Uniform Administrative Requirements for Grants and Agreements With Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations

DEPARTMENT OF THE INTERIOR

Office of the Secretary

43 CFR Part 12

RIN 1090-AA42

Uniform Administrative Requirements for Grants and Agreements

With Institutions of Higher Education, Hospitals, and Other Non-Profit

Organizations

AGENCY: Department of the Interior, Office of the Secretary.

ACTION: Interim final rule; request for comments.

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SUMMARY: This interim final rule will adopt for the Department of the

Interior, standards which will be imposed on grantees covered by the

revised Office of Management and Budget (OMB) Circular A-110, ``Uniform

Administrative Requirements for Grants and Agreements With Institutions

of Higher Education, Hospitals, and Other Non-Profit Organizations.''

DATES: This rule is effective on August 26, 1994. Comments must be in

writing and must be received by September 26, 1994.

ADDRESSES: Comments should be mailed to Acquisition and Assistance

Division, Office of Acquisition and Property Management, Department of

the Interior, 1849 C St., NW., Mail Stop 5512, Washington, DC 20240.

FOR FURTHER INFORMATION CONTACT:Dean A. Titcomb, (Chief, Acquisition

and Assistance Division), (202) 208-6431.

SUPPLEMENTARY INFORMATION: OMB Circular A-110 covers both grants made

by Federal agencies and subgrants made by States to nongovernmental

organizations.

Agencies were required to adopt those standards which would be

imposed on grantees in codified regulations within six months after

publication in the Federal Register.

Over 200 comments were received by OMB from Federal agencies, non-

profit organizations, professional organizations, and others in

response to the notice published on August 27, 1992 (57 FR 39018)

requesting comments on proposed revisions. The comments were considered

in developing the final version. Consequently, this rule is published

as an interim final rule because of the previous request for comment

process used in the development of the Circular, the large number of

comments already received and considered by OMB and the Federal

agencies, and due to the limited flexibility to revise the rule

provided by OMB.

This interim final rule essentially adopts all the language in the

Circular with two exceptions. At Section 12.904, language has been

added to describe the procedure for handling requests for class

deviations and case-by-case exceptions. At Section 12.915, the

Department is including a term and condition concerning use of the

metric system of measurement.

The Department is revising 43 CFR part 12, by adding subpart F to

implement these requirements.

Public Participation

The policy of the Department of the Interior, is whenever

practicable, to afford the public an opportunity to participate in the

rulemaking process. Accordingly, interested persons may submit written

comments, suggestions or objections regarding the interim final rule to

the location identified in this preamble.

Executive Order 12866, Paperwork Reduction Act, and Regulatory

Flexibility Act

This interim final rule was not subject to Office of Management and

Budget review under Executive Order 12866.

The Department has determined that this rule will not have a

significant economic impact on a substantial number of small entities

because it does not affect the amount of funds provided in the covered

programs, but rather modifies and updates administrative and procedural

requirements. This interim final rule does not contain a collection of

information subject to the Paperwork Reduction Act of 1980 (44 U.S.C.

3501 et seq.).

Environmental Effects

The Department has determined that this rule does not constitute a

major Federal action having a significant impact on the human

environment under the National Environmental Policy Act of 1969.

Executive Order No. 12778

The Department has certified to the Office of Management and Budget

that this proposed rule meets the applicable standards provided in

Sections 2(a) and 2(b)(2) of Executive Order 12778.

List of Subjects in 43 CFR Part 12

Cooperative agreements, Grants administration, Grant program.

Dated: July 11, 1994.

B.R. Cohen,

Assistant Secretary--Policy, Management and Budget.

For the reasons set forth in the preamble, Title 43, part 12 of the

Code of Federal Regulations is amended as set forth below:

PART 12--ADMINISTRATIVE AND AUDIT REQUIREMENTS AND COST PRINCIPLES

FOR ASSISTANCE PROGRAMS

1. The authority citation for part 12 is revised to read as

follows:

Authority: 5 U.S.C. 301; 31 U.S.C. 7501; 41 U.S.C. 701 et seq.;

E.O. 12539, 3 CFR, 1986 Comp. p. 189; E.O. 12674, 3 CFR, 1989 Comp.

p. 215; E.O. 12731, 3 CFR, 1990 Comp. p. 306; OMB Circular A-102;

OMB Circular A-110; OMB Circular A-128; and OMB Circular A-133.

2. Part 12 is amended by adding subpart F to read as set forth

below.

Subpart F--Uniform Administrative Requirements for Grants and

Agreements With Institutions of Higher Education, Hospitals, and

Other Non-Profit Organizations

General

Sec

12.901 Purpose and applicability.

12.902 Definitions.

12.903 Effect on other issuances.

12.904 Deviations.

12.905 Subawards.

Pre-Award Requirements

12.910 Purpose.

12.911 Pre-award policies.

12.912 Forms for applying for Federal assistance.

12.913 Debarment and suspension.

12.914 Special award conditions.

12.915 Metric system of measurement.

12.916 Resource Conservation and Recovery Act.

12.917 Certifications and representations.

Post-Award Requirements

Financial and Program Management

12.920 Purpose of financial and program management.

12.921 Standards for financial management systems.

12.922 Payment.

12.923 Cost sharing or matching.

12.924 Program income.

12.925 Revision of budget and program plans.

12.926 Non-Federal audits.

12.927 Allowable costs.

12.928 Period of availability of funds.

Property Standards

12.930 Purpose of property standards.

12.931 Insurance coverage.

12.932 Real property.

12.933 Federally-owned and exempt property.

12.934 Equipment.

12.935 Supplies and other expendable property.

12.936 Intangible property.

12.937 Property trust relationship.

Procurement Standards

12.940 Purpose of procurement standards.

12.941 Recipient responsibilities.

12.942 Codes of conduct.

12.943 Competition.

12.944 Procurement procedures.

12.945 Cost and price analysis.

12.946 Procurement records.

12.947 Contract administration.

12.948 Contract provisions.

Reports and Records

12.950 Purpose of reports and records.

12.951 Monitoring and reporting program performance.

12.952 Financial reporting.

12.953 Retention and access requirements for records.

Termination and Enforcement

12.960 Purpose of termination and enforcement.

12.961 Termination.

12.962 Enforcement.

After-the-Award Requirements

12.970 Purpose.

12.971 Closeout procedures.

12.972 Subsequent adjustments and continuing responsibilities.

12.973 Collection of amounts due.

Appendix A to Subpart F--Contract Provisions

General

Sec. 12.901 Purpose and applicability.

This subpart establishes uniform administrative requirements for

grants and agreements awarded to institutions of higher education,

hospitals, and other non-profit organizations.

Sec. 12.902 Definitions.

Accrued expenditures means the charges incurred by the recipient

during a given period requiring the provision of funds for:

(1) goods and other tangible property received;

(2) services performed by employees, contractors, subrecipients,

and other payees; and,

(3) other amounts becoming owed under programs for which no current

services or performance is required.

Accrued income means the sum of:

(1) earnings during a given period from:

(i) services performed by the recipient, and

(ii) goods and other tangible property delivered to purchasers, and

(2) amounts becoming owed to the recipient for which no current

services or performance is required by the recipient.

Acquisition cost of equipment means the net invoice price of the

equipment, including the cost of modifications, attachments,

accessories, or auxiliary apparatus necessary to make the property

usable for the purpose for which it was acquired. Other charges, such

as the cost of installation, transportation, taxes, duty or protective

in-transit insurance, shall be included or excluded from the unit

acquisition cost in accordance with the recipient's regular accounting

practices.

Advance means a payment made by Treasury check or other appropriate

payment mechanism to a recipient upon its request either before outlays

are made by the recipient or through the use of predetermined payment

schedules.

Award means financial assistance that provides support or

stimulation to accomplish a public purpose. Awards include grants and

other agreements in the form of money or property in lieu of money, by

the Federal Government to an eligible recipient. The term does not

include: technical assistance that provides services instead of money;

other assistance in the form of loans, loan guarantees, interest

subsidies, or insurance; direct payments of any kind to individuals;

and contracts which are required to be entered into and administered

under procurement laws and regulations.

Cash contributions means the recipient's cash outlay, including the

outlay of money contributed to the recipient by third parties.

Closeout means the process by which a Federal agency determines

that all applicable administrative actions and all required work of the

award have been completed by the recipient and Federal awarding agency.

Contract means a procurement contract under an award or subaward,

and a procurement subcontract under a recipient's or subrecipient's

contract.

Cost sharing or matching means that portion of project or program

costs not borne by the Federal Government.

Date of completion means the date on which all work under an award

is completed or the date on the award document, or any supplement or

amendment thereto, on which Federal sponsorship ends.

Disallowed costs means those charges to an award that the Federal

awarding agency determines to be unallowable, in accordance with the

applicable Federal cost principles or other terms and conditions

contained in the award.

Equipment means tangible nonexpendable personal property, including

exempt property charged directly to the award having a useful life of

more than one year and an acquisition cost of $5000 or more per unit.

However, consistent with recipient policy, lower limits may be

established.

Excess property means property under the control of any Federal

awarding agency that, as determined by the head thereof, is no longer

required for its needs or the discharge of its responsibilities.

Exempt property means tangible personal property acquired in whole

or in part with Federal funds, where the Federal awarding agency has

statutory authority to vest title in the recipient without further

obligation of the Federal Government. An example of exempt property

authority is contained in the Federal Grant and Cooperative Agreement

Act (31 U.S.C. 6306), for property acquired under an award to conduct

basic or applied research by a non-profit institution of higher

education or non-profit organization whose principal purpose is

conducting scientific research.

Federal funds authorized means the total amount of Federal funds

obligated by the Federal Government for use by the recipient. This

amount may include any authorized carryover of unobligated funds from

prior funding periods when permitted by agency regulations or agency

implementing instructions.

Federal share of real property, equipment, or supplies means that

percentage of the property's acquisition costs and any improvement

expenditures paid with Federal funds.

Funding period means the period of time when Federal funding is

available for obligation by the recipient.

Intangible property and debt instruments means, but is not limited

to: trademarks; copyrights; patents and patent applications; and such

property as loans, notes and other debt instruments; lease agreements;

stock and other instruments of property ownership, whether considered

tangible or intangible.

Obligations means the amounts of orders placed, contracts and

grants awarded, services received and similar transactions during a

given period that require payment by the recipient during the same or a

future period.

Outlays or expenditures means charges made to the project or

program. They may be reported on a cash or accrual basis. For reports

prepared on a cash basis, outlays are the sum of: cash disbursements

for direct charges for goods and services, the amount of indirect

expense charged, the value of third party in-kind contributions

applied, and the amount of cash advances and payments made to

subrecipients. For reports prepared on an accrual basis, outlays are

the sum of: cash disbursements for direct charges for goods and

services; the amount of indirect expense incurred; the value of in-kind

contributions applied; and the net increase (or decrease) in the

amounts owed by the recipient for goods and other property received,

for services performed by employees, contractors, subrecipients and

other payees and other amounts becoming owed under programs for which

no current services or performance are required.

Personal property means property of any kind except real property.

It may be tangible, having physical existence, or intangible, having no

physical existence, such as copyrights, patents, or securities.

Prior approval means written approval by an authorized official

evidencing prior consent.

Program income means gross income earned by the recipient that is

directly generated by a supported activity or earned as a result of the

award (see exclusions in paragraphs 12.924 (e) and (h)). Program income

includes, but is not limited to, income from: fees for services

performed, the use or rental of real or personal property acquired

under federally-funded projects, the sale of commodities or items

fabricated under an award, license fees and royalties on patents and

copyrights, and interest on loans made with award funds. Interest

earned on advances of Federal funds is not program income. Except as

otherwise provided in Federal awarding agency regulations or the terms

and conditions of the award, program income does not include the

receipt of principal on loans, rebates, credits, discounts, etc., or

interest earned on any of them.

Project costs means all allowable costs, as set forth in the

applicable Federal cost principles, incurred by a recipient and the

value of the contributions made by third parties in accomplishing the

objectives of the award during the project period.

Project period means the period established in the award document

during which Federal sponsorship begins and ends.

Property means, unless otherwise stated, real property, equipment,

supplies, intangible property, and debt instruments.

Real property means land, including land improvements, structures

and appurtenances thereto, but excludes movable machinery and

equipment.

Recipient means an organization receiving financial assistance

directly from Federal awarding agencies to carry out a project or

program. The term includes public and private institutions of higher

education, public and private hospitals, commercial organizations, and

quasi-public and private non-profit organizations such as, but not

limited to: community action agencies, research institutes, educational

associations, and health centers. The term may include, at the

discretion of the Federal awarding agency foreign or international

organizations (such as agencies of the United Nations) which are

recipients, subrecipients, or contractors or subcontractors of

recipients or subrecipients. The term does not include government-owned

contractor-operated facilities or research centers providing continued

support for mission-oriented, large-scale programs that are government-

owned or controlled, or are designated as federally-funded research and

development centers.

Research and development means all research activities, both basic

and applied, and all development activities that are supported at

universities, colleges, and other non-profit institutions.

(1) ``Research'' is defined as a systematic study directed toward

fuller scientific knowledge or understanding of the subject studied.

(2) ``Development'' is the systematic use of knowledge and

understanding gained from research directed toward the production of

useful materials, devices, systems, or methods, including design and

development of prototypes and processes. The term research also

includes activities involving the training of individuals in research

techniques where such activities utilize the same facilities as other

research and development activities and where such activities are not

included in the instruction function.

Small awards means a grant or cooperative agreement not exceeding

the small purchase threshold fixed at 41 U.S.C. 403(11) (currently

$25,000).

Subaward means an award of financial assistance in the form of

money, or property in lieu of money, made under an award by a recipient

to an eligible subrecipient or by a subrecipient to a lower tier

subrecipient. The term includes financial assistance when provided by

any legal agreement, even if the agreement is called a contract, but

does not include procurement of goods and services nor does it include

any form of assistance that is excluded from the definition of

``award'' in this section.

Subrecipient means the legal entity to which a subaward is made and

which is accountable to the recipient for the use of the funds

provided. The term may include foreign or international organizations

(such as agencies of the United Nations) at the discretion of the

Federal awarding agency.

Supplies means all personal property excluding equipment,

intangible property, and debt instruments as defined in this section,

and inventions of a contractor conceived or first actually reduced to

practice in the performance of work under a funding agreement

(``subject inventions''), as defined in 37 CFR part 401, ``Rights to

Inventions Made by Nonprofit Organizations and Small Business Firms

Under Government Grants, Contracts, and Cooperative Agreements.''

Suspension means an action by a Federal awarding agency that

temporarily withdraws Federal sponsorship under an award, pending

corrective action by the recipient or pending a decision to terminate

the award by the Federal awarding agency. Suspension of an award is a

separate action from suspension under the Department of the Interior

regulations implementing E.O.'s 12549 and 12689, ``Debarment and

Suspension.'' See Subpart D of 43 CFR part 12.

Termination means the cancellation of Federal sponsorship, in whole

or in part, under an agreement at any time prior to the date of

completion.

Third party in-kind contributions means the value of non-cash

contributions provided by non-Federal third parties. Third party in-

kind contributions may be in the form of real property, equipment,

supplies and other expendable property, and the value of goods and

services directly benefiting and specifically identifiable to the

project or program.

Unliquidated obligations, for financial reports prepared on a cash

basis, means the amount of obligations incurred by the recipient that

have not been paid. For reports prepared on an accrued expenditure

basis, they represent the amount of obligations incurred by the

recipient for which an outlay has not been recorded.

Unobligated balance means the portion of the funds authorized by

Federal awarding agency that has not been obligated by the recipient

and is determined by deducting the cumulative obligations from the

cumulative funds authorized.

Unrecovered indirect cost means the difference between the amount

awarded and the amount that could have been awarded under the

recipient's approved negotiated indirect cost rate.

Working capital advance means a procedure whereby funds are

advanced to the recipient to cover its estimated disbursement needs for

a given initial period.

Sec. 12.903 Effect on other issuances.

For awards subject to this subpart, all administrative requirements

of codified program regulations, program manuals, handbooks and other

nonregulatory materials which are inconsistent with the requirements of

this subpart shall be superseded, except to the extent they are

required by statute, or authorized in accordance with the deviations

provision in section 12.904.

Sec. 12.904 Deviations.

The Office of Management and Budget (OMB), may grant exceptions for

classes of grants or recipients subject to the requirements of this

subpart when exceptions are not prohibited by statute. However, in the

interest of maximum uniformity, exceptions from the requirements of

this subpart shall be permitted only in unusual circumstances. Federal

awarding agencies may apply more restrictive requirements to a class of

recipients when approved by OMB. All requests for class deviations

shall be processed through the Assistant Secretary--Policy, Management,

and Budget. Federal awarding agencies may apply less restrictive

requirements when awarding small awards, except for statutory

requirements. Exceptions on a case-by-case basis may also be made by

Federal awarding agencies. Bureau/office application of less

restrictive requirements when awarding small awards, except for

statutory requirements as well as exceptions on a case-by-case basis,

will be approved by designated officials identified in bureau/office

procedures.

Sec. 12.905 Subawards.

Unless sections of this subpart specifically exclude subrecipients

from coverage, the provisions of this subpart shall be applied to

subrecipients performing work under awards if such subrecipients are

institutions of higher education, hospitals, or other non-profit

organizations. State and local government subrecipients are subject to

the provisions of regulations implementing the grants management common

rule, ``Uniform Administrative Requirements for Grants and Cooperative

Agreements to State and Local Governments,'' 43 CFR part 12.

Pre-Award Requirements

Sec. 12.910 Purpose.

Sections 12.911 through 12.917 prescribe forms and instructions and

other pre-award matters to be used in applying for Federal awards.

Sec. 12.911 Pre-award policies.

(a) Use of Grants and Cooperative Agreements, and Contracts. In

each instance, the Federal awarding agency shall decide on the

appropriate award instrument (i.e., grant, cooperative agreement, or

contract). The Federal Grant and Cooperative Agreement Act (31 U.S.C.

6301-08) governs the use of grants, cooperative agreements and

contracts. A grant or cooperative agreement shall be used only when the

principal purpose of a transaction is to accomplish a public purpose of

support or stimulation authorized by Federal statute. The statutory

criterion for choosing between grants and cooperative agreements is

that for the latter, ``substantial involvement is expected between the

executive agency and the State, local government, or other recipient

when carrying out the activity contemplated in the agreement.''

Contracts shall be used when the principal purpose is acquisition of

property or services for the direct benefit or use of the Federal

Government.

(b) Public Notice and Priority Setting. Federal awarding agencies

shall notify the public of their funding priorities for discretionary

grant programs, unless funding priorities are established by Federal

statute.

Sec. 12.912 Forms for applying for Federal assistance.

(a) Federal awarding agencies shall comply with the applicable

report clearance requirements of 5 CFR part 1320, ``Controlling

Paperwork Burdens on the Public,'' with regard to all forms used by the

Federal awarding agency in place of or as a supplement to the Standard

Form 424 (SF-424) series.

(b) Applicants shall use the SF-424 series or those forms and

instructions prescribed by the Federal awarding agency.

(c) For Federal programs covered by E.O. 12372, ``Intergovernmental

Review of Federal Programs,'' the applicant shall complete the

appropriate sections of the SF-424 (Application for Federal Assistance)

indicating whether the application was subject to review by the State

Single Point of Contact (SPOC). The name and address of the SPOC for a

particular State can be obtained from the Federal awarding agency or

the Catalog of Federal Domestic Assistance. The SPOC shall advise the

applicant whether the program for which application is made has been

selected by that State for review.

(d) Federal awarding agencies that do not use the SF-424 form will

indicate whether the application is subject to review by the State

under E.O. 12372.

Sec. 12.913 Debarment and suspension.

Federal awarding agencies and recipients shall comply with the

nonprocurement debarment and suspension common rule implementing E.O.s

12549 and 12689, ``Debarment and Suspension,'' Subpart D of 43 CFR part

12. This common rule restricts subawards and contracts with certain

parties that are debarred, suspended or otherwise excluded from or

ineligible for participation in Federal assistance program or

activities.

Sec. 12.914 Special award conditions.

(a) Federal awarding agencies may impose additional requirements as

needed, if an applicant or recipient:

(1) Has a history of poor performance,

(2) Is not financially stable,

(3) Has a management system that does not meet the standards

prescribed in this part,

(4) Has not conformed to the terms and conditions of a previous

award, or

(5) Is not otherwise responsible.

(b) Additional requirements may only be imposed provided that the

applicant or recipient is notified in writing as to:

(1) The nature of the additional requirements;

(2) The reason why the additional requirements are being imposed;

(3) The nature of the corrective action needed;

(4) The time allowed for completing the corrective actions; and

(5) The method for requesting reconsideration of the additional

requirements imposed.

(c) Any special conditions shall be promptly removed once the

conditions that prompted them have been corrected.

Sec. 12.915 Metric system of measurement.

The Metric Conversion Act, as amended by the Omnibus Trade and

Competitiveness Act (15 U.S.C. 205) declares that the metric system is

the preferred measurement system for U.S. trade and commerce. The Act

requires each Federal agency to establish a date or dates in

consultation with the Secretary of Commerce, when the metric system of

measurement will be used in the agency's procurements, grants, and

other business-related activities. Metric implementation may take

longer where the use of the system is initially impractical or likely

to cause significant inefficiencies in the accomplishment of federally-

funded activities. Federal awarding agencies will follow the provisions

of E.O. 12770, ``Metric Usage in Federal Government Programs.'' When

applicable, the awarding agency shall request that measurement-

sensitive information to be included as part of the application be

expressed in metric units. When required by the awarding agency for

grants to recipients, the following term and condition will be

incorporated into the grant:

Provision

All progress and final reports, other reports, or publications

produced under this award shall employ the metric system of

measurement. However, the recipient may use non-metric measurements

to the extent that the recipient has supporting documentation that

the use of metric measurements is impracticable or is likely to

cause significant inefficiencies or loss of markets to the

recipient, such as when foreign competitors are producing competing

products in non-metric units.

End of Provision

Sec. 12.916 Resource Conservation and Recovery Act.

Under the Resource Conservation and Recovery Act (42 U.S.C. 6962),

any State agency or agency of a political subdivision of a State that

is using appropriated Federal funds must comply with Section 6002.

Section 6002 requires that preference be given in procurement programs

to the purchase of specific products containing recycled materials

identified in guidelines developed by the Environmental Protection

Agency (EPA) (40 CFR parts 247-254). Accordingly, State and local

institutions of higher education and hospitals that receive direct

Federal awards or other Federal funds shall give preference in their

procurement programs funded with Federal funds to the purchase of

recycled products pursuant to the EPA guidelines.

Sec. 12.917 Certifications and representations.

Unless prohibited by statute or codified regulation, each Federal

awarding agency is authorized and encouraged to allow recipients to

submit certifications and representations required by statute,

executive order, or regulation on an annual basis, if the recipients

have ongoing and continuing relationships with the agency. Annual

certifications and representations shall be signed by responsible

officials with the authority to ensure recipients' compliance with the

pertinent requirements.

Post-Award Requirements

Financial and Program Management

Sec. 12.920 Purpose of financial and program management.

Sections 12.921 through 12.928 prescribe standards for financial

management systems, methods for making payments, and rules for:

satisfying cost sharing and matching requirements, accounting for

program income, budget revision approvals, making audits, determining

allowability of cost, and establishing fund availability.

Sec. 12.921 Standards for financial management systems.

(a) Federal awarding agencies shall require recipients to relate

financial data to performance data and develop unit cost information

whenever practical.

(b) Recipients' financial management systems shall provide for the

following.

(1) Accurate, current and complete disclosure of the financial

results of each federally-sponsored project or program in accordance

with the reporting requirement set forth in Section 12.952. If a

Federal awarding agency requires reporting on an accrual basis from a

recipient that maintains its records on other than an accrual basis,

the recipient shall not be required to establish an accrual accounting

system. These recipients may develop accrual data for their reports on

the basis of an analysis of the documentation on hand.

(2) Records that identify adequately the source and application of

funds for federally-sponsored activities. These records shall contain

information pertaining to Federal awards, authorizations, obligations,

unobligated balances, assets, outlays, income and interest.

(3) Effective control over and accountability for all funds,

property, and other assets. Recipients shall adequately safeguard all

such assets and assure they are used solely for authorized purposes.

(4) Comparison of outlays with budget amounts for each award.

Whenever appropriate, financial information should be related to

performance and unit cost data.

(5) Written procedures to minimize the time elapsing between the

transfer of funds to the recipient from the U.S. Treasury and the

issuance or redemption of checks, warrants, or payments by other means

for program purposes by the recipient. To the extent that the

provisions of the Cash Management Improvement Act (CMIA) (Pub. L. 101-

453) govern, payment methods of State agencies, instrumentalities, and

fiscal agents shall be consistent with CMIA Treasury-State Agreements

or the CMIA default procedures codified at 31 CFR part 205,

``Withdrawal of Cash from the Treasury for Advances under Federal Grant

and Other Programs.''

(6) Written procedures for determining the reasonableness,

allocability and allowability of costs in accordance with the

provisions of the applicable Federal cost principles and the terms and

conditions of the award.

(7) Accounting records, including cost accounting records, that are

supported by source documentation.

(c) Where the Federal Government guarantees or insures the

repayment of money borrowed by the recipient, the Federal awarding

agency at its discretion, may require adequate bonding and insurance if

the bonding and insurance requirements of the recipient are not deemed

adequate to protect the interest of the Federal Government.

(d) The Federal awarding agency may require adequate fidelity bond

coverage where the recipient lacks sufficient coverage to protect the

Federal Government's interest.

(e) Where bonds are required in the situations described above in

Section 12.921 (c) & (d), the bonds shall be obtained from companies

holding certificates of authority as acceptable sureties, as prescribed

in 31 CFR part 223, ``Surety Companies Doing Business with the United

States.''

Sec. 12.922 Payment.

(a) Payment methods shall minimize the time elapsing between the

transfer of funds from the United States Treasury and the issuance of

redemption of checks, warrants, or payment by other means by the

recipients. Payment methods of State agencies or instrumentalities

shall be consistent with Treasury-State CMIA agreements or default

procedures codified at 31 CFR part 205.

(b) (1) Recipients are to be paid in advance, provided they

maintain or demonstrate the willingness to maintain or demonstrate:

(i) written procedures that minimize the time elapsing between the

transfer of funds and disbursement by the recipient, and

(ii) financial management systems that meet the standards for fund

control and accountability as established in Section 12.921.

(2) Cash advances to a recipient organization shall be limited to

the minimum amounts needed and be timed to be in accordance with the

actual, immediate cash requirements of the recipient organization in

carrying out the purpose of the approved program or project. The timing

and amount of cash advances shall be as close as is administratively

feasible to the actual disbursements by the recipient organization for

direct program or project costs and the proportionate share of any

allowable indirect costs.

(c) Whenever possible, advances will be consolidated to cover

anticipated cash needs for all awards made by the Federal awarding

agency to the recipient.

(1) Advance payment mechanisms include, but are not limited to,

Treasury check and electronic funds transfer.

(2) Advance payment mechanisms are subject to 31 CFR Part 205.

(3) Recipients shall be authorized to submit requests for advances

and reimbursements at least monthly when electronic fund transfers are

not used.

(d) Requests for Treasury check advance payment shall be submitted

on SF-270, ``Request for Advance or Reimbursement,'' or other forms as

may be authorized by OMB. This form is not to be used when Treasury

check advance payments are made to the recipient automatically through

the use of a predetermined payment schedule or if precluded by special

Federal awarding agency instructions for electronic funds transfer.

(e) Reimbursement is the preferred method when the requirements in

paragraph (b) of this section cannot be met. Federal awarding agencies

may also use this method on any construction agreement, or if the major

portion of the construction project is accomplished through private

market financing or Federal loans, and the Federal assistance

constitutes a minor portion of the project.

(1) When the reimbursement method is used, the Federal awarding

agency shall make payment within 30 days after receipt of the billing,

unless the billing is improper.

(2) Recipients shall be authorized to submit a request for

reimbursement at least monthly when electronic funds transfers are not

used.

(f) If a recipient cannot meet the criteria for advance payments

and the Federal awarding agency has determined that reimbursement is

not feasible because the recipient lacks sufficient working capital,

the Federal awarding agency may provide cash on a working capital

advance basis. Under this procedure, the Federal awarding agency shall

advance cash to the recipient to cover its estimated disbursement needs

for an initial period generally geared to the awardee's disbursing

cycle. Thereafter, the Federal awarding agency shall reimburse the

recipient for its actual cash disbursements. The working capital

advance method of payment shall not be used for recipients unwilling or

unable to provide timely advances to their subrecipient to meet the

subrecipient's actual cash disbursements.

(g) To the extent available, recipients shall disburse funds

available from repayments to and interest earned on a revolving fund,

program income, rebates, refunds, contract settlements, audit

recoveries and interest earned on such funds before requesting

additional cash payments.

(h) Unless otherwise required by statute, Federal awarding agencies

shall not withhold payments for proper charges made by recipients at

any time during the project period unless paragraph (h)(1) or (h)(2) of

this section apply:

(1) A recipient has failed to comply with the project objectives,

the terms and conditions of the award, or Federal reporting

requirements; or

(2) The recipient or subrecipient is delinquent in a debt to the

United States as defined in OMB Circular A-129, ``Managing Federal

Credit Programs.'' Under such conditions, the Federal awarding agency

may, upon reasonable notice, inform the recipient that payments shall

not be made for obligations incurred after a specified date until the

conditions are corrected or the indebtedness to the Federal Government

is liquidated.

(i) Standards governing the use of banks and other institutions as

depositories of funds advanced under awards are as follows.

(1) Except for situations described in paragraph (i)(2) of this

section, Federal awarding agencies shall not require separate

depository accounts for funds provided to a recipient or establish any

eligibility requirements for depositories for funds provided to a

recipient. However, recipients must be able to account for the receipt,

obligation and expenditure of funds.

(2) Advances of Federal funds shall be deposited and maintained in

insured accounts whenever possible.

(j) Consistent with the national goal of expanding the

opportunities for women-owned and minority-owned business enterprises,

recipients are encouraged to use women-owned and minority-owned banks

(a bank which is owned at least 50 percent by women or minority group

members).

(k) Recipients shall maintain advances of Federal funds in interest

bearing accounts, unless paragraph (h) (1), (2) or (3) apply:

(1) The recipient receives less than $120,000 in Federal awards per

year.

(2) The best reasonably available interest bearing account would

not be expected to earn interest in excess of $250 per year on Federal

cash balances.

(3) The depository would require an average or minimum balance so

high that it would not be feasible within the expected Federal and non-

Federal cash resources.

(l) For those entities where CMIA and its implementing regulations

do not apply, interest earned on Federal advances deposited in interest

bearing accounts shall be remitted annually to Department of Health and

Human Services, Payment Management System, P.O. Box 6021, Rockville, MD

20852. Interest amounts up to $250 per year may be retained by the

recipient for administrative expense. In keeping with Electric Funds

Transfer rules, (31 CFR part 206), interest should be remitted to the

HHS Payment Management System through an electric medium such as the

FEDWIRE Deposit system. Recipients who do not have this capability

should use a check. State universities and hospitals shall comply with

CMIA as it pertains to interest. If an entity subject to CMIA uses its

own funds to pay preaward costs for discretionary awards without prior

written approval from the Federal awarding agency, it waives its right

to recover the interest under CMIA.

(m) Except as noted elsewhere in this subpart, only the following

forms shall be authorized for the recipients in requesting advances and

reimbursements. Federal agencies shall not require more than an

original and two copies of these forms.

(1) SF-270, ``Request for Advance or Reimbursement.'' Each Federal

awarding agency shall adopt the SF-270 as a standard form for all

nonconstruction programs where electronic funds transfer or

predetermined advance methods are not used. Federal awarding agencies,

however, have the option of using this form for construction programs

in lieu of the SF-271, ``Outlay Report and Request for Reimbursement

for Construction Programs.''

(2) SF-271, ``Outlay Report and Request for Reimbursement for

Construction Programs.'' Each Federal awarding agency shall adopt the

SF-271 as the standard form to be used for requesting reimbursement for

construction programs. However, a Federal awarding agency may

substitute the SF-270 when the Federal awarding agency determines that

it provided adequate information to meet Federal needs.

Sec. 12.923 Cost sharing or matching.

(a) All contributions, including cash and third party in-kind,

shall be accepted as part of the recipient's cost sharing or matching

when the contributions meet all of the following criteria.

(1) Are verifiable from the recipient's records.

(2) Are not included as contributions for any other federally-

assisted project or program.

(3) Are necessary and reasonable for proper and efficient

accomplishment of project or program objectives.

(4) Are allowable under the applicable cost principles.

(5) Are not paid by the Federal Government under another award,

except where authorized by Federal statute to be used for cost sharing

or matching.

(6) Are provided for in the approved budget when required by the

Federal awarding agency.

(7) Conform to other provisions of this subpart, as applicable.

(b) Unrecovered indirect costs may be included as part of cost

sharing or matching only with the prior approval of the Federal

awarding agency.

(c) Values for recipient contributions of services and property

shall be established in accordance with the applicable cost principles.

If a Federal awarding agency authorizes recipients to donate buildings

or land for construction/facilities acquisition projects or long-term

use, the value of the donated property for cost sharing or matching

shall be the lesser of paragraph (c) (1) or (2) of this section:

(1) The certified value of the remaining life of the property

recorded in the recipient's accounting records at the time of donation.

(2) The current fair market value. However, when there is

sufficient justification, the Federal awarding agency may approve the

use of the current fair market value of the donated property, even if

it exceeds the certified value at the time of donation to the project.

(d) Volunteer services furnished by professional and technical

personnel, consultants, and other skilled and unskilled labor may be

counted as cost sharing or matching if the service is an integral and

necessary part of an approved project or program. Rates for volunteer

services shall be consistent with those paid for similar work in the

recipient's organization. In those instances in which the required

skills are not found in the recipient organization, rates shall be

consistent with those paid for similar work in the labor market in

which the recipient competes for the kind of services involved. In

either case, paid fringe benefits that are reasonable, allowable, and

allocable may be included in the valuation.

(e) When an employer other than the recipient furnishes the

services of an employee, these services shall be valued at the

employee's regular rate of pay (plus an amount of fringe benefits that

are reasonable, allowable, and allocable, but exclusive of overhead

costs), provided these services are in the same skill for which the

employee is normally paid.

(f) Donated supplies may include such items as office supplies,

laboratory supplies, or workshop and classroom supplies. Value assessed

to donated supplies included in the cost sharing or matching share

shall be reasonable and shall not exceed the fair market value of the

property at the time of the donation.

(g) The method used for determining cost sharing or matching for

donated equipment, buildings, and land for which title passes to the

recipient may differ according to the purpose of the award, if

paragraph (1) or (2) of this section apply:

(1) If the purpose of the award is to assist the recipient to

acquire equipment, buildings, or land, the total value of the donated

property may be claimed as cost sharing or matching.

(2) If the purpose of the award is to support activities that

require the use of equipment, buildings, or land, normally only

depreciation or use charges for equipment and buildings may be made.

However, the full value of equipment or other capital assets and fair

rental charges for land may be allowed, provided that the Federal

awarding agency has approved the charges.

(h) The value of donated property shall be determined in accordance

with the usual accounting policies of the recipient, with the following

qualifications.

(1) The value of donated land and buildings shall not exceed their

fair market value at the time of donation to the recipient as

established by an independent appraiser (e.g., certified real property

appraiser or General Services Administration representative) and

certified by a responsible official of the recipient.

(2) The value of donated equipment shall not exceed the fair market

value of equipment of the same age and condition at the time of

donation.

(3) The value of donated space shall not exceed the fair rental

value of comparable space as established by an independent appraisal of

comparable space and facilities in a privately-owned building in the

same locality.

(4) The value of loaned equipment shall not exceed its fair rental

value.

(i) The following requirements pertain to the recipient's

supporting records for in-kind contributions from third parties.

(1) Volunteer services shall be documented and, to the extent

feasible, supported by the same methods used by the recipient for its

own employees.

(2) The basis for determining the valuation for personal service,

material, equipment, buildings and land shall be documented.

Sec. 12.924 Program income.

(a) Federal awarding agencies shall apply the standards in this

section in requiring recipient organization to account for program

income related to projects financed in whole or in part with Federal

funds.

(b) Except as provided in paragraph (h) of this section, program

income earned during the project period shall be retained by the

recipient and, in accordance with Federal awarding agency regulations

or the terms and conditions of the award, shall be used in one or more

of the following ways:

(1) added to funds committed to the project or program by the

Federal awarding agency and recipient and used to further eligible

project or program objectives;

(2) used to finance the non-Federal share of the project or

program; or

(3) deducted from the total project or program allowable cost in

determining the net allowable costs upon which the Federal share of

costs is based.

(c) When an agency authorizes the disposition of program income as

described in paragraph (b)(1) or (b)(2) of this section, program income

in excess of any limits stipulated shall be use in accordance with

paragraph (b)(3) of this section.

(d) If the Federal awarding agency does not specify in its

regulations or the terms and conditions of the award how program income

is to be used, paragraph (b)(3) of this section shall apply

automatically to all projects or programs except research. For awards

that support research, paragraph (b)(1) of this section shall apply

automatically unless the awarding agency indicates in the terms and

conditions another alternative on the award or the recipient is subject

to special award conditions, as indicated in Section 12.924.

(e) Unless Federal awarding agency regulations or the terms and

conditions of the award provide otherwise, recipients shall have no

obligation to the Federal Government regarding program income earned

after the end of the project period.

(f) If authorized by Federal awarding agency regulations or the

terms and conditions of the award, costs incident to the generation of

program income may be deducted from gross income to determine program

income, provided these costs have not been charged to the award.

(g) Proceeds from the sale of property shall be handled in

accordance with the requirements of the Property Standards (See

Sections 12.930 through 12.937).

(h) Unless Federal awarding agency regulations or the terms and

condition of the award provide otherwise, recipients shall have no

obligation to the Federal Government with respect to program income

earned from license fees and royalties for copyrighted material,

patents, patent applications, trademarks, and inventions produced under

an award. However, Patent and Trademark Amendments (35 U.S.C. 18) apply

to inventions made under an experimental, developmental, or research

award.

Sec. 12.925 Revision of budget and program plans.

(a) The budget plan is the financial expression of the project or

program as approved during the award process. It may include either the

Federal and non-Federal share, or only the Federal share, depending

upon Federal awarding agency requirements. It shall be related to

performance for program evaluation purposes whenever appropriate.

(b) Recipients are required to report deviations from budget and

program plans, and request prior approvals for budget and program plan

revisions, in accordance with this section.

(c) For nonconstruction awards, recipients shall request prior

approvals from Federal awarding agencies for one or more of the

following program or budget related reasons.

(1) Change in the scope or the objective of the project or program

(even if there is no associated budget revision requiring prior written

approval).

(2) Change in a key person specified in the application or award

document.

(3) The absence for more than three months, or a 25 percent

reduction in time devoted to the project, by the approved project

director or principal investigator.

(4) The need for additional Federal funding.

(5) The transfer of amounts budgeted for indirect costs to absorb

increases in direct costs, or vice versa, if approval is required by

the Federal awarding agency.

(6) The inclusion, unless waived by the Federal awarding agency, of

costs that require prior approval in accordance with OMB Circular A-21,

``Cost Principles for Institutions of Higher Education,'' OMB Circular

A-122, ``Cost Principles for Non-Profit Organizations,'' or 45 CFR part

74 Appendix E, ``Principles for Determining Costs Applicable to

Research and Development under Grants and Contracts with Hospitals,''

or 48 CFR part 31, ``Contract Cost Principles and Procedures,'' as

applicable.

(7) The transfer of funds allotted for training allowances (direct

payment to trainees) to other categories of expense.

(8) Unless described in the application and funded in the approved

award, the subaward, transfer or contracting out of any work under an

award. This provision does not apply to the purchase of supplies,

material, equipment, or general support services.

(d) No other prior approval requirements for specific items may be

imposed unless a deviation has been approved by OMB.

(e) Except for requirements listed in paragraph (c)(1) and (c)(4)

of this section, Federal Awarding agencies are authorized, at their

option to waive cost-related and administrative prior written approvals

required by this subpart and OMB Circulars A-21 and A-122. Such waivers

may include authorizing recipients to do any one or more of the

following:

(1) Incur pre-award costs 90 calendar days prior to award or more

than 90 calendar days with the prior approval of the Federal awarding

agency. All pre-award costs are incurred at the recipient's risk (i.e.,

the Federal awarding agency is under no obligation to reimburse such

costs if for any reason the recipient does not receive an award or if

the award is less than anticipated and inadequate to cover such costs).

(2) Initiate a one-time extension of the expiration date of the

award of up to 12 months unless one or more of the conditions listed

below apply. For one-time extensions, the recipient must notify the

Federal awarding agency in writing, with the supporting reasons and

revised expiration date, at least 10 days before the expiration date

specified in the award. This one-time extension may not be exercised

merely for the purpose of using unobligated balances. The conditions

that prevent issuance of a one-time extension are:

(i) the terms and conditions of award prohibit the extension;

(ii) the extension requires additional Federal funds; or

(iii) the extension involves any change in the approved objectives

or scope of the project.

(3) Carry forward unobligated balances to subsequent funding

periods.

(4) For awards the support research, unless the Federal awarding

agency provides otherwise in the award or in the agency's regulations,

the prior approval requirements described in paragraph (e)(1) through

(3) of this section are automatically waived (i.e., recipients need not

obtain such prior approvals) unless one of the conditions included in

paragraph (e)(2) applies.

(f) The Federal awarding agency may, at its option, restrict the

transfer of funds among direct cost categories or programs, functions,

and activities for awards in which the Federal share of the project

exceeds $100,000 and the cumulative amount of the transfer exceeds or

is expected to exceed 10 percent of the total budget as last approved

by the Federal awarding agency. No Federal awarding agency shall permit

a transfer that would cause any Federal appropriation or part thereof

to be used for purposes other than those consistent with the original

intent of the appropriation.

(g) No other changes to nonconstruction budgets, except for the

changes described in paragraph (j) of this section require prior

approval.

(h) For construction awards, recipients shall request prior written

approval promptly from Federal awarding agencies for budget revisions

whenever paragraph (h)(1), (2) or (3) of this section apply:

(1) the revision results from changes in the scope or the objective

of the project or program;

(2) additional Federal funds are needed to complete the project; or

(3) the recipient requests a revision that involves specific costs

for which prior written approval requirements may be imposed under

Section 12.927.

(i) No other prior approval requirements for specific items will be

imposed unless OMB approves a deviation.

(j) When a Federal awarding agency makes an award that provides

support for both construction and nonconstruction work, the Federal

awarding agency may require the recipient to request prior approval

before making any fund or budget transfers between the two types of

work supported.

(k) For both construction and nonconstruction awards, Federal

awarding agencies shall require recipients to notify the Federal

awarding agency in writing promptly whenever the amount of Federal

authorized funds is expected to exceed the needs of the recipient for

the project period by more than $5,000 or five percent of the Federal

award, whichever is greater. This notification shall not be required if

an application for additional funding is submitted for a continuation

award.

(l) When requesting approval for budget revisions, recipients shall

use the budget forms that were used in the application unless the

Federal awarding agency indicates that a letter of request suffices.

(m) Within 30 calendar days from the date of receipt of the request

for budget revisions, the Federal awarding agency shall review the

request and notify the recipient whether the budget revisions have been

approved. If the revision is still under consideration at the end of 30

calendar days, the Federal awarding agency shall inform the recipient

in writing of the date when the recipient may expect the decision.

Sec. 12.926 Non-Federal audits.

Certain recipients and subrecipients shall be subject to non-

Federal audits in accordance with the applicable directive from the

table below.

------------------------------------------------------------------------

Type of recipient Applicable directive

------------------------------------------------------------------------

Institution of higher education or OMB Circular A-133.

other non-profit organization.

State or local government.......... Single Audit Act 31 U.S.C. 7501-7

and 43 CFR Part 12, Subpart B.

Hospital........................... OMB Circular A-133 or audit

requirements of the Federal

awarding agency.

------------------------------------------------------------------------

Sec. 12.927 Allowable Costs.

Federal awarding agencies shall determine allowable costs in

accordance with the type of entity incurring the costs, using the

appropriate directive from the table below.

------------------------------------------------------------------------

Entity incurring costs Applicable directive

------------------------------------------------------------------------

State, local, or Federally OMB Circular A-87, Cost Principles

recognized Indian Tribe. for State and Local Governments.

Non-profit organization............ OMB Circular A-122, Cost Principles

for Non-profit Organizations and

43 CFR 12.927(b).

Institution of Higher Education.... OMB Circular A-21, Cost Principles

for Educational Institutions.

Hospital........................... 45 CFR 74, Appendix E, Principles

for Determining Costs Applicable

to Research and Development Under

Grants and Contracts with

Hospitals.

Commercial organization or non- 48 CFR Part 31, Contract Principles

profit organization listed in and Procedures, or uniform cost

Attachment C of OMB Circular A-122. accounting standards that comply

with cost principles acceptable to

the Federal agency.

------------------------------------------------------------------------

Sec. 12.928 Period of availability of funds.

Where a funding period is specified, a recipient may charge to the

grant only allowable costs resulting from obligations incurred during

the funding period and any pre-award costs authorized by the Federal

awarding agency.

Property Standards

Sec. 12.930 Purpose of property standards.

Sections 12.931 through 12.937 set forth uniform standards

governing management and disposition of property furnished by the

Federal Government whose cost was charged to a project supported by a

Federal award. The recipient may use its own property management

standards and procedures provided it observes the provisions of

Secs. 12.931 through 12.937.

Sec. 12.931 Insurance coverage.

Recipients shall, at a minimum, provide the equivalent insurance

coverage for real property and equipment acquired with Federal funds as

provided to property owned by the recipient. Federally-owned property

need not be insured unless required by the terms and conditions of the

award.

Sec. 12.932 Real property.

(a) Title to real property shall vest in the recipient subject to

the condition that the recipient shall use the real property for the

authorized purpose of the project as long as it is needed and shall not

encumber the property without approval of the awarding agency.

(b) The recipient shall obtain written approval by the Federal

awarding agency for the use of real property in other federally-

sponsored projects when the recipient determines that the property is

no longer needed for the purpose of the original project. Use in other

projects shall be limited to those under federally-sponsored projects

(i.e., awards) or programs that have purposes consistent with those

authorized for support by the Department of the Interior.

(c) When the real property is no longer needed as provided in

paragraphs (a) and (b) of this section, the recipient shall request

disposition instructions from the Federal awarding agency or its

successor. The Federal awarding agency shall give one or more of the

following disposition instructions.

(1) The recipient may be permitted to retain title without further

obligation to the Federal Government after it compensates the Federal

Government for that percentage of the current fair market value of the

property attributable to the Federal participation in the project.

(2) The recipient may be directed to sell the property under

guidelines provided by the Federal awarding agency and pay the Federal

Government for that percentage of the current fair market value of the

property attributable to the Federal participation in the project

(after deducting actual and reasonable selling and fix-up expenses, if

any, from the sales proceeds). When the recipient is authorized or

required to sell the property, proper sales procedures shall be

established that provide for competition to the extent practicable and

result in the highest possible return.

(3) The recipient may be directed to transfer title to the property

to the Federal Government or to an eligible third party provided that,

in such cases, the recipient shall be entitled to compensation for its

attributable percentage of the current fair market value of the

property.

Sec. 12.933 Federally-owned and exempt property.

(a) Federally-owned property. (1) Title to federally-owned property

remains vested in the Federal Government. Recipients shall submit

annually to the Federal awarding an inventory listing of federally-

owned property in their custody. Upon completion of the award, or when

the property is no longer needed, the recipient shall report the

property to the Federal awarding agency for further Federal

utilization.

(2) If the Federal awarding agency has no further need for the

property, it shall be declared excess and reported to the General

Services Administration, unless the Federal awarding agency has

statutory authority to dispose of the property by alternative methods

(e.g., the authority provided by the Federal Technology Transfer Act

(15 U.S.C. 3710 (I)) to donate research equipment to educational and

non-profit organizations in accordance with E.O. 12821, ``Improving

Mathematics and Science Education in Support of the National Education

Goals.'') Appropriate instructions shall be issued to the recipient by

the Federal awarding agency.

(b) Exempt property. When statutory authority exists, the Federal

awarding agency has the option to vest title to property acquired with

Federal funds in the recipient without further obligation to the

Federal Government and under conditions the Federal awarding agency

considers appropriate. Such property is ``exempt property.'' Should a

Federal awarding agency not establish conditions, title to exempt

property upon acquisition shall vest in the recipient without further

obligation to the Federal Government.

Sec. 12.934 Equipment.

(a) Title to equipment acquired by a recipient with Federal funds

shall vest in the recipient, subject to conditions of this section.

(b) The recipient shall not use equipment acquired with Federal

funds to provide services to non-Federal outside organizations for a

fee that is less than private companies charge for equivalent services,

unless specifically authorized by Federal statute, for as long as the

Federal Government retains an interest in the equipment.

(c) The recipient shall use the equipment in the project or program

for which it was acquired as long as needed, whether or not the project

or program continues to be supported by Federal funds and shall not

encumber the property without approval of the Federal awarding agency.

When no longer needed for the original project or program, the

recipient shall use the equipment in connection with its other

federally-sponsored activities, in the following order of priority:

(1) activities sponsored by the Federal awarding agency, then

(2) activities sponsored by other Federal agencies.

(d) During the time that equipment is used on the project or

program for which it was acquired, the recipient shall make it

available for use on other projects or programs if such other use will

not interfere with the work on the project or program for which the

equipment was originally acquired. First preference for such other use

shall be given to other projects or programs sponsored by the Federal

awarding agency that financed the equipment; second preference shall be

given to projects or programs sponsored by other Federal agencies. If

the equipment is owned by the Federal Government, use on other

activities not sponsored by the Federal Government shall be permissible

if authorized by the Federal awarding agency. User charges shall be

treated as program income.

(e) When acquiring replacement equipment, the recipient may use the

equipment to be replaced as trade-in or sell the equipment and use the

proceeds to offset the costs of the replacement equipment subject to

the approval of the Federal awarding agency.

(f) The recipient's property management standards for equipment

acquired with Federal funds and federally-owned equipment shall include

all of the following.

(1) Equipment records shall be maintained accurately and shall

include the following information.

(i) A description of the equipment.

(ii) Manufacturer's serial number, model number, Federal stock

number, national stock number, or other identification number.

(iii) Source of the equipment, including the award number.

(iv) Whether title vests in the recipient or the Federal

Government.

(v) Acquisition date (or date received, if the equipment was

furnished by the Federal Government) and cost.

(vi) Information from which one can calculate the percentage of

Federal participation in the cost of the equipment (not applicable to

equipment furnished by the Federal Government).

(vii) Location and condition of the equipment and the date the

information was reported.

(viii) Unit acquisition cost.

(ix) Ultimate disposition data, including date of disposal and

sales price or the method used to determine current fair market value

where a recipient compensates the Federal awarding agency for its

share.

(2) Equipment owned by the Federal Government shall be identified

to indicate Federal ownership.

(3) A physical inventory of equipment shall be taken and the

results reconciled with the equipment records at least once every two

years. Any differences between quantities determined by the physical

inspection and those shown in the accounting records shall be

investigated to determine the causes of the difference. The recipient

shall, in connection with the inventory, verify the existence, current

utilization, and continued need for the equipment.

(4) A control system shall be in effect to insure adequate

safeguards to prevent loss, damage, or theft of the equipment. Any

loss, damage, or theft of equipment shall be investigated and fully

documented; if the equipment was owned by the Federal Government, the

recipient shall promptly notify the Federal awarding agency.

(5) Adequate maintenance procedures shall be implemented to keep

the equipment in good condition.

(6) Where the recipient is authorized or required to sell the

equipment, proper sales procedures shall be established which provide

for competition to the extent practicable and result in the highest

possible return.

(g) When the recipient no longer needs the equipment, the equipment

may be used for other activities in accordance with the following

standards. For equipment with a current per unit fair market value of

$5,000 or more, the recipient may retain the equipment for other uses

if compensation is made to the original Federal awarding agency or its

successor. The amount of compensation shall be computed by applying the

percentage of Federal participation in the cost of the original project

or program to the current fair market value of the equipment. If the

recipient has no need for the equipment, the recipient shall request

disposition instructions from the Federal awarding agency. The Federal

awarding agency shall determine whether the equipment can be used to

meet the agency's requirements. If no requirement exists within that

agency, the availability of the equipment shall be reported to the

General Services Administration by the Federal awarding agency to

determine whether a requirement for the equipment exists in other

Federal agencies. The Federal awarding agency shall issue instructions

to the recipient no later than 120 calendar days after the recipient's

request and the following procedures shall govern:

(1) If so instructed, or if disposition instructions are not issued

within 120 calendar days after the recipient's request, the recipient

shall sell the equipment and reimburse the Federal awarding agency an

amount computed by applying to the sales proceeds the percentage of

Federal participation in the cost of the original project or program.

However, the recipient shall be permitted to deduct and retain from the

Federal share $500 or ten percent of the proceeds, whichever is less,

for the recipient's selling and handling expenses.

(2) If the recipient is instructed to ship the equipment elsewhere,

the recipient shall be reimbursed by the Federal Government by an

amount which is computed by applying the percentage of the recipient's

participation in the cost of the original project or program to the

current fair market value of the equipment, plus any reasonable

shipping or interim storage costs incurred.

(3) If the recipient is instructed to otherwise dispose of the

equipment, the recipient will be reimbursed by the Federal awarding

agency for such costs incurred in its disposition.

(h) The Federal awarding agency may reserve the right to transfer

the title to the Federal Government or to a third party named by the

Federal Government when the third party is otherwise eligible under

existing statutes. The transfer shall be subject to the following

standards.

(1) The equipment shall be appropriately identified in the award or

otherwise described to the recipient in writing.

(2) The Federal awarding agency shall issue disposition

instructions within 120 calendar days after receipt of a final

inventory. The final inventory shall list all equipment acquired with

Federal funds and federally owned equipment. If the Federal awarding

agency fails to issue disposition instructions within the 120-calendar-

day period, the recipient shall apply the standards of this section, as

appropriate.

(3) When the Federal awarding agency exercises its right to take

title, the equipment shall be subject to the provisions for federally

owned equipment.

Sec. 12.935 Supplies and other expendable property.

(a) Title to supplies and other expendable property shall vest in

the recipient upon acquisition. If there is a residual inventory of

unused supplies exceeding $5,000 in total aggregate value upon

termination or completion of the project or program and the supplies

are not needed for any other federally sponsored project or program,

the recipient shall retain the supplies for use on non-Federal

sponsored activities or sell them, but shall, in either case,

compensate the Federal Government for its share. The amount of

compensation shall be computed in the same manner as for equipment.

(b) The recipient shall not use supplies acquired with Federal

funds to provide services to non-Federal outside organizations for a

fee that is less than private companies charge for equivalent services,

unless specifically authorized by Federal statute, as long as the

Federal Government retains an interest in the supplies.

Sec. 12.936 Intangible property.

(a) The recipient may copyright any work that is subject to

copyright and was developed, or for which ownership was purchased,

under an award. The Federal awarding agency(ies) reserves a royalty-

free, nonexclusive and irrevocable right to reproduce, publish, or

otherwise use the work for Federal purposes, and to authorize others to

do so.

(b) Recipients are subject to applicable regulations governing

patents and inventions, including government-wide regulations issued by

the Department of Commerce at 37 CFR part 401, ``Rights to Inventions

Made by Nonprofit Organizations and Small Business Firms Under

Government Grants, Contracts and Cooperative Agreements.''

(c) Unless waived by the Federal awarding agency, the Federal

Government has the right to:

(1) Obtain, reproduce, publish or otherwise use the data first

produced under an award; and

(2) Authorize others to receive, reproduce, publish, or otherwise

use the data for Federal purposes.

(d) Title to intangible property and debt instruments acquired

under an award or subaward vests upon acquisition in the recipient. The

recipient shall use that property for the originally authorized

purpose, and the recipient shall not encumber the property without

approval of the Federal awarding agency. When no longer needed for the

originally authorized purpose, disposition of the intangible property

shall occur in accordance with the provisions of Section 12.934(g).

Sec. 12.937 Property trust relationship.

Real property, equipment, intangible property and debt instruments

that are acquired or improved with Federal funds shall be held in trust

by the recipient as trustee for the beneficiaries of the project or

program under which the property was acquired or improved. Agencies may

require recipients to record liens or other appropriate notices of

record to indicate that personal or real property has been acquired or

improved with Federal funds and that use and disposition conditions

apply to the property.

Procurement Standards

Sec. 12.940 Purpose of procurement standards.

Sections 12.941 through 12.948 set forth standards for use by

recipients in establishing procedures for the procurement of supplies

and other expendable property, equipment, real property and other

services with Federal funds. These standards are furnished to ensure

that materials and services are obtained in an effective manner and in

compliance with the provisions of applicable Federal statutes and

executive orders. No additional procurement standards or requirements

shall be imposed by the Federal awarding agencies upon recipients,

unless specifically required by Federal statute or executive order or

approved by OMB.

Sec. 12.941 Recipient responsibilities.

The standards contained in this section do not relieve the

recipient of the contractual responsibilities arising under its

contract(s). The recipient is the responsible authority, without

recourse to the Federal awarding agency, regarding the settlement and

satisfaction of all contractual and administrative issues arising out

of procurements entered into in support of an award or other agreement.

This includes disputes, claims, protests of award, source evaluation or

other matters of a contractual nature. Matters concerning violation of

statute are to be referred to such Federal, State or local authority as

may have proper jurisdiction.

Sec. 12.942 Codes of conduct.

The recipient shall maintain written standards of conduct governing

the performance of its employees engaged in the award and

administration of contracts. No employee, officer, or agent shall

participate in the selection, award, or administration of a contract

supported by Federal funds if a real or apparent conflict of interest

would be involved. Such a conflict would arise when the employee,

officer, or agent, any member of his or her immediate family, his or

her partner, or an organization that employs or is about to employ any

of the parties indicated herein, has a financial or other interest in

the firm selected for an award. The officers, employees, and agents of

the recipient shall neither solicit nor accept gratuities, favors, or

anything of monetary value from contractors, or parties to

subagreements. However, recipients may set standards for situations in

which the financial interest is not substantial or the gift is an

unsolicited item of nominal value. The standards of conduct shall

provide for disciplinary actions to be applied for violations of such

standards by officers, employees, or agents of the recipient.

Sec. 12.943 Competition.

All procurement transactions shall be conducted in a manner to

provide, to the maximum extent practical, open and free competition.

The recipient shall be alert to organizational conflicts of interest as

well as noncompetitive practices among contractors that may restrict or

eliminate competition or otherwise restrain trade. In order to ensure

objective contractor performance and eliminate unfair competitive

advantage, contractors that develop or draft specifications,

requirements, statements of work, invitations for bids and/or requests

for proposals shall be excluded from competing for the related

procurements. Awards shall be made to the bidder or offeror whose bid

or offer is responsive to the solicitation and is most advantageous to

the recipient, price, quality and other factors considered.

Solicitations shall clearly set forth all requirements that the bidder

or offeror shall fulfill in order for the bid or offer to be evaluated

by the recipient. Any and all bids or offers may be rejected when it is

in the recipient's interest to do so.

Sec. 12.944 Procurement procedures.

(a) All recipients shall establish written procurement procedures.

These procedures shall provide, at a minimum, that:

(1) Recipients avoid purchasing unnecessary items.

(2) Where appropriate, an analysis is made of lease and purchase

alternatives to determine which would be the most economical and

practical procurement for the Federal Government; and

(3) Solicitations for goods and services provide for all of the

following.

(i) A clear and accurate description of the technical requirements

for the material, product or service to be procured. In competitive

procurements, the description shall not contain features which unduly

restrict competition.

(ii) Requirements which the bidder/offeror must fulfill and all

other factors to be used in evaluating bids or proposals.

(iii) A description, whenever practicable, of technical

requirements in terms of functions to be performed or performance

required, including the range of acceptable characteristics or minimum

acceptable standards.

(iv) The specific features of ``brand name or equal'' descriptions

that bidders are required to meet when such items are included in the

solicitation.

(v) The acceptance, to the extent practicable and economically

feasible, of products and services dimensioned in the metric system of

measurement.

(vi) Preference, to the extent practicable and economically

feasible, for products and services that conserve natural resources and

protect the environment and are energy efficient.

(b) Positive efforts shall be made by recipients to utilize small

businesses, minority-owned firms, and women's business enterprises,

whenever possible. Recipients of Federal awards shall take all of the

following steps to further this goal.

(1) Ensure that small businesses, minority-owned firms, and women's

business enterprises are used to the fullest extent practicable.

(2) Make information on forthcoming opportunities available and

arrange time frames for purchases and contracts to encourage and

facilitate participation by small businesses, minority-owned firms, and

women's business enterprises.

(3) Consider in the contract process whether firms competing for

larger contracts intend to subcontract with small businesses, minority-

owned firms, and women's business enterprises.

(4) Encourage contracting with consortiums of small businesses,

minority-owned firms, and women's business enterprises when a contract

is too large for one of these firms to handle individually.

(5) Use the services and assistance, as appropriate, of such

organizations as the Small Business Administration and the Department

of Commerce's Minority Business Development Agency in the solicitation

and utilization of small businesses, minority-owned firms and women's

business enterprises.

(c) The type of procuring instruments used (e.g., fixed price

contracts, cost reimbursable contracts, purchase orders, and incentive

contracts) shall be determined by the recipient but shall be

appropriate for the particular procurement and for promoting the best

interest of the program or project involved. The ``cost-plus-a-

percentage-of-cost'' or ``percentage of construction cost'' methods of

contracting shall not be used.

(d) Contracts shall be made only with responsible contractors who

posses the potential ability to perform successfully under the terms

and conditions of the proposed procurement. Consideration shall be

given to such matters as contractor integrity, record of past

performance, financial and technical resources, and accessibility to

other necessary resources. In certain circumstances, contracts with

certain parties are restricted by agencies' implementation of E.O.s

12549 and 12689, ``Debarment and Suspension.'' See Subpart D of 43 CFR

part 12.

(e) Recipients shall, on request, make available for the Federal

awarding agency, pre-award review of procurement documents, such as

request for proposals or invitations for bids, independent cost

estimates, etc., when any of the following conditions apply.

(1) A recipient's procurement procedures or operation fails to

comply with the procurement standards in this part.

(2) The procurement is expected to exceed the small purchase

threshold fixed at 41 U.S.C. 403 (11) (currently $25,000) and is to be

awarded without competition or only one bid or offer is received in

response to a solicitation.

(3) The procurement, which is expected to exceed the small purchase

threshold, specifies a ``brand name'' product.

(4) The proposed award over the small purchase threshold is to be

awarded to other than the apparent low bidder under a sealed bid

procurement.

(5) A proposed contract modification changes the scope of a

contract or increases the contract amount by more than the amount of

the small purchase threshold.

Sec. 12.945 Cost and price analysis.

Some form of cost or price analysis shall be made and documented in

the procurement files in connection with every procurement action.

Price analysis may be accomplished in various ways, including the

comparison of price quotations submitted, market prices and similar

indicia, together with discounts. Cost analysis is the review and

evaluation of each element of cost to determine reasonableness,

allocability, and allowability.

Sec. 12.946 Procurement records.

Procurement records and files for purchases in excess of the small

purchase threshold shall include the following at a minimum:

(a) Basis for contractor selection,

(b) justification for lack of competition when competitive bids or

offers are not obtained, and

(c) basis for award cost or price.

Sec. 12.947 Contract administration.

A system for contract administration shall be maintained to ensure

contractor conformance with the terms, conditions, and specifications

of the contract and to ensure adequate and timely follow-up of all

purchases. Recipients shall evaluate contractor performance and

document, as appropriate, whether contractors have met the terms,

conditions, and specifications of the contract.

Sec. 12.948 Contract provisions.

The recipient shall include, in addition to provisions to define a

sound and complete agreement, the provisions below in all contracts and

subcontracts.

(a) Contracts in excess of the small purchase threshold shall

contain contractual provisions or conditions that allow for

administrative, contractual, or legal remedies in instances in which a

contractor violates or breaches the contract terms, and provide for

such remedial actions as may be appropriate.

(b) All contracts in excess of the small purchase threshold shall

contain suitable provisions for termination by the recipient, including

the manner by which termination shall be effected and the basis for

settlement. In addition, such contracts shall describe conditions under

which the contract may be terminated for default as well as conditions

where the contract may be terminated because of circumstances beyond

the control of the contractor.

(c) Except as otherwise required by statute, an award that requires

the contracting (or subcontracting) for construction or facility

improvements shall provide for the recipient to follow its own

requirements relating to bid guarantees, performance bonds, and payment

bonds unless the construction contract or subcontract exceeds $100,000.

For those contracts or subcontracts exceeding $100,000, the Federal

awarding agency may accept the bonding policy and requirements of the

recipient, provided the Federal awarding agency has made a

determination that the Federal Government's interest is adequately

protected. If such a determination has not been made, the minimum

requirements shall be as follows.

(1) A bid guarantee from each bidder equivalent to five percent of

the bid price. The ``bid guarantee'' shall consist of a firm commitment

such as a bid bond, certified check, or other negotiable instrument

accompanying a bid as assurance that the bidder shall, upon acceptance

of his bid, execute such contractual documents as may be required

within the time specified.

(2) A performance bond on the part of the contractor for 100

percent of the contract price. A ``performance bond'' is one executed

in connection with a contract to secure fulfillment of all the

contractor's obligations under such contract.

(3) A payment bond on the part of the contractor for 100 percent of

the contract price. A ``payment bond'' is one executed in connection

with a contract to assure payment as required by statute of all persons

supplying labor and material in the execution of the work provided for

in the contract.

(4) Where bonds are required in the situations described herein,

the bonds shall be obtained from companies holding certificates of

authority as acceptable sureties pursuant to 31 CFR part 223, ``Surety

Companies Doing Business with the United States.''

(d) All negotiated contracts (except those for less than the small

purchase threshold) awarded by recipients shall include a provision to

the effect that the recipient, the Federal awarding agency, the

Comptroller General of the United States, or any of their duly

authorized representatives, shall have access to any books, documents,

papers and records of the contractor that are directly pertinent to a

specific program for the purpose of making audits, examinations,

excerpts and transcriptions.

(e) All contracts, including small purchases, awarded by recipients

and their contractors shall contain the procurement provisions of

Appendix A to this subpart, as applicable.

Reports and Records

Sec. 12.950 Purpose of reports and records.

Sections 12.951 through 12.953 set forth the procedures for

monitoring and reporting on the recipient's financial and program

performance and the necessary standard reporting forms. They also set

forth record retention requirements.

Sec. 12.951 Monitoring and reporting program performance.

(a) Recipients are responsible for managing and monitoring each

project, program, subaward, function, or activity supported by the

award. Recipients shall monitor subawards to ensure that subrecipients

have met the audit requirements in Section 12.926.

(b) The Federal awarding agency shall prescribe the frequency of

submission for performance reports. Except as provided in

Sec. 12.951(f), performance reports will not be required more

frequently than quarterly or less frequently than annually. Annual

reports shall be due 90 calendar days after the end of the grant year;

quarterly or semi-annual reports shall be due 30 days after the end of

the reporting period. The Federal awarding agency may require annual

reports before the anniversary dates of multiple year awards in lieu of

these requirements. Final performance reports are due 90 calendar days

after the expiration or termination of the award.

(c) A final technical or performance report shall be required after

completion of the project only if the awarding agency determines this

to be appropriate.

(d) When required, performance reports shall generally contain, for

each award, brief information on each of the following:

(1) A comparison of actual accomplishments with the goals and

objectives established for the period, the findings of the

investigator, or both. Whenever appropriate and the output of programs

or projects can be readily quantified, such quantitative data should be

related to cost data for computation of unit costs.

(2) Reasons why established goals were not met, if appropriate.

(3) Other pertinent information including, when appropriate,

analysis and explanation of cost overruns or high unit costs.

(e) Recipients shall not be required to submit more than the

original and two copies of performance reports.

(f) Recipients shall immediately notify the Federal awarding agency

of developments that have a significant impact on the award-supported

activities. Also, notification shall be given in the case of problems,

delays, or adverse conditions that materially impair the ability to

meet the objectives of the award. This notification shall include a

statement of the action taken or contemplated, and any assistance

needed to resolve the situation.

(g) Federal awarding agencies may make site visits, as needed.

(h) Federal awarding agencies shall comply with clearance

requirements of 5 CFR part 1320 when requesting performance data from

recipients.

Sec. 12.952 Financial reporting.

(a) The following forms or such other forms as may be approved by

OMB are authorized for obtaining financial information from recipients.

(1) SF-269 or SF-269A, Financial Status Report.

(i) Each Federal awarding agency will require recipients to use

either the SF-269 or SF-269A to report the status of funds for all

nonconstruction projects or programs. A Federal awarding agency may,

however, have the option of not requiring the SF-269 or SF-269A when

the SF-270, Request for Advance or Reimbursement, or SF-272, Report of

Federal Cash Transactions, is determined to provide adequate

information to meet its needs, except that a final SF-269 or SF-269A

shall be required at the completion of the project when the SF-270 is

used only for advances.

(ii) The Federal awarding agency shall prescribe whether the report

shall be on a cash or accrual basis. If the Federal awarding agency

requires accrual information and the recipient's accounting records are

not normally kept on an accrual basis, the recipient shall not be

required to convert its accounting system, but shall develop accrual

information through best estimates based upon an analysis of the

documentation on hand.

(iii) The Federal awarding agency shall determine the frequency of

the Financial Status Report for each project or program, considering

the size and complexity of the particular project or program. However,

the report shall not be required more frequently than quarterly or less

frequently than annually. A final report shall be required at the

completion of the agreement.

(iv) The Federal awarding agency shall require recipients to submit

the SF-269 or SF-269A (an original and no more than two copies) no

later than 30 days after the end of each specified reporting period for

quarterly and semi-annual reports, and 90 calendar days for annual and

final reports. Extensions of reporting due dates may be approved by the

Federal awarding agency upon request by the recipient.

(2) SF-272, Report of Federal Cash Transactions.

(i) When funds are advanced to recipients, the Federal awarding

agency shall require each recipient to submit the SF-272 and, when

necessary, its continuation sheet, SF-272a. The Federal awarding agency

shall use this report to monitor cash advanced to recipients and to

obtain disbursement information for each agreement with the recipients.

(ii) Federal awarding agencies may require forecasts of Federal

cash requirements in the ``Remarks'' section of the report.

(iii) When practical and deemed necessary, Federal awarding

agencies may require recipients to report in the ``Remarks'' section

the amount of cash advances received in excess of three days.

Recipients shall provide short narrative explanations of actions taken

to reduce the excess balances.

(iv) Recipients shall be required to submit not more than the

original and two copies of the SF-272 15 calendar days following the

end of each quarter. The Federal awarding agencies may require a

monthly report from those recipients receiving advances totaling $1

million or more per year.

(v) Federal awarding agencies may waive the requirement for

submission of the SF-272 for any one of the following reasons:

(A) When monthly advances do not exceed $25,000 per recipient,

provided that the advances are monitored through other forms contained

in this section;

(B) If, in the Federal awarding agency's opinion, the recipient's

accounting controls are adequate to minimize excessive Federal

advances; or

(C) When the electronic payment mechanisms provide adequate data.

(b) When the Federal awarding agency needs additional information

or more frequent reports, the following shall be observed.

(1) When additional information is needed to comply with

legislative requirements, Federal awarding agencies shall issue

instructions to require recipients to submit such information under the

``Remarks'' section of the reports.

(2) When a Federal awarding agency determines that a recipient's

accounting system does not meet the standards in Section 12.921,

additional pertinent information to further monitor awards may be upon

written notice to the recipient until such time as the system is

brought up to standard. The Federal awarding agency, in obtaining this

information, shall comply with report clearance requirements of 5 CFR

part 1320.

(3) Federal awarding agencies are encouraged to shade out any line

item or any report if not necessary.

(4) Federal awarding agencies may accept the identical information

from the recipients in machine readable format or computer printouts or

electronic outputs in lieu of prescribed formats.

(5) Federal awarding agencies may provide computer or electronic

outputs to recipients when such expedites or contributes to the

accuracy of reporting.

Sec. 12.953 Retention and access requirements for records.

(a) This section sets forth requirements for record retention and

access to records for awards to recipients. Federal awarding agencies

shall not impose any other record retention or access requirements upon

recipients.

(b) Financial records, supporting documents, statistical records,

and all other records pertinent to an award shall be retained for a

period of three years from the date of submission of the final

expenditure report or, for awards that are renewed quarterly or

annually, from the date of the submission of the quarterly or annual

financial report. The only exceptions are the following:

(1) If any litigation, claim, or audit is started before the

expiration of the 3-year period, the records shall be retained until

all litigation, claims or audit findings involving the records have

been resolved and final action taken.

(2) Records for real property and equipment acquired with Federal

funds shall be retained for 3 years after final disposition.

(3) When records are transferred to or maintained by the Federal

awarding agency, the 3-year retention requirement is not applicable to

the recipient.

(4) Indirect cost rate proposals, cost allocations plans, etc. as

specified in paragraph 12.953(g).

(c) Copies of original records may be substituted for the original

records.

(d) The Federal awarding agency will request transfer of certain

records to its custody from recipients when it determines that the

records possess long term retention value. However, in order to avoid

duplicate recordkeeping, a Federal awarding agency may make

arrangements for recipients to retain any records that are continuously

needed for joint use.

(e) The Federal awarding agency, the Inspector General, Comptroller

General of the United States, or any of their duly authorized

representatives, have the right of timely and unrestricted access to

any books, documents, papers, or other records of recipients that are

pertinent to the awards, in order to make audits, examinations,

excerpts, transcripts and copies of such documents. This right also

includes timely and reasonable access to a recipient's personnel for

the purpose of interview and discussion related to such documents. The

rights of access in this paragraph are not limited to the required

retention period, but shall last as long as records are retained.

(f) Unless required by statute, no Federal awarding agency shall

place restrictions on recipients that limit public access to the

records of recipients that are pertinent to an award, except when the

Federal awarding agency can demonstrate that such records shall be kept

confidential and would have been exempted from disclosure pursuant to

the Freedom of Information Act (5 U.S.C. 552) if the records had

belonged to the Federal awarding agency.

(g) Indirect cost rate proposals, cost allocations plans, etc.

Paragraphs (g)(1) and (g)(2) of this section apply to the following

types of documents, and their supporting records: indirect cost rate

computations or proposals, cost allocation plans, and any similar

accounting computations of the rate at which a particular group of

costs is chargeable (such as computer usage chargeback rates or

composite fringe benefit rates).

(1) If submitted for negotiation. If the recipient submits to the

Federal awarding agency or the subrecipient submits to the recipient

the proposal, plan, or other computation to form the basis for

negotiation of the rate, then the 3-year retention period for its

supporting records starts on the date of the submission.

(2) If not submitted for negotiation. If the recipient is not

required to submit to the Federal awarding agency or the subrecipient

is not required to submit to the recipient the proposal, plan, or other

computation for negotiation purposes, then the 3-year retention period

for the proposal, plan, or other computation and its supporting records

starts at the end of the fiscal year (or other accounting period)

covered by the proposal, plan, or other computation.

Termination and Enforcement

Sec. 12.960 Purpose of termination and enforcement.

Sections 12.961 and 12.962 set forth uniform suspension,

termination and enforcement procedures.

Sec. 12.961 Termination.

(a) Awards may be terminated in whole or in part only if paragraph

(a)(1), (a)(2) or (a)(3) apply.

(1) By the Federal awarding agency, if a recipient materially fails

to comply with the terms and conditions of an award.

(2) By the Federal awarding agency with the consent of the

recipient, in which case the two parties shall agree upon the

termination conditions, including the effective date and, in the case

of partial termination, the portion to be terminated.

(3) By the recipient upon sending to the Federal awarding agency

written notification setting forth the reasons for such termination,

the effective date, and, in the case of partial termination, the

portion to be terminated. However, if the Federal awarding determines

in the case of partial termination that the reduced or modified portion

of the grant will not accomplish the purposes for which the grant was

made, it may terminate the grant in its entirety.

(b) If costs are allowed under an award, the responsibilities of

the recipient referred to in Sec. 12.971(a), including those for

property management as applicable, shall be considered in the

termination of the award, and provision shall be made for continuing

responsibilities of the recipient after termination, as appropriate.

Sec. 12.962 Enforcement.

(a) Remedies for noncompliance. If a recipient materially fails to

comply with the terms and conditions of an award, whether stated in a

Federal statute, regulation, assurance, application, or notice of

award, the Federal awarding agency may in addition to imposing any of

the special conditions outlined in Section 12.914, take one or more of

the following actions, as appropriate in the circumstances.

(1) Temporarily withhold cash payments pending correction of the

deficiency by the recipient or more severe enforcement action by the

Federal awarding agency.

(2) Disallow (that is, deny both use of funds and any applicable

matching credit for) all or part of the cost of the activity or action

not in compliance.

(3) Wholly or partly suspend or terminate the current award.

(4) Withhold further awards for the project or program.

(5) Take other remedies that may be legally available.

(b) Hearings and appeals. In taking an enforcement action, the

awarding agency shall provide the recipient an opportunity for hearing,

appeal, or other administrative proceeding to which the recipient is

entitled under any statute or regulation applicable to the action

involved.

(c) Effects of suspension and termination. Costs of a recipient

resulting from obligations incurred by the recipient during a

suspension or after termination of an award are not allowable unless

the Federal awarding agency expressly authorizes them in the notice of

suspension or termination or subsequently. Other recipient costs during

suspension or after termination which are necessary and not reasonably

avoidable are allowable if paragraph (c) (1) and (2) of this section

apply:

(1) The costs result from obligations which were properly incurred

by the recipient before the effective date of suspension or

termination, are not in anticipation of it, and in the case of a

termination, are noncancellable.

(2) The costs would be allowable if the award were not suspended or

expired normally at the end of the funding period in which the

termination takes effect.

(d) Relationship to debarment and suspension. The enforcement

remedies identified in this section, including suspension and

termination, do not preclude a recipient from being subject to

debarment and suspension under E.O.s 12549 and 12689 and the Federal

awarding agency implementing regulations (see 43 CFR Part 12).

After-the-Award Requirements

Sec. 12.970 Purpose.

Sections 12.971 through 12.973 contain closeout procedures and

other procedures for subsequent disallowances and adjustments.

Sec. 12.971 Closeout procedures.

(a) Recipients shall submit, within 90 calendar days after the date

of completion of the award, all financial, performance, and other

reports as required by the terms and conditions of the award. The

Federal awarding agency may approve extensions when requested by the

recipient.

(b) Unless the Federal awarding agency authorizes an extension, a

recipient shall liquidate all obligations incurred under the award not

later than 90 calendar days after the funding period or the date of

completion as specified in the terms and conditions of the award or in

agency implementing instructions.

(c) The Federal awarding agency shall make prompt payments to a

recipient for allowable reimbursable costs under the award being closed

out.

(d) The recipient shall promptly refund any balance of obligated

cash that the Federal awarding agency has advanced or paid and that the

recipient is not authorized to retain for use in other projects. OMB

Circular A-129 governs unreturned amounts that become delinquent debts.

(e) When authorized by the terms and conditions of the award, the

Federal awarding agency shall make a settlement for any upward or

downward adjustments to the Federal share of costs after closeout

reports are received.

(f) The recipient shall account for any real and personal property

acquired with Federal funds or received from the Federal Government in

accordance with Sections 12.931 through 12.937.

(g) If a final audit has not been performed prior to the closeout

of an award, the Federal awarding agency shall retain the right to

recover an appropriate amount after fully considering the

recommendations on disallowed costs resulting from the final audit.

Sec. 23.972 Subsequent adjustments and continuing responsibilities.

(a) The closeout of an award does not affect any of the following.

(1) The right of the Federal award agency to disallow costs and

recover funds on the basis of a later audit or other review.

(2) The obligation of the recipient to return any funds due as a

result of later refunds, corrections, or other transactions.

(3) Audit requirements in Section 12.926.

(4) Property management requirements in Sections 12.931 through

12.937.

(5) Records retention as required in Section 12.953.

(b) After closeout of an award, a relationship created under an

award may be modified or ended in whole or in part with the consent of

the Federal awarding agency and the recipient, provided the

responsibilities of the recipient referred to in paragraph 12.973(a),

including those for property management as applicable, are considered

and provisions made for continuing responsibilities of the recipient,

as appropriate.

Sec. 12.973 Collection of amounts due.

(a) Any funds paid to a recipient in excess of the amount to which

the recipient is finally determined to be entitled under the terms and

conditions of the award constitute a debt to the Federal Government. If

the recipient does not pay within a reasonable period after the demand

for payment, the Federal awarding agency may reduce the debt by:

(1) making an administrative offset against other requests for

reimbursements;

(2) withholding advance payments otherwise due to the recipient; or

(3) taking other action permitted by statute.

(b) Except as otherwise provided by law, the Federal awarding

agency shall charge interest on an overdue debt in accordance with 4

CFR Chapter II, ``Federal Claims Collection Standards.''

Appendix A to Subpart F--Contract Provisions

All contracts, awarded by a recipient including small purchases,

shall contain the following provisions as applicable:

1. Equal Employment Opportunity--All contracts shall contain a

provision requiring compliance with E.O. 11246, ``Equal Employment

Opportunity,'' as amended by E.O. 11375, ``Amending Executive Order

11246 Relating to Equal Employment Opportunity,'' and as

supplemented by regulations at 41 CFR part 60, ``Office of Federal

Contract Compliance Programs, Equal Employment Opportunity,

Department of Labor.''

2. Copeland ``Anti-Kickback'' Act (18 U.S.C. 874 and 40 U.S.C.

276c)--All contracts and subgrants in excess of $2,000 for

construction or repair awarded by recipients and subrecipients shall

include a provision for compliance with the Copeland ``Anti-

Kickback'' Act (18 U.S.C. 874), as supplemented by Department of

Labor regulations (29 CFR part 3, ``Contractors and Subcontractors

on Public Building or Public Work Financed in Whole or in Part by

Loans or Grants from the United States''). The Act provides that

each contractor or subrecipient shall be prohibited from inducing,

by any means, any person employed in the construction, completion,

or repair of public work, to give up any part of the compensation to

which he is otherwise entitled. The recipient shall report all

suspected or reported violations to the Federal awarding agency.

3. Davis-Bacon Act, as amended (40 U.S.C. 276a to a-7)--When

required by Federal program legislation, all construction contracts

awarded by the recipients and subrecipients of more than $2,000

shall include a provision for compliance with the Davis-Bacon Act

(40 U.S.C. 276a to a-7) and as supplemented by Department of Labor

regulations (29 CFR part 5, ``Labor Standards Provisions Applicable

to Contracts Governing Federally Financed and Assisted

Construction''). Under this Act, contractors shall be required to

pay wages to laborers and mechanics at a rate not less than the

minimum wages specified in a wage determination made by the

Secretary of Labor. In addition, contractors shall be required to

pay wages not less than once a week. The recipient shall place a

copy of the current prevailing wage determination issued by the

Department of Labor in each solicitation and the award of a contract

shall be conditioned upon the acceptance of the wage determination.

The recipient shall report all suspected or reported violations to

the Federal awarding agency.

4. Contract Work Hours and Safety Standards Act (40 U.S.C. 327-

333)--Where applicable, all contracts awarded by recipients in

excess of $2,000 for construction contracts and in excess of $2,500

for other contracts that involve the employment of mechanics or

laborers shall include a provision for compliance with Sections 102

and 107 of the Contract Work Hours and Safety Standards Act (40

U.S.C. 327-333), as supplemented by Department of Labor regulations

(29 CFR part 5). Under Section 102 of the Act, each contractor shall

be required to compute the wages of every mechanic and laborer on

the basis of a standard work week of 40 hours. Work in excess of the

standard work week is permissible provided that the worker is

compensated at a rate of not less than 1\1/2\ times the basic rate

of pay for all hours worked in excess of 40 hours in the work week.

Section 107 of the Act is applicable to construction work and

provides that no laborer or mechanic shall be required to work in

surroundings or under working conditions which are unsanitary,

hazardous or dangerous. These requirements do not apply to the

purchases of supplies or materials or articles ordinarily available

on the open market, or contracts for transportation or transmission

of intelligence.

5. Rights to Inventions Made Under a Contract or Agreement--

Contracts or agreements for the performance of experimental,

developmental, or research work shall provide for the rights of the

Federal Government and the recipient in any resulting invention in

accordance with 37 CFR part 401, ``Rights to Inventions Made by

Nonprofit Organizations and Small Business Firms Under Government

Grants, Contracts and Cooperative Agreements,'' and any implementing

regulations issued by the awarding agency.

6. Clean Air Act (42 U.S.C. 7401 et seq.) and the Federal Water

Pollution Control Act (33 U.S.C. 1251 et seq.), as amended)--

Contracts and subgrants of amounts in excess of $100,000 shall

contain a provision that requires the recipient to agree to comply

with all applicable standards, orders or regulations issued pursuant

to the Clean Air Act (42 U.S.C. 7401 et seq.) and the Federal Water

Pollution Control Act as amended (33 U.S.C. 1251 et seq.).

Violations shall be reported to the Federal awarding agency and the

Regional Office of the Environmental Protection Agency (EPA).

7. Byrd Anti-Lobbying Amendment (31 U.S.C. 1352)--Contractors

who apply or bid for an award of $100,000 or more shall file the

required certification. Each tier certifies to the tier above that

it will not and has not used Federal appropriated funds to pay any

person or organization for influencing or attempting to influence an

officer or employee of any agency, a member of Congress, officer or

employee of Congress, or an employee of a member of Congress in

connection with obtaining any Federal contract, grant or any other

award covered by 31 U.S.C. 1352. Each tier shall also disclose any

lobbying with non-Federal funds that takes place in connection with

obtaining any Federal award. Such disclosures are forwarded from

tier to tier up to the recipient.

8. Debarment and Suspension (E.O.s 12549 and 12689)--No

contracts shall be made to parties listed on the General Services

Administration's ``Lists of Parties Excluded from Federal

Procurement or Nonprocurement Programs'' in accordance with E.O.s

12549 and 12689, ``Debarment and Suspension.'' This list contains

the names of parties debarred, suspended, or otherwise excluded by

agencies, and contractors declared ineligible under statutory or

regulatory authority other than E.O. 12549. Contractors with awards

that exceed the small purchase threshold shall provide the required

certification regarding its exclusion status and that of its

principals.

* * * * *

[FR Doc. 94-20974 Filed 8-25-94; 8:45 am]

BILLING CODE 4310-RF-M