I was recently leading grant management training in Jackson Mississippi and was pleasantly surprised to have some people in the room who are involved with proposal development for federal awards.
Now it wasn’t just professional courtesy that made me so happy to see them, but because there are some changes baked into the new grant regulation 2 CFR Part 200 (aka the Uniform Guidance) that both grant writers and grant managers need to know about.
In particular, the new Administrative Requirements include some opportunities for making your proposal more attractive to federal funding agencies but only if the grant writers and grant managers collaborate early enough in the process.
Let’s take a look at the brave new world of federal grants since the new regulations took effect.
Funders Want the Focus on Well-Spent Direct Costs
You may not realize this if you are a grant writer, but the new regulations make it clear. Federal funders want to minimize indirect costs so that the bulk of spending is spent directly by the project or program being funded.
And they added new ways to accomplish this but only if you are aware of the rules in 2 CFR Part 200.
Next, federal agencies have a new requirements to ensure that those direct costs they fund will not be wasted…or worse!
That is why there is a new risk assessment for applicants to minimize the chance that waste, fraud and abuse will take place with federal programs.
More about that in just a minute…
Secret #1: Help Your Organization Have Some of Your Indirect Costs Covered
Maybe you are helping a small nonprofit or local government that has never had their indirect costs covered as part of their federal grants before. Or maybe, they were intimidated by the daunting task of creating and negotiating an indirect cost rate.
Now there is an “easy, peasy” way for the federal government to cover some of their fair share of support services for the federal award.
The new regulations provide a new 10% de minimis indirect cost rate for organizations that never had a negotiated indirect cost rate.
This new low rate makes funding agencies happy because it keeps indirect costs from spiraling out of control, and makes non-federal entities happy because it’s an easy method to get some of their costs covered without all the work of negotiating and indirect cost rate.
This new method also saves the time and effort of the Finance and Legal departments-potentially keeping indirect costs lower.
With this method, your organization can be reimbursed for indirect costs as the rate of ten percent of your Modified Total Direct Costs (MTDC) and no indirect cost proposal needs to be submitted, it can be used indefinitely.
But don’t forget it’s only available if you haven’t had a negotiated indirect cost rate before.
Secret #2: How to Have Your Program Get More Support
The next little gem hidden in the new regulations is that the door has been opened for the grant to pay for people who directly support the federally sponsored program.
In the past, there was a little thing call the “consistency of cost” treatment that was often interpreted to mean if you had an administrative support person or analyst supporting indirect areas such as the Finance department or President’s office, you couldn’t also have someone with the same job title working directly on the program.
In fact section 200.413 Direct Costs states that costs incurred for the same purpose in like circumstances must be treated consistently as either direct or indirect (F&A) costs.
Fortunately, the new Uniform Guidance recognizes that most programs need both administrative support and analysts ensure the program is working as efficiently as possible.
There’s just one catch…
If you don’t plan for them at the proposal development stage, you may be out of luck.
Think about this as the “You snooze, you lose” rule.
Everyone who is legitimately supporting the federal sponsored program could potentially be paid for as part of the program rather than having to be recovered as an indirect cost.
How sweet would that be?
Here is where the grant writers and developers come in.
This cost treatment needs to be planned into the program budget.
Here are the rules on this nugget in section 200.413 Direct Costs:
(c) Administrative and clerical staff should normally be treated as indirect (F&A) costs.
BUT direct charging may be appropriate if ALL the following conditions are met:
(1) Services are integral to a project
(2) Individuals can be specifically identified with the project or activity;
(3) Such costs are explicitly included in the budget or have the prior written approval
(4) Not recovered in indirect costs
Do you see how you can both get the program the support it needs and also make your funders happy because you have just reduced indirect costs and put more of the costs directly into the federally sponsored program?
It’s a win-win situation…but only if you plan for it from the beginning.
Secret #3: Uncle Sam Wants the Low Risk Grantee
I shared about how the federal agencies want to keep the indirect support costs as low as possible and I don’t see that trend reversing anytime soon. (Take notes those of you with high indirect cost rates!)
But one other area that you may not be aware of is the push towards making grant recipients more accountable for their spending and program performance.
In other words, the federal agencies want responsible grant recipients who are ACCOUNTABLE for what happens on their programs.
One of that ways they are doing this is to perform a risk assessment of grant applicants prior to awarding funding.
(They want the low-risk applicant to do the work-one that won’t end up on 60 Minutes, or in front of a Senate sub-committee.)
You may be wondering what this new requirement has to do with grant writers.
Here’s the thing…
Grant writers and developers have the opportunities to make it easy for the funding agencies to say “yes” to the proposal if they understand what the agencies are looking for.
So don’t make your funding agency have to hunt for the things that tell them you are a good bet to do what you say you will with the federal funds.
This is not like the Highlights magazine of childhood dentist trips where you found the umbrella and cat in the drawing of the tree!
Explicitly the risk frame work covered in 200.205 Federal awarding agency review of risk posed by applicants. Assure that your funding agency that you understand your responsibilities and that you are a good bet for the funding agency.
Talk about the organizations:
- Financial stability
- Quality of management systems
- History of performance
- Previous audit reports and findings
- Ability to effectively implement the program objectives
Being upfront in the proposal about why you are the LOW RISK choice can help your Program Officer sleep at night and demonstrate that you understand your duties as a grant recipient from the beginning of the process to the end.
Ready to Improve Your Grant Management?
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Hope to see you there!
Lucy Morgan CPA, MBA
CEO, Compliance Warrior
Author of “Decoding Grant Management-The Ultimate Success Guide to the Federal Grant Regulations in 2 CFR Part 200” The 2nd Edition is now available on Amazon in Paperback and Kindle versions.