Somewhere in your award terms is a line saying the grant is subject to 2 CFR 200, and your finance director starts using words like "allowable" and "procurement." If you run the program or write the proposal, it's tempting to leave all of that to finance. But program decisions create most compliance questions: who you hire, what you buy, which partner does what.
You don't need to memorize the rules. This article gives you the ten ideas from the Uniform Guidance that actually come up in a federal award, in plain language, so you can spot a problem before it becomes one.
What the Uniform Guidance is
2 CFR part 200 is titled "Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards." It's the government-wide rulebook for federal grants and cooperative agreements, usually called the Uniform Guidance. Federal agencies must apply it to nonprofits, states, local governments, tribes and universities unless a section or statute says otherwise, and under 2 CFR 200.101 its terms flow down to subawards.
A revision was published in the Federal Register on April 22, 2024. The government-wide effective date was October 1, 2024, and agencies could choose to apply it to earlier awards. Your own award terms tell you which version governs.
The notice and your award terms come first. What follows is the common core.
Ten ideas that come up
1. A cost must be allowable
Under 2 CFR 200.403, a cost must be necessary and reasonable for the award, allocable to it, consistent with your policies, treated the same way every time, and adequately documented. If a cost is paid from the grant, you should be able to explain why the project needed it.
2. Some costs are never allowable
A few categories trip people up. The rules make unallowable the cost of alcoholic beverages (200.423), organized fundraising (200.442) and fines and penalties (200.441). Entertainment, including social activities and gifts, is unallowable unless it has a specific and direct programmatic purpose and is in the award (200.438). Certain lobbying costs are also unallowable (200.450).
Here's a hypothetical example. Say a program manager wants to charge a $1,400 volunteer appreciation dinner to the grant: 40 volunteers at $35 each. It's a social activity with no direct programmatic purpose, so it belongs in unrestricted funds, not the award.
3. You need written procedures
Your financial management system must include written procedures for determining allowability and for requesting payment, and it must compare actual spending with the budget for each award (200.302). If your organization has no written policy for these, finance needs one before the first draw.
4. Your budget is a plan you report against
Your financial system must compare actual spending with the budgeted amounts for each award (200.302). The rules define prior approval as written approval obtained in advance, and your award terms say which changes need it. If the plan shifts, ask before you spend, not after.
5. Procurement needs competition and paperwork
When you buy goods and services with award money, 2 CFR 200.320 requires documented procurement procedures. The method depends on size: small purchases can use informal methods, larger ones require formal bids or proposals with public notice, and noncompetitive purchases are allowed only in specific circumstances such as a single source or an emergency. The dollar thresholds are tied to federal acquisition rules and your organization's own policy, so ask finance what yours are.
Under 2 CFR 200.318(c), you also need written standards of conduct covering conflicts of interest. No one with a real or apparent conflict may take part in selecting or administering a contract. If your board member's company is the obvious vendor, stop and talk to finance first.
6. Equipment gets tracked
Under 2 CFR 200.1, equipment is tangible property with a useful life of more than one year and a per-unit cost at or above the lesser of your capitalization level or $10,000. The 2024 revision raised the federal figure from $5,000. Equipment must be managed under 2 CFR 200.313, which includes a physical inventory reconciled with your property records at least once every two years. Items below the threshold are supplies.
7. Partners are subrecipients or contractors
The label determines which rules apply. A subrecipient carries out part of the program, and the contractor sells you goods or services. 2 CFR 200.331 says the substance of the relationship matters more than the form of the agreement. Pass-through entities must monitor subrecipients, including assessing their risk (200.332). The pass-through funding article covers how that works from both sides.
8. Payment has rules too
Federal payment methods are meant to minimize the time between receiving funds and spending them (200.305). Advance payments are allowed when you have the right procedures and systems, and reimbursement is used in other cases. What your award uses affects your cash flow, so check before you commit.
9. Large spenders get audited
A nonprofit that spends $1,000,000 or more in federal awards in its fiscal year must have a single audit or, in limited cases, a program-specific audit (200.501). The 2024 revision raised that threshold from $750,000. Below it, you're exempt from the federal audit requirement, but your records must still be available to the agency, the pass-through entity and the Government Accountability Office.
Note that the threshold counts total federal expenditures, so several small awards can add up to it.
10. Keep your records
Under 2 CFR 200.334, you must keep federal award records for three years from the date you submit your final financial report. Longer periods apply if there's an audit, claim or litigation, or if the agency notifies you in writing to extend. Records for equipment run three years after final disposition. The reporting and closeout article shows where those reports fall.
What changed in 2024
The 2024 revision (89 FR 30046) did more than raise thresholds. According to OMB, it raised several monetary thresholds that hadn't been updated for many years, including the equipment and single audit figures above. It also increased the part of each subaward that counts in the modified total direct cost base from $25,000 to $50,000 and allowed a de minimis indirect cost rate of up to 15 percent. If you're working from older training materials, those are the numbers to update.
Your next step
Download the current table of contents for 2 CFR part 200 from the eCFR and bookmark Subpart E, the cost principles. Next time a purchase, hire or partner comes up on a federal award, spend ten minutes there before you commit. Then ask finance which of the ten ideas your organization has a written procedure for, and which it doesn't.
When a notice calls for a budget narrative, SoliContraX drafts one from your own materials with the rest of the application, so you start from a draft your finance team can check against the cost rules. See how to get started.
Sources
- 2 CFR part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (eCFR)
- 2 CFR 200.101, Applicability (eCFR)
- 2 CFR 200.1, Definitions (eCFR)
- 2 CFR 200.302, Financial management (eCFR)
- 2 CFR 200.305, Federal payment (eCFR)
- 2 CFR 200.313, Equipment (eCFR)
- 2 CFR 200.318, General procurement standards (eCFR)
- 2 CFR 200.320, Procurement methods (eCFR)
- 2 CFR 200.331, Subrecipient and contractor determinations (eCFR)
- 2 CFR 200.332, Requirements for pass-through entities (eCFR)
- 2 CFR 200.334, Record retention requirements (eCFR)
- 2 CFR 200.403, Factors affecting allowability of costs (eCFR)
- 2 CFR 200.501, Audit requirements (eCFR)
- 2 CFR 200.423, Alcoholic beverages (eCFR)
- 2 CFR 200.438, Entertainment and prizes (eCFR)
- 2 CFR 200.441, Fines, penalties, damages and other settlements (eCFR)
- 2 CFR 200.442, Fundraising and investment management costs (eCFR)
- 2 CFR 200.450, Lobbying (eCFR)
- Guidance for Federal Financial Assistance, 89 FR 30046, April 22, 2024 (Federal Register)