, perhaps, the larger changes are in the new areas grantees will be expected to address:

  • A shift to electronic record keeping and the accompanying need for security are top of mind for OMB regulators.
  • A shift to an emphasis on program outcomes will push recipients into developing new non-accounting metrics.
  • A shift of submonitoring requirements from audit to the post award area with specific requirements stated for information in the award, ability to accept subrecipient indirect cost rates, and steps needed in monitoring.

It’s also important to note that some of the changes contained in preliminary OMB reform drafts didn’t make the official announcement—and the committee continues to meet.

Next Steps

Now is the time for nonprofits that receive federal grants to take a close look at their internal practices before December 26, when these changes will be included in their audits.
For an overview of the OMB reform changes and how they could impact your organization, listen to my recent webinar with Senior Consulting Manager, Karen Frost, titled Understanding OMB Reform for Grant Administration and Single Audits.

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