Subpart F: Audit requirements 2024 Uniform Guidance · effective Oct 1, 2024

2 CFR 200.509: Auditor selection

2 CFR 200.509 sets 2 requirements for organizations that receive federal grants and cooperative agreements. Applies once you spend federal award money, at audit time.

Shows up in your application: Financial management systemsBudget justificationOrganizational capacityIndirect cost rate

What 2 CFR 200.509 requires

1. Procurement

What you must do

When procuring audit services, the auditee must follow the procurement standards in §§ 200.317 through 200.327 (or the FAR, 48 CFR part 42, as applicable), make the audit objectives and scope clear in the RFP, request the audit organization's peer review report, evaluate proposals on responsiveness, relevant experience, staff qualifications, peer/external quality-control review results, and price, and whenever possible make efforts to contract with businesses as stated in § 200.321.

When it applies

Auditee procures single-audit or program-specific-audit services

Financial management systemsBudget justificationOrganizational capacity
2. Procurement

What you must do

An auditor who prepares the auditee's indirect cost proposal or cost allocation plan may not be selected to perform the Subpart F audit when indirect costs recovered by the auditee during the prior year exceed $1 million; the restriction covers the base year of the proposal/plan and any subsequent years in which the resulting agreement or plan is used to recover costs.

When it applies

Auditee recovered more than $1 million in indirect costs in the prior year and its audit firm also prepared its indirect cost proposal or cost allocation plan

Indirect cost rateBudget justification
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Regulation text of 2 CFR 200.509

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(a) Auditor procurement. When procuring audit services, the auditee must follow the procurement standards in §§ 200.317 through 200.327 of subpart D or the FAR (48 CFR part 42), as applicable. When requesting proposals for audit services, the objectives and scope of the audit must be made clear, and the non-Federal entity must request a copy of the audit organization's peer review report, which the auditor must provide under GAGAS. Factors to be considered in evaluating each proposal for audit services include the responsiveness to the request for proposal, relevant experience, availability of staff with professional qualifications and technical abilities, the results of peer and external quality control reviews, and price. Whenever possible, the auditee must make efforts to contract with businesses as stated in § 200.321 or the FAR (48 CFR part 42), as applicable.

(b) Restriction on auditor preparing indirect cost proposals. An auditor who prepares the indirect cost proposal or cost allocation plan may not be selected to perform the audit required by this part when the indirect costs recovered by the auditee during the prior year exceed $1 million. This restriction applies to the base year used to prepare the indirect cost proposal or cost allocation plan and any subsequent years in which the resulting indirect cost agreement or cost allocation plan is used to recover costs.

(c) Use of Federal auditors. Federal auditors may perform all or part of the work required under this part if they fully comply with the requirements of this part.

Source: eCFR · checked Sep 17, 2026

Questions about 2 CFR 200.509

What does 2 CFR 200.509 require?

When procuring audit services, the auditee must follow the procurement standards in §§ 200.317 through 200.327 (or the FAR, 48 CFR part 42, as applicable), make the audit objectives and scope clear in the RFP, request the audit organization's peer review report, evaluate proposals on responsiveness, relevant experience, staff qualifications, peer/external quality-control review results, and price, and whenever possible make efforts to contract with businesses as stated in § 200.321. An auditor who prepares the auditee's indirect cost proposal or cost allocation plan may not be selected to perform the Subpart F audit when indirect costs recovered by the auditee during the prior year exceed $1 million; the restriction covers the base year of the proposal/plan and any subsequent years in which the resulting agreement or plan is used to recover costs.

When does 2 CFR 200.509 apply?

Auditee procures single-audit or program-specific-audit services. Auditee recovered more than $1 million in indirect costs in the prior year and its audit firm also prepared its indirect cost proposal or cost allocation plan.

Plain-English summaries for information only, not legal advice. Always check the regulation text, your award terms and your agency’s guidance.