The 2024 Uniform Guidance Thresholds: Audit, Indirect, Equipment

The single audit threshold and what crossing it costs you

For small nonprofits that receive federal funds, the single audit threshold remains one of the most important numbers to watch. As of the 2024 revision, the threshold is $750,000 in federal expenditures during an organization's fiscal year. This figure is not new, but its continued relevance shapes the reporting burden for hundreds of small grantees across the country.

Crossing this line means a full audit under the Uniform Guidance, in addition to the standard financial audit. Federal funds from all sources count toward this threshold, not just from a single agency or program. If your organization spends $750,000 or more in total federal awards, whether direct or pass-through, you are required to obtain a single audit for that year.

The cost of a single audit is significant. Most small shops can expect to pay at least several thousand dollars more than their standard independent audit, and the process is more intrusive. The auditor will test compliance with federal program requirements, examine internal controls, and report findings to the Federal Audit Clearinghouse. Expect to dedicate more staff time to pulling documentation, responding to questions, and following up on findings.

If your federal spending is close to the line, it pays to track obligations and planned purchases throughout the year. Dropping below the threshold saves both money and time. Consistent tracking can also prevent surprises when a delayed grant reimbursement or a large subaward pushes you over the mark at the end of the fiscal year.

Keep reading: Rolling, Fixed Cycle, and Invitation Only Grants: Planning for Each

The de minimis indirect rate and the modified total direct cost base

For nonprofits without a negotiated indirect cost rate, the Uniform Guidance allows use of a de minimis rate, 10 percent of modified total direct costs, or MTDC. This option is available to organizations that have never received a negotiated rate agreement from a federal agency. The de minimis rate can be applied indefinitely, as long as the organization remains eligible.

The de minimis rate covers overhead and administrative costs that are not easily assigned to a specific project, things like office rent, utilities, and administrative staff. To use it, nonprofits must apply the 10 percent to their MTDC base, not to the full grant award or total project budget.

Using the de minimis rate does not require advance approval from the federal agency. However, it must be applied consistently across all federal awards, unless a particular program has stricter rules. Nonprofits must disclose their intent to use the rate in their grant budgets and proposals.

The simplicity of the de minimis rate appeals to small organizations. It avoids the need to develop a full indirect cost proposal or negotiate with a federal agency. However, it is essential to understand which costs belong in the MTDC base and which are excluded.

What the MTDC base excludes, including the subaward cap

The MTDC base is not simply the total project direct costs. Certain expenses are always left out, according to 2 CFR 200.1. These exclusions ensure that the 10 percent rate applies only to costs that fairly reflect the administrative burden.

• Equipment: The full purchase price of equipment is excluded from the MTDC base. Only supplies and materials that do not meet the federal definition of equipment are included.
• Subawards: Only the first $25,000 of each subaward to another organization is included in your MTDC base. Any amount above $25,000 per subrecipient is excluded. This cap applies regardless of the duration of the subaward or the number of payments.
• Participant support costs: Stipends, travel allowances, and similar expenses paid directly to program participants are excluded from MTDC.
• Rental costs of off-site facilities and scholarships: These are also left out of the base.

Failure to exclude these items can lead to overcharging the federal program and trouble during audit. Many small shops stumble on the subaward rule, especially when managing multi-year projects. Careful bookkeeping and review of each line item are essential.

Keep reading: Eight Ways Small Nonprofits Lose a Grant Renewal They Had Earned

Equipment and supplies capitalization thresholds

Uniform Guidance draws a key line at what counts as "equipment." For federal grants, equipment means an item with a useful life of more than one year and a per-unit cost of $5,000 or more. Anything under that amount, or with a shorter useful life, is treated as supplies.

This $5,000 threshold applies at the item level, not at the total purchase or invoice level. For example, buying 10 laptops at $800 each does not count as equipment, but a single server costing $5,100 does. Your organization may use a lower threshold for its own accounting, but you cannot claim a higher one on federal grants.

Capitalized equipment purchases must be tracked separately from supplies. You need to maintain property records, perform regular inventories, and follow federal rules for disposition at the end of the grant. Supplies, on the other hand, require only standard expense documentation.

If your nonprofit regularly buys items near the $5,000 line, review your capitalization policy every year. Consistency, not just cost, is what auditors look for. Document any organizational thresholds in your policies and apply them to all purchases, federal or not.

Prior approval points and the budget deviation rule

Federal grants usually come with detailed budgets, but some flexibility is built in. The Uniform Guidance allows for certain re-budgeting without prior approval, but only up to a point.

The 10 percent rule

Most federal agencies allow a budget deviation of up to 10 percent (of the total approved budget) between budget categories without prior written approval. If you plan to shift more than 10 percent from one category to another, for example, from salaries to supplies, you must request prior approval from the funding agency. This rule applies to the total federal award, not just the direct costs.

Be aware that some grants have stricter terms and may require approval for any change. Always check your Notice of Award or award terms.

Other prior approval triggers

• Purchasing equipment with a per-unit value over $5,000 always requires prior approval, unless it was listed in the approved budget.
• Transferring funds to "participant support costs," or from that category to another, usually needs approval.
• Issuing a subaward not included in the original application also triggers the prior approval requirement.

Failing to get approval can result in costs being disallowed, which means your organization must cover them from non-federal sources. Keeping a record of approvals and budget requests is critical for audit and for future grant applications.

See how GrantClock handles this for nonprofit administration

Micro purchase and simplified acquisition limits for procurement

When using federal funds to buy goods or services, procurement rules set by Uniform Guidance apply. Two key thresholds steer how much documentation and competition is required.

Micro purchase threshold

The micro purchase threshold is now $10,000. Purchases at or below this amount do not require competitive quotes or bids. You are expected to distribute purchases among qualified suppliers, when practical, and keep basic records showing price reasonableness.

If your organization has a documented policy and meets certain risk standards, you may set a higher micro purchase threshold, up to $50,000. However, most small nonprofits use the default $10,000 limit to stay safe. Purchases above the threshold must follow the small purchase procedures, which require price or rate quotes from an adequate number of qualified sources.

Simplified acquisition threshold

The simplified acquisition threshold is $250,000. Purchases above $10,000 but below $250,000 require competitive quotes, but not the full formal bidding process. For contracts above $250,000, sealed bids or competitive proposals are required, unless an exception applies.

These federal thresholds do not override stricter local or state laws. If your board or your state's procurement statutes have lower thresholds, you must follow the more restrictive rule.

A procurement log or calendar is useful for tracking when purchases approach key limits. Documentation is critical: keep quotes, selection memos, and rationale for each purchase above the micro purchase threshold.

When a negotiated rate beats the de minimis rate

The de minimis indirect rate is not always the best deal for every organization. If your actual indirect costs routinely exceed 10 percent of MTDC, a negotiated rate may let you recover more of your true overhead.

Negotiating a rate requires a formal proposal, supporting documentation, and review by a federal cognizant agency. This process is more demanding than using the de minimis rate, but it can pay off for organizations with dedicated administrative staff, higher facility costs, or complex multi-grant operations.

Once your organization receives a negotiated rate, you cannot revert to the de minimis rate as long as the agreement remains active. You must apply the negotiated rate to all federal awards that permit it. If the negotiated agreement expires, you can return to the de minimis rate, unless you negotiate a new one.

For many small nonprofits, the time and expertise required to negotiate a rate outweigh the benefit. However, if your indirect costs are consistently high compared to direct program expenses, it is worth running the numbers. Consult with your auditor or an experienced grant accountant to model both options with your actual spending patterns.

Checking your own numbers against the current text of 2 CFR 200

Uniform Guidance updates do not happen every year, but when they do, the numbers matter. A small change in a threshold can mean a new audit requirement or a different procurement process. That is why the most reliable way to stay in compliance is to check your own numbers directly against the current text of 2 CFR 200 and your Notice of Award.

Start by listing your federal grants and their cumulative expenditures for the fiscal year. Review each major threshold: single audit, equipment capitalization, procurement limits, and budget deviation. For indirect costs, check your eligibility for the de minimis rate or note your current negotiated rate and its expiration date. For every key dollar figure, confirm whether it is set by Uniform Guidance, your own policies, or your funder's notice.

A grant calendar tool with deadline alerts, report tracking, and funder history makes it easier for small nonprofit teams to keep up with Uniform Guidance thresholds and avoid costly compliance lapses. Tools designed for grant portfolio management can help ensure critical rules and deadlines do not slip through the cracks, even if you do not have a dedicated compliance officer.