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White House to change rules for managing grants

Jul. 27, 2012 - 10:44AM   |  
By SARAH CHACKO   |   Comments

The White House will change how the government’s $600 billion grant programs are managed in the coming months, Office of Management and Budget Controller Danny Werfel said this week.

The proposed guidance would change how federal grant recipients are audited, administrative costs and reporting requirements.

Among the changes that OMB is considering:

• Raising the audit threshold for grant recipients to $1 million and performing more focused audits on recipients that receive between $1 million and $3 million in federal grant funds. Currently agencies must audit people and organizations who receive more than $500,000 in federal grants.

Raising the threshold would allow agencies to focus their audit resources on recipients who receive more money and are higher risk, OMB said in a notice of proposed guidance in February. Focusing the audits on recipients who receive between $1 million and $3 million would enable agencies to tighten their oversight on the highest risk areas, the notice said.

• Creating a flat rate for indirect costs, such as facility and administrative costs, instead of negotiating rates. A flat fee would reduce negotiation costs and the administrative burden associated with rate preparation and negotiations.

• Allowing grant funds to pay for costs associated with detecting and recovering improper payments, when the anticipated amount of recovered funding more than justifies the expense of collection.

The proposed changes build on comments received after OMB posed questions to grant recipients about the changes in February. OMB will publish the proposed guidance with another comment period before issuing final guidance, Werfel said.

The proposed changes arose from conversations with grant recipients, such as nonprofit organizations, state and local governments, and colleges, and OMB’s Council on Financial Assistance Reform, which was created last October, Werfel told the Senate federal financial management subcommittee during a hearing Wednesday. The council is made up of the eight largest grant-making agencies plus one rotating member to represent the smaller agencies.

The council is focused on reducing the burden of grant-related paperwork, reducing errors and increasing transparency, Werfel said.

For example, the administration is trying to pull back on the amount of paperwork required to track federal funds. However, auditors and inspectors general rely on that paperwork for their investigations, Werfel said. The council is working to strike the right balance between alleviating administrative burdens and collecting needed information, he said.

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