In December 2013, the Office of Management and Budget (“OMB”) released its long-awaited final guidance for grants and other Federal non-procurement awards, entitled “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.” See 78 Fed. Reg. 78589. Also referred to as “the Super Circular,” this final guidance is “a key component of a larger Federal effort to more effectively focus Federal resources on improving performance and outcomes while ensuring the financial integrity of taxpayer dollars,” and is part of a Government multi-step process to simplify and streamline Federal acquisition practices. The Super Circular was specifically developed in response to multiple Presidential directives (see EO 13520 and this recent Presidential Memorandum) that called for eliminating waste and fraud, increasing accountability, and reducing administrative burdens. The final guidance represents more than two years of work between the Federal government, state and local governments, and non-federal partners, and supersedes prior OMB Circulars A-21, A-50, A-87, A-89, A-102, A-110, A-122, and A-133.

There are three major parts to the final guidance, which spans more than 100 pages: (1) changes to administrative requirements; (2) changes to cost principles; and (3) audit requirements. These changes apply to Federal agencies that make Federal awards to non-Federal entities, and in some instances significantly deviate from prior Federal practice. In addition, certain portions of the final guidance apply to different types of Federal awards. Generally, the terms and conditions of Federal awards flow down to subawards to subrecipients unless the guidance or the specific agreement’s terms and conditions state otherwise. Non-Federal entities will therefore also be required to comply with the Super Circular, whether they are recipients or subrecipients of Federal awards. Nothing can substitute reading the final guidance itself, but some excellent resources are available for those who need additional help understanding how it may affect you. The Council on Financial Assistance Reform has helpfully posted training videos on YouTube: (1) Intro, (2) Administrative Requirements, (3) Cost Principles, and (4) Audit Requirements.

It is important to remember that OMB itself is not a regulatory body. The final guidance that was issued is just that – guidance, and not rules. Thus, while the Super Circular’s guidance was effective immediately upon its publication in December, Federal agencies must take action to properly implement the guidance in their policies, procedures, and official regulations. The OMB makes this clear at the outset of the guidance, stating that the standards set forth only “become effective once implemented by Federal agencies…” OMB then establishes a deadline of December 26, 2014 for Federal agencies to implement the policies and procedures applicable to Federal awards by promulgating regulations to be effective by that date.

The forthcoming period of rulemaking between now and December 2014 affords recipients of Federal funds an opportunity to influence the way agencies implement the new OMB guidance. Agencies are required to provide the public with meaningful participation in the regulatory process, including an opportunity to review and comment on proposed rules. Recipients are encouraged to be on the lookout for notices of proposed or interim rules in the Federal Register, review the draft language, and provide feedback to agencies regarding any issues or concerns. In addition, recipients always have the ability to submit a request for rulemaking to an agency. Such requests may be made not only once regulations have been promulgated, but also preemptively in order to influence the rulemaking from the earliest stages.

2014 will be a very dynamic year for recipients of federal funding as agencies wrestle with understanding and implementing the new OMB guidance. However, despite some likely growing pains during the process, the resulting streamlined rules and procedures should be a significant improvement over the prior multitude of guidance that was often duplicative or conflicting. Recipients are strongly recommended to be proactive, and to participate as much as possible in agency rulemaking so as to ensure reasonable implementations of the Super Circular in forthcoming Federal regulations.

As a footnote, increased congressional attention will be paid to the level of programmatic grant funding, as well as compliance with imposed requirements. While individual project earmarking may continue to be barred, techniques can be available to impact appropriated funding, as well as the “re-use” of “returned” grant funding.