Uniform Guidance Rewrite Pt. 2: Increase of De Minimis Rate

On April 4, 2024, the Office of Management and Budget (OMB) issued final changes to 2 CFR 200, “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” (Uniform Guidance). The Uniform Guidance sets forth the administrative requirements, cost principles, and audit requirements for federal awards to nonfederal entities. The final changes follow OMB’s proposed revision from fall 2023 and a subsequent public comment period. The changes will take effect on October 1, 2024. See our previous post, “Uniform Guidance Rewrite Part 1: Overview,” for an overview of the significant changes from the rewrite.  

The OMB’s rewrite increased the de minimis indirect cost rate from 10 to 15 percent over modified total direct costs (MTDC) while still permitting an election of a lower rate. The rewrite also revised the definition of MTDC to increase the value of each subaward that can be included in MTDC from $25,000 to $50,000. The de minimis rate is the percentage of the MTDC that can be used by nongovernmental entities that do not have a negotiated indirect cost agreement.  

The increase in the de minimis rate allows new, smaller, or inexperienced companies a more reasonable and realistic recovery of indirect costs, because a negotiated indirect cost rate agreement can be timely and costly to calculate. These types of organizations deserve full compensation for overhead costs but may not have the capacity to undergo a formal rate negotiation.  

BRG’s Government Contracts and Grants Advisory practice provides a wide range of advisory services to companies, nongovernmental organizations, and not-for-profit organizations that provide mission-driven services under federally funded grants, contracts, or cooperative agreements. These organizations face a unique challenge to balance the need for compliant practices with limited budgets and resources. Many of our clients have a broad geographic footprint and are faced with additional complexities and risks associated with decentralized field office operations.