A practical introduction to 2 CFR Part 200 (Uniform Guidance) for federal grantees, cost principles, audit requirements, and how to comply.

If your nonprofit, government, or institution receives federal grants, 2 CFR Part 200, the Uniform Guidance, is the most important federal regulation you’ll work with. It sets cost principles, administrative requirements, and audit standards for all federal grants.

TL;DR

What is 2 CFR 200? The federal Uniform Guidance establishing administrative requirements, cost principles, and audit requirements for federal awards.
Who does it apply to? All non-Federal entities receiving federal awards (nonprofits, state/local government, tribes, universities, etc.).
What does it cover? Cost principles (allowable, allocable, reasonable), administrative rules, audit requirements, and procurement standards.
Why does it matter? Non-compliance creates audit findings, disallowed costs, and risk to future federal funding.

Key Concepts

Allowable costs. Costs are allowable under federal awards if they are:

Necessary and reasonable for the proper performance of the award.
Allocable to federal awards under cost principles.
Conform to any limitations or exclusions in the award.
Consistent with policies of your organization.
Adequately documented.

Direct costs vs. indirect costs. See our grant proposal budget guide for the practical writing-side breakdown.

Indirect cost rate. A federally negotiated indirect cost rate agreement (NICRA) determines what you can charge for overhead. A de minimis rate of up to 15% of modified total direct costs (MTDC) is available to organizations without a NICRA under the 2024 OMB Uniform Guidance revisions (raised from the prior 10%, effective Oct 1, 2024). The MTDC definition also changed: the subaward exclusion threshold rose from $25,000 to $50,000. See 2 CFR § 200.414.

Reasonable costs. A cost is reasonable if a prudent person would have incurred it in the conduct of normal business.

Allocable costs. Costs are allocable to federal awards in proportion to the benefits received.

Categorical grant types. Federal categorical grants (those tied to a specific, defined purpose) generally fall into four types recognized under federal guidance: project grants (competitive awards for specific projects), formula grants (allocated by a set formula, often to states), formula-project grants (a hybrid where formula-allocated funds are then competed for at the project level), and open-end reimbursement grants (which reimburse a share of a grantee’s qualifying expenditures with no fixed ceiling). Knowing which type you’re pursuing shapes how you budget and report under 2 CFR 200.

Major Areas

Subpart A, definitions.

Subpart B, general provisions.

Subpart C, pre-federal award and federal award requirements.

Subpart D, post-federal award requirements (financial management, internal controls, procurement, performance management, reporting).

Subpart E, cost principles, the heart of the regulation. Detailed rules on direct and indirect costs, fringe benefits, equipment, supplies, travel, conferences, alcoholic beverages (no), bad debt (no), entertainment (no), fines and penalties (no), and dozens of other categories.

Subpart F, audit requirements (Single Audit). This is where the key threshold lives: under 2 CFR 200, any nonprofit, state, or local government that spends $1,000,000 or more in federal grants in a fiscal year must undergo a Single Audit of its grant management.

Common Compliance Issues

Time and effort reporting. Personnel costs charged to federal awards require documented time and effort. Inadequate documentation is a top finding.
Allowable costs. Charging things to federal awards that aren’t allowable.
Procurement. Federal procurement standards are stricter than typical nonprofit procurement.
Sub-recipient monitoring. See sub-recipient monitoring.
Cost transfers. Moving costs between awards requires care.
Cash management. Drawdowns timed to actual disbursement needs (no parking federal cash).

Building Internal Capacity

To comply at scale:

Written policies. Internal policies aligned to 2 CFR 200 (procurement, payroll, conflict of interest, travel, equipment, sub-recipient monitoring).
Trained staff. Finance, program, and HR staff trained on relevant requirements.
Strong financial systems. Grant-level tracking, time and effort, allowability review.
Annual review. Federal rules update; review and adjust annually.

When to Get Help

For organizations new to federal grants, consider:

An experienced federal-grant CFO or controller (in-house or fractional).
Grant-specialized accounting firm for audits and advisory.
Federal-grants training (federal training programs, GPA, association resources, see grant writing conferences).

How Grantboost Helps

Grantboost is a grant-writing and management platform, not a compliance system. What it does is free your team’s time for the compliance work federal grants demand, by automating discovery and drafting in your organization’s voice (see training AI on your past proposals).

Try Grantboost free.

2 CFR 200 (Uniform Guidance): What Federal Grantees Need to Know