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Plain-English guide · for nonprofits
2 CFR 200.502, explained in plain English
Updated September 2026
§200.502 decides what counts toward the $1,000,000 single audit threshold. An award counts when the activity happens, not when cash moves. So spending, payments to subrecipients, loan proceeds, property and food commodities can all count.
The test
§200.502 works with §200.501, the section of the Uniform Guidance that sets the threshold.
“The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs.”
Activity, not payment. That single sentence is why organizations that track cash miscount, in both directions.
What counts
- Expenditures and expenses under grants, cooperative agreements, cost-reimbursement contracts, direct appropriations and Indian Tribe compacts
- Disbursements to subrecipients, counted by you when you disburse
- The use of loan proceeds
- Receipt of property, including surplus property
- Receipt or use of program income
- Distribution or use of food commodities
- Disbursement of interest subsidy amounts
- Periods when insurance is in force
Five that are easy to miss
Loans keep counting
New loans made during the year count, and so do prior-year balances where continuing compliance requirements remain. A loan does not fall out of the calculation just because it was drawn years ago.
Endowments count every year
A federally restricted endowment counts its cumulative balance as expended in each audit period the restriction remains. It can push an organization over the line without any new money arriving.
Free rent counts only in context
Free rent on its own is not a federal award. Free rent received as part of a federal program award is, and it is valued at fair market value or the agency's assessed value.
Medicare does not count; Medicaid counts only if the State says so
Medicare payments for patient care are not federal awards expended. Medicaid payments to a subrecipient for patient care are not either, unless the State requires them to be treated as federal awards expended because it reimburses on a cost-reimbursement basis.
Non-cash is valued, not ignored
Donated property and commodities are counted at value. An organization distributing significant commodities can cross the threshold with very little cash.
What to do with this
Keep the running total by program using this definition, not your bank balance. Revisit it when a loan, an endowment restriction or a commodity program enters the picture. If you are within sight of $1,000,000, the calculation is worth an auditor's eye before year end rather than after.
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.
The Ember tool for thisEmber Budget
Ember Budget tracks money in and out by program and keeps restricted funds apart from flexible funds. Unlimited users on every tier.
Sources: 2 CFR Part 200 (eCFR), read 1 September 2026. Federal grant rules change; check the current text before relying on this.