OMB Proposes Guidance to Simplify Federal Grantmaking Process

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Guidance seeks to ease regulatory burdens while increasing effectiveness of oversight.

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Every year, the federal government distributes $500 billion in grants to more than 1,000 programs.  Despite the revalence of these disbursements, at least one federal agency believes that current regulations overcomplicate the grantmaking process.

The Office of Management and Budget (OMB) recently published a proposed guidance that would streamline the oversight of federal grants and combine eight existing guidance circulars into one document. According to OMB, the proposal is “intended to both increase the efficiency and effectiveness of grant programs by eliminating unnecessary and duplicative requirements and strengthen the oversight of grant dollars.”

The proposed guidance is intended to clarify existing obligations, not create new regulations over current programs. By reducing duplicative language, OMB hopes to “clarify where policy is substantively different across types of entities, and where it is not.”

The proposed substantive changes to existing guidelines may help reduce red tape while making oversight more effective. Under current regulations, any entity that expends $500,000 in federal grants must undergo a thorough audit, known as the “single audit.” To use federal investigative resources more efficiently, the proposed guidance would raise that threshold to $750,000.  According to OMB, this change would reduce auditing requirements on 5,000 entities, while continuing single audit oversight of more than 99% of federal grant dollars.

Additionally, to make grant opportunities more accessible to potential recipients, the proposed guidance advocates using a standard format to announce new funding opportunities and requiring that such opportunities stay open for at least 30 days on

The document would also require federal agencies to take a more proactive stance toward safeguarding federal dollars by analyzing the financial risks of grant applicants before making an award.

The proposed guidance follows an advance notice of proposed guidance that the agency published in February 2012. The advance notice received more than 350 public comments, including a large number of interested parties that receive federal grants like colleges and universities, research institutes, non-profit groups, and even Native American tribes.

OMB appeared to incorporate some comments into the current proposed guidance. For instance, the earlier document proposed to clarify that financial gains or losses related to speculative financing arrangements are not permissible.  However, OMB abandoned this proposed requirement after a number of institutions argued that they frequently use these arrangements to protect themselves against fluctuations in other types of investments.

According to OMB, the proposed reforms were strongly supported by the Obama Administration, which has expressed a desire to reduce red tape in the federal government. OMB specifically cited Executive Order 13520, “Reducing Improper Payments,” which encouraged government offices to find ways to reduce waste in federal programs and end grant-related fraud.

The guidance also cited a 2011 formal memo from President Obama, entitled “Administrative Flexibility, Lower Costs, and Better Results for State, Local, and Tribal Governments.”  The memo asked agencies to collaborate with interested parties to “identify administrative, regulatory, and legislative barriers in Federally funded programs that currently prevent [other government entities] from efficiently using tax dollars to achieve the best results for their constituents.”

OMB is accepting public comments on the proposed guidelines through May 2, 2013.