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Uniform Guidance, officially known as 2 CFR Part 200, is a comprehensive set of federal regulations issued by the U.S. Office of Management and Budget (OMB). It establishes the administrative requirements, cost principles, and audit standards that apply to organizations receiving federal grant funding.
These rules were created to simplify and unify what used to be a patchwork of separate federal grant regulations, ensuring that funds are managed responsibly, consistently, and with full transparency.
For nonprofit organizations, Uniform Guidance provides the framework for how to plan, spend, and report on federal awards. It sets standards for:
Although Uniform Guidance was designed for federal funding, many non-federal awards in New York State also require recipients to follow these same principles. State and local agencies frequently incorporate 2 CFR 200 by reference to ensure consistent accountability and fiscal integrity across all publicly funded programs.
In short, compliance with Uniform Guidance is not only a federal expectation—it’s a best practice for maintaining transparency, efficiency, and trust in the management of public resources.
Under Uniform Guidance (2 CFR 200), every cost charged to a federal or federally linked award must meet three fundamental standards — it must be allowable, allocable, and reasonable. These principles ensure that public funds are used properly, efficiently, and only for legitimate program purposes.
Allowable Costs
A cost is considered allowable when it clearly supports the work outlined in the grant agreement and complies with federal, state, and organizational rules.
Allowable expenses typically:
Examples include employee compensation directly tied to the project, fringe benefits, materials and supplies used for program delivery, travel essential to project goals, and approved indirect costs.
Allocable Costs
A cost is allocable when it directly benefits the specific award being charged or can be fairly distributed among multiple projects based on the relative benefit received.
For instance, if one program uses 70% of a shared resource, it may charge 70% of that cost to its grant.
Costs that do not directly advance or support the objectives of the funded project cannot be allocated to that award.
Reasonable Costs
A cost is reasonable when the amount reflects what a prudent person would pay for the same item or service under comparable circumstances.
Reasonable costs:
In short, a reasonable cost is one that makes sense from both a business and public-trust standpoint.
Time and effort reporting is a key requirement under Uniform Guidance (2 CFR 200.430) that ensures all salary and wage costs charged to federal or federally linked awards are accurate, properly supported, and directly related to work performed on those projects.
This requirement exists to verify that personnel costs billed to a grant truly reflect the time employees spend on grant-funded activities, and that no federal funds are used for unrelated work.
What the Regulation Requires
Uniform Guidance states that charges for salaries and wages must be based on records that accurately reflect the work performed.
These records must:
Acceptable Time and Effort Documentation
Different organizations may use varying formats, but all must contain the same essential information. Acceptable documentation can include:
These records must cover all compensated time — including federally funded projects, non-federal programs, and administrative duties — to ensure a full picture of each employee’s work distribution.
Why It Matters
Accurate time and effort reporting protects your organization’s credibility and funding eligibility.
It ensures that salary costs are reasonable, allocable, and allowable under 2 CFR 200, supports clean audit findings, and prevents disallowed costs or repayment of grant funds.
A strong reporting system demonstrates fiscal responsibility, transparency, and compliance with both federal and state oversight standards — critical traits for any organization managing public funds.
Under Uniform Guidance (2 CFR 200.1), equipment is defined as tangible personal property that:
Items below this threshold are typically treated as supplies rather than equipment.
Examples of equipment include laboratory instruments, vehicles, computers, medical devices, and other durable assets purchased for a federally funded project.
What an Equipment Policy Must Contain
To comply with 2 CFR 200.313, every organization that manages federal or federally linked awards must have a written equipment management policy.
That policy should clearly outline how the organization acquires, records, maintains, safeguards, and disposes of property purchased with public funds.
A well-designed policy typically includes:
Why It Matters
A current and well-implemented equipment policy helps maintain compliance with 2 CFR 200.313, reduces audit risk, and ensures proper stewardship of federal and state resources.
It also reflects strong internal controls — demonstrating to funders that all property purchased with public money is accounted for, maintained, and responsibly managed.
Under Uniform Guidance (2 CFR 200.1), supplies are defined as all tangible personal property other than equipment.
This generally means items that:
Typical examples include office materials, educational resources, minor IT accessories, lab reagents, and other consumable or short-term-use items purchased to carry out a federally funded project.
Allowable Supply Costs
To be charged to a federal or federally linked award, supply costs must be:
Items used for both grant and non-grant activities must be allocated proportionally based on benefit received.
Procurement and Inventory Controls
Although supplies are generally considered lower-value assets, Uniform Guidance (2 CFR 200.314) still requires strong internal controls over their purchase and use.
An effective policy should address:
Distinguishing Supplies from Equipment
The main distinction between supplies and equipment lies in useful life and cost.
If an item costs $5,000 or more per unit and has a useful life of more than one year, it is classified as equipment.
Otherwise, it is treated as a supply.
Organizations may adopt a lower internal threshold (for example, $2,500) for tracking or audit purposes, but they must apply it consistently across all funding sources.
Why It Matters
Proper classification of supplies ensures accurate financial reporting, compliance with 2 CFR 200.314, and reduces audit risk.
A well-maintained supply-management process demonstrates transparency, supports cost-effectiveness, and safeguards public resources used to deliver your organization’s mission.
Under Uniform Guidance (2 CFR § 200.475), travel costs are the expenses for transportation, lodging, meals, and incidentals that are necessary to carry out a federal or federally linked award.
To be charged to a grant, travel must serve a direct program purpose—such as attending project-related meetings, training, fieldwork, or conferences that clearly advance the goals of the funded activity.
Allowable Travel Expenses
Travel costs are allowable when they are:
Typical allowable costs include:
Unallowable or Restricted Travel Costs
Expenses that are unreasonable or unrelated to the award cannot be charged to federal funds.
Examples include:
Travel Policy Requirements
Each organization must maintain a written travel policy that establishes:
All employee travel charged to a federal award must follow the organization’s policy and the Uniform Guidance cost principles to ensure fairness, transparency, and audit readiness.
Why It Matters
Properly managed travel costs ensure compliance with 2 CFR § 200.475 and demonstrate responsible use of public funds.
A consistent travel policy promotes accountability, prevents questioned costs during audits, and allows staff to fulfill program objectives efficiently while maintaining fiscal integrity.
While Uniform Guidance (2 CFR 200 Subpart E) does not specifically use the term client incentives, such costs may be allowable if they meet the general cost principles of being reasonable, necessary, and allocable to the federal program.
Client incentives are typically small monetary or non-monetary items (such as gift cards, transit passes, or educational materials) provided to program participants to encourage engagement, attendance, or data collection participation when these actions directly support the goals of a federally funded project.
Allowability Criteria
To be allowable under a federal or federally linked award, client incentive costs must:
Incentives that serve as tokens of participation or engagement—rather than income or reward—are generally considered allowable when their purpose is programmatic and well-documented.
Examples of Allowable Incentives
Unallowable or Questionable Incentives
Client incentive costs are unallowable if they are:
Policy Recommendations
Each organization managing federal funds should include client incentive guidance within its written cost or procurement policy.
This policy should:
Why It Matters
Clearly defining and controlling client incentive practices ensures compliance with the cost principles of 2 CFR 200, protects federal funds from misuse, and demonstrates that program expenditures are driven by mission-related goals, not personal benefit.
A well-documented incentive policy strengthens audit readiness, ensures equitable participant treatment, and upholds the integrity of your federally funded programs.
Under Uniform Guidance (2 CFR 200 Subpart E), organizations that receive federal or federally linked funding are allowed to recover indirect costs—also called administrative or overhead costs—that support the general operation of grant activities but cannot be easily identified with a specific project.
Indirect costs represent the shared services that make program delivery possible, such as accounting, payroll, IT, human resources, facility expenses, and other administrative functions necessary for managing federal awards.
Direct vs. Indirect Costs
Uniform Guidance requires that costs be classified consistently: a cost treated as direct on one award cannot also be included in the indirect cost pool.
Types of Indirect Cost Rates
Organizations may recover indirect costs using one of several federally recognized methods:
Modified Total Direct Costs (MTDC)
The MTDC base is used to calculate the portion of direct costs eligible for the indirect rate.
As of 2024, MTDC generally includes:
MTDC excludes:
Why It Matters
Applying an accurate and compliant indirect cost rate ensures that organizations recover legitimate administrative and operational expenses that are essential to the delivery of federal programs.
The 2024 Uniform Guidance update — raising the de minimis rate to 15% and expanding the MTDC cap — offers more flexibility and fairness, particularly for smaller nonprofits and local agencies without negotiated rates.
Adhering to these rules under 2 CFR 200.414 promotes transparency, sustainability, and accountability in the use of public funds while ensuring that administrative costs are properly documented and equitably distributed across programs.
Under Uniform Guidance (2 CFR 200.112), every organization that receives federal or federally linked funding must maintain written standards of conduct to prevent personal, financial, or organizational conflicts of interest in connection with the use of public funds.
This regulation ensures that all purchasing, contracting, and program decisions are made objectively and in the best interest of the program, free from bias, favoritism, or personal gain.
What Constitutes a Conflict of Interest
A conflict of interest exists when an employee, officer, board member, or agent:
Conflicts can be actual, potential, or apparent — meaning even the appearance of impropriety should be avoided.
What an Organizational Policy Must Include
A compliant Conflict of Interest Policy should contain:
Why It Matters
Strong conflict-of-interest controls protect your organization’s integrity, funding eligibility, and public trust.
They demonstrate compliance with 2 CFR 200.318(c)(1) and 200.112, both of which emphasize fairness and accountability in procurement and program administration.
By enforcing disclosure and impartial decision-making, your organization ensures that all grant-related actions serve the public interest, not private advantage — a key principle of sound financial and ethical management.
Under Uniform Guidance (2 CFR 200.318(c)(1)), every organization that receives federal or federally linked funding must maintain written standards of conduct covering conflicts of interest and gratuities. These standards ensure that all employees, officers, agents, and board members act with integrity, avoid undue influence, and make decisions solely in the best interest of the program.
Prohibition on Gratuities
No employee, officer, agent, or representative of the organization may:
Nominal items of minimal value (such as promotional pens, calendars, or small refreshments) may be permissible if allowed by the organization’s written policy and if acceptance does not influence official decision-making.
Other Prohibited Practices
In addition to gratuities, organizations must prohibit and actively prevent:
Policy and Enforcement
An effective Standards of Conduct Policy should include:
Organizations must also train staff regularly to ensure understanding of ethical obligations and to maintain a culture of compliance.
Why It Matters
Prohibiting gratuities and related misconduct protects your organization’s federal funding eligibility, strengthens public trust, and ensures compliance with Uniform Guidance, federal procurement rules, and state ethics laws.
By enforcing clear standards and holding all participants accountable, your organization demonstrates that public funds are managed with honesty, transparency, and fairness.
Under Uniform Guidance (2 CFR §§ 200.317–200.327), all organizations that receive federal or federally linked funds must follow written procurement procedures that ensure open competition, transparency, and responsible use of public resources.
The goal is to obtain necessary goods and services efficiently, fairly, and at the best value, while preventing waste, fraud, and conflicts of interest.
General Procurement Requirements
Organizations must have a written procurement policy that includes:
All procurement must comply with applicable federal, state, and local laws and use sound business judgment.
Procurement Methods
Uniform Guidance outlines several approved methods of procurement:
Contract and Cost Standards
All contracts must include:
Contractors must not be suspended or debarred from federal funding eligibility (verified through SAM.gov).
Small, Minority, and Women-Owned Businesses
Organizations are encouraged to use small businesses, minority-owned firms, women’s business enterprises, and labor surplus area firms whenever possible. Efforts should be documented in accordance with 2 CFR 200.321.
Why It Matters
A strong procurement policy ensures that public funds are spent with integrity and fairness, prevents audit findings, and supports compliance with federal, state, and Uniform Guidance regulations.
By following competitive, transparent procurement practices, your organization demonstrates accountability, value for money, and responsible stewardship of all grant funds.
Under Uniform Guidance (2 CFR § 200.302), every organization that receives federal or federally linked funding must maintain a financial management system that provides full accountability, accuracy, and transparency in the use of public funds.
The system must be able to identify the source and application of each grant dollar, ensure funds are used only for authorized purposes, and prevent waste, fraud, and misuse.
Core Financial Management Requirements
To comply with federal standards, the organization’s financial system must:
Internal Control Standards
Effective internal controls are the foundation of financial integrity.
In line with 2 CFR § 200.303, controls must provide reasonable assurance that:
Organizations are encouraged to follow frameworks such as the Committee of Sponsoring Organizations (COSO) standards or GAO Green Book for internal control best practices.
System of Recordkeeping
Each organization must maintain adequate documentation to support every transaction charged to a grant.
Records should include:
Records must be retained for at least three years from the date of final expenditure or per federal award conditions.
Cash and Budget Controls
Financial systems must ensure:
Why It Matters
Strong financial management and internal controls protect the organization’s resources, prevent audit findings, and ensure that every federal dollar is used for its intended purpose.
Compliance with 2 CFR § 200.302 demonstrates to funders that your nonprofit operates with transparency, accountability, and sound stewardship — critical for maintaining trust and eligibility for future awards.
Under Uniform Guidance (2 CFR §§ 200.334–200.338), all organizations that receive federal or federally linked funding must maintain complete, accurate, and accessible records that document the use of those funds.
Proper record retention ensures transparency, supports audits and monitoring, and demonstrates that all costs and program activities comply with federal, state, and grantor requirements.
Retention Period
Types of Records to Retain
Records must include both financial and non-financial documentation related to grant activities, such as:
Records may be maintained in paper, electronic, or microform formats, provided they are accurate, complete, and easily retrievable.
Access to Records
Per 2 CFR § 200.337, the following entities must be granted reasonable access to records:
Access must be provided without undue delay, and organizations must ensure all requested materials are organized, legible, and complete.
Methods of Storage and Security
The organization must safeguard all records—both physical and electronic—against unauthorized access, alteration, or destruction.
Policies should include:
When records reach the end of their retention period, they must be disposed of securely to protect sensitive or personally identifiable information.
Why It Matters
Maintaining proper records is essential to support the integrity of every federal award.
Compliance with 2 CFR §§ 200.334–200.338 ensures the organization can fully demonstrate that funds were used for their intended purpose, withstand audits confidently, and protect both the organization and its funders from financial or legal risk.
A strong record retention policy not only supports compliance but also fosters operational efficiency, transparency, and accountability in every program.
Under Uniform Guidance (2 CFR § 200.332), organizations that pass federal or federally linked funds to another entity—called a subrecipient—are responsible for ensuring that those funds are used properly and in full compliance with all federal laws, regulations, and award terms.
This responsibility cannot be delegated to the subrecipient. The pass-through entity (your organization) must establish and document procedures for evaluating, monitoring, and supporting subrecipients throughout the life of the award.
Pre-Award Risk Assessment
Before issuing any subaward, the organization must assess each subrecipient’s ability to manage federal funds responsibly.
This risk assessment may include reviewing:
The results of the assessment determine the level of oversight and monitoring required during the award period.
Required Subaward Documentation
Each subaward agreement must include:
Subawards must be written, signed, and retained in accordance with federal and organizational policies.
Ongoing Monitoring Responsibilities
Throughout the award, the pass-through entity must actively monitor subrecipient performance to ensure compliance.
Monitoring activities may include:
If a subrecipient fails to comply, the organization must take appropriate action, such as additional oversight, technical assistance, or enforcement measures up to suspension or termination of the subaward.
Audit and Reporting Requirements
Subrecipients that expend $750,000 or more in federal funds during their fiscal year must undergo a Single Audit under 2 CFR Subpart F.
The pass-through entity must:
Organizations must maintain documentation of all monitoring activities and corrective actions as part of the grant record.
Why It Matters
Subrecipient monitoring safeguards public funds and ensures program results meet federal expectations.
By following 2 CFR § 200.332, your organization demonstrates accountability, transparency, and due diligence in overseeing all partners and collaborators who receive federal funds through your programs.
Effective monitoring also reduces audit risk, prevents misuse of funds, and promotes strong working relationships built on integrity and compliance.
Under Uniform Guidance (2 CFR § 200.306), cost sharing (also known as matching) refers to the portion of a project’s total cost that is not paid by federal funds.
These contributions can come from the organization itself, third-party partners, or other non-federal sources — but they must be verifiable, necessary, and allowable under the terms of the award.
Cost sharing is often required as part of the grant agreement or may be voluntarily committed by the organization to strengthen an application. Once committed, it becomes legally binding and must be tracked and reported just like federal expenditures.
Allowable Matching Contributions
To qualify as allowable, all cost-sharing or matching contributions must meet the following criteria:
Examples of allowable matches include:
Documentation and Valuation of Contributions
All cost sharing must be supported by clear and auditable documentation, such as:
Non-cash contributions must be valued in accordance with 2 CFR § 200.306(d–j), ensuring consistency and accuracy in assigning dollar values.
Tracking and Reporting Requirements
The organization must:
If cost sharing commitments are not met, the federal share may be reduced proportionally, or unallowable match costs may lead to audit findings or repayment.
Why It Matters
Cost sharing demonstrates the organization’s commitment to the project and its ability to leverage other resources for public benefit.
Proper documentation and valuation ensure that these contributions are credible, defensible, and compliant with 2 CFR § 200.306.
By maintaining a consistent and transparent system for tracking and verifying match contributions, your organization strengthens its compliance posture, audit readiness, and reputation for fiscal responsibility.
Under Uniform Guidance (2 CFR § 200.305), all organizations receiving federal or federally linked funding must establish and follow sound cash management procedures to ensure that funds are used efficiently, promptly, and solely for authorized purposes.
The goal of these rules is to minimize the time between the receipt of federal funds and their actual disbursement for program costs, preventing excess cash on hand and ensuring compliance with federal cash flow and interest requirements.
Fund Drawdown Methods
Federal funds are typically received in one of two ways:
Timing and Use of Funds
When advances are approved, the organization must:
If cash is held longer than necessary, or if interest is earned on advance balances, the organization may be required to remit the interest to the U.S. Department of Health and Human Services (HHS) Payment Management System, in accordance with 2 CFR § 200.305(b)(9).
Internal Control Requirements
A strong cash management system must include:
Organizations should also use unique project or fund codes to track each award’s cash activity separately.
Reporting and Reconciliation
Federal and pass-through entities may require periodic Federal Financial Reports (SF-425) to reconcile expenditures, drawdowns, and cash balances.
The organization must:
Why It Matters
Sound cash management protects public funds and ensures compliance with 2 CFR § 200.305.
By minimizing idle balances, maintaining proper documentation, and reconciling cash activity regularly, your organization demonstrates fiscal discipline, transparency, and readiness for audits or monitoring reviews.
Effective cash controls also strengthen trust with funders and ensure that every dollar is used efficiently to advance the mission of your federally supported programs.
Under Uniform Guidance (2 CFR § 200.113), every organization that receives federal or federally linked funding is required to promptly disclose fraud, waste, abuse, or other criminal violations affecting federal awards.
In addition, 41 U.S.C. § 4712 provides whistleblower protections for employees who report such concerns in good faith.
Together, these rules ensure that organizations maintain a culture of transparency, accountability, and ethical behavior in managing public funds.
Mandatory Disclosure Requirements
Nonprofit organizations must immediately disclose in writing to the federal awarding agency or pass-through entity any:
Reports should be made to the Office of Inspector General (OIG) of the federal agency administering the award or, if applicable, to the state pass-through entity’s compliance office.
Failure to disclose known violations may result in penalties, suspension, or debarment from future funding.
Whistleblower Protections (41 U.S.C. § 4712)
Employees, officers, and contractors who report suspected wrongdoing in connection with a federal award are protected by federal law.
Specifically, organizations may not retaliate against individuals who disclose, in good faith:
Retaliation includes termination, demotion, harassment, or any adverse employment action.
Violations of whistleblower protections can lead to reinstatement, back pay, and disciplinary consequences for responsible officials.
Internal Reporting Procedures
A compliant policy should outline how employees and stakeholders can report concerns safely and confidentially.
This includes:
Reports should be documented, reviewed, and investigated promptly, with appropriate corrective actions taken when misconduct is confirmed.
Training and Communication
All employees should receive training on the organization’s whistleblower and fraud reporting policy during onboarding and periodically thereafter.
Posters, policy manuals, or intranet notices should clearly explain:
Why It Matters
A strong whistleblower and fraud reporting policy safeguards both your organization and the public trust.
It fulfills the mandatory disclosure requirements under 2 CFR § 200.113 and reinforces your commitment to ethical conduct, transparency, and accountability.
Encouraging staff to speak up without fear ensures that problems are addressed early — preventing potential legal violations, reputational damage, and funding risks.
Under Uniform Guidance (2 CFR § 200.405), every organization receiving federal or federally linked funds must ensure that shared costs are fairly and accurately allocated among programs that benefit from them.
A Cost Allocation Plan (CAP) documents how common expenses — such as rent, utilities, supplies, or administrative salaries — are distributed across multiple grants, contracts, or cost centers.
This ensures that each funding source bears its equitable share of total costs in proportion to the benefits received.
Purpose of a Cost Allocation Plan
The primary goal of a CAP is to:
A written plan is especially important for organizations that receive multiple federal or state awards, as it helps standardize cost assignment practices.
Types of Costs Addressed in a CAP
A Cost Allocation Plan typically explains how the organization allocates:
Allocation Methods
Uniform Guidance requires that allocation methods be reasonable, documented, and applied consistently.
Common approaches include:
The plan must describe the chosen methodology and include examples showing how percentages are calculated.
Documentation and Review
To maintain compliance, the organization must:
The Cost Allocation Plan should be approved by management and made available for review by auditors or funding agencies.
Why It Matters
A well-prepared Cost Allocation Plan is critical for demonstrating financial integrity and compliance with 2 CFR § 200.405.
It ensures transparency in how shared resources are distributed, supports accurate reporting to funders, and minimizes audit risk by providing a clear trail for how each program’s share of costs was determined.
By documenting and applying cost allocation methods consistently, your organization shows that it manages public funds fairly and responsibly across all programs.
Effective compliance with Uniform Guidance (2 CFR Part 200) requires more than written policies — it depends on well-trained staff and active oversight.
Organizations that receive federal or federally linked funding must ensure that all employees involved in program, fiscal, and administrative functions understand and follow the rules governing the use of public funds.
A strong training and oversight framework ensures consistency, prevents unintentional violations, and supports a culture of transparency and ethical stewardship.
Training Responsibilities
The organization must provide regular and documented training to all relevant staff, covering:
Training should be delivered to both new and existing employees, with annual refreshers to address policy updates or regulatory changes.
Management Oversight and Accountability
Strong compliance oversight includes:
Supervisors and department heads share responsibility for ensuring their teams consistently apply all relevant Uniform Guidance policies and procedures.
Documentation and Continuous Improvement
To demonstrate compliance, the organization must maintain records of:
Regular evaluation of training effectiveness and oversight practices helps ensure the organization remains responsive to evolving regulations and funding agency requirements.
Why It Matters
Training and compliance oversight safeguard the organization’s integrity and funding eligibility.
They ensure that staff fully understand their roles in maintaining compliance with Uniform Guidance, minimize audit findings, and build a culture of accountability and continuous improvement.
By investing in staff knowledge and oversight systems, the organization demonstrates to funders and stakeholders that it manages public funds responsibly, consistently, and transparently.
Under Uniform Guidance (2 CFR Subpart F), any nonprofit organization that expends $750,000 or more in federal awards during its fiscal year is required to undergo a Single Audit (also known as a Uniform Guidance Audit).
This audit provides independent assurance that federal funds are managed properly, spent for authorized purposes, and supported by adequate internal controls and documentation.
Organizations below the $750,000 threshold are exempt from the Single Audit requirement but must still maintain records available for review by funding agencies or pass-through entities.
Purpose of the Single Audit
The Single Audit is designed to:
This comprehensive approach replaces multiple separate audits of each federal program with a single, organization-wide review.
Audit Scope and Requirements
The audit must be conducted by an independent auditor in accordance with:
The auditor will review:
Reporting and Submission
After completion, the organization must:
Audits must be retained in the organization’s records and made available to funding agencies upon request.
Corrective Action and Follow-Up
If findings or questioned costs are identified, the organization must:
Strong internal controls, regular self-assessments, and timely responses help prevent recurring findings in future audits.
Why It Matters
The Single Audit process strengthens financial accountability and promotes trust between nonprofits and funding agencies.
Compliance with 2 CFR Subpart F demonstrates that your organization:
A successful audit outcome confirms your organization’s readiness to manage future federal awards and reinforces its reputation for sound governance and integrity.