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HomeMy WebLinkAboutWORKSHOP OMB JEFFERSON COUNTY BOARD OF COUNTY COMMISSIONERS AGENDA REQUEST TO: Board of County Commissioners FROM: Heather Dudley-Nollette, Commissioner District 1 DATE: July 6, 2026 RE: PUBLIC COMMENT LETTER: Proposed Rule – Regulation for Federal Financial Assistance; 2 CFR Part 200 (Docket OMB-2026-0034) STATEMENT OF ISSUE: Jefferson County Commissioners have received an Action Alert from the National Association of Counties regarding a proposed federal rule change by the U.S. Office of Management and Budget which would rewrite 2 CFR Part 200 — the Uniform Guidance. This proposed rewrite would represent the largest overhaul of federal grant rules since 2013. This rule governs every federal grant Jefferson County receives, covering public safety, transportation, housing, public health, emergency management and more. Members of the public, including counties must submit comments by July 13, 2026 in order to be considered in shaping the final rule. FISCAL IMPACT: No impact from signing the letter. If the rule change were to pass, it could affect approximately $10 million dollars in federal funding managed by the county each year. RECOMMENDATION: Sign the letter of support and upload a copy as a submittal of public comment to the United States Office of Management and Budget through the Regulations.gov website: Proposed Rule – Regulation for Federal Financial Assistance. Public comments are due by or before July 13, 2026. REVIEWED BY: Josh Peters, County Administrator Date 7/1/2026 What the OMB Uniform Guidance Proposed Rule Means Understanding the Proposed Rewrite of 2 CFR: What is Uniform Guidance? aka Uniform Grants Guidance aka UGG aka 2 CFR Part 200 •Established in 2014 o Combines “circulars” with directives on federal government spend o Significant re-writes in October 2020 and October 2024 Congress Appropriates •Establishes Legislative Intent Agencies Organize •Design Reporting Requirements •Define How to Report OMB Oversees •Uniform Grants Guidance •Guidelines for Audits Why Do We Care? •Billions allocated to state and local governments to satisfy the legislative intent – UGG provides an audit (aka Single Audit) •S/L Have Responsive Systems of Internal Controls in place o Grants Administration o Internal Control for Grants o Indirect Cost Allocation o SEFA Preparation Is This New? No, Not Really. "There is a strong need to strengthen oversight and coordination of, and to streamline, agency grantmaking to address these problems, prevent them from recurring, and ensure greater accountability for use of public funds more broadly. The Government holds tax revenue in trust for the American people, and agencies should treat it accordingly" How Is The Focus Of Federal Financial Assistance Changing? Historical Focus Focus Moving Forward National Policy PrioritiesProgram Performance Workforce VerificationFinancial Accountability Recipient EligibilityCompliance Risk Indicators Real-Time Oversight Federal Discretion What Is OMB Trying To Accomplish? Clarify that 2 CFR is a regulation, not guidance Reduce recipient burden 1 Improve transparency, accountability, and oversight 2 3 Proposed Rewrite of Uniform Guidance The proposed rewrite of 2 CFR 200 represents the most significant overhaul of federal grants administration since the original Uniform Guidance was implemented. Potential Impacts •Expanded termination authority •New stop-work authority •Increased payment verification •E-Verify requirements •Enhanced subrecipient oversight •Greater federal discretion •Increased compliance burden Four Broad Sections 1.Administrative Changes 2.Pre-Award Rules 3.Grant Administration (post-award) Rules 4.Audit 1. Administrative Changes Current Environment •Agency implementation varies •Guidance often subject to interpretation Proposed Environment •OMB rules automatically apply government-wide •Agencies no longer separately adopt changes KEY CHANGE: Uniform Guidance Becomes Regulation RISK - Less flexibility and more direct federal control 1. Administrative Changes Federal agencies could terminate awards on a discretionary basis if: •Not achieving program goals •Not supporting agency priorities •No longer in the federal government's interest Questions Recipients Should Ask: •How will priorities be measured? •Can priorities change mid-award? •How should recipients manage this risk? KEY CHANGE: Discretionary Termination 1. Administrative Changes Senior Level Appointee •Ensures thorough pre-issuance reviews •Use independent judgement when evaluating Federal award proposals •Deploys peer review as applicable to ensure advisory recommendations Implementing Executive Orders in Grant Requirements •Diversity, Equity, Inclusion, and Accessibility (DEIA) •Gender ideology •Disparate impact liability •Faith-based organization protections •Immigration and workforce verification requirements •National policy priorities KEY CHANGE: Appointment of Senior-Level Political Appointee 2. Pre-Award Requirements KEY CHANGE: Changes To NOFOs Streamlining Processes •Agencies must post NOFOs on grants.gov •Applications through grants.gov •Executive summary with key eligibility information & dates on grants.gov •Encourages statement of interest (SOI) pre-application phases in certain cases Improving Access •Plain language requirements •Minimum posting period of 30 days •Green lights pre-grant technical assistance 2. Pre-Award Requirements KEY CHANGE: Pre-Award Risk Reviews New Merit & Expanded Risk Reviews •Merit reviews •Factors related to: President’s national priorities, “unlawful DEI” •Risk reviews •Adds to the list: membership and affiliations, questionable practices •Do Not Pay system for States & eVerify for all Questions Recipients Should Ask: •Will evaluation criteria be defined? •Will agencies provide a list of practices or organizations that raise risk? •Will factors and risks be weighed equally? 2. Pre-Award Requirements Pass-through entities may be required to address: •Actions damaging recipient reputation •Actions damaging agency reputation •Actions damaging federal government reputation Risk Question: How do you monitor reputational risk? 3. Grant Administration KEY CHANGE: Subrecipient Monitoring New monitoring requirements include: •All down-stream entities must be subaward or contract •Applies to internal transfers to related entities •All subawards and contracts must be logged in SAM.gov •Failure is grounds for termination for non-compliance •Ensure activities do not cause “reputational harm” to recipient or federal agency •Federal agency could terminate award to recipient based on subrecipient actions Questions Recipients Should Ask: •How will transfers between government departments be treated? •How does OMB define reputational harm? •Will there be opportunities to correct SAM.gov reporting? 3. Grant Administration KEY CHANGE: New Documentation Layers Payment Justifications •Required for recipients and subrecipients other than states •Applicable to advance payments & reimbursements •Recipients submit justification to agency •Subrecipients submit justification to recipient Questions Recipients Should Ask: •Will there be limits to length and contents of justification? •Would OMB consider a phase-in? •Will recipients be expected to implement before federal agencies? 3. Grant Administration KEY CHANGE: New Cost Restrictions Added cost principles related to: •Advertising and public relations •Conferences •Memberships, subscriptions and professional activity costs •General cost of government outside of specified grant activities Questions Recipients Should Ask: •How clear will the delineation between grant activities and general government activities be? •Will OMB or federal agencies provide further guidance specific to grant programs? 4. Audit and Update Frequency KEY CHANGE: No Longer an Annual Update for Compliance Supplement Anticipated Audit Impacts •No change to Single Audit but under review •Less frequent guidance for single audit process •High risk programs •Compliance factors Questions Recipients Should Ask: •What occasions would trigger a compliance supplement update? •Will 2026 compliance supplement remain in effect until a new update is released? How Can Local Governments Respond? The Notice is Vast: Here Are Immediate Administrative Actions Monitor ALL grants in your organization Review grant terms and conditions – and governance structures Understand internal policies and standards – along with adherence to them Inventory subrecipient relationships Assess E-Verify readiness Review payment verification processes Enhance Monitoring Frequency and Detail Improve documentation standards Evaluate exposure across grant portfolio What Does October 1 Mean? The Notice is Vast: Here Are Immediate Administrative Actions •Current grants? •Grants awarded OR renewed on or after October 1? •What about renewing grants? •How to handle retroactivity of affiliates, subsidiaries, or related organizations? •Will there be a list of agencies authorized to not use Grants.gov? •Will Statements of Interest be published in Grants.gov like a NOFO? How Can Local Governments Respond 1. Tell them what your organization does well o Grants Administration o Internal Controls 2. Ask specific questions about impacts to current grants o Create a repository/clearinghouse of your organization's outstanding grants – ask direct questions about impact (direct fiscal/direct human/direct credit) o Ask questions about whether they are excluded – or part of a safe harbor o The most effective comment letters articulate broad principles and ALSO are specific 3. Be specific about timelines o How does implementation impact your budget for this year o How will these changes impact your organization's future grants plans, competitive and otherwise What other concerns do you have? AS1 Phone (360) 385-9100 jeffbocc@co.jefferson.wa.us Board of County Commissioners 1820 Jefferson Street PO Box 1220 Port Townsend, WA 98368 Heather Dudley-Nollette, District 1 Heidi Eisenhour, District 2 Greg Brotherton, District 3 July 6, 2026 Russell T. Vought Director, Office of Management and Budget 725 17th Street, NW Washington, DC 20503 Re: Comments on Proposed Rule – Regulation for Federal Financial Assistance; 2 CFR Part 200 (Docket OMB-2026-0034) Dear Director Vought: On behalf of Jefferson County, Washington, we respectfully submit these comments in response to the Office of Management and Budget's (OMB) proposed rule rewriting 2 CFR Part 200 – commonly known as the Uniform Guidance – published in the Federal Register on May 29, 2026 (Docket OMB-2026-0034). This rulemaking represents the most significant revision to federal grant administration since 2013, and its scope and complexity demand the most thorough stakeholder input possible. We thank you for taking public comment and for working with local jurisdictions as partners in the work of efficiently distributing federal funds. Jefferson County administers federal grant funds across 56 programs totaling approximately $10 million in 2025, supporting critical services including construction of infrastructure, transportation, public safety, public health, housing and social services. These funds are delivered directly to residents and, in many cases, passed through to local subrecipients and community organizations. The proposed rule would affect every aspect of how we apply for, administer and account for those funds and we believe would make that work less efficient and more costly. We appreciate OMB's stated objectives of improving transparency, accountability and oversight of federal financial assistance – and we share those goals. Jefferson County maintains robust internal controls, documented policies and procedures, and a strong audit record. We submit these comments to ensure the final rule reflects the operational realities of our county and preserves our ability to effectively deliver federally-funded services to our communities. We appreciate the elements of the proposed rule change that facilitate simplification of the Notice of Funding Opportunity (NOFO) process, converting to plain language and less complex requirements wherever possible. The remainder of our comments below will focus on the ways we believe the bulk of this proposed rule change will add administrative burden and increase the cost of government services. As a small rural county that relies heavily on programs like Payment in Lieu of Taxes (PILT) and Secure Rural Schools, we are deeply committed to managing those dollars well and working together with our federal government to serve American people. Concerns Regarding Expanded Federal Termination Authority - § 200.339; § 200.340; § 200.341 The proposed rule would grant federal agencies broad new discretionary authority to terminate grant awards, including authority subject to senior political appointee approval. While we understand the administration's interest in ensuring awards align with current policy priorities, this provision creates severe fiscal uncertainty for county governments. County budgets are adopted months before the fiscal year begins. Revenue projections and service commitments – including staffing, contracts and capital investments – are made based on anticipated federal funding. The prospect of award termination at any point based on shifting federal policy priorities creates an untenable level of fiscal risk. As an example of the impacts in Jefferson County, the Engineering Division of our Public Works department has been almost entirely grant funded for approximately the last 15 years. Despite the perpetual challenge of keeping funds active, these federal dollars have allowed our small county to sustain the engineering work necessary to grow our economy. If grants suddenly go away, then the associated staffing positions as well as the capital projects themselves, likely also go away - together with the local prevailing wage construction jobs and county tax revenue. Furthermore, if we’ve spent grant money but have not completed the agreed-upon scope, in some cases we may be contractually obligated to pay back the grant funds expended, something we cannot afford to do. This example also applies to our new Port Hadlock Sewer capital project. This new system was a huge accomplishment for our small rural county, taking almost 30 years to actualize. It is now fully operational, with many surrounding septic systems now decommissioned. This is not something we can go back and “undo”. Significant county subsidy will continue to be required until adequate connections are made. If our capital grant funding is not sustained, these connections cannot be made and this critical infrastructure cannot continue to support much-needed opportunities for small businesses and residents to thrive and grow. Another example of impacts shows up within our Public Health department. A total of $1,115,132.75 of federal funds were deployed in 2025 via our Jefferson County Public Health work. We managed these funds very efficiently to provide life-saving, life-preserving and life-enhancing service to American people. If these funds are further cut, that would mean reductions in every division of Public Health affecting programs like Women, Infants and Children (WIC), Emergency Preparedness and Response, Children with Special Health Care Needs, Septic Cost Share, Recreational Water Safety, and Water Quality. We urge OMB to: • Limit termination authority to existing bases in law and the current Uniform Guidance • Establish clear, published criteria and a notice-and-cure process before any termination • Ensure adequate wind-down periods that allow counties to responsibly transition affected programs and protect service recipients Concerns Regarding New Pre-Award Review and Risk Evaluation Requirements - § 200.205; § 200.206 The proposed rule would require pre-award review of grant applications by senior agency officials and expanded risk evaluations of applicants prior to award. While appropriate risk management is an important goal, we are concerned that these requirements will significantly increase administrative burden, extend award timelines and deter counties – particularly smaller and rural counties – from applying for federal assistance. Jefferson County invests considerable resources in grant preparation and maintains a small, efficient and dedicated grants management team with documented policies reviewed annually. Additional pre-award layers should not duplicate existing accountability mechanisms or create new barriers to well-qualified applicants. We urge OMB to: • Define clear, objective and publicly available risk criteria so counties can anticipate and prepare for pre- award review • Establish firm timelines for pre-award review to prevent indefinite delays in award execution • Provide safe harbors for counties with strong audit histories and established compliance track records • Ensure pre-award review processes do not duplicate Single Audit findings or other existing accountability mechanisms Concerns Regarding New Viewpoint-Neutrality and Event-Services Requirements - § 200.219 The proposed rule would impose new viewpoint-neutrality requirements for event services on property under a public entity's control, regardless of whether any federal funds support the event itself. Counties would also bear responsibility for ensuring subrecipient compliance with these requirements. We have serious concerns about both the scope and workability of this provision. Even as a small rural county, Jefferson County manages community centers, fairgrounds, parks and public meeting spaces, sometimes in partnership with community organizations, that host hundreds of events annually. Applying federal grant conditions to all activities on county-owned property – irrespective of federal funding – would require counties to monitor, regulate and potentially restrict constitutionally protected activities on public property, creating significant legal and administrative exposure. We urge OMB to: • Limit event-services requirements to events that are themselves supported with federal funds • Remove pass-through entity liability for subrecipient event activities on non-federally-funded county property • Provide clear safe-harbor guidance that counties can implement without legal risk Concerns Regarding Pass-Through Entity Responsibilities - §§ 200.305(c), 200.329(b), 200.329(h), 200.331(c), 200.332(g)–(l), 200.333 Jefferson County serves as a pass-through entity for several of the federal grants we administer, distributing funds to nonprofits, local service providers and junior taxing districts. The County also partners with these entities to execute important projects in the community. The proposed rule would expand pass-through entity oversight obligations in several areas, including subaward reporting to SAM.gov, subrecipient monitoring and compliance with new policy conditions. The proposed requirement that pass-through entities ensure subrecipients do not take actions that "could significantly damage the reputation" of the pass- through entity, the awarding agency, or the Federal Government is unworkable as written and poses unacceptable legal and financial risk to county governments. The consequence of a federal agency's determination that reputational harm has occurred is termination of the county's entire federal award, regardless of the county's own compliance record. This provision would effectively require counties to surveil the public conduct of every subrecipient organization on an ongoing basis as a condition of receiving federal funds — a standard no county has the capacity to meet and one that creates significant due process concerns. These expanded obligations – stacked on existing pass-through requirements – will require additional staff capacity and system investment. Small and mid-sized counties often lack the infrastructure to absorb these requirements without reducing program capacity or applying for fewer grants. We urge OMB to: • Provide implementation guidance and technical assistance before new pass-through requirements take effect • Allow adequate transition time – at least 12 months from the final rule's effective date – for counties to update subaward agreements, monitoring procedures and reporting systems • Clarify that pass-through entity liability does not extend to subrecipient activities beyond the scope of the federal award • Define or remove "significantly damage the reputation" with objective, measurable criteria and limit any consequences to the specific subaward at issue rather than the county's entire federal award Concerns Regarding Reclassification from Guidance to Binding Regulation - §§ 1.105, § 200.110 The proposed rule would reclassify 2 CFR Subtitle A from OMB guidance to binding federal regulation, meaning future amendments would take effect government-wide without separate notice-and-comment rulemaking by individual agencies. This represents a significant structural change to how federal grant policy is made. We urge OMB to preserve notice-and-comment requirements for any future substantive amendments to the Uniform Guidance, consistent with the Administrative Procedure Act. The intergovernmental partnership depends on county governments having a meaningful opportunity to respond to regulatory changes that directly affect our operations and budgets. Concerns Regarding New Policy Conditions on Award Administration and Cost Disallowance — § 200.300(b); § 200.403 The proposed rule would establish sweeping new government-wide prohibitions on how federal award funds may be used without defining the key terms that determine whether a recipient is in compliance. Counties cannot reliably determine in advance whether a given program activity meets or violates the new standard – making good-faith compliance planning impossible and exposing counties to significant legal and fiscal risk. Under the proposed rule, the prohibition’s critical terms are undefined. Counties administering health, workforce, housing and human services programs need clear, objective definitions before we can assess program-by-program compliance, update subrecipient agreements or train staff. Without defined terms, counties face a difficult compliance standard – and face it immediately upon the rule's effective date. Compounding this concern, § 200.403 converts any violation of § 200.300(b) into an unallowable cost, meaning counties may be required to repay federal funds already spent on programs that were operating in good faith. This transforms what might otherwise be a forward-looking compliance adjustment into a retroactive financial liability with no clear ceiling. We urge OMB to: • Provide clear, objective definitions of all operative terms in § 200.300(b) before these prohibitions take effect, sufficient for counties to assess compliance program by program • Establish an explicit safe harbor for recipients acting in good faith under state law, existing court orders or consent decrees at the time of expenditure • Clarify that § 200.403 cost disallowance applies only to expenditures made after a specific, individualized finding of noncompliance — not retroactively to prior good-faith spending • Confirm that pass-through entity liability does not extend to subrecipient activities beyond the direct scope of the federally funded award The Intergovernmental Partnership and County Grant Administration - § 200.207(c) We want to be clear about the quality and rigor of Jefferson County's federal grant administration. We maintain: • Documented policies and procedures: Jefferson County adheres to federal and state law as well as its own civil code and policies passed by resolution in order to govern grant-funded programming. • Internal controls: Jefferson County maintains strict internal controls within finance, procurement, public works, equipment and property management, and subrecipient monitoring systems in accordance with Washington State Auditor Office (WA SAO) and OMB CFR § 200. • Audit history: Jefferson County works with the WA SAO to complete annual single financial audits of all federal grant revenue programs, and completes additional compliance audits. The county has had no findings for multiple years. • Staff training: Jefferson County employs a full-time staff Grants Administrator within the County Auditor’s office who maintains an active Grants Workgroup providing annual training and an updated manual to all county staff working in grants and finance. The intergovernmental system works because counties take federal stewardship seriously. We ask that the final rule be calibrated to the full range of county grant administrators – not only those with documented compliance failures – and that it not impose uniform new burdens that disadvantage well-managed governments. Conclusion We are committed to the responsible stewardship of federal funds and to the success of the intergovernmental partnership that makes federal programs effective at the local level. We appreciate OMB's attention to stakeholder input and urge the agency to: • Limit termination authority and establish clear, predictable procedures • Narrow event-services requirements to federally-funded activities • Provide adequate transition time and technical assistance for new requirements • Preserve notice-and-comment rulemaking for future substantive changes • Extend the comment period by at least 45 days to fully consider these potential impacts We stand ready to provide additional information or to meet with OMB staff to discuss these comments in greater detail. Again, we look forward to partnering with our federal government to serve the people of Jefferson County. Please contact the Jefferson County Administrator, Josh Peters at jdpeters@co.jefferson.wa.us or 360-385-9130 with any questions. Respectfully, ___________________________ __________________________ __________________________ Heather Dudley-Nollette, Dist. 1 Heidi Eisenhour, Dist. 2 Greg Brotherton, Dist. 3- Chair