Oct. 7 Federal Update: Guidance to Facilitate Grant Applications Among Nonprofits

The Office of Management and Budget (OMB) recently released guidance, effective Oct. 1, to reduce the barriers organizations face in accessing government grants. The revisions are intended to offer clarity and improve the readability of funding opportunities through plain, concise, consistent language. They are also expected to address longstanding challenges to recovering actual costs and reduce the burdens and costs of seeking, performing, and reporting on federal grants.

A few key provisions are highlighted below:

• Encourages community engagement
• Recommends considering diversity when developing merit review panels
• Permits language translations of programs and awards
• Allows federal agencies to offer pre-application technical assistance or provide clarifying information for funding opportunities
• Includes tribal organizations as an example of potentially eligible applicants
• Increased the single audit threshold to $1 million

Notice of Funding Opportunity: Funding details, an executive summary, and key dates will be required to be listed at the top of the notice before the announcement’s full text.

Reimbursement for Indirect Costs: Passthrough entities, often states and local governments and occasionally larger nonprofits, that use federal funds and all federal departments and agencies are required to reimburse a nonprofit for the reasonable indirect costs incurred performing services on behalf of governments.

15% Minimum Rate: Federal grants are now required to provide the guaranteed minimum (de minimis) rate for indirect costs of 15% of modified total direct costs. Federal agencies cannot compel recipients and subrecipients to use an indirect rate lower than the 15% de minimis rate unless required by statute. While organizations may choose not to utilize the 15% minimum, they cannot be forced to.

Mandated Application: Nonprofits are allowed to negotiate a higher rate through a negotiated indirect cost rate agreement (NICRA). Passthrough entities are then required to accept a grantee’s NICRA, although it remains subject to statutory and a few other limitations. Nonprofits with negotiated rates with one federal agency must be paid that same rate by all other federal, state, and local government agencies.

Right of Appeal: Receipts and subrecipients are now empowered to notify OMB of any disputes over how a federal agency applies or accepts their federally negotiated indirect cost rates or fails to pay the minimum indirect cost rate. For the first time, nonprofits can turn to OMB for help when federal agencies are not following the law.

Upfront Payments: Once financial and written procedures are met, the recipient or subrecipient of federal grants must be paid in advance. Meanwhile, reimbursable grants are preferred only when those requirements cannot be met. The guidance offers key flexibility as governments can be encouraged to make advance payments to nonprofits, rather than assuming that reimbursable grants are their only option or default.

Reporting Requirements: Federal agencies are instructed to eliminate reports that are not necessary to effectively monitor the grant. By encouraging agencies to only measure things that matter, nonprofits are able to redirect their efforts from burdensome, needlessly complex reporting requirements toward serving their communities.

Continuing Resolution Approved, Preventing a Government Shutdown

The U.S. House of Representatives and Senate negotiated a bipartisan continuing resolution to continue funding the government until Dec. 20. President Biden signed the bill shortly afterward. Congress has since adjourned and will return to session Nov. 12 to negotiate spending agreements on FY2025 spending bills funding key services, including housing and transportation.

A few of the programs and services that will continue to receive funding are included below:

• U.S. Federal Emergency Management Agency Disaster Relief Fund
• Supplemental Nutrition Assistance Program replacement benefits for victims of card skimming
• Temporary Assistance for Needy Families
• Special Supplemental Nutrition Program for Women, Infants, and Children
• Commodity Supplemental Food Program
• Tenant-Based Rental Assistance through the Department of Housing and Urban Development’s Public and Indian Housing Department
• Developmental Disabilities Surveillance and Research Program
• Autism Education, Early Detection, and Intervention
• Medicare Improvement Fund
• Extension of Funding for Health Care and Housing Programs That Serve Veterans

Executive Order to Address Emerging Firearms Threats and Improve School-Based Active-Shooter Drills

President Biden recently issued an executive order to address emerging firearms threats, including by preventing unauthorized access to firearms for youth and individuals in crisis. The order strives to address the mental health needs of students, particularly those impacted by gun violence. It also intends to support schools that are implementing evidence-based safety and gun violence prevention and intervention solutions.

The executive order additionally created an Interagency Emerging Firearms Threats Task Force to develop a risk assessment and strategy to stop the proliferation of machine gun conversion devices and address the emerging threat related to 3D printed firearms. Additionally, it directs key government agencies to develop and publish information about school-based active shooter drills for schools, including the appropriate frequency of such drills and the effects of such drills on students and educators.

Throughout, President Biden enforced the importance of an integrated approach to promoting the safety of students and educators, uniting the Department of Justice, the Department of Health and Human Services, the Department of Education, and the Department of Homeland Security.

House Ways and Means Committee Holds Hearing on Reforming Temporary Assistance for Needy Families

Chairman Jason Smith (R-Mo.) highlighted the House Ways and Means Committee’s efforts to promote stable, prosperous lives for families, including by reforming direct cash assistance. He stressed the importance of restoring integrity and accountability to Temporary Assistance for Needy Families (TANF) as he lamented waste, fraud, and abuse. Chairman Smith discussed the importance of guardrails to ensure funds are directed to those in need, including through data collection.

Ranking Member Richard Neal (D-Mass.) echoed the profound impact TANF funds can have on the well-being of families and the importance of ensuring families receive the assistance they deserve. He affirmed the importance of a multifaceted approach, including through an expanded Child Tax Credit, guaranteed child care, and paid family and medical leave.

Sam Adolphsen, policy director of the Foundation for Government Accountability, and Brett Favre, a former professional football player, spoke of the positive impacts of TANF through economic growth and falling rates of childhood poverty. They also discussed egregious instances of fraud, waste, and abuse associated with TANF funds and emphasized the importance of addressing loopholes that allow the misuse of funds. They recommended rebalancing program spending on work-related activities to combat fraud alongside increased accountability, oversight, and stronger guardrails.

Jarvis Dortch, executive director of the American Civil Liberties Union (ACLU) of Mississippi, echoed the presence of widespread abuse and fraud of TANF funds in Mississippi. He recommended policies that verify families in need are receiving assistance and stressed the importance of directing funds toward programs that meet the spirit of TANF, including quality child care and access to transportation. He warned of the harm of redundant verification systems while encouraging innovative programs to advance employment and assist low-income families. Dortch also urged the committee to pass legislation creating a TANF ombudsman program, which would be able to ensure compliance, monitor misspending, and gather data.

Representatives discussed potential reforms to ensure TANF-funded programs help those most in need while safeguarding against fraud and abuse. Representatives and witnesses also discussed the importance of work, underscoring the lack of requirements, incentives, and minimum standards for state spending on work, education, and training activities among TANF’s non-assistance funds. The hearing follows a report issued by the Government Accountability Office outlining preliminary observations on state budget decisions, single audit filings, and fraud risks within TANF.

Sector Updates from the Judiciary

Salary Tests Upheld for Overtime Pay
A Texas businessman recently challenged a rule issued by the Department of Labor in 2019. The rule raised the required minimum weekly salary to qualify for the exemptions for executives, administrators, and professionals (EAP) by more than 50%, from $455 to $684 per week.

On Sept. 11, 2024, the U.S. Court of Appeals for the Fifth Circuit ruled in favor of the U.S. Department of Labor. They affirmed the department’s authority to use a salary basis to define its white-collar overtime exemptions and to define the professions classified within the EAP exemptions.

The ruling establishes key precedent to defend the recently published April 2024 rule to further increase the minimum salary requirement for the EAP exemptions in similar legal challenges. Nevertheless, potential challenges to the 2024 rule remain, including from a Texas district court that has temporarily prevented the rule from taking effect for the state government’s employees.

The 2024 DOL rule raised the minimum weekly salary to qualify for the EAP exemption from $684 per week to $844 per week, or the equivalent salary of $43,888 per year, on July 1, 2024. Salaries are set to rise again on Jan. 1, 2025, when the minimum salary will increase to $1,128 per week, the equivalent of a $58,656 annual salary. Under the rule, the salary threshold would increase every three years based on up-to-date wage data.

For more information on the rule and employee classifications, view the Department of Labor’s fact sheet.

Student Loan Forgiveness Remains on Pause
Judge Hall, a judge for the District Court for the Southern District of Georgia, recently moved a challenge to President Biden’s student loan forgiveness plan from Georgia to Missouri. The challenge was brought by a coalition of seven Republican-led states, including Alabama, Arkansas, Florida, Georgia, Missouri, North Dakota, and Ohio.

Biden’s plan to ease student loan debt would erase up to $20,000 in interest for those who have seen their original balances increase. It would also provide relief to individuals who have been repaying their loans for 20 to 25 years.

Judge Hall ruled that Georgia failed to demonstrate it would experience harm following student loan relief. The Judge allowed the suit to be moved to Missouri, which stands to lose millions directly through the Missouri Higher Education Loan Authority, the nonprofit student loan servicer the state operates.

Judge Matthew Schelp, a district judge based in St. Louis, has since issued a preliminary injunction against President Biden’s student loan relief plan. Borrowers are not expected to witness any changes as student loan relief remains paused.

Texas Sues to Stop Biden Administration Rule Requiring Affirming Placements for Youth in Foster Care
Texas Attorney General Ken Paxton recently filed a lawsuit against the federal government claiming the requirement that states provide LGBTQ+ affirming placement for foster care youth would exacerbate the shortage of foster families.

The rule requires that child welfare agencies ensure that a foster parent is supportive of the child’s LGBTQI+ status, is knowledgeable and skilled to address the child’s needs, and is willing to provide access to appropriate resources to support the child’s well-being. Agencies are required to implement the rule by Oct. 1, 2026 as non-compliance jeopardizes Title IV-E and Title IV-B funding.

Paxton alleged the U.S. Department of Health and Human Services does not have the statutory authority to implement the rule and that it further violates the U.S. Constitution’s Spending Clause without fair notice. He additionally maintained the rule violates the Administrative Procedure Act as Title IV does not include any requirement for special accommodations for sexual orientation or gender identity.

Texas has asserted that the Texas Department of Family and Protective Services will implement the rule, but remains concerned of the potential harm to the state’s financial security and sovereignty. The suit asks the court to declare the rule unlawful, postpone its effective date, and grant a permanent injunction against its enforcement.

New Jersey Sues Hospitals Over ‘Discriminatory’ Pregnancy Drug Screens
New Jersey Attorney General Matthew J. Platkin and Director of the New Jersey Division on Civil Rights Sundeep Iyer filed a lawsuit against three Virtua hospitals in Southern New Jersey. The suit follows an investigation into complaints filed with the Division of Civil Rights by several pregnant women who gave birth at Virtua Voorhees Hospital. The patients were drug tested without informed consent after being admitted to the labor and delivery and high-risk obstetrics units.

The lawsuit claims the hospital’s mandatory drug testing policy violates the New Jersey Law Against Discrimination and the state’s right to privacy. Iyer underscored the potential trauma of the policy, as several families faced lengthy investigations for child abuse following screenings that incorrectly indicated drug use. Once the results were shared with New Jersey’s child welfare agencies, several individuals experienced unannounced home visits and some patients were not allowed to be discharged with their babies.

The lawsuit asks for an injunction to stop Virtua’s universal drug testing policy for pregnant patients and civil penalties against the South Jersey hospital system, including compensatory damages.

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