OMB Clarifies Applicability Date for Micro-Purchase and Simplified Acquisition Thresholds Increase

The Uniform Guidance (UG) was issued in 2013 by the U.S. Office of Management and Budget (OMB) and effective on December 26, 2014 for all nonprofit entities.  OMB granted a grace period of three full fiscal years for the implementation of the UG procurement standard.  Nonprofit entities with a June 30^th fiscal year end must have implemented the new UG procurement standard by July 1, 2018 if they elected the full three fiscal year grace period.  The new UG procurement standard requires nonprofits to use one of the following methods when procuring goods and services using Federal funds: (1) micro-purchase, (2) small purchase, (3) sealed bids, (4) competitive proposals, and (5) noncompetitive proposals.
Micro-purchase and simplified acquisition thresholds are used to determine which procurement methods to be followed.   The dollar thresholds for micro-purchase and simplified acquisition are set by the Federal Acquisition Regulation (FAR) at 48 CFR Subpart 2.1 (Definition), and are periodically adjusted for inflation. According to the 2018 OMB Compliance Supplement, the current micro-purchase and simplified acquisition thresholds are $3,500 and $150,000, respectively, with exceptions described in the 2017 and 2018 National Defense Authorization Act (NDAA).
However, the 2018 OMB Compliance Supplement did not provide guidance for the applicability date of 2017 and 2018 NDAA.

• 2017 NDAA increases the micro-purchase threshold from $3,500 to $10,000 for procurements under grants and cooperative agreements to institutions of higher education, or related/affiliated nonprofit entities, nonprofit research organizations or independent research institutes.
• 2018 NDAA further increases the micro-purchase threshold to $10,000 for all recipients and also increases the simplified acquisition threshold from $150,000 to $250,000 for all recipients.

On June 20, 2018, OMB issued memorandum M-18-18 titled, Implementing Statutory Changes to the Micro-Purchase and Simplified Acquisition Thresholds for Financial Assistance, to implement the effect of the 2017 and 2018 NDAA on the procurement micro-purchase and simplified acquisition thresholds.  Although the memorandum is intended to provide guidance to the federal agencies, it does clarify the effective date for the threshold changes as mentioned above.  According to the OMB memorandum, the micro-purchase threshold increase provision contained in the 2017 NDAA was effective December 23, 2016.   The micro-purchase and simplified acquisition thresholds increase provision contained in the 2018 NDAA will not be effective until this portion of provisions is implemented in the FAR at 48 CFR Subpart 2.1.  However, OMB is granting an exception allowing recipients to use the higher thresholds and the exception takes effect upon the issuance of the OMB memorandum (June 20, 2018) as long as the recipients document any change based on this exception in their internal procurement policies in accordance with the Uniform Guidance Section 200.318 (general procurement standard).
If you have questions regarding your procurement procedures, or need additional information regarding grant compliance, please contact: Hui-Ting Grady, CPA, at 774.512.4106, hgrady@aafcpa.com; Matt Hutt, CPA, CGMA, at 774.512.4043, mhutt@aafcpa.com; or your AAFCPAs Partner.