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Plain-English guide · for small nonprofits
2 CFR 200.318, explained in plain English
Updated September 2026
The procurement rules that apply to every purchase, before the dollar thresholds decide how much competition you need.
§200.320 decides how much competition a purchase needs. §200.318 sets the rules that apply to all of them, including the $40 one: written procedures, a written conflict of interest standard, and enough documentation to reconstruct the decision.
Why this is the section that matters more
Most small nonprofits read the thresholds at §200.320, find that almost everything they buy sits under the micro-purchase line, and conclude procurement is handled. It is not. §200.318 has no dollar floor.
The obligations, in order of how often they are missed
- Documented procurement procedures. Your own, written down, reflecting applicable law and the standards in this part. Not the funder's, not a template you downloaded and never adopted.
- A written standard of conduct covering conflicts of interest. It must cover employees engaged in the selection, award and administration of contracts, and it must say that nobody participates where they have a real or apparent conflict. If your organization has a parent, affiliate or subsidiary that is not a state or local government, the standard must also cover organizational conflicts.
- No unnecessary or duplicative items. You are expected to review purchases to avoid buying what you already have.
- Records sufficient to detail the history of the procurement. The rationale for the method, the contractor selection or rejection, and the basis for the price.
- Oversight to ensure contractors perform. Buying is not the end of it.
The conflict of interest standard is the one to write today
It is a page. It names who it applies to, which is broader than most policies assume: employees, officers, agents and board members. It defines a conflict to include financial interest and the interests of family, partners and prospective employers. It carries the prohibition as the rule writes it. None of those people may solicit or accept gratuities, favors, or anything of monetary value from contractors. And it states the disciplinary consequence for violating it.
One thing to get right, because policies copied from the internet get it wrong: the flat ban is the rule. The section then lets your organization choose to set standards for cases where a financial interest is not substantial or a gift is an unsolicited item of nominal value. That carve-out is yours to adopt or not, and it is not a threshold built into the regulation. If your policy says small gifts are fine because the rule allows it, your policy is describing a choice you made as though it were the law.
Where small organizations get caught
- No written procedures at all, on the theory that the thresholds excuse them. They do not.
- A board member's company doing the work with nothing in the file showing how that was handled.
- Verbal quotes. The price was reasonable and nobody can now show it was.
- Buying from a sole source out of habit rather than after a documented determination.
This is general information, not legal or accounting advice. Federal grant rules change and are applied differently by different agencies and auditors. Check with your auditor, your grant officer, or an attorney before relying on any of it.
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Sources: 2 CFR Part 200 (eCFR), read 1 September 2026. Federal grant rules change; check the current text before relying on this.