Updated Federal Micro Purchase Threshold & How to Self-Certify

There are two different federal micro purchase threshold requirements, depending on the type of organization spending the funds.

This article will explain the differences between the two types of organizations and the micro purchase threshold for each.

Federal vs. Non-Federal Entities

Federal entities must follow the Federal Acquisition Regulation (FAR), a set of rules governing federal purchases. Therefore, they are subject to the more restrictive FAR micro purchase threshold.

Alternatively, non-federal entities that receive federal funds can follow the threshold allowance in 2 CFR 200.

Federal Entities Defined

Federal entities subject to FAR are most of the entities that are part of the U.S. government’s executive branch. Examples include:

• U.S. Military
• NASA
• USDA
• US Department of Education
• Social Security Administration

There are a few exceptions to this though, such as USPS and the Federal Reserve. Furthermore, it does not apply to any of the legislative or judicial branches of the U.S. government.

Non-Federal Entities Defined

Non-federal entities receiving federal funding are subject to the regulations in 2 CFR 200 instead of FAR when spending those federal funds. Therefore, non-federal entities can follow the 2 CFR 200 micro purchase threshold regulations.

Examples of non-federal entities receiving federal funding are:

• Local schools receiving Title funds
• Local schools operating school nutrition programs
• Higher education institutes issuing federally funded scholarships
• State Transportation Departments completing infrastructure projects funded by the federal government
• Local health departments administering the WIC program
• Non-profit organizations receiving federal grants to fund projects

In each of these cases, the organization is not considered part of the federal government, but they are receiving federal funds.

FAR Micro Purchase Threshold

The FAR micro purchase threshold is $10,000. The federal government established this in 2020 and recalculates it every 5 years based on inflation.

There are a few exceptions where the limit is higher for extreme cases, like nuclear attacks and disaster relief. Otherwise, federal entities must stick to the $10,000 limit.

2 CFR 200 Micro Purchase Threshold

2 CFR 200 states that non-federal entities can use the micro purchase threshold in FAR (currently $10,000) OR self-certify a different amount up to $50,000.

They can even work with their cognizant agency for indirect costs to develop a micro purchase threshold over $50,000.

How to Self-Certify a Micro Purchase Threshold Up to $50,000 (Non-Federal Entities Only)

Non-federal entities wishing to self-certify a micro purchase threshold between $10,001-50,000 can do so by completing the following steps:

1. Ensure you qualify.
2. Write your self-certification.
3. Check to see if your awarding agency or pass-through entity imposes additional requirements.
4. Document everything.
5. Repeat annually.

We’ll talk about each of these steps in more depth.

Step 1: Ensure you qualify.

The non-federal entity must fall under at least one of these requirements:

Option 1: Considered a low-risk auditee, as outlined in 2 CFR 200.520 OR

Option 2: An annual internal risk assessment is completed to identify, mitigate, and manage finance risks OR

Option 3: For public institutions, State law sets a higher threshold

Option 1: You’re considered a low-risk auditee

Let’s take a closer look at what it means to be a low-risk auditee. All of the following must be true to be considered a low-risk auditee.

• • Single audits were performed on an annual basis. Single audits are required for non-federal entities receiving at least $750,000 in federal funding. However, receiving biennial audits disqualifies you from being considered “low risk”. You can find the report from your single audit on the Federal Audit Clearinghouse site.
  • The auditor’s opinion was unmodified. This means they did not make a “modified” opinion”, which means they either found your financial data to be incorrect or couldn’t verify it. Watch out for the words “qualified opinion”, “adverse opinion”, or “disclaimer of opinion”. These will disqualify you from being considered a low-risk auditee.

    

  • They found no deficiencies in internal control which were identified as material weaknesses under GAGAS.
  • The auditor did not report a substantial doubt about the auditee’s ability to continue as a going concern. They would likely use that language in the report.
  • No audit findings in previous two years:
    • Material weaknesses in internal control over compliance
    • A modified opinion on a major program
    • Known or likely questioned costs that exceed 5% of the award

Option 2: Your organization completes an annual internal risk assessment

If you do not qualify under the single audit option, you may qualify with an annual internal risk assessment.

An internal risk assessment is an in-depth review of your procedures and internal controls to identify, mitigate, and manage finance risks.

Typically, someone is reviewing your procedures for cash management, equipment management, procurement, reporting, etc. Then, they’ll see if there are any potential improvements to minimize mistakes and fraud.

Option 3: State law allows a higher micro purchase threshold

The last option for qualifying to self-certify is if state law allows a higher micro purchase threshold.

For example, New York law allows micro purchases up to $20,000 for non-construction and $30,000 for construction purchases. Therefore, public non-federal entities in New York could adopt these higher thresholds.

Step 2: Write a Justification

Once you’re sure you qualify, you need to write a justification.

Essentially, write down why you want to self-certify a higher micro purchase threshold and what that threshold will be.

The reasoning might look like, “It is not always possible or good stewardship of employee time to require multiple quotations.”

Then clearly identify the threshold. For example, “Therefore, XYZ organization self-certifies a micro purchase threshold of $50,000.”

Step 3: Check to see if your awarding agency or pass-through entity imposes additional requirements.

Your awarding agency or your pass through entity may have additional requirements for you to follow.

For example, schools in Texas must get their self-certification documented in school board policy and must submit a form to the Texas Education Agency annually. In contrast, the Tennessee Department of Education does not require TN schools to complete this process, even though they’re operating the same programs as the ones in Texas.

Refer to your pass-through entity if you are unsure.

Step 4: Document everything.

Save your documents from Steps 1-3, including:

• Proof that you are eligible (audit reports, internal risk assessments)
• Your written self-certification
• Any other required documents.

Step 5: Repeat annually.

The law says you must you must self-certify on an “annual basis”. This means you should be checking that you qualify to use the higher threshold each year and saving proof that you do.

Also keep documentation showing you are reviewing your self-certification annually.

Should You Raise Your Micro Purchase Threshold?

Remember that the purpose of getting quotes or bids is to obtain best pricing, ensuring wise use of taxpayer dollars.

The federal micro purchase threshold exists to ensure operations run efficiently when it is not practical to obtain quotes or bids. Consider this carefully when deciding which threshold to adopt.

Summary

The federal micro purchase threshold you can use depends on if you must follow the regulations in FAR or 2 CFR 200.

Federal entities must follow the $10,000 FAR micro purchase threshold, while non-federal entities can follow the $10,000 FAR limit or self-certify up to $50,000 using the 2 CFR 200 micro purchase threshold guidance.

For more information on conducing micro purchases, check out this article.