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From 2 CFR 230 to the New Uniform Guidance for Indirect Costs

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From 2 CFR 230 to the New Uniform Guidance for Indirect Costs

You may have heard about the new Uniform Guidance for indirect costs that will supersede the 2 CFR Part 230 circular, but have no idea what this change means for your nonprofit. Even reading the name may leave you going, “Huh?” Or you may have downloaded the 100+ page document with the new requirements, but haven’t had the time to delve into it. If you haven’t taken the time to read about the new and impactful Uniform Guidance, the following are the main points to be mindful of.

The 2 CFR Part 200 Uniform Guidance encompasses eight previously separately-held circulars, including the 2 CFR Part 230 followed by nonprofit organizations for the preparation of indirect cost rate proposals (ICRP) for federal reimbursement. After this year, all nonprofits preparing an ICRP will have to follow the regulations set forth by this new guidance.

It may not seem like such an important change, but it is! The changes in the guidance impact nonprofit organizations more than any other type of entity included in the guidelines.

The most notable change to prepare for with the new Uniform Guidance is that it federally mandates that any pass-through entity, such as states and local governments, as well as larger nonprofit organizations, must reimburse nonprofits for any indirect costs that you incur on behalf of the federal government.

According to recent research by the Urban Institute, more than 50 percent of nonprofits with government contracts reported that governments failed to pay the full cost of their services, creating problems within their organization. The new Uniform Guidance is a step toward fixing this very real issue many nonprofits face.

So what is your cognizant agency looking for when you negotiate your indirect cost rate with them? They want to know that you have fully accounted for and can justify your indirect costs, not only at a departmental level, but agency-wide. This is only achieved by including a cost allocation plan with your ICRP. Some other Uniform Guidance positives to think about:

  • The threshold requirement for single audits has increased from $500,000 to $750,000
  • You can now charge idle facilities and idle capacity as an indirect cost
  • You will now have the opportunity to spread the cost of actual depreciation of fixed assets to a period benefiting from asset use

These changes in federal regulations are just one step toward fairer opportunities for nonprofits. They aren’t meant to scare you, but to empower you to take control of your nonprofit’s indirect cost reimbursements.

Want to know more about the new guidance? Visit the CostTree 2 CFR Part 200 Uniform Guidance resource page. Don’t know where to get started? Start by reaching out to The Council of Nonprofits or CostTree. Together…we got this.

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