The 2024 Uniform Guidance Revision Changed Almost Everything
The April 22, 2024 OMB Final Rule, effective October 1, 2024, represents the most significant revision to 2 CFR Part 200 (the Uniform Guidance) since its original 2013 publication. If your budget uses the old thresholds, reviewers will notice. The de minimis indirect cost rate increased from 10 percent to 15 percent of Modified Total Direct Costs. The equipment capitalization threshold doubled from $5,000 to $10,000 per unit. The Single Audit threshold rose from $750,000 to $1,000,000 in total federal expenditures. The subaward amount included in MTDC calculations doubled from the first $25,000 to the first $50,000. The fixed amount subaward maximum doubled from $250,000 to $500,000. These changes apply to new awards and funding increments issued on or after October 1, 2024. Existing awards may continue under prior rules unless the agency renegotiates. A separate controversy: NIH attempted to cap indirect costs at 15 percent for all research grants (NOT-OD-25-068, February 2025). A federal court permanently enjoined this cap in April 2025. As of February 2026, the NIH cap is not in effect, though an appeal is pending in the First Circuit. If you are writing an NIH budget, use your organization's full negotiated indirect cost rate.
Indirect Costs and NICRA: The Rate That Funds Your Operations
Indirect costs are real costs of running your organization that cannot be directly attributed to a single project: rent, utilities, accounting, IT support, executive oversight, general administration. Federal grants cover these through an indirect cost rate applied to your direct costs. If your organization has a Negotiated Indirect Cost Rate Agreement (NICRA), use it. A NICRA is negotiated with your cognizant federal agency (the agency providing the most direct funding) and is accepted by all federal agencies. Typical rates range from 15 to 65 percent depending on organization type. Major research universities often have rates of 50 to 65 percent. Nonprofits typically fall between 15 and 40 percent. Some organizations negotiate separate rates for on-campus and off-campus work. If you do not have a NICRA, you have two options. First, the de minimis rate: 15 percent of MTDC with no negotiation required (2 CFR 200.414(f)). Any non-federal entity that has never had a NICRA can elect this rate. It is the simplest path. Second, you can negotiate a rate with your cognizant agency. For organizations receiving most funding from HHS, contact the HHS Division of Cost Allocation. For other agencies, contact the grants management office. MTDC (Modified Total Direct Costs) is the base to which indirect costs are applied. It includes all direct costs except equipment ($10,000 or more per unit), capital expenditures, patient care charges, rental costs, tuition remission, scholarships, participant support costs, and the portion of subawards exceeding $50,000 each. Only the first $50,000 of each subaward counts toward MTDC. Never leave indirect costs out of your budget to appear cheaper. It signals you do not understand federal cost principles. Reviewers know your organization has overhead. Not recovering it means you are subsidizing the federal government with unreimbursed costs.
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Cost Share and Matching: Types, Ratios, and Documentation
Many federal programs require the applicant to contribute a share of project costs. The Notice of Funding Opportunity specifies whether matching is required and at what ratio. Common matching ratios: FEMA HMGP requires 25 percent non-federal match. FEMA EMPG requires 50 percent. Many DOT programs require 20 percent. Some USDA programs require dollar-for-dollar matching. Some programs require no match at all. Cost share comes in two forms. Cash match is actual funds your organization or a third party contributes. In-kind match is the value of non-cash contributions: volunteer labor, donated equipment, donated space, or donated supplies. For volunteer labor, use rates consistent with those ordinarily paid for similar work. If you do not have comparable employees, use prevailing rates in your labor market. The Independent Sector published a 2024 estimate of $34.79 per hour for general volunteer time. Specialized volunteers (a CPA providing accounting services, for example) should be valued at their professional rate. You may include a reasonable fringe benefit amount. Documentation requirements are strict (2 CFR 200.306). For volunteer labor, maintain signed timesheets recording hours, duties, and the hourly rate used. For donated equipment, establish fair market value at the time of donation considering age and condition. For donated space, use the fair rental value of comparable private space established by independent appraisal. Critical rule: cost share contributions must be verifiable from the recipient's records, necessary and reasonable, allowable under the cost principles, not already counted as match for another federal award, and not paid with other federal funds (unless explicitly authorized by the program). Double-counting match is a compliance violation.
The Eight Budget Categories and What Goes in Each
The SF-424A organizes federal grant budgets into standard categories. Every line item must include what the cost is, why it is necessary, and how the amount was calculated. Personnel: salaries and wages for project staff. Show each position with annual salary, percent effort on the project, and number of months. Example: Project Director, $85,000 annual salary, 75 percent effort, 12 months equals $63,750. Personnel typically consumes 40 to 50 percent of a service-delivery or research grant budget. Fringe Benefits: employer-paid benefits beyond salary. FICA is 7.65 percent (6.2 percent Social Security on wages up to $184,500 in 2026, plus 1.45 percent Medicare with no cap). Add your organization's health insurance, retirement contribution, workers compensation, and unemployment insurance costs. Composite fringe rates typically range from 20 to 35 percent for nonprofits and 28 to 50 percent for government entities. If you have a NICRA, it includes negotiated fringe rates by employee category. Travel: project-related travel for staff. Show number of trips, travelers per trip, nights, and per-item costs. Use GSA per diem rates for domestic travel. Foreign travel often requires prior agency approval. Equipment: items costing $10,000 or more per unit with a useful life exceeding one year. Equipment is excluded from MTDC (no indirect costs applied) and requires prior written approval, inventory tracking, and disposition procedures. Most technology purchases now fall under supplies. Supplies: items under $10,000 per unit. Included in MTDC. A $9,000 laptop is a supply, not equipment, under the 2024 revision. Contractual: services procured from external entities (consultants, evaluators, IT support). Justify the rate and scope. Many agencies cap consultant rates (DOL limits at $750 per day; other agencies vary). Other: allowable costs that do not fit other categories: participant stipends, meeting space rental, communications, printing. Each item needs justification. Indirect Costs: calculated as your NICRA rate (or 15 percent de minimis) applied to MTDC.
Allowable versus Unallowable Costs
2 CFR 200 Subpart E defines cost principles. Some costs are always unallowable regardless of the program. Always unallowable: alcoholic beverages (200.423, no exceptions), entertainment including tickets, shows, sports events, and associated meals, transportation, and lodging (200.438), lobbying to influence government employees regarding awards (200.450), fundraising and solicitation of gifts (200.442), fines and penalties from legal violations (200.441), bad debts from uncollectible accounts (200.426), contingency reserves for unforeseen events (200.433), and goods or services for personal use (200.445). Allowable with conditions: advertising for recruitment or procurement purposes (200.421), communication costs for project activities (200.422), insurance required for the project (200.447), memberships in professional organizations (200.454), and training directly related to the project (200.472). Requiring prior written approval: equipment purchases over $10,000 (200.439), foreign travel (varies by agency), participant support costs (200.456), pre-award costs beyond 90 days (200.458), and rearrangement or reconversion costs (200.462). The simplest test: would this cost have been incurred regardless of the federal award? If yes, it probably belongs in indirect costs, not direct charges. Would a reasonable person question this expenditure? If yes, get written approval before incurring it.
A Realistic $500,000 Budget Example
Here is how a two-year, $500,000 federal grant budget looks for a nonprofit running a community health program, using the 15 percent de minimis indirect rate. Personnel ($233,450, 46.7 percent): Project Director at $70,000 annual salary, 75 percent effort ($52,500 Year 1, $54,075 Year 2 with 3 percent cost-of-living adjustment). Program Coordinator at $50,000, 100 percent effort ($50,000 Year 1, $51,500 Year 2). Data Analyst at $50,000, 25 percent effort ($12,500 Year 1, $12,875 Year 2). Fringe Benefits ($70,035, 14.0 percent): 30 percent composite rate covering FICA 7.65 percent, health insurance 15 percent, retirement 5 percent, and workers compensation and unemployment 2.35 percent. Travel ($13,000, 2.6 percent): two mandatory DC grantee meetings per year (two travelers, three nights at $200, $450 airfare, $79 per diem) plus four regional site visits at $0.67 per mile. Equipment ($0): no items meet the $10,000 threshold. Supplies ($15,000, 3.0 percent): three laptops at $1,800 each ($5,400 Year 1), office supplies, printing, and software licenses. Contractual ($50,000, 10.0 percent): external evaluator at $200 per hour for 100 hours per year ($20,000 per year) plus IT support ($5,000 per year). Other ($34,000, 6.8 percent): participant stipends ($10,000 per year), meeting space ($3,000 per year), communications and outreach ($4,000 per year). Subaward ($22,192, 4.4 percent): community partner organization for outreach. First $50,000 included in MTDC. Indirect Costs ($62,323, 12.5 percent): 15 percent de minimis applied to MTDC. Total: $500,000. Personnel plus fringe consumes 60.7 percent, which is typical for service-delivery grants.
The Mistakes That Get Budgets Flagged or Rejected
Budget-narrative mismatch is the most common fatal error. If your narrative describes serving 500 participants with five staff but your budget funds two staff for one year, reviewers will reject it. Every activity described in the narrative must have corresponding funding, and every budget line must connect to a described activity. Requesting unallowable costs signals you do not understand federal rules. Budgeting for food at meetings (unless the NOFO explicitly allows it or participants qualify for per diem), alcohol, entertainment, or lobbying activities will cost you the award. Arithmetic errors undermine confidence in your financial management. If line items do not add up to totals, reviewers question whether you can manage federal funds. Triple-check every calculation. Lump-sum line items without breakdowns lose points. "$50,000 for supplies" tells the reviewer nothing. "Three laptops at $1,800 ($5,400), software licenses at $200 per user for 12 users ($2,400), and printed outreach materials at 5,000 units times $1.20 ($6,000)" demonstrates you have actually planned the work. Using outdated thresholds. If your budget classifies a $7,000 item as equipment or uses a 10 percent de minimis rate, it signals you are working from old information. Use the current thresholds from the October 2024 revision. Committing staff at over 100 percent effort across multiple grants. Grant agencies communicate. If you list a PI at 50 percent on this grant but they are already at 75 percent on another, that is a compliance problem. Not including indirect costs. Omitting them does not make your proposal cheaper; it makes it look like you do not understand cost principles. Missing the NOFO format requirements. Many NOFOs prescribe a specific budget template. Not using it is often an automatic disqualification.
Key Rules: Pre-Award Costs, Subawards, and Single Audit
Pre-award costs (2 CFR 200.458): you may incur costs up to 90 calendar days before the federal award date without prior approval. Costs incurred more than 90 days before require prior written approval. All pre-award costs are at your own risk; if the award is not made, the agency is not obligated to reimburse you. Subaward versus contractor (2 CFR 200.331): the determination matters for compliance requirements. A subrecipient has programmatic decision-making responsibility and must comply with federal program requirements, including potential Single Audit obligations. A contractor provides goods and services within normal business operations and is not subject to federal program compliance. The substance of the relationship determines the classification, not the form of the agreement. Getting this wrong creates audit findings. Single Audit (2 CFR 200.501): required when your organization expends $1,000,000 or more in total federal awards in a fiscal year. This is the cumulative total across all federal awards, not per grant. Budget $15,000 to $50,000 for the audit depending on your organizational complexity. Audit costs are an allowable charge to federal awards. The audit must be completed within nine months of your fiscal year end. Program income (2 CFR 200.307): if your project generates revenue (fees for services, licensing, sales), it is program income and must be used for the project purpose. The default method for most agencies is deduction (reducing the federal share). For universities and research nonprofits, the default is addition (increasing total project funds). Check your award terms. Record retention: maintain all financial records for at least three years from the date you submit the final financial report. Also see our SAM.gov registration guide for the prerequisite to any federal grant application, our federal funding search guide for how to find opportunities, and search Funding Landscape to find programs that match your organization.