Two major developments affecting nonprofits this year have been the U.S. Office of Management and Budget's (OMB) adoption of large-scale changes to the uniform rules governing Federal grants, known as the "Super Circular," and President Obama's use of Executive Orders to impose new requirements on Federal contractors, including nonprofits. In this month's update, we focus on examples of how two agencies are responding to these developments.

Agencies Begin Issuing New Guidance Prompted by the Super Circular

Even though the December 26, 2014, effective date approaches, agencies still have not issued corresponding regulations. However, the National Science Foundation (NSF) has issued preliminary revisions to its Proposal and Award Policies and Procedures Guide (PAPPG) to align NSF's grant procedures with the Super Circular. The revised PAPPG provides some insight into how agencies may address the changes prompted by the Super Circular.

The first and most notable aspect of the revised PAPPG is that it is not a "regulatory" revision, as we will expect to see from several Federal agencies, but rather a "policy" revision. In the Federal Registernotice announcing the revisions, NSF noted its "longstanding practice of implementing [grant requirements] via use of a policy rather than regulation." Thus, grantees should recognize that not all Federal grant making entities will issue new regulations to effectuate the Super Circular's requirements. Accordingly, grantees should keep an eye on their grantor entities – not just for regulatory revisions, but also for any revised policy documents or directives that might affect grant proposal and administration requirements.

While the revisions to the PAPPG are not a wholesale redrafting of that guidance, they are too numerous to summarize here, and NSF grantees should review the revised PAPPG to understand the new requirements. The following are just a few examples of the changes in the revised document:

  • Salaries of administrative and clerical staff are treated as indirect costs and may be treated as direct costs only under circumstances outlined in the Super Circular that are now incorporated into the PAPPG.
  • Proposers will be assessed for risk in accordance with procedures that conform to those set forth in the Super Circular. Among other criteria, these risk assessments will include pre-award financial and administrative reviews for all new proposers (or proposers who have not received NSF funding in the previous five years) who are recommended for funding and stand to receive $200,000 or more.
  • Various definitions and terms are brought into line with the Super Circular, such as the definitions of "grant agreement" and "cooperative agreement," and the use of the terms "start date" and "end date" rather than "effective date" and "expiration date" to describe the term of an award.
  • Cash and in-kind contributions are subject to Super Circular-prescribed recordkeeping and audit requirements.
  • NSF grantees must have financial management systems that meet the requirements of the Super Circular, set forth at 2 C.F.R. § 200.302.

NSF has helpfully highlighted the changes to the PAPPG that were driven by the Super Circular. These changes are highlighted in yellow in the revised document. (There are further changes, unrelated to the Super Circular, that are highlighted in blue.) Even better, NSF has annotated the changes with comments that cite the specific Super Circular provision that prompted each change. Thus, the revised PAPPG is extremely useful to NSF grantees, who need to understand the new and revised requirements. Hopefully, other agencies' revised policies and regulatory documents will follow NSF's lead. Grantees should remember to track changing requirements that are both related and unrelated to the Super Circular. Should a grantee find any inconsistencies between the Super Circular and non-Super Circular regulations, grantees should raise this issue immediately with their Grants & Agreements officer and request written guidance on how to interpret those requirements.

Update on Pay Equality

In our April 2014 update, we focused on President Obama's Executive Order and Presidential Memorandum advancing pay equality for women and minorities employed by Federal contractors, including nonprofits. The U.S. Department of Labor recently extended the deadline for comments on the proposed rules to implement the president's directive.

The proposed rules create an equal pay reporting requirement for prime contractors and subcontractors who (1) are required to file an EEO-1 report (generally, those contractors with 50 or more employees and a contract worth $50,000 or more), (2) have more than 100 employees, and (3) have a contract, subcontract, or purchase order of $50,000 or more that covers a period of at least 30 days. Affected contractors will be required to submit summary data on compensation by sex, race, ethnicity, specified job categories, and other relevant data points on a form to be promulgated by the U.S. Office of Federal Contract Compliance Programs (OFCCP). OFCCP in turn will use the data to focus its enforcement efforts.

The new deadline for comments on the proposed rules is January 5, 2015.