Grants and Cooperative Agreements With State and Local Governments; Notice OFFICE OF MANAGEMENT AND BUDGET

SUMMARY: The Office of Management and Budget is revising Circular A-102

to include references to the requirements in three executive orders and

four statutory provisions issued or enacted since the last issuance of

the Circular in March 1988. The revisions relate to: use of the metric

system of measurement, cash management, infrastructure investment,

purchase of recycled products, and disclosure of the Federal

contribution in procurement of goods and services.

DATES: The revisions to the Circular are effective October 14, 1994.

FOR FURTHER INFORMATION CONTACT: Thomas Cocozza, Financial Standards

and Reporting Branch, Office of Federal Financial Management, Office of

Management and Budget, (202) 395-3993.

SUPPLEMENTARY INFORMATION:

A. Background

On August 5, 1992, the Office of Management and Budget (OMB)

published a notice in the Federal Register (57 FR 34599) requesting

comments on proposed revisions to OMB Circular A-102, ``Grants and

Cooperative Agreements with State and Local Governments.'' The proposed

revisions referenced three statutory provisions and an executive order.

These relate to: (a) A requirement that encourages recipients of

federally-funded grants and cooperative agreements to use the metric

system of measurement in their assistance programs; (b) a reference to

the Department of the Treasury's regulations to implement the Cash

Management Improvement Act of 1990; (c) a requirement that State and

local governments comply with section 6002 of the Resource Conservation

and Recovery Act (RCRA), as amended; and (d) a requirement that Federal

agencies comply with Executive Order 12803, ``Infrastructure

Privatization.''

Interested parties were invited to submit comments on the revisions

by October 5, 1992. Federal agencies submitted two comments.

B. Comments and Responses

Comment: One commenter said, in accordance with Section 6002(a) of

RCRA, procurement items under $10,000 are not covered. The commenter

recommended that the $10,000 ceiling be noted in the Circular. The same

commenter said that RCRA provides that ``each procuring agency shall

procure items * * * consistent with maintaining a satisfactory level of

competition.''

Response: The substance of these provisions in Section 6002 are

included in the Environmental Protection Agency's (EPA's) guidelines

found at 40 CFR 247-253. Since EPA's guidelines are referenced in

paragraph 2.h. of the Circular, it is not necessary to make a specific

reference in the Circular to the particular provisions within Section

6002.

Comment: One commenter recommended that OMB add language to the

Circular which states that the Metric Conversion Act requires each

Federal agency to establish a date(s) when the metric system of

measurement will be used in that agency's procurement, grants and other

business-related activities.

Response: OMB has added language which cites to the requirement for

each agency to establish dates showing when the metric system of

measurement will be used. This paragraph was also expanded to explain

procedures for obtaining exceptions from metric usage.

C. Additional Changes

In addition to revising the Circular to add references to the

statutory provisions and executive orders described in the August 1992

Notice, OMB is also revising the Circular to add references to another

statutory provision and to two other executive orders. OMB is not

requesting additional comment on these changes before finalization

because they merely reference new requirements without elaboration.

In Section 623 of the Treasury, Postal Service, and General

Government Appropriations Act for fiscal year 1993, Congress provided

that grantees must specify, in any announcement of the awarding of

contracts with an aggregate value of $500,000 or more, the amount of

Federal funds that will be used to finance the acquisitions. In the

following year, Congress reenacted this provision (see Section 621 of

the fiscal year 1994 Appropriations Act). Congress is likely to reenact

this provision for fiscal year 1995 and for subsequent fiscal years.

Accordingly, a paragraph has been added to this Circular that

references this requirement.

In January 1994, the President issued Executive Order No. 12893

(``Principles for Federal Infrastructure Investment''). A reference to

this Executive Order, and to OMB's guidance for implementing it, has

been included in the paragraph that references Executive Order No.

12803 (``Infrastructure Privatization'').

Finally, in the proposed paragraph that would reference the Metric

Conversion Act of 1975, a reference should have also been made to

Executive Order No. 12770 (``Metric Usage in Federal Government

Programs''). A reference to the Executive Order has been included in

this paragraph.

Locations of the added (or amended) paragraphs and the citations

for the four statutory provisions and three executive orders are as

follows:

(1) Paragraph 1.j.--Metric Conversion Act of 1975, as amended (codified

as amended at 15 U.S.C. 205a-205k), and Executive Order No. 12770

(``Metric Usage in Federal Government Programs''), 56 FR 35,801 (1991).

(2) Paragraph 2.a.--Cash Management Improvement Act of 1990, as amended

(codified as amended in scattered sections of Title 31 U.S. Code).

(3) Paragraph 2.g.--Executive Order No. 12803 (``Infrastructure

Privatization''), 57 FR 19,036 (1992), and Executive Order No. 12893

(``Principles for Federal Infrastructure Investment''), 59 FR 4233

(1994).

(4) Paragraph 2.h.--Resource Conservation and Recovery Act of 1976,

section 6002, as amended (codified as amended at 42 U.S.C. 6962).

(5) Paragraph 2.i.--Treasury, Postal Service, and General Government

Appropriations Act, 1994, Public Law 103-123, section 621, 107 Stat.

1226, 1265 (1993).

No other changes have been made to the Circular, which is being

reissued in its entirety, as revised.

Darrell A. Johnson,

Deputy Assistant Director for Administration.

To the Heads of Executive Departments and Establishments

SUBJECT: Grants and Cooperative Agreements with State and Local

Governments

1. Purpose. This Circular establishes consistency and uniformity

among Federal agencies in the management of grants and cooperative

agreements with State, local, and federally recognized Indian tribal

governments. This revision supersedes Office of Management and

Budget (OMB) Circular No. A-102, dated March 3, 1988.

2. Authority. This Circular is issued under the authority of the

Budget and Accounting Act of 1921, as amended; the Budget and

Accounting Procedures Act of 1950, as amended; Reorganization Plan

No. 2 of 1970; Executive Order 11541 and the Chief Financial

Officers Act, 31 U.S.C. 503. Also included in the Circular are

standards to ensure consistent implementation of sections 202, 203,

and 204 of the Intergovernmental Cooperation Act of 1968, the Office

of Federal Procurement Policy Act Amendments of 1983, and sections

6301-08, title 31, United States Code.

3. Background. On March 12, 1987, the President directed all

affected agencies to issue a grants management common rule to adopt

government-wide terms and conditions for grants to State and local

governments, and they did so. In 1988, OMB revised the Circular to

provide guidance to Federal agencies on other matters not covered in

the common rule.

4. Required Action. Consistent with their legal obligations, all

Federal agencies administering programs that involve grants and

cooperative agreements with State, local and Indian tribal

governments (grantees) shall follow the policies in this Circular.

If the enabling legislation for a specific grant program prescribes

policies or requirements that differ from those in this Circular,

the provisions of the enabling legislation shall govern.

5. OMB Responsibilities. OMB may grant deviations from the

requirements of this Circular when permissible under existing law.

However, in the interest of uniformity and consistency, deviations

will be permitted only in exceptional circumstances.

6. Information Contact. Further information concerning this

Circular may be obtained from: Office of Federal Financial

Management, Office of Management and Budget, Room 6025, New

Executive Office Building, Washington, DC 20503, (202) 395-3993.

7. Termination Review Date. The Circular will have a policy

review three years from the date of issuance.

8. Effective Date. The Circular is effective on publication.

Alice M. Rivlin,

Acting Director.

Attachment:

Grants and Cooperative Agreements With State and Local Governments

1. Pre-Award Policies

a. Use of grants and cooperative agreements. Sections 6301-08,

title 31, United States Code govern the use of grants, contracts and

cooperative agreements. 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. Contracts shall be used when the principal purpose

is acquisition of property or services for the direct benefit or use

of the Federal Government. 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.''

b. Advance Public Notice and Priority Setting.--(1) Federal

agencies shall provide the public with an advance notice in the

Federal Register, or by other appropriate means, of intended funding

priorities for discretionary assistance programs, unless funding

priorities are established by Federal statute. These priorities

shall be approved by a policy level official.

(2) Whenever time permits, agencies shall provide the public an

opportunity to comment on intended funding priorities.

(3) All discretionary grant awards in excess of $25,000 shall be

reviewed for consistency with agency priorities by a policy level

official.

c. Standard Forms for Applying for Grants and Cooperative

Agreements.--(1) Agencies shall use the following standard

application forms unless they obtain Office of Management and Budget

(OMB) approval under the Paperwork Reduction Act of 1980 (44 U.S.C.

35) and the 5 CFR Part 1320, ``Controlling Paperwork Burdens on the

Public'':

SF-424 Facesheet

SF-424a Budget Information (Non-Construction)

SF-424b Standard Assurances (Non-Construction)

SF-424c Budget Information (Construction)

SF-424d Standard Assurances (Construction)

When different or additional information is needed to comply

with legislative requirements or to meet specific program needs,

agencies shall also obtain prior OMB approval.

(2) A preapplication shall be used for all construction, land

acquisition and land development projects or programs when the need

for Federal funding exceeds $100,000, unless the Federal agency

determines that a preapplication is not needed. A preapplication is

used to:

(a) Establish communication between the agency and the

applicant,

(b) Determine the applicant's eligibility,

(c) Determine how well the project can compete with similar

projects from others, and

(d) Discourage any proposals that have little or no chance for

Federal funding before applicants incur significant costs in

preparing detailed applications.

(3) Agencies shall use the Budget Information (Construction) and

Standard Assurances (Construction) when the major purpose of the

project or program is construction, land acquisition or land

development.

(4) Agencies may specify how and whether budgets shall be shown

by functions or activities within the program or project.

(5) Agencies should generally include a request for a program

narrative statement which is based on the following instructions:

(a) Objectives and need for assistance. Pinpoint any relevant

physical, economic, social, financial, institutional, or other

problems requiring a solution. Demonstrate the need for the

assistance and state the principal and subordinate objectives of the

project. Supporting documentation or other testimonies from

concerned interests other than the applicant may be used. Any

relevant data based on planning studies should be included or

footnoted.

(b) Results or Benefits Expected. Identify costs and benefits to

be derived. For example, show how the facility will be used. For

land acquisition or development projects, explain how the project

will benefit the public.

(c) Approach. Outline a plan of action pertaining to the scope

and detail how the proposed work will be accomplished for each

assistance program. Cite factors which might accelerate or

decelerate the work and reasons for taking this approach as opposed

to others. Describe any unusual features of the project, such as

design or technological innovations, reductions in cost or time, or

extraordinary social and community involvements. Provide for each

assistance program quantitative projections of the accomplishments

to be achieved, if possible. When accomplishments cannot be

quantified, list the activities in chronological order to show the

schedule of accomplishments and target expected completion dates.

Identify the kinds of data to be collected and maintained, and

discuss the criteria to be used to evaluate the results and success

of the project. Explain the methodology that will be used to

determine if the needs identified and discussed are being met and if

the results and benefits identified are being achieved. List each

organization, cooperator, consultant, or other key individuals who

will work on the project along with a short description of the

nature of their effort or contribution.

(d) Geographic location. Give a precise location of the project

and area to be served by the proposed project. Maps or other graphic

aids may be attached.

(e) If applicable, provide the following information: for

research and demonstration assistance requests, present a

biographical sketch of the program director with the following

information: name, address, telephone number, background, and other

qualifying experience for the project. Also, list the name, training

and background for other key personnel engaged in the project.

Describe the relationship between this project and other work

planned, anticipated, or underway under Federal assistance. Explain

the reason for all requests for supplemental assistance and justify

the need for additional funding. Discuss accomplishments to date and

list in chronological order a schedule of accomplishments, progress

or milestones anticipated with the new funding request. If there

have been significant changes in the project objectives, location,

approach or time delays, explain and justify. For other requests for

changes, or amendments, explain the reason for the change(s). If the

scope or objectives have changed or an extension of time is

necessary, explain the circumstances and justify. If the total

budget has been exceeded or if the individual budget items have

changes more than the prescribed limits, explain and justify the

change and its effect on the project.

(6) Additional assurances shall not be added to those contained

on the standard forms, unless specifically required by statute.

d. Debarment and Suspension. Federal agencies shall not award

assistance to applicants that are debarred or suspended, or

otherwise excluded from or ineligible for participation in Federal

assistance programs under Executive Order 12549. Agencies shall

establish procedures for the effective use of the List of Parties

Excluded from Federal Procurement or Nonprocurement programs to

assure that they do not award assistance to listed parties in

violation of the Executive Order. Agencies shall also establish

procedures to provide for effective use and/or dissemination of the

list to assure that their grantees and subgrantees (including

contractors) at any tier do not make awards in violation of the

nonprocurement debarment and suspension common rule.

e. Awards and Adjustments.--(1) Ordinarily awards shall be made

at least ten days prior to the beginning of the grant period.

(2) Agencies shall notify grantees immediately of any

anticipated adjustments in the amount of an award. This notice shall

be provided as early as possible in the funding period. Reductions

in funding shall apply only to periods after notice is provided.

Whenever an agency adjusts the amount of an award, it shall also

make an appropriate adjustment to the amount of any required

matching or cost sharing.

f. Carryover Balances. Agencies shall be prepared to identify to

OMB the amounts of carryover balances (e.g., the amounts of

estimated grantee unobligated balances available for carryover into

subsequent grant periods). This presentation shall detail the fiscal

and programmatic (level of effort) impact in the following period.

g. Special Conditions or Restrictions. Agencies may impose

special conditions or restrictions on awards to ``high risk''

applicants/grantees in accordance with section ____.12 of the grants

management common rule. Agencies shall document use of the

``Exception'' provisions of section ____.6 and ``High-risk''

provisions of section ____.12 of the grants management common rule.

h. Waiver of Single State Agency Requirements.--(1) Requests to

agencies from the Governors, or other duly constituted State

authorities, for waiver of ``single'' State agency requirements in

accordance with section 31 U.S.C. 6504, ``Use of existing State or

multi-member agency to administer grant programs,'' shall be given

expeditious handling and, whenever possible, an affirmative

response.

(2) When it is necessary to refuse a request for waiver of

``single'' State agency requirements under section 204 of the

Intergovernmental Corporation Act, the Federal grantor agency shall

advise OMB prior to informing the State that the request cannot be

granted. The agency shall indicate to OMB the reasons for the denial

of the request.

(3) Legislative proposals embracing grant-in-aid programs shall

avoid inclusion of proposals for ``single'' State agencies in the

absence of compelling reasons to do otherwise. In addition, existing

requirements in present grant-in-aid programs shall be reviewed and

legislative proposals developed for the removal of these restrictive

provisions.

i. Patent Rights. Agencies shall use the standard patent rights

clause specified in ``Rights to Inventions made by Non-profit

Organizations and Small Business Firms'' (37 CFR Part 401), when

providing support for research and development.

j. Metric System of Measurement. The Metric Conversion Act of

1975, as amended, 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(s), in consultation with the

Secretary of Commerce, when the metric system of measurement will be

used in the agency's procurement, 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.

Heads of departments and agencies shall establish a process for a

policy level and program level review of proposed exceptions to

metric usage in grants programs. Executive Order 12770 (``Metric

Usage in Federal Government Programs'') elaborates on implementation

of the Act.

2. Post-Award Policies

a. Cash Management. Agency methods and procedures for

transferring funds shall minimize the time elapsing between the

transfer to recipients of grants and cooperative agreements and the

recipient's need for the funds.

(1) Such transfers shall be made consistent with program

purposes, applicable law and Treasury regulations contained in 31

CFR Part 205, Federal Funds Transfer Procedures.

(2) Where letters-of-credit are used to provide funds, they

shall be in the same amount as the award.

b. Grantee Financial Management Systems. In assessing the

adequacy of an applicant's financial management system, the awarding

agency shall rely on readily available sources of information, such

as audit reports, to the maximum extent possible. If additional

information is necessary to assure prudent management of agency

funds, it shall be obtained from the applicant or from an on-site

review.

c. Financial Status Reports.--(1) Federal agencies shall require

grantees to use the SF-269, Financial Status Report-Long Form, or

SF-269a, Financial Status Report-Short Form, to report the status of

funds for all non-construction projects or programs. Federal

agencies need not require the Financial Status Report when the SF-

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

Federal Cash Transactions, is determined to provide adequate

information.

(2) Federal agencies shall not require grantees to report on the

status of funds by object class category of expenditure (e.g.,

personnel, travel, equipment).

(3) If reporting on the status of funds by programs, functions

or activities within the project or program is required by statute

or regulation, Federal agencies shall instruct grantees to use block

12, Remarks, on the SF-269, or a supplementary form approved by the

OMB under the Paperwork Reduction Act of 1980.

(4) Federal agencies shall prescribe whether the reporting shall

be on a cash or an accrual basis. If the Federal agency requires

accrual information and the grantees's accounting records are not

normally kept on an accrual basis, the grantee shall not be required

to convert its accounting system but shall develop such accrual

information through an analysis of the documentation on hand.

d. Contracting With Small and Minority Firms, Women's Business

Enterprises and Labor Surplus Area Firms. It is national policy to

award a fair share of contracts to small and minority business

firms. Grantees shall take similar appropriate affirmative action to

support of women's enterprises and are encouraged to procure goods

and services from labor surplus areas.

e. Program Income.--(1) Agencies shall encourage grantees to

generate program income to help defray program costs. However,

Federal agencies shall not permit grantees to use grant-acquired

assets to compete unfairly with the private sector.

(2) Federal agencies shall instruct grantees to deduct program

income from total program costs as specified in the grants

management common rule at paragraph ----.25 (g)(1), unless agency

regulations or the terms of the grant award state otherwise.

Authorization for recipients to follow the other alternatives in

paragraph ____.25 (g) (2) and (3) shall be granted sparingly.

f. Site Visits and Technical Assistance. Agencies shall conduct

site visits only as warranted by program or project needs. Technical

assistance site visits shall be provided only (1) In response to

requests from grantees, (2) based on demonstrated program need, or

(3) when recipients are designated ``high risk'' under section

____.12 of the grants management common rule.

g. Infrastructure Investment. Agencies shall encourage grantees

to consider the provisions of the common rule at Section ____. 31

and Executive Order 12803 (``Infrastructure Privatization''). This

includes reviewing and modifying procedures affecting the management

and disposition of federally-financed infrastructure owned by State

and local governments, with their requests to sell or lease

infrastructure assets, consistent with the criteria in Section 4 of

the Order. Related guidance contained in Executive Order 12893

(``Principles for Federal Infrastructure Investments'') requiring

economic analysis and the development of investment options,

including public-private partnership, shall also be applied. On

March 7, 1994, OMB issued guidance on Executive Order 12893 in OMB

Bulletin No. 94-16.

h. Resource Conservation and Recovery Act. Agencies shall

implement the Resource Conservation and Recovery Act of 1976 (RCRA)

(42 U.S.C. 6962). Any State agency or agency of a political

subdivision of a State which is using appropriated Federal funds

must comply with Section 6002 of RCRA. 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).

Current guidelines are contained in 40 CFR Parts 247-253. State and

local recipients of grants, loans, cooperative agreements or other

instruments funded by appropriated Federal funds shall give

preference in procurement programs to the purchase of recycled

products pursuant to the EPA guidelines.

i. Procurement of Goods and Services. Agencies should be aware

of and comply with the requirement enacted in Section 623 of the

Treasury, Postal Service and General Government Appropriations Act,

1993, and reenacted in Section 621 of the fiscal year 1994

Appropriations Act. This Section requires grantees to specify in any

announcement of the awarding of contracts with an aggregate value of

$500,000 or more, the amount of Federal funds that will be used to

finance the acquisitions.

3. After-the-grant Policies

a. Closeout. Federal agencies shall notify grantees in writing

before the end of the grant period of final reports that shall be

due, the dates by which they must be received, and where they must

be submitted. Copies of any required forms and instructions for

their completion shall be included with this notification. The

Federal actions that must precede closeout are:

(1) Receipt of all required reports,

(2) Disposition or recovery of federally-owned assets (as

distinct from property acquired under the grant), and

(3) Adjustment of the award amount and the amount of Federal

cash paid the recipient.

b. Annual Reconciliation of Continuing Assistance Awards.

Federal agencies shall reconcile continuing awards at least annually

and evaluate program performance and financial reports.

Items to be reviewed include:

(1) A comparison of the recipient's work plan to its progress

reports and project outputs,

(2) the Financial Status Report (SF-269),

(3) Request(s) for payment,

(4) Compliance with any matching, level of effort or maintenance

of effort requirement, and

(5) A review of federally-owned property (as distinct from

property acquired under the grant).

[FR Doc. 94-25509 Filed 10-13-94; 8:45 am]

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