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

DEPARTMENT OF JUSTICE

Office of Justice Programs

28 CFR Part 70

[OJP No. 1004; AG Order No. 1980-95]

RIN 1121-AA18

Uniform Administrative Requirements for Grants and Agreements

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

Organizations

January 23, 1995.

AGENCY: Department of Justice.

ACTION: Final rule.

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

SUMMARY: On November 29, 1993, the Office of Management and Budget

(OMB) published a revision of OMB Circular A-110. The Circular is

applicable to awards made by Federal agencies and subawards made by

States to nongovernmental entities. This rule implements the OMB

Circular A-110.

FOR FURTHER INFORMATION CONTACT:Cynthia J. Schwimer, Director,

Financial Management Division, Office of the Comptroller, Office of

Justice Programs at 202-307-3186.

EFFECTIVE DATE: July 26, 1995.

SUPPLEMENTARY INFORMATION: This final rule amends 28 CFR by setting

forth a new part 70 to enact the changes established by revised OMB

Circular A-110, ``Uniform Administrative Requirements for Grants and

Agreements with Institutions of Higher Education, Hospitals and Other

Non-Profit Institutions,'' published by OMB on November 29, 1993 (58 FR

62992).

In November 1990, OMB established an interagency task force to

revise Circular A-110. The task force developed a proposed revision of

the Circular, which OMB published with a request for comments on August

27, 1992 (57 FR 39018). After considering the over 200 comments from a

wide variety of Federal and non-Federal respondents, OMB published the

final revised Circular in the Federal Register on November 29, 1993 (58

FR 62992).

OMB Circular A-110 sets forth government-wide standards governing

Federal agency administration of grants and other agreements with

institutions of higher education, hospitals and other non-profit

organizations. Federal agencies must apply the provisions of the

Circular in making awards to the covered entities; all primary

recipients (including governments) of Federal awards must also apply

the Circular's provisions to any subawards they make to such entities.

Those provisions that affect Federal agencies were effective on

December 29, 1993 (58 FR 62992-93). With respect to the Circular's

application to recipients of Federal agency awards, OMB's notice

directed each agency to promulgate its own rules adopting the

provisions of the Circular (58 FR 62992-93).

Agency specific rules must follow the provisions of the Circular

unless OMB has granted the agency an exception for classes of

recipients of awards from a particular requirement of the Circular (58

FR 62992, 62995). The terms of the Circular, however, permit Federal

awarding agencies to make exceptions on an award-by-award basis without

prior OMB approval and to apply less restrictive requirements in the

case of small awards. Where a conflict exists between a provision of

the Circular and

[[Page 38242]]

a statute, the statute governs (58 FR 62992-93, 62995).

With respect to our implementation of the Circular, in general, we

have faithfully followed its provisions. However, in several instances

we have either elaborated on a provision or modified it to make it

pertain more clearly to the Department of Justice's (the Department)

environment. Directives made strictly to the Federal agencies and not

to grantees have been deleted.

A notice of proposed rulemaking is not necessary for this

regulation because OMB obtained public comments in the development of

the Circular, and the Circular was written in a regulatory format.

Furthermore, OMB requires that Federal agencies implement the Circular

within six months of its publication.

Impact Analysis

1. Executive Order 12866

This regulation has been drafted and reviewed in accordance with

Executive Order 12866, 1(b), Principles of Regulation. This rule is not

a significant regulatory action under Executive Order 12866, 3(f),

Regulatory Planning and Review, and accordingly, this rule has not been

reviewed by OMB.

2. Regulatory Flexibility Act

This rule has been reviewed in accordance with the requirements of

the Regulatory Flexibility Act of 1980 (5 U.S.C. 601 et seq.) The

Attorney General has determined that compliance with the rule would not

have a significant economic impact on a substantial number of small

entities and, therefore, a Regulatory Flexibility Analysis is not

required.

3. Paperwork Reduction Act

The information collection requirements contained in this rule are

cleared by OMB as Standard Forms.

Catalog of Federal Domestic Assistance

This rule affects all of the grant programs administered by the

Department.

List of Subjects in 28 CFR Part 70

Accounting; Administrative practice and procedures; Grant

programs--health; Grant programs--social programs; Grants

administration; and Reporting and recordkeeping requirements.

For the reasons set out in the preamble, Title 28, Chapter I of the

Code of Federal Regulations is amended by adding the new part 70 as set

forth below.

PART 70--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND

AGREEMENTS (INCLUDING SUBAWARDS) WITH INSTITUTIONS OF HIGHER

EDUCATION, HOSPITALS AND OTHER NON-PROFIT ORGANIZATIONS

Subpart A--General

Sec.

70.1 Purpose and applicability.

70.2 Definitions.

70.3 Effect on other issuances.

70.4 Deviations.

70.5 Subawards.

Subpart B--Pre-Award Requirements

70.10 Purpose.

70.11 Pre-award policies.

70.12 Forms for applying for Federal assistance.

70.13 Debarment and suspension.

70.14 Special award conditions.

70.15 Metric system of measurement.

70.16 Resource Conservation and Recovery Act (RCRA) (Pub. L. 94-580

Codified at 42 U.S.C. 6962).

70.17 Certifications and representations.

Subpart C--Post-Award Requirements

Financial and Program Management

70.20 Purpose of financial and program management.

70.21 Standards for financial management systems.

70.22 Payment.

70.23 Cost sharing or matching.

70.24 Program income.

70.25 Revision of budget and program plans.

70.26 Non-Federal audits.

70.27 Allowable costs.

70.28 Period of availability of funds.

Property Standards

70.30 Purpose of property standards.

70.31 Insurance coverage.

70.32 Real property.

70.33 Federally-owned and exempt property.

70.34 Equipment.

70.35 Supplies and other expendable property.

70.36 Intangible property.

70.37 Property trust relationship.

Procurement Standards

70.40 Purpose of procurement standards.

70.41 Recipient responsibilities.

70.42 Codes of conduct.

70.43 Competition.

70.44 Procurement procedures.

70.45 Cost and price analysis.

70.46 Procurement records.

70.47 Contract administration.

70.48 Contract provisions.

Reports and Records

70.50 Purpose of reports and records.

70.51 Monitoring and reporting program performance.

70.52 Financial reporting.

70.53 Retention and access requirements for records.

Termination and Enforcement

70.60 Purpose of termination and enforcement.

70.61 Termination.

70.62 Enforcement.

Subpart D--After-the-Award Requirements

70.70 Purpose.

70.71 Closeout procedures.

70.72 Subsequent adjustments and continuing responsibilities.

70.73 Collection of amounts due.

Appendix A to Part 70--Contract Provisions

Authority: 5 U.S.C. 301; the Omnibus Crime Control and Safe

Streets Act of 1968, 42 U.S.C. 3711, et seq. (as amended); Juvenile

Justice and Delinquency Prevention Act of 1974, 42 U.S.C. 5601, et

seq. (as amended); Victims of Crime Act of 1984, 42 U.S.C. 10601, et

seq. (as amended); 18 U.S.C. 4042, 4351-4353.

Subpart A--General

Sec. 70.1 Purpose and applicability.

This part establishes uniform administrative requirements for the

Department grants and agreements awarded to institutions of higher

education, hospitals, and other non-profit organizations. It also

establishes rules governing how State, local and Indian tribal

governments shall administer subawards to nongovernmental entities.

Sec. 70.2 Definitions.

(a) 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.

(b) 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.

(c) 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

[[Page 38243]]

be included or excluded from the unit acquisition cost in accordance

with the recipient's regular accounting practices.

(d) 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.

(e) 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 Department to an eligible recipient. The term does not include:

Technical assistance, which 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.

(f) Cash contributions means the recipient's cash outlay, including

the outlay of money contributed to the recipient by third parties.

(g) Closeout means the process by which the Department determines

that all applicable administrative actions and all required work of the

award have been completed by the recipient and the Department.

(h) Contract means a procurement contract under an award or

subaward, and a procurement subcontract under a recipient's or

subrecipient's contract.

(i) Cost sharing or matching means the portion of project or

program costs not borne by the Federal Government.

(j) The Department refers to the United States Department of

Justice awarding agencies, which include the Office of Justice Programs

(OJP), Community Relation Service (CRS), United States Marshals Service

(USMS), National Institute of Corrections (NIC), Office of Special

Counsel (OSC), and the Civil Rights Division (CRD).

(k) 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 the Department sponsorship ends.

(l) Disallowed costs means those charges to an award that the

Department determines to be unallowable, in accordance with the

applicable Federal cost principles or other terms and conditions

contained in the award.

(m) 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.

(n) Excess property means property under the control of the

Department that, as determined by the head thereof, is no longer

required for its needs or the discharge of its responsibilities.

(o) Exempt property means tangible personal property acquired in

whole or in part with Federal funds, where the Department has statutory

authority to vest title in the recipient without further obligation to

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.

(p) 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.

(q) 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.

(r) Funding period means the period of time when Federal funding is

available for obligation by the recipient.

(s) Independent Research and Development costs means research and

development conducted by an organization which is not sponsored by

Federal or non-Federal awards, contracts, or other agreements.

(t) 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.

(u) 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.

(v) 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.

(w) 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.

(x) Prior approval means written approval by an authorized official

evidencing prior consent.

(y) 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 Sec. 70.24 (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, interest on loans made with award funds, and income from

asset forfeitures accounted for from the time of seizure. Interest

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

otherwise provided in the Department 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.

(z) Project costs means all allowable costs, as set forth in the

applicable Federal costs 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.

(aa) Project period means the period established in the award

document during which Federal sponsorship begins and ends.

(bb) Property means, unless otherwise stated, real property,

equipment, intangible property and debt instruments.

(cc) Real property means land, including land improvements,

structures and appurtenances thereto,

[[Page 38244]]

but excludes movable machinery and equipment.

(dd) Recipient means an organization receiving financial assistance

directly from the Department to carry out a project or program. The

term includes public and private institutions of higher education,

public and private hospitals, and other 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 commercial organizations, foreign or

international organizations (such as agencies of the United Nations)

which are recipients, subrecipients, or contractors or subcontractors

of recipients or subrecipients at the discretion of the Department. 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

designed as Federally-funded research and development centers.

(ee) 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. Research is

defined as a systematic study directed toward fuller scientific

knowledge or understanding of the subject studied. ``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.

(ff) 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).

(gg) 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 which is excluded from the definition of

``award'' in Sec. 70.2(e).

(hh) 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

Department.

(ii) 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.''

(jj) Suspension means an action by the Department that temporarily

withdraws the Department sponsorship under an award, pending corrective

action by the recipient or pending a decision to terminate the award by

the Department. Suspension of an award is a separate action from

suspension under the Department regulations implementing Exec. Order

No. 12549 and 12689, ``Debarment and Suspension.''

(kk) Termination means the cancellation of the Department

sponsorship, in whole or in part, under an agreement at any time prior

to the date of completion.

(ll) 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.

(mm) 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.

(nn) Unobligated balance means the portion of the funds authorized

by the Department that has not been obligated by the recipient and is

determined by deducting the cumulative obligations from the cumulative

funds authorized.

(oo) Unrecovered indirect cost means the difference between the

amount awarded and the amount which could have been awarded under the

recipient's approved negotiated indirect cost rate.

(pp) Working capital advance means a procedure where by funds are

advanced to the recipient to cover its estimated disbursement needs for

a given initial period.

Sec. 70.3 Effect on other issuances.

For awards subject to this part, all administrative requirements of

codified program regulations, program manuals, handbooks and other

nonregulatory materials which are inconsistent with the requirements of

this part shall be superseded, except to the extent they are required

by statute, or authorized in accordance with the deviations provision

in Sec. 70.4.

Sec. 70.4 Deviations.

OMB, after consultation with the Department's Division of Financial

Management and Grants Administration may grant exceptions for classes

of grants or recipients subject to the requirements of this part when

exceptions are not prohibited by statute. However, in the interest of

maximum uniformity, exceptions from the requirements of this part shall

be permitted only in unusual circumstances. The Department shall apply

more restrictive requirements to a class of recipients when approved by

OMB. The Department may apply less restrictive requirements when

awarding small awards, except for those requirements which are

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

Department.

Sec. 70.5 Subawards.

Unless sections of this part specifically exclude subrecipients

from coverage, all of the Department's recipients, including State and

local governments, shall apply the provisions of this part 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,'' published at 28 CFR part

66 (3/11/88).

Subpart B--Pre-Award Requirements

Sec. 70.10 Purpose.

Sections 70.11 through 70.17 prescribe forms and instructions and

other pre-award matters to be used in applying for the Department's

awards.

[[Page 38245]]

Sec. 70.11 Pre-award policies.

(a) Use of grants and cooperative agreements, and contracts. In

each instance, the Department 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. The Department shall notify

the public of its intended funding priorities for discretionary grant

programs, unless funding priorities are established by Federal statute.

Sec. 70.12 Forms for applying for Federal assistance.

(a) The Department 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

Department as a supplement to the Standard Form 424 (SF-424) series.

(b) Applicants shall use the SF-424 series and instructions

prescribed by the Department.

(c) For the Department's programs covered by Exec. Order No. 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

``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.

Sec. 70.13 Debarment and suspension.

Recipients shall comply with the nonprocurement debarment and

suspension common rule implementing Exec. Order No. 12549 and 12689,

``Debarment and Suspension.'' 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 programs or activities.

Sec. 70.14 Special award conditions.

If an applicant or recipient: Has a history of poor performance, Is

not financially stable, Has a management system that does not meet the

standards prescribed in this part, Has not conformed to the terms and

conditions of a previous award, or Is not otherwise responsible, the

Department will impose additional requirements as needed, provided that

such applicant or recipient is notified in writing as to: The nature of

the additional requirements, the reason why the additional requirements

are being imposed, the nature of the corrective action needed, the time

allowed for completing the corrective actions, and the method for

requesting reconsideration of the additional requirements imposed. Any

special conditions will be promptly removed once the conditions that

prompted them have been corrected.

Sec. 70.15 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. The Department will follow the provisions of Exec.

Order No. 12770, ``Metric Usage in Federal Government Programs.''

Sec. 70.16 Resource Conservation and Recovery Act (RCRA) (Pub. L. No.

94-580 codified at 42 U.S.C. 6962).

Under the Act, any State agency or agency of a political

subdivision of a State which 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,

hospitals, and non-profit organizations 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. 70.17 Certifications and representations.

Unless prohibited by statute or codified regulation, the Department

will 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 must be signed by

responsible officials with the authority to ensure recipients'

compliance with the pertinent requirements.

Subpart C--Post-Award Requirements

Financial and Program Management

Sec. 70.20 Purpose of financial and program management.

Sections 70.21 through 70.28 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. 70.21 Standards for financial management systems.

(a) Recipients must relate financial data to performance data and

development unit cost information whenever practical.

(b) Recipients' financial management systems must 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 requirements set forth in Sec. 70.52. When the

Department requires reporting on an accrual basis from a recipient that

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

will not be required to establish an accrual accounting system. These

recipients may develop such accrual data for its 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 must contain

information pertaining to Federal awards, authorizations, obligations,

unobligated balances, assets, outlays, income and interest.

[[Page 38246]]

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

property and other assets. Recipients must 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 must 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) The Department, 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 Department will require adequate fidelity bond coverage

when the recipient lacks sufficient coverage to protect the Federal

Government's interest.

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

bonds must 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. 70.22 Payment.

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

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

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

recipients. Payment methods of State agencies or instrumentalities must

be consistent with Treasury-State CMIA agreements or default procedures

codified at 31 CFR part 205.

(b) Recipients may be paid in advance, provided they maintain or

demonstrate the willingness to maintain written procedures that

minimize the time elapsing between the transfer of funds and

disbursement by the recipient, and financial management systems that

meet the standards for fund control and accountability as established

in Sec. 70.21. Cash advances to a recipient organization will 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 must 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 Department 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 may 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 must be submitted

on SF-270, ``Request for Advance or Reimbursement.''

(e) Reimbursement is the method that will be used when the

requirements in paragraph (b) of this section cannot be met. The

Department 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 Department will make

payment within 30 days after receipt of the billing, unless the billing

is improper.

(2) Recipients will be authorized to submit requests 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 Department has determined that reimbursement is not feasible

because the recipient lacks sufficient working capital, the Department

may provide cash on a working capital advance basis. Under this

procedure, the Department will 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 Department will

reimburse the recipient for its actual cash disbursements. The working

capital advance method of payment will 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 must 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, the Department will not

withhold payments for proper charges made by recipients at any time

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

section apply.

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

the terms and conditions of the award, or the Department's reporting

requirements.

(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, DOS may, upon reasonable

notice, inform the recipient that payments must 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, the Department will 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 the Department funds must 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 fifty percent by women or minority

group members).

(k) Recipients must maintain advances of the Department's funds in

[[Page 38247]]

interest bearing accounts, unless paragraphs (k) (1), (2) or (3) of

this section 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 must be remitted annually to Department of Health and

Human Services, (HHS), 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. State

universities and hospitals must comply with CMIA, as it pertains to

interest. If an entity subject to CMIA uses its own funds to pay pre-

award costs for discretionary awards without prior written approval

from the Department, it waives its right to recover the interest under

CMIA. In keeping with Electronic Funds Transfer rules, (31 CFR part

206), interest should be remitted to the HHS Payment Management System

through an electronic medium such as the FEDWIRE Deposit System.

Recipients which do not have this capability should use a check.

(m) Recipients must use the SF-270, Request for Advance or

Reimbursement or other standard form for all nonconstruction programs

when electronic funds transfer is not used.

Sec. 70.23 Cost sharing or matching.

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

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

such 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.

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

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

sharing or matching only with the prior approval of the Department.

(c) Values for recipient contributions of services and property

must be established in accordance with the applicable cost principles.

If the Department 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 must 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 Department 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 must 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 must 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 must 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 skills for which the

employee would normally be paid.

(f) Donated supplies may include such items as expendable

equipment, office supplies, laboratory supplies or workshop and

classroom supplies. Value assessed to donated supplies included in the

cost sharing or matching share must be reasonable and must 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 (g) (1) or (2) of this section apply.

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

acquisition of 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 Department

has approved the charges.

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

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

qualifications.

(1) The value of donated land and buildings must not exceed its

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 must 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 must 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 must not exceed its fair rental

value.

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

supporting records for in-kind contributions from third parties.

(i) Volunteer services must be documented and, to the extent

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

own employees.

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

material, equipment, buildings and land must be documented.

Sec. 70.24 Program income.

(a) The standards set forth in this section requiring recipient

organizations to account for program income related to projects

financed in whole or in part with Department funds.

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

income earned during the project period must be retained by the

recipient and, in

[[Page 38248]]

accordance with the Department regulations or the terms and conditions

of the award, must be used in one or more of the ways listed in the

following:

(1) Added to funds committed to the project by the Department and

recipient and used to further eligible project or program objectives.

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

program.

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

determining the net allowable costs on which the Federal share of costs

is based.

(c) When the Department authorizes the disposition of program

income as described in paragraphs (b)(1) or (b)(2), of this section,

program income in excess of any limits stipulated must be used in

accordance with paragraph (b)(3) of this section.

(d) In the event that the Department 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 applies automatically

to all projects or programs.

(e) Unless the Department's regulations or the terms and conditions

of the award provide otherwise, recipients will have no obligation to

the Federal Government regarding program income earned after the end of

the project period.

(f) If authorized by 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 must be handled in

accordance with the requirements of the Property Standards (See

Secs. 70.30 through 70.37).

(h) Unless the terms and conditions of the award provide otherwise,

recipients will 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.

(i) Recipients must account for seized assets from the date of

seizure until forfeiture and liquidation of funds occur.

Sec. 70.25 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 the Department's requirements. It must 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 must request in writing

prior approval from the Department 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, approval is required by the

Department.

(6) The inclusion, unless waived by the Department, 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

awards, 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) The Department restricts the transfer of funds among direct

cost categories or programs, functions and activities, without prior

written approval for awards in which the Federal share of the project

exceeds $100,000 and the cumulative amount of such transfers exceeds or

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

by the Department. The Department will not 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.

(e) All other changes to nonconstruction budgets, except for the

changes described in paragraph (h) of this section, do not require

prior approval.

(f) For construction awards, recipients must request prior written

approval promptly from the Department for budget revisions whenever

paragraph (e) (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) The need arises for additional Department funds to complete the

project.

(3) A revision is desired which involves specific costs for which

prior written approval requirements may be imposed consistent with

applicable OMB cost principles listed in Sec. 70.27.

(g) When the Department makes an award that provides support for

both construction and nonconstruction work, the Department will require

the recipient to request prior approval from the Department before

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

supported.

(h) For both construction and nonconstruction awards, the

Department will require recipients to notify the Department 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

$5000 or five percent of the award, whichever is greater. This

notification will not be required if an application for additional

funding is submitted for a continuation award.

(i) When requesting approval for budget revisions, recipients must

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

Department indicates a letter of request suffices.

(j) Within thirty of the request for budget revisions, the

Department will 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 thirty calendar days, the Department will

inform the recipient in writing of the date when the recipient may

expect the decision.

Sec. 70.26 Non-Federal audits.

(a) Recipients and subrecipients that are institutions of higher

education or other non-profit organizations are subject to the audit

requirements contained in OMB Circular A-133, ``Audits of Institutions

of Higher

[[Page 38249]]

Education and Other Non-Profit Institutions.''

(b) State and local governments are subject to the audit

requirements contained in the Single Audit Act (31 U.S.C. 7501-7) and

the Department's regulations implementing OMB Circular A-128, ``Audits

of State and Local Governments.''

(c) Hospitals not covered by the audit provisions of OMB Circular

A-133 and commercial organizations must follow the audit thresholds in

OMB Circular A-133 in determining whether to conduct an audit in

accordance with Government Auditing Standards.

Sec. 70.27 Allowable costs.

(a) For each kind of recipient, there is a set of Federal

principles for determining allowable costs. Allowability of costs must

be determined in accordance with the cost principles applicable to the

entity incurring the costs. Thus, allowability of costs incurred by

State, local or Federally-recognized Indian tribal governments is

determined in accordance with the provisions of OMB Circular A-87,

``Cost Principles for State and Local Governments.'' The allowability

of costs incurred by non-profit organizations is determined in

accordance with the provisions of OMB Circular A-122, ``Cost Principles

for Non-Profit Organizations.'' The allowability of costs incurred by

institutions of higher education is determined in accordance with the

provisions of OMB Circular A-21, ``Cost Principles for Educational

Institutions.'' The allowability of costs incurred by commercial

organizations and those non-profit organizations listed in Attachment C

to Circular A-122 is determined in accordance with the provisions of

the Federal Acquisition Regulation (FAR) at 48 CFR part 31.

(b) OMB Circular A-122 does not cover the treatment of bid and

proposal costs or independent research and development costs. The

following rules apply to these costs for non-profit organizations

subject to the Circular.

(1) Bid and proposal costs. Bid and proposal costs are the

immediate costs of preparing bids, proposals, and applications for

Federal and non-Federal awards, contracts, and agreements, including

the development of scientific, costs, and other data needed to support

the bids, proposals, and applications. Bid and proposal costs of the

current accounting period are all allowable as indirect costs. Bid and

proposal costs of past accounting periods are unallowable in the

current period. However, if the recipient's established practice is to

treat these costs by some other method, they may be accepted if they

are found to be reasonable and equitable. Bid and proposal costs do not

include independent research and development costs covered by paragraph

(b)(2) of this section, or preaward costs covered by Attachment B,

Paragraph 33 of OMB Circular A-122.

(2) Independent Research and Development costs. Independent

research and development shall must be allocated its proportionate

share of indirect costs on the same basis as the allocation of indirect

costs to sponsored research and development. The costs of independent

research and development, including its proportionate share of indirect

costs, are unallowable.

Sec. 70.28 Period of availability of funds.

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

grant only allowable costs resulting from obligations incurred during

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

Department.

Property Standards

Sec. 70.30 Purpose of property standards.

Sections 70.31 through 70.37 sets 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 Department will require recipients to observe these

standards under awards and will not impose additional requirements,

unless specifically required by Federal statute. The recipient may use

its own property management standards and procedures provided it

observes the provisions of Secs. 70.31 through 70.37.

Sec. 70.31 Insurance coverage.

Recipients must, 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. 70.32 Real property.

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

the condition that the recipient use the real property for the

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

encumber the property without approval of the Department.

(b) The recipient must obtain written approval by the Department

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 will 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.

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

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

disposition instructions from the Department. The Department will

observe 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 Department 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 must 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. 70.33 Federally-owned and exempt property.

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

remains vested in the Federal Government. Recipients may be required by

the terms and conditions of the award, to submit annually an inventory

listing of Federally-owned property in their custody to the Department.

Upon completion of the award or when the property is no longer needed,

the recipient must report the property to the Department for further

Federal agency utilization.

(2) If the Department has no further need for the property, it will

be declared excess and reported to the General Services Administration,

unless the Department has statutory authority to dispose of the

property by alternative methods (e.g., the authority provided by the

Federal Technology Transfer Act (15

[[Page 38250]]

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

profit organizations in accordance with Exec. Order No. 12821,

``Improving Mathematics and Science Education in Support of the

National Education Goals.'') Appropriate instructions shall be issued

to the recipient by the Department.

(b) Exempt property. The Department will vest title to property

acquired with Federal funds in the recipient without further obligation

to the Federal Government when such property is ``exempt property.''

Sec. 70.34 Equipment.

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

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

(b) The recipient must 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 must 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 must not

encumber the property without approval of the Department. When no

longer needed for the original project or program, the recipient must

use the equipment in connection with its other Federally-sponsored

activities, in the following order of priority:

(1) Activities sponsored by the Department which funded the

original project, then

(2) Activities sponsored by other Federal awarding agencies.

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

program for which it was acquired, the recipient must 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

must be given to other projects or programs sponsored by the

Department. Second preference must be given to projects or programs

sponsored by other Federal awarding agencies. If the equipment is owned

by the Federal Government, use on other activities not sponsored by the

Federal Government may be permissible if authorized in writing by the

Department. User charges must 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 written approval of the Department.

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

acquired with Federal funds and Federally-owned equipment must include

all of the following:

(1) Equipment records must be maintained accurately and must

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 Department for its share.

(2) Equipment owned by the Federal Government must be identified to

indicate Federal ownership.

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

reconciled with the equipment records annually. Any differences between

quantities determined by the physical inspection and those shown in the

accounting records must be investigated to determine the causes of the

difference. The recipient must, in connection with the inventory,

verify the existence, current utilization, and continued need for the

equipment.

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

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

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

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

recipient must promptly notify the Department.

(5) Adequate maintenance procedures must be implemented to keep the

equipment in good condition.

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

equipment, proper sales procedures must 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

provided that compensation is made to the Department or its successor.

The amount of compensation must 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 must request disposition

instructions from the Department. The Department will 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 must be reported to the General Services Administration by

the Department to determine whether a requirement for the equipment

exists in other Federal agencies. The Department will issue

instructions to the recipient no later than 120 calendar days after the

recipient's request and the following procedures will govern.

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

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

may sell the equipment and reimburse the Department 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 may 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 may 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 may be reimbursed by the Department for such

costs incurred in its disposition.

[[Page 38251]]

(4) The Department reserves the right to transfer the title to the

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

when such third party is otherwise eligible under existing statutes.

Such transfer will be subject to the following standards.

(i) The equipment must be appropriately identified in the award or

otherwise made known to the recipient in writing.

(ii) The Department will issue disposition instructions within 120

calendar days after receipt of a final inventory. The final inventory

must list all equipment acquired with grant funds and Federally-owned

equipment. If the Department fails to issue disposition instructions

within the 120 calendar day period, the recipient may apply the

standards of this section, as appropriate.

(iii) When the Department exercises its right to take title, the

equipment is subject to the provisions for Federally-owned equipment.

Sec. 70.35 Supplies and other expendable property.

(a) Title to supplies and other expendable property vests in the

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

supplies exceeding $5000 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 may

retain the supplies for use on non-Federal sponsored activities or sell

them, but must, in either case, compensate the Federal Government for

its share. The amount of compensation must be computer in the same

manner as for equipment.

(b) The recipient must 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. 70.36 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 Department 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) The Department, unless expressly waived by the Department, has

the right to paragraphs (c) (1) and (2) of this section.

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

produced under an award.

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

use such 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 must use that property for the originally-authorized purpose,

and the recipient must not encumber the property without approval of

the Department. When no longer needed for the originally authorized

purpose, disposition of the intangible property must occur in

accordance with the provisions of Sec. 70.34(g).

Sec. 70.37 Property trust relationship.

Real property, equipment, intangible property and debt instruments

that are acquired or improved with Federal funds must 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. Recipients

are required 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. 70.40 Purpose of procurement standards.

Sections 70.41 through 70.48 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 such 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 will be

imposed by the Department upon recipients, unless specifically required

by Federal statute or executive order or approved by OMB.

Sec. 70.41 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 Department, 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. 70.42 Codes of conduct.

The recipient must 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 which 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 must

provide for disciplinary actions to be applied for violations of such

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

Sec. 70.43 Competition.

All procurement transactions must be conducted in a manner to

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

The recipient must 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 must be excluded from competing for such procurements.

Awards must be made to the bidder or offeror whose bid or offer is

responsive to the solicitation and is most advantageous to the

recipient,

[[Page 38252]]

price, quality and other factors considered.

Solicitations must clearly set forth all requirements that the

bidder or offeror must 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. 70.44 Procurement procedures.

(a) All recipients must establish written procurement procedures.

These procedures must provide for, at a minimum, that paragraphs (a)

(1), (2), and (3) of this section apply.

(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.

(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, such a description must 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 must be made by recipients to utilize small

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

whenever possible. Recipients of Federal awards must 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) must be determined by the recipient and must 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 must not

be used.

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

possess the potential ability to perform successfully under the terms

and conditions of the proposed procurement. Consideration must be given

to such matters as contractor integrity, record of past performance,

financial and technical resources or accessibility to other necessary

resources. In certain circumstances, contracts with certain parties are

restricted by agencies' implementation of Exec. Order No. 12549 and

12689, ``Debarment and Suspension.''

(e) Recipients must, on request, make available for the Department,

pre-award review and 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 the Department's regulation.

(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. 70.45 Cost and price analysis.

Some form of cost or price analysis must 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. 70.46 Procurement records.

Procurement records and files for purchases in excess of the small

purchase threshold must 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. 70.47 Contract administration.

A system for contract administration must 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 must evaluate contractor performance and

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

conditions and specifications of the contract.

Sec. 70.48 Contract provisions.

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

sound and complete agreement, the following provisions in all

contracts. The following provisions must also be applied to

subcontracts.

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

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 must

contain suitable provisions for termination by the recipient, including

the manner by

[[Page 38253]]

which termination must be effected and the basis for settlement. In

addition, such contracts must 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 must 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 Department

may accept the bonding policy and requirements of the recipient,

provided the Department has made a determination that the Federal

Government's interest is adequately protected. If such a determination

has not been made, the minimum requirements are to be as follows:

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

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

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

accompanying a bid as assurance that the bidder must, 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 must 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 must include a provision to

the effect that the recipient, the Department, the Comptroller General

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

must have access to any books, documents, papers and records of the

contractor which 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 must contain the procurement provisions of

Appendix A to this part as applicable.

Reports and Records

Sec. 70.50 Purpose of reports and records.

Sections 70.51 through 70.53 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. 70.51 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 must monitor subawards to ensure subrecipients have

met the audit requirements as delineated in Sec. 70.26.

(b) Performance reports must be submitted based on each calendar

quarter. Reports are due thirty days after the reporting period, unless

stated differently in the terms and conditions of the award. The final

performance reports are due ninety calendar days after the expiration

or termination of the award.

(c) Performance reports must 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.

(d) Recipients are required to submit the original and two copies

of performance reports.

(e) Recipients must immediately notify DOS, in writing, of

developments that have a significant impact on the award-supported

activities. Also, written notification must be given in the case of

problems, delays, or adverse conditions which materially impair the

ability to meet the objectives of the award. This notification must

include a statement of the action taken or contemplated, and any

assistance needed to resolve the situation.

(f) The Department will make site visits, as needed.

(g) The Department will comply with clearance requirements of 5 CFR

part 1320 when requesting performance data from recipients.

Sec. 70.52 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) Recipients are required to use the SF-269 or SF-269A to report

the status of funds for all nonconstruction projects or programs.

(ii) Reports must be on an accrual basis. Recipients are not

required to convert their accounting system, but must develop such

accrual information through best estimates based on an analysis of the

documentation on hand.

(iii) The Department requires the SF-269, SF-269A, or turnaround

document to be submitted no later than forty days after the calendar

quarter. The final report is due ninety days from the end date of the

award.

(b) When the Department needs additional information or more

frequent reports, the following will be observed.

(1) When additional information is needed to comply with

legislative requirements, the Department will issue instructions to

require recipients to submit such information under the ``Remarks''

section of the reports.

(2) When the Department determines that a recipient's accounting

system does not meet the standards in Sec. 70.21, additional pertinent

information to further monitor awards will be obtained upon written

notice to the recipient until such time as the system is brought up to

standard. The Department, in obtaining this information, will comply

with report clearance requirements of 5 CFR part 1320.

(3) The Department will accept the identical information from the

recipients in machine readable format or computer printouts or

electronic outputs in lieu of prescribed formats.

(4) The Department will provide computer or electronic outputs to

recipients when such expedites or contributes to the accuracy of

reporting.

Sec. 70.53 Retention and access requirements for records.

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

access to records for awards to recipients. The Department will not

impose any other record retention or access requirements upon

recipients.

[[Page 38254]]

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

and all other records pertinent to an award must 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, as authorized by the Department. The only exceptions

are the following:

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

expiration of the three year period, the records must 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 must be retained for three years after final disposition.

(3) When records are transferred to or maintained by DOS, the three

year retention requirement is not applicable to the recipient.

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

specified in Sec. 70.53(g).

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

records if authorized by the Department.

(d) The Department 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, the Department will make arrangements for recipients to

retain any records that are continuously needed for joint use.

(e) The Department, its 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 must last as long as records are retained.

(f) Unless required by statute, the Department will not place

restrictions on recipients that limit public access to the records of

recipients that are pertinent to an award, except when the Department

can demonstrate that such records must 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

Department.

(g) Indirect cost rate proposals, cost allocation 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

Department or the subrecipient submits to the recipient the proposal,

plan, or other computation to form the basis for negotiation of the

rate, then the three year retention period for its supporting records

starts on the date of such submission.

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

required to submit to the Department or the subrecipient is not

required to submit to the recipient the proposal, plan, or other

computation for negotiation purposes, then the three 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. 70.60 Purpose of termination and enforcement.

Sections 70.61 and 70.62 set forth uniform suspension, termination

and enforcement procedures.

Sec. 70.61 Termination.

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

(a) (1), (2) or (3) of this section apply.

(1) By the Department, if a recipient materially fails to comply

with the terms and conditions of an award.

(2) By the Department with the consent of the recipient, in which

case the two parties must 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 Department 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 Department 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 under either paragraph (a) (1) or

(2) of this section.

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

the recipient referred to in Sec. 70.71(a), including those for

property management as applicable, must be considered in the

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

responsibilities of the recipient after termination, as appropriate.

Sec. 70.62 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 Department will, in addition to imposing any of the special

conditions outlined in Sec. 70.14, 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

Department.

(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

Department will 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 Department 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 paragraphs (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.

[[Page 38255]]

(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 Exec. Order No. 12549 and 12689 and DOS

implementing regulations (see Sec. 70.13).

Subpart D--After-the-Award Requirements

Sec. 70.70 Purpose.

Sections 70.71 through 70.73 contain closeout procedures and other

procedures for subsequent disallowances and adjustments.

Sec. 70.71 Closeout procedures.

(a) Recipients must 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

Department may approve extensions when requested in writing by the

recipient.

(b) Unless the Department authorizes an extension, a recipient must

liquidate all obligations incurred under the award not later than

ninety 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 Department will make prompt payments to a recipient for

allowable reimbursable costs under the award being closed out.

(d) The recipient must promptly refund any balances of unobligated

cash that the Department has advanced or paid and that is not

authorized to be retained by the recipient 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

Department will make a settlement for any upward or downward

adjustments to the Federal share of costs after closeout reports are

received.

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

acquired with Federal funds or received from the Federal Government in

accordance with Secs. 70.31 through 70.37.

(g) In the event a final audit has not been performed prior to the

closeout of an award, the Department retains the right to recover an

appropriate amount after fully considering the recommendations on

disallowed costs resulting from the final audit.

Sec. 70.72 Subsequent adjustments and continuing responsibilities.

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

(1) The right of the Department 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 Sec. 70.26.

(4) Property management requirements in Secs. 70.31 through 70.37.

(5) Records retention as required in Sec. 70.53.

(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 Department and the recipient, provided the responsibilities of the

recipient referred to in Sec. 70.73(a), including those for property

management as applicable, are considered and provisions made for

continuing responsibilities of the recipient, as appropriate.

Sec. 70.73 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

not paid within a reasonable period after the demand for payment, the

Department may reduce the debt by paragraph (a) (1), (2) or (3) of this

section.

(1) Making an administrative offset against other requests for

reimbursements.

(2) Withholding advance payments otherwise due to the recipient.

(3) Taking other action permitted by statute.

(b) Except as otherwise provided by law, the Department may charge

interest on an overdue debt in accordance with 4 CFR Chapter II,

``Federal Claims Collection Standards.''

Appendix A to Part 70--Contract Provisions

All contracts, awarded by a recipient including small purchases,

must contain the following provisions as applicable:

1. Equal Employment Opportunity--All contracts must contain a

provision requiring compliance with Exec. Order No. 11246, ``Equal

Employment Opportunity,'' as amended by Exec. Order No. 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 subawards in excess of $2000 for

construction or repair awarded by recipients and subrecipients must

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 must 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 must report all

suspected or reported violations to the Department.

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 $2000 must

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 must 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 are required to pay wages not less

than once a week. The recipient must place a copy of the current

prevailing wage determination issued by the Department of Labor in

each solicitation and the award of a contract must be conditioned

upon the acceptance of the wage determination. The recipient must

report all suspected or reported violations to the Department.

4. Contract Work Hours and Safety Standards Act (40 U.S.C. 327-

333)--Where applicable, all contracts awarded by recipients in

excess of $2000 for construction contracts and in excess of $2500

for other contracts that involve the employment of mechanics or

laborers must 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 is

required to compute the wages of every mechanic and laborer on the

basis of a standard work week of forty hours. Work in excess of the

standard work week is permissible provided that the worker is

compensated at a rate of not less than one and one-half times the

basic rate of pay for all hours worked in excess of forty 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

[[Page 38256]]

agreements for the performance of experimental, developmental, or

research work must 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 subawards of amounts in excess of $100,000 must

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 must be reported to the DOS 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 must 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 must 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 (Exec. Order No. 12549 and 12689)--

No contract shall be made to parties listed on the General Services

Administration's List of Parties Excluded from Federal Procurement

or Nonprocurement Programs in accordance with Exec. Order No. 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 Exec. Order No. 12549. Contractors

with awards that exceed the small purchase threshold must provide

the required certification regarding its exclusion status and that

of its principal employees.

Dated: July 18, 1995.

Janet Reno,

Attorney General.

[FR Doc. 95-18157 Filed 7-25-95; 8:45 am]

BILLING CODE 4410-18-M