Administration of Assistance Awards to U.S. Non-Governmental Organizations

AGENCY FOR INTERNATIONAL DEVELOPMENT

22 CFR Part 226

Administration of Assistance Awards to U.S. Non-Governmental

Organizations

AGENCY: Agency for International Development (USAID).

ACTION: Interim final rule.

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SUMMARY: This interim final rule adds a new 22 CFR part 226 which

implements Office of Management and Budget (OMB) Circular A-110

establishing uniform administrative requirements for Federal grants and

agreements awarded to institutions of higher education, hospitals, and

other non-profit organizations. In keeping with existing USAID policy,

this rule is also being made applicable to commercial organizations.

EFFECTIVE DATE: This rule is effective February 21, 1995. Comments must

be submitted before March 20, 1995.

FOR FURTHER INFORMATION CONTACT:

Diana Joan Esposito, Office of Procurement, Procurement Policy and

Evaluation (M/OP/P), USAID, SA-14 Rm.1600I, 320 21st Street, Washington

DC 20523. Telephone 703 875-1529, Fax 703 875-1243.

SUPPLEMENTARY INFORMATION: On August 27, 1992, OMB published a proposed

version of Circular A-110 (57 FR 39018). Over 200 comments were

received from Federal agencies, non-profit organizations, professional

organizations, and others. OMB addressed these comments in the final

version of the Circular published November 29, 1993.

The revised Circular was developed by an interagency task force for

government-wide use in a common rule format to facilitate regulatory

adoption by executive departments and agencies. This interim final rule

essentially adopts the Government-wide common rule format and

provisions of the Circular with some minor changes to the Circular to

add clarity and some agency-specific technical changes.

I. The Circular provides agencies with a certain discretion in

implementing its provisions. USAID has exercised this discretion as

follows:

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USAID has decided to include commercial organizations as recipients

and subrecipients covered by this rule and not to include foreign or

international organizations. The definitions have been revised to

reflect this.

The Circular states in ____.22(c) that advance payment mechanisms

include, but are not limited to, Treasury check and electronic funds

transfer. Because USAID frequently issues agency letters of credit for

advances, a USAID letter of credit is also referenced in 226.22.

In Section 226.23(b), USAID has determined that unrecovered

indirect costs may be included as part of cost sharing without

additional approval from USAID.

Section 226.24(d) is amended to reflect USAID's policy

determination that commercial organizations may not use the additive

formula for program income.

In Section 226.24(f), USAID provides that costs incident to the

generation of program income may be deducted from gross income when

they are in keeping with the applicable cost principles.

II. 22 CFR Part 226 includes the following additions and changes to

A-110 that have been submitted for OMB review and approval as

deviations:

Section 226.22(g) is revised to provide that it does not apply to

funds earned in foreign currency.

Section 226.22(i) is revised to state that separate depository

accounts may be required by the terms of an award where specifically

required under USAID's guidance covering endowment funds.

Section 226.22(l) is revised to provide that interest earned shall

be remitted to USAID, not HHS, and that USAID may authorize recipients

to retain all interest earned in accordance with USAID's statutory

authority.

Sections 226.32 and 226.34 are revised to allow for USAID to vest

title in an entity other than the recipient (e.g., so that the

recipient country government may take title when the award is funded

under a bilateral project agreement between USAID and a developing

country).

Section 226.44(b) is expanded to provide that certain procurement

information be sent to the USAID Office of Small Disadvantaged Business

Utilization in accordance with established USAID practice and Section

602 of the Foreign Assistance Act of 1961, as amended.

Section 226.61 is expanded to incorporate USAID's existing

authority to suspend or terminate an award where continuation would be

in violation of applicable law or otherwise not be in the national

interest of the United States.

Subpart G contains additional procurement eligibility requirements

based on USAID's statutory and regulatory requirements. The coverage on

eligibility of goods and services, local cost financing, air

transportation, and ocean shipment is currently reserved.

III. Editorial changes designed to help clarify the provisions for

USAID recipients and program/agreement officers include the following:

Section 226.2 adds definitions of ``Agreement Officer'' and

``USAID.''

Section 226.15 includes USAID's existing implementation of the

Metric Conversion Act, as amended by the Omnibus Trade and

Competitiveness Act (15 U.S.C. 205).

Subpart E contains additional requirements for awards to commercial

(for-profit) organizations.

Subpart F contains coverage of USAID's process for disputes with

recipients.

Appendix A contract provisions have been altered to indicate

applicability to activities conducted in or outside the United States.

Also in Appendix A, the provision on the Byrd Anti-Lobbying Amendment

corrects the applicability of the provision which was inadvertently

misstated in the Circular. The provision applies to awards exceeding

$100,000 rather than awards of $100,000 or more.

Waiver of Proposed Rulemaking

It is the practice of USAID to offer interested parties the

opportunity to comment on proposed regulations. However, USAID has

determined that further public comment on the common rule portion is

unnecessary because the substance of the rule received public comment

when published by OMB. Given the mandatory nature of the bulk of the

text, USAID has determined that issuance of a Notice of Proposed

Rulemaking for the modifications would be impractical, unnecessary and

contrary to the public interest since the changes are relatively few

and most reflect existing policies and practices. Public comments on

USAID-specific implementation of this interim final rule are welcome.

Executive Order 12866

USAID has determined that this is not a significant rule in

accordance with E.O. 12866.

Regulatory Flexibility Act

This is a mandatory, Government-wide uniform rule. The limited

USAID-specific provisions in the rule have been reviewed in accordance

with the requirements of the Regulatory Flexibility Act of 1980 (5

U.S.C. Chapter 6). USAID has determined that these portions of 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.

The information collection requirements contained in this rule have

been previously cleared by OMB.

List of Subjects in 22 CFR Part 226

Accounting, Administrative practice and procedures, Grant programs,

Grant administration, Reporting and recordkeeping requirements.

Accordingly, Part 226 of Title 22 of the Code of Federal

Regulations is added, consisting of Subparts A through G and Appendix

A, to read as follows:

PART 226--ADMINISTRATION OF ASSISTANCE AWARDS TO U.S. NON-

GOVERNMENTAL ORGANIZATIONS

Subpart A--General

Sec.

226.1 Purpose and applicability.

226.2 Definitions.

226.3 Effect on other issuances.

226.4 Deviations.

226.5 Subawards.

Subpart B--Pre-Award Requirements

226.10 Purpose.

226.11 Pre-award policies.

226.12 Forms for applying for Federal assistance.

226.13 Debarment and suspension.

226.14 Special award conditions.

226.15 Metric system of measurement.

226.16 Resource Conservation and Recovery Act.

226.17 Certifications and representations.

Subpart C--Post-Award Requirements

Financial and Program Management

226.20 Purpose of financial and program management.

226.21 Standards for financial management systems.

226.22 Payment.

226.23 Cost sharing or matching.

226.24 Program income.

226.25 Revision of budget and program plans.

226.26 Non-Federal audits.

226.27 Allowable costs.

226.28 Period of availability of funds.

Property Standards

226.30 Purpose of property standards.

226.31 Insurance coverage.

226.32 Real property.

226.33 Federally-owned and exempt property.

226.34 Equipment.

226.35 Supplies and other expendable equipment.

226.36 Intangible property.

226.37 Property trust relationship.

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Procurement Standards

226.40 Purpose of procurement standards.

226.41 Recipient responsibilities.

226.42 Codes of conduct.

226.43 Competition.

226.44 Procurement procedures.

226.45 Cost and price analysis.

226.46 Procurement records.

226.47 Contract administration.

226.48 Contract provisions.

226.49 USAID-Specific procurement requirements.

Reports and Records

226.50 Purpose of reports and records.

226.51 Monitoring and reporting program performance.

226.52 Financial reporting.

226.53 Retention and access requirements for records.

Suspension, Termination and Enforcement

226.60 Purpose of suspension, termination and enforcement.

226.61 Suspension and termination.

226.62 Enforcement.

Subpart D--After-the-Award Requirements

226.70 Purpose.

226.71 Closeout procedures.

226.72 Subsequent adjustments and continuing responsibilities.

226.73 Collection of amounts due.

Subpart E--Special Provisions for Awards to Commercial Organizations

226.80 Scope of subpart.

226.81 Prohibition against profit.

226.82 Program income.

Subpart F--Miscellaneous

226.90 Disputes.

Subpart G--USAID-Specific Requirements

226.1001 Eligibility rules for goods and services. [Reserved]

226.1002 Local cost financing. [Reserved]

226.1003 Air transportation. [Reserved]

226.1004 Ocean shipment of goods. [Reserved]

Appendix A to Part 226--Contract Provisions

Authority: Sec. 621, Pub. L. 87-195, 75 Stat. 445 (22 U.S.C.

2381), as amended; E.O. 12163, Sept. 29, 1979, 44 FR 56673; 3 CFR

1979 Comp., p. 435.

Subpart A--General

Sec. 226.1 Purpose and applicability.

Except as otherwise authorized by statute, this part establishes

uniform administrative requirements for grants and cooperative

agreements awarded by USAID to U.S. institutions of higher education,

hospitals, and other non-profit organizations, and to U.S. commercial

organizations; and to subawards thereunder. USAID shall not impose

additional or inconsistent requirements, except as provided in Sections

226.4, and 226.14, or unless specifically required by Federal statute

or executive order. Non-profit and commercial organizations that

implement Federal programs for the States are also subject to State

requirements.

Sec. 226.2 Definitions.

Accrued expenditures means the charges incurred by the recipient

during a given period requiring the provision of funds for:

(1) Goods and other tangible property received;

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

and other payees; and,

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

services or performance is required.

Accrued income means the sum of:

(1) Earnings during a given period from services performed by the

recipient, and goods and other tangible property delivered to

purchasers, and

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

services or performance is required by the recipient.

Acquisition cost of equipment means the net invoice price of the

equipment, including the cost of modifications, attachments,

accessories, or auxiliary apparatus necessary to make the property

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

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

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

acquisition cost in accordance with the recipient's regular accounting

practices.

Advance means a payment made by Treasury check or other appropriate

payment mechanism to a recipient upon its request either before outlays

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

schedules.

Agreement Officer means a person with the authority to enter into,

administer, terminate and/or closeout assistance agreements subject to

this part, and make related determinations and findings on behalf of

USAID. An Agreement Officer can only act within the scope of a duly

authorized warrant or other valid delegation of authority. The term

``Agreement Officer'' includes persons warranted as ``Grant Officers.''

It also includes certain authorized representatives of the Agreement

Officer acting within the limits of their authority as delegated by the

Agreement Officer.

Award means financial assistance that provides support or

stimulation to accomplish a public purpose. Awards include grants,

cooperative agreements and other agreements in the form of money or

property in lieu of money, by the Federal Government to an eligible

recipient. The term does not include: Technical assistance, 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.

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

outlay of money contributed to the recipient by third parties.

Closeout means the process by which the Agreement Officer

determines that all applicable administrative actions and all required

work of the award have been completed by the recipient and USAID.

Contract means a procurement contract under an award or subaward,

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

contract.

Cost sharing or matching means that portion of project or program

costs not borne by the Federal Government.

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

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

amendment thereto, on which USAID sponsorship ends.

Disallowed costs means those charges to an award that the USAID

Agreement Officer determines to be unallowable, in accordance with the

applicable Federal costs principles or other terms and conditions

contained in the award.

Equipment means tangible nonexpendable personal property including

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

more than one year and an acquisition cost of $5,000 or more per unit.

However, consistent with recipient policy, lower limits may be

established.

Excess property means property under the control of USAID that, as

determined by the head of the Agency, is no longer required for its

needs or the discharge of its responsibilities.

Exempt property means tangible personal property acquired in whole

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

statutory authority to vest title in the recipient without further

obligation 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.

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Federal awarding agency means the Federal agency that provides an

award to the recipient.

Federal funds authorized means the total amount of Federal funds

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

amount may include any authorized carryover of unobligated funds from

prior funding periods when permitted by agency regulations or agency

implementing instructions.

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

percentage of the property's acquisition costs and any improvement

expenditures paid with Federal funds.

Funding period means the period of time when Federal funding is

available for obligation by the recipient.

Intangible property and debt instruments means, but is not limited

to, trademarks, copyrights, patents and patent applications and such

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

stock and other instruments of property ownership, whether considered

tangible or intangible.

Obligations means the amounts of orders placed, contracts and

grants awarded, services received and similar transactions during a

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

future period.

Outlays or expenditures means charges made to the project or

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

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

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

charged, the value of third party in-kind contributions applies and the

amount of cash advances and payments made to subrecipients. For reports

prepared on an accrual basis, outlays are the sum of cash disbursements

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

expense incurred, the value of in-kind contributions applied, and the

net increase (or decrease) in the amounts owed by the recipient for

goods and other property received, for services performed by employees,

contractors, subrecipients and other payees and other amounts becoming

owed under programs for which no current services or performance are

required.

Personal property means property of any kind except real property.

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

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

Prior approval means written approval by an authorized official

evidencing prior consent.

Program income means gross income earned by the recipient that is

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

award (see exclusions in Secs. 226.24 (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, and interest on loans made with award funds. Interest

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

otherwise provided in USAID regulations or the terms and conditions of

the award, program income does not include the receipt of principal on

loans, rebates, credits, discounts, etc., or interest earned on any of

them.

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

applicable Federal cost principles, incurred by a recipient and the

value of the contributions made by third parties in accomplishing the

objectives of the award during the project period.

Project period means the period established in the award document

during which Federal sponsorship begins and ends.

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

supplies, intangible property and debt instruments.

Real Property means land, including land improvements, structures

and appurtenances thereto, but excludes movable machinery and

equipment.

Recipient means an organization receiving a grant or cooperative

agreement directly from USAID to carry out a project or program. The

term includes the following types of U.S. organizations: public and

private institutions of higher education; public and private hospitals;

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

limited to, community action agencies, research institutes, educational

associations, and health centers; and commercial organizations. The

term does not include government-owned contractor-operated facilities

or research centers providing continued support for mission-oriented,

large-scale programs that are government-owned or controlled, or are

designated as federally-funded research and development centers.

Research and development means all research activities, both basic

and applied, and all development activities that are supported at

universities, colleges, and other non-profit institutions. ``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.

Small awards means a grant or cooperative agreement not exceeding

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

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 this section.

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

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

provided.

Supplies means all personal property excluding equipment,

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

and inventions of a contractor conceived or first actually reduced to

practice in the performance of work under a funding agreement

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

Inventions Made by Nonprofit Organizations and Small Business Firms

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

Suspension means an action by USAID that temporarily withdraws

Federal sponsorship under an award, pending corrective action by the

recipient or pending a decision to terminate the award. Suspension of

an award is a separate action from suspension under USAID regulations

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

22 CFR Part 208.

Termination means the cancellation of USAID sponsorship, in whole

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

completion.

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

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

kind

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

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

directly benefiting and specifically identifiable to the project or

program.

Unliquidated obligations, for financial reports prepared on a cash

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

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

basis, they represent the amount of obligations incurred by the

recipient for which an outlay has not been recorded.

Unobligated balance means the portion of the funds authorized by

USAID that has not been obligated by the recipient and is determined by

deducting the cumulative obligations from the cumulative funds

authorized.

Unrecovered indirect cost means the difference between the amount

awarded and the amount which could have been awarded under the

recipient's approved negotiated indirect cost rate.

USAID means the United States Agency for International Development.

Working capital advance means a procedure whereby funds are

advanced to the recipient to cover its estimated disbursement needs for

a given initial period.

Sec. 226.3 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

Sec. 226.4.

Sec. 226.4 Deviations.

The Office of Management and Budget (OMB) 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. USAID may

apply more restrictive requirements to a class of recipients when

approved by OMB. USAID 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 the

USAID Deputy Assistant Administrator for Management.

Sec. 226.5 Subawards.

Unless sections of this part specifically exclude subrecipients

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

subrecipients if such subrecipients are organizations which, if

receiving awards directly from USAID, would fall within the definition

of recipients. 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,'' as amended.

Subpart B--Pre-award Requirements

Sec. 226.10 Purpose.

Sections 226.11 through 226.17 prescribe forms and instructions and

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

Sec. 226.11 Pre-award policies.

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

each instance USAID 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. USAID shall notify the

public of its intended funding priorities for discretionary grant

programs, unless funding priorities are established by Federal statute.

Sec. 226.12 Forms for applying for Federal assistance.

(a) USAID 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 in place of or as a supplement

to the Standard Form 424 (SF-424) series.

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

instructions prescribed by USAID.

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

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

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

indicating whether the application was subject to review by the State

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

particular State can be obtained from the Federal awarding agency or

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

applicant whether the program for which application is made has been

selected by that State for review.

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

should indicate whether the application is subject to review by the

State under E.O. 12372.

Sec. 226.13 Debarment and suspension.

USAID and recipients shall comply with the nonprocurement debarment

and suspension common rule implementing E.O.s 12549 and 12689,

``Debarment and Suspension,'' 22 CFR Part 208. 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. 226.14 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

USAID Agreement Officer may 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. 226.15 Metric system of measurement.

(a) 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.

(b) Wherever measurements are required or authorized, they shall be

made, computed, and recorded in metric system units of measurement,

unless otherwise authorized by the

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agreement officer in writing when it has been found that such usage is

impractical or is likely to cause U.S. firms to experience significant

inefficiencies or the loss of markets. Where the metric system is not

the predominant standard for a particular application, measurements may

be expressed in both the metric and the traditional equivalent units,

provided the metric units are listed first.

Sec. 226.16 Resource Conservation and Recovery Act.

Under the Act, any U.S. 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 and

hospitals that receive direct Federal awards or other Federal funds

shall given preference in their procurement programs funded with

Federal funds to the purchase of recycled products pursuant to the EPA

guidelines.

Sec. 226.17 Certifications and representations.

Unless prohibited by statute or codified regulation, USAID may at

some future date, allow recipients to submit certifications and

representations required by statute, executive order, or regulation on

an annual basis, if the recipients have ongoing and continuing

relationships with the agency. Annual certifications and

representations shall be signed by responsible officials with the

authority to ensure recipients' compliance with the pertinent

requirements.

Subpart C--Post-Award Requirements

Financial and Program Management

Sec. 226.20 Purpose of financial and program management.

Sections 226.21 through 226.28 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 costs and establishing funds availability.

Sec. 226.21 Standards for financial management systems.

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

develop unit cost information whenever practical.

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

following.

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

results of each federally-sponsored project or program in accordance

with the reporting requirements set forth in Sec. 226.52. While USAID

requires reporting on an accrual basis, if the recipient maintains its

records on other than an accrual basis, the recipient shall not be

required to establish an accrual accounting system. These recipients

may develop such accrual data for their reports on the basis of an

analysis of the documentation on hand.

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

funds for federally-sponsored activities. These records shall contain

information pertaining to all Federal awards, authorizations,

obligations, unobligated balances, assets, outlays, income and

interest.

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

property and other assets. Recipients shall adequately safeguard all

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

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

Whenever appropriate, financial information should be related to

performance and unit cost data.

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

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

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

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

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

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

fiscal agents shall be consistent with CMIA Treasury-State Agreements

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

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

and Other Programs.''

(6) Written procedures for determining the reasonableness,

allocability and allowability of costs in accordance with the

provisions of the applicable Federal cost principles and the terms and

conditions of the award.

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

supported by source documentation.

(c) Where the Federal Government guarantees or insures the

repayment of money borrowed by the recipient, USAID, 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) USAID may require adequate fidelity bond coverage where the

recipient lacks sufficient coverage to protect the Federal Government's

interest.

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

bonds shall be obtained from companies holding certificates of

authority as acceptable sureties, as prescribed in 31 CFR part 223,

``Surety Companies Doing Business with the United States.''

Sec. 226.22 Payment

(a) Payment methods shall 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

shall be consistent with Treasury-State CMIA agreements or default

procedures codified at 31 CFR part 205.

(b)(1) Recipients will be paid in advance, provided they maintain

or demonstrate the willingness to maintain:

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

transfer of funds and disbursement by the recipient, and

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

control and accountability as established in Section 226.21.

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

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

actual, immediate cash requirements of the recipient organization in

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

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

feasible to the actual disbursements by the recipient organization for

direct program or project costs and the proportionate share of any

allowable indirect costs.

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

anticipated cash needs for all awards made by USAID to the recipient.

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

USAID Letter of Credit, Treasury check and electronic funds transfer.

[[Page 3749]]

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

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

and reimbursements at least monthly when electronic fund transfers are

not used.

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

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

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

check advance payments are made to the recipient automatically through

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

USAID instructions for electronic funds transfer.

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

paragraph (b) of this section cannot be met. USAID 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, USAID shall make payment

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

improper.

(2) Recipients are authorized to submit a request for reimbursement

at least monthly when electronic funds transfers are not used.

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

and USAID has determined that reimbursement is not feasible because the

recipient lacks sufficient working capital, the USAID Agreement Officer

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

procedure, USAID shall advance cash to the recipient to cover its

estimated disbursement needs for an initial period generally geared to

the recipient's disbursing cycle, normally 30 days. Thereafter, USAID

shall 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

subrecipients to meet the subrecipients' actual cash disbursements.

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

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

program income, rebates, refunds, contract settlements, audit

recoveries and interest earned on such funds before requesting

additional cash payments. This paragraph is not applicable to such

earnings which are generated as foreign currencies.

(h) Unless otherwise required by statute, USAID will not withhold

payments for proper charges made by recipients at any time during the

project period unless:

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

the terms and conditions of the award, or Federal reporting

requirements, or

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

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

Credit Programs.'' Under such conditions, USAID may, upon reasonable

notice, inform the recipient that payments shall not be made for

obligations incurred after a specified date until the conditions are

corrected or the indebtedness to the Federal Government is liquidated.

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

depositories of funds advanced under awards are as follows.

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

section, or as otherwise provided in USAID regulations or implementing

guidance governing endowment funds, USAID does not require separate

depository accounts for funds provided to a recipient or establish any

eligibility requirements for depositories for funds provided to a

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

obligation and expenditure of funds.

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

insured accounts whenever possible.

(j) Consistent with the national goal of expanding the

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

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

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

members).

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

bearing accounts, unless:

(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, or

(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) Except as otherwise provided in the terms and conditions of the

award in accordance with USAID regulations or other implementing

guidance, for those entities where CMIA and its implementing

regulations do not apply, interest earned on Federal advances deposited

in interest bearing accounts shall be remitted annually to Department

of Health and Human Services, Payment Management System, Rockville, MD

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

recipient for administrative expense. State universities and hospitals

shall comply with CMIA, as it pertains to interest. If an entity

subject to CMIA uses its own funds to pay pre-award costs for

discretionary awards without prior written approval from the Federal

awarding agency, it waives its right to recover the interest under

CMIA.

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

forms shall be authorized for the recipients in requesting advances and

reimbursements. USAID shall not require more than an original and two

copies of these forms.

(1) The SF-270, Request for Advance or Reimbursement, is the

standard form for all nonconstruction programs when electronic funds

transfer or predetermined advance methods are not used. USAID has the

option of using this form for construction programs in lieu of the SF-

271, ``Outlay Report and Request for Reimbursement for Construction

Programs.''

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

Construction Programs, is the standard form to be used for requesting

reimbursement for construction programs. However, USAID may substitute

the SF-270 when it determines that it provides adequate information to

meet Federal needs.

Sec. 226.23 Cost sharing or matching.

(a) All contributions, including cash and third party inkind, shall

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.

[[Page 3750]]

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

sharing or matching.

(c) Values for recipient contributions of services and property

shall be established in accordance with the applicable cost principles.

If USAID authorizes recipients to donate buildings or land for

construction/facilities acquisition projects or long-term use, the

value of the donated property for cost sharing or matching shall be the

lesser of:

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

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

or

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

sufficient justification, the USAID Agreement Officer may approve the

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

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

(d) Volunteer services furnished by professional and technical

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

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

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

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

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

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

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

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

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

allocable may be included in the valuation.

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

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

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

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

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

employee is normally paid.

(f) Donated supplies may include such items as expendable

equipment, office supplies, laboratory supplies or workshop and

classroom supplies. Value assessed to donated supplies included in the

cost sharing or matching share shall be reasonable and shall not exceed

the fair market value of the property at the time of the donation.

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

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

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

(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, or

(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 USAID

Agreement Officer has approved the charges.

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

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

qualifications.

(1) The value of donated land and buildings shall not exceed 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 shall not exceed the fair market

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

donation.

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

value of comparable space as established by an independent appraisal of

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

same locality.

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

value.

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

supporting records for in-kind contributions from third parties.

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

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

own employees,

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

material, equipment, buildings and land shall be documented.

Sec. 226.24 Program income.

(a) Recipients shall apply the standards set forth in this section

to account for program income related to projects financed in whole or

in part with Federal funds.

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

income earned during the project period shall be retained by the

recipient and, in accordance with USAID regulations, other implementing

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

one or more of the following ways:

(1) Added to funds committed by USAID and the recipient to the

project or program, 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 agreement authorizes the disposition of program income

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

income in excess of any limits stipulated shall be used in accordance

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

(d) If the terms and conditions of the award do not specify how

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

apply automatically to all projects or programs except research. For

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

apply automatically unless the terms and conditions of the award

provide another alternative, or the recipient is subject to special

award conditions, as indicated in Sec. 226.14. Recipients which are

commercial organizations may not apply paragraph (b)(1) of this

section, in accordance with Sec. 226.82 of this part.

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

recipients shall have no obligation to the Federal Government regarding

program income earned after the end of the project period.

(f) 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 and they comply with the cost

principles applicable to the award funds.

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

accordance with the requirements of the Property Standards (See

Secs. 226.30 through 226.37).

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

recipients shall have no obligation to the Federal Government with

respect to program income earned from license fees and royalties for

copyrighted material, patents, patent applications, trademarks, and

inventions produced under an award. However, Patent and Trademark

Amendments (35 U.S.C. 18) apply to inventions made under an

experimental, developmental, or research award.

Sec. 226.25 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

[[Page 3751]]

may include either the sum of the Federal and non-Federal shares, or

only the Federal share, depending upon USAID requirements as reflected

in the terms and conditions of the agreement. It shall be related to

performance for program evaluation purposes whenever appropriate.

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

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

revisions, in accordance with this section.

(c) For nonconstruction awards, recipients shall request prior

approvals from the USAID Agreement Officer 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.

(6) The inclusion, unless waived in the agreement by USAID, 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

budget of the award, the subaward, transfer or contracting out of any

work under an award. This provision does not apply to the purchase of

supplies, material, equipment or general support services.

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

imposed unless a deviation has been approved by OMB.

(e) USAID may waive cost-related and administrative prior written

approvals required by this part and OMB Circulars A-21 and A-122,

except for requirements listed in paragraphs (c)(1) and (c)(4) of this

section. Such waivers may authorize recipients to do any one or more of

the following:

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

than 90 calendar days with the prior approval of the USAID Agreement

Officer. All pre-award costs are incurred at the recipient's risk

(i.e., USAID is under no obligation to reimburse such costs if for any

reason the recipient does not receive an award or if the award is less

than anticipated and inadequate to cover such costs).

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

award of up to 12 months. For one-time extensions, the recipient must

notify the USAID Agreement Officer in writing, with the supporting

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

expiration date specified in the award. This one-time extension may not

be exercised merely for the purpose of using unobligated balances. The

recipient may initiate a one-time extension unless one or more of the

following conditions apply:

(i) The terms and conditions of award prohibit the extension.

(ii) The extension requires additional Federal funds.

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

or scope of the project.

(3) Carry forward unobligated balances to subsequent funding

periods.

(4) Except for awards under Section 226.14 and Subpart E of this

part, for awards that support research, unless USAID provides otherwise

in the award or in its regulations or other implementing guidance, the

prior approval requirements described in paragraphs (e) (1) through (3)

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

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

paragraph (e)(2) of this section applies.

(f) USAID may, at its option, restrict the transfer of funds among

direct cost categories or programs, functions and activities for awards

in which the Federal share of the project exceeds $100,000 and the

cumulative amount of such transfers exceeds or is expected to exceed 10

percent of the total budget as last approved by the USAID Agreement

Officer. USAID shall 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.

(g) All other changes to non-construction budgets, except for the

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

prior approval.

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

approval promptly from the USAID Agreement Officer for budget revisions

whenever:

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

of the project or program,

(2) The need arises for additional Federal funds to complete the

project, or

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

prior written approval requirements may be imposed consistent with the

applicable cost principles listed in Sec. 226.27.

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

imposed unless a deviation has been approved by OMB.

(j) When USAID makes an award that provides support for both

construction and nonconstruction work, the USAID Agreement Officer may

require the recipient to request prior approval before making any fund

or budget transfers between the two types of work supported.

(k) For both construction and nonconstruction awards, recipients

shall notify the USAID Agreement Officer 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 Federal award, whichever is greater. This notification

shall not be required if an application for additional funding is

submitted for a continuation award.

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

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

Agreement Officer indicates a letter of request suffices.

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

for budget revisions, the USAID Agreement Officer shall review the

request and notify the recipient whether the budget revisions have been

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

calendar days, the USAID Agreement Officer shall inform the recipient

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

Sec. 226.26 Non-Federal audits.

(a) Recipients and subrecipients shall be subject to the audit

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

of Higher Education and Other Non-Profit Institutions.''

(b) State and local governments shall be subject to the audit

requirements contained in the Single Audit Act (31

[[Page 3752]]

U.S.C. 7501-7) and Federal awarding agency 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 shall be subject to the audit requirements of USAID.

(d) Commercial organizations shall be subject to the audit

requirements of USAID or the prime recipient as incorporated in the

award document.

Sec. 226.27 Allowable costs.

For each kind of recipient, there is a set of Federal principles

for determining allowable costs. Allowability of costs shall be

determined by the Agreement Officer 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 hospitals is determined in accordance with the

provisions of Appendix E of 45 CFR part 74, ``Principles for

Determining Costs Applicable to Research and Development Under Grants

and Contracts with Hospitals.'' 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.

Sec. 226.28 Period of availability of funds.

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

award only allowable costs resulting from obligations incurred during

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

Agreement Officer.

Property Standards

Sec. 226.30 Purpose of property standards.

Sections 226.31 through 226.37 set forth uniform standards

governing management and or disposition of property furnished by the

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

a Federal award. USAID shall not impose additional requirements unless

specifically required by statute. The recipient may use its own

property management standards and procedures provided it observes the

provisions of Secs. 226.31 through 226.37.

Sec. 226.31 Insurance coverage.

Recipients shall, at a minimum, provide the equivalent insurance

coverage for real property and equipment acquired with Federal funds as

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

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

award.

Sec. 226.32 Real property.

(a) Unless the agreement provides otherwise, title to real property

shall vest in the recipient subject to the condition that the recipient

shall use the real property for the authorized purpose of the project

as long as it is needed and shall not encumber the property without

approval of the Agreement Officer.

(b) The recipient shall obtain written approval from the Agreement

Officer for the use of real property in other federally-sponsored

projects when the recipient determines that the property is no longer

needed for the purpose of the original project. Use in other projects

shall be limited to those under federally-sponsored projects (i.e.,

awards) or programs that have purposes consistent with those authorized

for support by USAID.

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

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

disposition instructions from the Agreement Officer. The Agreement

Officer will give one or more of the following disposition

instructions:

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

obligation to the Federal Government after it compensates the Federal

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

property attributable to the Federal participation in the project.

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

guidelines provided by USAID and pay the Federal Government for that

percentage of the current fair market value of the property

attributable to the Federal participation in the project (after

deducting actual and reasonable selling and fix-up expenses, if any,

from the sales proceeds). When the recipient is authorized or required

to sell the property, proper sales procedures shall be established that

provide for competition to the extent practicable and result in the

highest possible return.

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

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

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

attributable percentage of the current fair market value of the

property.

Sec. 226.33 Federally-owned and exempt property.

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

remains vested in the Federal Government. Recipients shall submit

annually an inventory listing of federally-owned property in their

custody to USAID. Upon completion of the award or when the property is

no longer needed, the recipient shall report the property to USAID for

further Federal agency utilization.

(2) If USAID has no further need for the property, it shall be

declared excess and reported to the General Services Administration,

unless USAID has statutory authority to dispose of the property by

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

Technology Transfer Act (15 U.S.C. 3710(I)) to donate research

equipment to educational and non-profit organizations in accordance

with E.O. 12821, ``Improving Mathematics and Science Education in

Support of the National Education Goals.'') Appropriate instructions

shall be issued to the recipient by USAID.

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

option to vest title to property acquired with Federal funds in the

recipient without further obligation to the Federal Government and

under conditions USAID considers appropriate. Such property is ``exempt

property'' (see definition in Sec. 226.2). Should USAID not establish

conditions, title to exempt property upon acquisition shall vest in the

recipient without further obligation to the Federal Government.

Sec. 226.34 Equipment.

(a) Unless the agreement provides otherwise, title to equipment

acquired by a recipient with Federal funds shall vest in the recipient,

subject to conditions of this part.

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

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

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

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

Federal Government retains an interest in the equipment.

[[Page 3753]]

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

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

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

encumber the property without approval of USAID. When no longer needed

for the original project or program, the recipient shall use the

equipment in connection with its other federally-sponsored activities,

in the following order of priority:

(1) Activities sponsored by USAID, then

(2) Activities sponsored by other Federal agencies.

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

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

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

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

equipment was originally acquired. First preference for such other use

shall be given to other projects or programs sponsored by USAID; second

preference shall be given to projects or programs sponsored by other

Federal agencies. If the equipment is owned by the Federal Government,

use on other activities not sponsored by the Federal Government shall

be permissible if authorized by USAID. User charges shall be treated as

program income.

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

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

proceeds to offset the costs of the replacement equipment subject to

the approval of USAID.

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

acquired with Federal funds and federally-owned equipment shall include

all of the following.

(1) Equipment records shall be maintained accurately and shall

include the following information.

(i) A description of the equipment.

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

number, national stock number, or other identification number.

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

(iv) Whether title vests in the recipient, the Federal Government,

or other specified entity.

(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 USAID for its share.

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

to indicate Federal ownership.

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

results reconciled with the equipment records at least once every two

years. Any differences between quantities determined by the physical

inspection and those shown in the accounting records shall be

investigated to determine the causes of the difference. The recipient

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

utilization, and continued need for the equipment.

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

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

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

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

recipient shall promptly notify the Federal awarding agency with whose

funds the equipment was purchased.

(5) Adequate maintenance procedures shall be implemented to keep

the equipment in good condition.

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

equipment, proper sales procedures shall be established which provide

for competition to the extent practicable and result in the highest

possible return.

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

may be used for other activities in accordance with the following

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

$5000 or more, the recipient may retain the equipment for other uses

provided that compensation is made to the original Federal awarding

agency or its successor. The amount of compensation shall be computed

by applying the percentage of Federal participation in the cost of the

original project or program to the current fair market value of the

equipment. If the recipient has no need for USAID-financed equipment,

the recipient shall request disposition instructions from the Agreement

Officer. USAID shall determine whether the equipment can be used to

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

the availability of the equipment shall be reported to the General

Services Administration to determine whether a requirement for the

equipment exists in other Federal agencies. The USAID Agreement Officer

shall issue instructions to the recipient no later than 120 calendar

days after the recipient's request and the following procedures shall

govern:

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

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

shall sell the equipment and reimburse USAID an amount computed by

applying to the sales proceeds the percentage of Federal participation

in the cost of the original project or program. However, the recipient

shall be permitted to deduct and retain from the Federal share $500 or

ten percent of the proceeds, whichever is less, for the recipient's

selling and handling expenses.

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

the recipient shall be reimbursed by the Federal Government by an

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

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

current fair market value of the equipment, plus any reasonable

shipping or interim storage costs incurred.

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

equipment, the recipient will be reimbursed by USAID for such costs

incurred in its disposition.

(h) USAID 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 shall be subject to the following standards:

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

otherwise made known to the recipient in writing.

(2) USAID shall issue disposition instructions within 120 calendar

days after receipt of a final inventory. The final inventory shall list

all equipment acquired with award funds and federally-owned equipment.

If USAID fails to issue disposition instructions within the 120

calendar day period, the recipient shall apply the standards of this

section, as appropriate.

(3) When USAID exercises its right to take title, the equipment

shall be subject to the provisions for federally-owned equipment.

Sec. 226.35 Supplies and other expendable equipment.

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

the recipient upon acquisition. If there is a

[[Page 3754]]

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 shall retain the supplies

for use on non-Federal sponsored activities or sell them, but shall, in

either case, compensate the Federal Government for its share. The

amount of compensation shall be computed in the same manner as for

equipment.

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

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

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

unless specifically authorized by Federal statute as long as the

Federal Government retains an interest in the supplies.

Sec. 226.36 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. USAID reserves a royalty-free, nonexclusive and

irrevocable right to reproduce, publish, or otherwise use the work for

Federal purposes, and to authorize others to do so.

(b) Recipients are subject to applicable regulations governing

patents and inventions, including government-wide regulations issued by

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

Made by Nonprofit Organizations and Small Business Firms Under

Government Grants, Contracts and Cooperative Agreements.''

(c) Unless waived by USAID, the Federal Government has the right

to:

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

produced under an award; and

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

use 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 shall use that property for the originally-authorized

purpose, and the recipient shall not encumber the property without

approval of USAID. When no longer needed for the originally authorized

purpose, disposition of the intangible property shall occur in

accordance with the provisions of Sec. 226.34(g).

Sec. 226.37 Property trust relationship.

Real property, equipment, intangible property and debt instruments

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

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

program under which the property was acquired or improved. Recipients

shall record liens or other appropriate notices of record to indicate

that personal or real property has been acquired, improved or

constructed with Federal funds and that use and disposition conditions

apply to the property.

Procurement Standards

Sec. 226.40 Purpose of procurement standards.

Sections 226.41 through 226.48 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 or

requirements shall be imposed by USAID upon recipients, unless

specifically required by Federal statute or executive order or approved

by OMB.

Sec. 226.41 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 USAID, 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. 226.42 Codes of conduct.

The recipient shall maintain written standards of conduct governing

the performance of its employees engaged in the award and

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

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

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

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

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

her partner, or an organization 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 shall

provide for disciplinary actions to be applied for violations of such

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

Sec. 226.43 Competition.

All procurement transactions shall be conducted in a manner to

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

The recipient shall be alert to organizational conflicts of interest as

well as noncompetitive practices among contractors that may restrict or

eliminate competition or otherwise restrain trade. In order to ensure

objective contractor performance and eliminate unfair competitive

advantage, contractors that develop or draft specifications,

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

for proposals shall be excluded from competing for such procurements.

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

responsive to the solicitation and is most advantageous to the

recipient, price, quality and other factors considered. Solicitations

shall clearly establish all requirements that the bidder or offeror

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

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

recipient's interest to do so.

Sec. 226.44 Procurement procedures.

(a) All recipients shall establish written procurement procedures.

These procedures shall provide, at a minimum, that:

(1) Recipients avoid purchasing unnecessary items,

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

alternatives to determine which would be the most economical and

practical procurement for the Federal Government, and

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

following.

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

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

procurements, such a description shall not contain features which

unduly restrict competition.

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

other factors

[[Page 3755]]

to be used in evaluating bids or proposals.

(iii) A description, whenever practicable, of technical

requirements in terms of functions to be performed or performance

required, including the range of acceptable characteristics or minimum

acceptable standards.

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

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

solicitation.

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

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

measurement.

(vi) Preference, to the extent practicable and economically

feasible, for products and services that conserve natural resources and

protect the environment and are energy efficient.

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

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

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

following steps to further this goal.

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

business enterprises are used to the fullest extent practicable.

(2) Make information on forthcoming opportunities available and

arrange time frames for purchases and contracts to encourage and

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

women's business enterprises. To permit USAID, in accordance with the

small business provisions of the Foreign Assistance Act of 1961, as

amended, to give United States small business firms an opportunity to

participate in supplying commodities and services procured under the

award, the recipient shall to the maximum extent possible provide the

following information to the Office of Small Disadvantaged Business

Utilization (OSDBU/MRC), USAID Washington, DC 20523, at least 45 days

prior to placing any order or contract in excess of the small purchase

threshold:

(i) Brief general description and quantity of goods or services;

(ii) Closing date for receiving quotations, proposals or bids; and

(iii) Address where solicitations or specifications can be

obtained.

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

larger contracts intend to subcontract with small businesses, minority-

owned firms, and women's business enterprises.

(4) Encourage contracting with consortiums of small businesses,

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

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

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

organizations as the Small Business Administration and the Department

of Commerce's Minority Business Development Agency in the solicitation

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

business enterprises.

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

contracts, cost reimbursable contracts, purchase orders, and incentive

contracts) shall be determined by the recipient but shall be

appropriate for the particular procurement and for promoting the best

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

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

contracting shall not be used.

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

possess the potential ability to perform successfully under the terms

and conditions of the proposed procurement. Consideration shall be

given to such matters as contractor integrity, record of past

performance, financial and technical resources or accessibility to

other necessary resources. In certain circumstances, contracts with

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

12549 and 12689, ``Debarment and Suspension.''

(e) Recipients shall, on request, make available for USAID, 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 this part.

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

threshold fixed at 41 U.S.C. 403(11) 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. 226.45 Cost and price analysis.

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

the procurement files in connection with every procurement action.

Price analysis may be accomplished in various ways, including the

comparison of price quotations submitted, market prices and similar

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

evaluation of each element of cost to determine reasonableness,

allocability and allowability.

Sec. 226.46 Procurement records.

Procurement records and files for purchases in excess of the small

purchase threshold shall include the following at a minimum:

(a) Basis for contractor selection,

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

offers are not obtained, and

(c) Basis for award cost or price.

Sec. 226.47 Contract administration.

A system for contract administration shall be maintained to ensure

contractor conformance with the terms, conditions and specifications of

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

purchases. Recipients shall evaluate contractor performance and

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

conditions and specifications of the contract.

Sec. 226.48 Contract provisions.

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

sound and complete agreement, the following provisions in all

contracts. The following provisions shall also be applied to

subcontracts.

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

contain contractual provisions or conditions that allow for

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

contractor violates or breaches the contract terms, and provide for

such remedial actions as may be appropriate.

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

contain suitable provisions for termination by the recipient, including

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

settlement. In addition, such contracts shall describe conditions under

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

where the contract may be terminated because of circumstances beyond

the control of the contractor.

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

the contracting (or subcontracting) for construction or facility

improvements shall provide for the recipient to follow its own

requirements relating to bid guarantees, performance bonds, and payment

bonds unless the construction

[[Page 3756]]

contract or subcontract exceeds $100,000. For those contracts or

subcontracts exceeding $100,000, the USAID Agreement Officer may accept

the bonding policy and requirements of the recipient, provided that

USAID determines that the Federal Government's interest is adequately

protected. In making this determination for contract or subcontracts to

be performed overseas, the Agreement Officer shall take into

consideration any established local practices relating to security. If

such a determination has not been made, the minimum requirements shall

be as follows.

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

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

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

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

of its 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, the bonds shall be obtained from

companies holding certificates of authority as acceptable sureties

pursuant to 31 CFR part 223, ``Surety Companies Doing Business with the

United States.''

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

purchase threshold) awarded by recipients shall include a provision to

the effect that the recipient, USAID, the Comptroller General of the

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

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

contractor 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 shall contain the procurement provisions of

Appendix A to this part, as applicable. Whenever a provision is

required to be inserted in a contract under an agreement, the recipient

shall insert a statement in the contract that in all instances where

the U.S. Government or USAID is mentioned, the recipient's name shall

be substituted.

Sec. 226.49 USAID-Specific procurement requirements

Procurement requirements which are applicable to USAID because of

statute and regulation are in Subpart G.

Reports and Records

Sec. 226.50 Purpose of reports and records.

Sections 226.51 through 226.53 establish 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. 226.51 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 shall monitor subawards to ensure subrecipients have

met the audit requirements as delineated in Section 226.26.

(b) The terms and conditions of the agreement will prescribe the

frequency with which the performance reports shall be submitted. Except

as provided in paragraph 226.51(f), performance reports will not be

required more frequently than quarterly or, less frequently than

annually. Annual reports shall be due 90 calendar days after the award

year; quarterly or semi-annual reports shall be due 30 days after the

reporting period. USAID may require annual reports before the

anniversary dates of multiple year awards in lieu of these

requirements. The final performance reports are due 90 calendar days

after the expiration or termination of the award.

(c) If inappropriate, a final technical or performance report shall

not be required after completion of the project.

(d) Performance reports shall generally contain, for each award,

brief information on each of the following:

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

objectives established for the period, the findings of the

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

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

related to cost data for computation of unit costs.

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

(3) Other pertinent information including, when appropriate,

analysis and explanation of cost overruns or high unit costs.

(e) Recipients shall submit the original and two copies of

performance reports.

(f) Recipients shall immediately notify USAID of developments that

have a significant impact on the award-supported activities. Also,

notification shall be given in the case of problems, delays, or adverse

conditions which materially impair the ability to meet the objectives

of the award. This notification shall include a statement of the action

taken or contemplated, and any assistance needed to resolve the

situation.

(g) USAID may make site visits, as needed.

(h) USAID shall comply with clearance requirements of 5 CFR part

1320 when requesting performance data from recipients.

Sec. 226.52 Financial reporting.

(a) The following forms are used for obtaining financial

information from recipients.

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

(i) USAID will require recipients to use either the SF-269 or SF-

269A to report the status of funds for all nonconstruction projects or

programs. The type of form required will be established in the award.

USAID may, however, have the option of not requiring the SF-269 or SF-

269A when the SF-270, Request for Advance or Reimbursement, or SF-272,

Report of Federal Cash Transactions, is determined to provide adequate

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

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

used only for advances.

(ii) The type of reporting required will be established in the

agreement. If USAID requires accrual information and the recipient's

accounting records are not normally kept on the accrual basis, the

recipient shall not be required to convert its accounting system, but

shall develop such accrual information through best estimates based on

an analysis of the documentation on hand.

(iii) USAID will determine the frequency of the Financial Status

Report for each project or program, considering the size and complexity

of the particular project or program. The frequency of reports will be

established in the agreement. However, the report shall not be required

more frequently than quarterly or less frequently than annually. A

final report shall be required at the completion of the agreement.

(iv) Recipients shall submit the SF-269 or SF-269A (an original and

two

[[Page 3757]]

copies) no later than 30 days after the end of each specified reporting

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

annual and final reports. Extensions of reporting due dates may be

approved by USAID upon request of the recipient.

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

(i) When funds are advanced to recipients USAID shall require each

recipient to submit the SF-272 and, when necessary, its continuation

sheet, SF-272a. USAID shall use this report to monitor cash advanced to

recipients and to obtain disbursement information for each agreement

with the recipients.

(ii) USAID may require forecasts of Federal cash requirements in

the ``Remarks'' section of the report.

(iii) When practical and deemed necessary, USAID may require

recipients to report in the ``Remarks'' section the amount of cash

advances received in excess of three days. Recipients shall provide

short narrative explanations of actions taken to reduce the excess

balances.

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

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

end of each quarter. USAID may require a monthly report from those

recipients receiving advances totaling $1 million or more per year.

(v) USAID may waive the requirement for submission of the SF-272

for any one of the following reasons:

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

provided that such advances are monitored through other forms contained

in this section;

(B) If, in USAID's opinion, the recipient's accounting controls are

adequate to minimize excessive Federal advances; or,

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

(b) When USAID needs additional information or more frequent

reports, the following shall be observed.

(1) When additional information is needed to comply with

legislative requirements, USAID shall issue instructions to require

recipients to submit such information under the ``Remarks'' section of

the reports.

(2) When USAID determines that a recipient's accounting system does

not meet the standards in Section 226.21, additional pertinent

information to further monitor awards may be obtained upon written

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

standard. USAID, in obtaining this information, shall comply with

report clearance requirements of 5 CFR part 1320.

(3) USAID may accept the identical information from the recipients

in machine readable format or computer printouts or electronic outputs

in lieu of prescribed formats.

(4) USAID may provide computer or electronic outputs to recipients

when such expedites or contributes to the accuracy of reporting.

Sec. 226.53 Retention and access requirements for records.

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

access to records for awards to recipients. USAID shall not impose any

other record retention or access requirements upon recipients.

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

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

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

expenditure report or, for awards that are renewed quarterly or

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

financial report, as authorized by USAID. The only exceptions are the

following:

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

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

all litigation, claims or audit findings involving the records have

been resolved and final action taken.

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

funds shall be retained for 3 years after final disposition.

(3) When records are transferred to or maintained by USAID, the 3-

year retention requirements is not applicable to the recipient.

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

specified in paragraph 226.53(g).

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

records if authorized by USAID.

(d) USAID shall 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,

USAID may make arrangements for recipients to retain any records that

are continuously needed for joint use.

(e) USAID, the Inspector General, Comptroller General of the United

States, or any of their duly authorized representatives, have the right

of timely and unrestricted access to any books, documents, papers, or

other records of recipients that are pertinent to the awards, in order

to make audits, examinations, excerpts, transcripts and copies of such

documents. This right also includes timely and reasonable access to a

recipient's personnel for the purpose of interview and discussion

related to such documents. The rights of access in this paragraph are

not limited to the required retention period, but shall last as long as

records are retained.

(f) Unless required by statute, USAID will not place restrictions

on recipients that limit public access to the records of recipients

that are pertinent to an award, except when USAID can demonstrate that

such records shall be kept confidential and would have been exempted

from disclosure pursuant to the Freedom of Information Act (5 U.S.C.

552) if the records had belonged to USAID.

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

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

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

computations or proposals, cost allocation plans, and any similar

accounting computations of the rate at which a particular group of

costs is chargeable (such as computer usage chargeback rates or

composite fringe benefit rates).

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

Federal awarding agency or the subrecipient submits to the recipient

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

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

supporting records starts on the date of such submission.

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

required to submit to the Federal awarding agency or the subrecipient

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

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

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

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

covered by the proposal, plan, or other computation.

Suspension, Termination and Enforcement

Sec. 226.60 Purpose of suspension, termination and enforcement.

Sections 226.61 and 226.62 set forth uniform suspension,

termination and enforcement procedures.

Sec. 226.61 Suspension and termination.

(a) Awards may be terminated (or, with respect to paragraphs (a)

(1) and (3) of this section, suspended) in whole or in part if any of

the circumstances stated in paragraphs (a)(1) through (4) of this

section apply.

[[Page 3758]]

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

terms and conditions of an award.

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

two parties shall agree upon the termination conditions, including the

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

be terminated.

(3) If at any time USAID determines that continuation of all or

part of the funding for a program should be suspended or terminated

because such assistance would not be in the national interest of the

United States or would be in violation of an applicable law, then USAID

may, following notice to the recipient, suspend or terminate the award

in whole or in part and prohibit the recipient from incurring

additional obligations chargeable to the award other than those costs

specified in the notice of suspension. If a suspension is effected and

the situation causing the suspension continues for 60 days or more,

then USAID may terminate the award in whole or in part on written

notice to the recipient and cancel any portion of the award which has

not been disbursed or irrevocably committed to third parties.

(4) By the recipient upon sending to USAID 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 USAID determines in the case of partial termination that

the reduced or modified portion of the award will not accomplish the

purposes for which the grant was made, it may terminate the award in

its entirety under paragraph (a)(1), (a)(2) or (a)(3) of this section.

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

the recipient referred to in paragraph 226.71(a), including those for

property management as applicable, shall be considered in the

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

responsibilities of the recipient after termination, as appropriate.

Sec. 226.62 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, USAID may, in addition to imposing any of the special conditions

outlined in Sec. 226.14, 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 USAID.

(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. The recipient may appeal, in accordance

with Subpart F, any action taken by USAID on which a dispute exists and

a decision by the Agreement Officer has been obtained. There is no

right to a hearing on such an appeal.

(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

USAID 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:

(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, and

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

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

termination takes effect.

(d) Relationship to debarment and suspension. The enforcement

remedies identified in this section, including suspension and

termination, do not preclude a recipient from being subject to

debarment and suspension under E.O.s 12549 and 12689 and USAID's

implementing regulations (see 22 CFR Part 208).

Subpart D--After-the-Award Requirements

Sec. 226.70 Purpose.

Sections 226.71 through 226.73 contain closeout procedures and

other procedures for subsequent disallowances and adjustments.

Sec. 226.71 Closeout procedures.

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

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

reports as required by the terms and conditions of the award. USAID may

approve extensions when requested by the recipient.

(b) Unless USAID authorizes an extension, a recipient shall

liquidate all obligations incurred under the award not later than 90

calendar days after the funding period or the date of completion as

specified in the terms and conditions of the award or in agency

implementing instructions.

(c) USAID will make prompt payments to a recipient for allowable

reimbursable costs under the award being closed out.

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

cash that USAID 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, USAID

shall make a settlement for any upward or downward adjustments to the

Federal share of costs after closeout reports are received.

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

acquired with Federal funds or received from the Federal Government in

accordance with Secs. 226.31 through 226.37.

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

closeout of an award, USAID retains the right to recover an appropriate

amount after fully considering the recommendations on disallowed costs

resulting from the final audit.

Sec. 226.72 Subsequent adjustments and continuing responsibilities.

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

(1) The right of USAID 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 Secs. 226.26.

(4) Property management requirements in Secs. 226.31 through

226.37.

(5) Records retention as required in Sec. 226.53.

(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

USAID and the recipient, provided the responsibilities of the recipient

referred to in paragraph 226.73(a), including those for property

management as applicable, are considered and provisions made for

continuing responsibilities of the recipient, as appropriate.

[[Page 3759]]

Sec. 226.73 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.

USAID reserves the right to require refund by the recipient of any

amount which USAID determines to have been expended for purposes not in

accordance with the terms and condition of the award, including but not

limited to costs which are not allowable in accordance with the

applicable Federal cost principles or other terms and conditions of the

award. If not paid within a reasonable period after the demand for

payment, USAID may reduce the debt by:

(1) Making an administrative offset against other requests for

reimbursements,

(2) Withholding advance payments otherwise due to the recipient, or

(3) Taking other action permitted by law.

(b) Except as otherwise provided by law, USAID will charge interest

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

Claims Collection Standards.''

Subpart E--Additional Provisions For Awards to Commercial

Organizations

Sec. 226.80 Scope of subpart.

This subpart contains additional provisions that apply to awards to

commercial organizations. These provisions supplement and make

exceptions for awards to commercial organizations from other provisions

of this part.

Sec. 226.81 Prohibition against profit.

No funds shall be paid as profit to any recipient that is a

commercial organization. Profit is any amount in excess of allowable

direct and indirect costs.

Sec. 226.82 Program income.

The additional costs alternative described in Sec. 226.24(b)(1) may

not be applied to program income earned by a commercial organization.

Subpart F--Miscellaneous

Sec. 226.90 Disputes.

(a) Any dispute under or relating to a grant or agreement shall be

decided by the USAID Agreement Officer. The Agreement Officer shall

furnish the recipient a written copy of the decision.

(b) Decisions of the USAID Agreement Officer shall be final unless,

within 30 days of receipt of the decision, the grantee appeals the

decision to USAID's Deputy Assistant Administrator for Management,

USAID, Washington, DC 20523. Appeals must be in writing with a copy

concurrently furnished to the Agreement Officer.

(c) In order to facilitate review on the record by the Deputy

Assistant Administrator for Management, the recipient shall be given an

opportunity to submit written evidence in support of its appeal. No

hearing will be provided.

(d) Decisions by the Deputy Assistant Administrator for Management

shall be final.

Subpart G--USAID-Specific Requirements

Sec. 226.1001 Eligibility rules for goods and services. [Reserved]

Sec. 226.1002 Local cost financing. [Reserved]

Sec. 226.1003 Air transportation. [Reserved]

Sec. 226.1004 Ocean shipment of goods. [Reserved]

Appendix A to Part 226--Contract Provisions

All contracts, awarded by a recipient including small purchases,

shall contain the following provisions as applicable:

1. Equal Employment Opportunity--All contracts to be performed

in the United States, or to be performed with employees who were

recruited in the United States, shall contain a provision requiring

compliance with E.O. 11246, ``Equal Employment Opportunity,'' as

amended by E.O. 11375, ``Amending Executive Order 11246 Relating to

Equal Employment Opportunity,'' and as supplemented by regulations

at 41 CFR Chapter 60, ``Office of Federal Contract Compliance

Programs, Equal Employment Opportunity, Department of Labor,'' to

the extent required by the foregoing.

2. Copeland ``Anti-Kickback'' Act (18 U.S.C. 874 and 40 U.S.C.

276c)--All contracts and subawards in excess of $2,000 for

construction or repair to be performed in the United States awarded

by recipients and subrecipients shall include a provision for

compliance with the Copeland ``Anti-Kickback'' Act (18 U.S.C. 874),

as supplemented by Department of Labor regulations (29 CFR part 3,

``Contractors and Subcontractors on Public Building or Public Work

Financed in Whole or in Part by Loans or Grants from the United

States''). The Act provides that each contractor or subrecipient

shall be prohibited from inducing, by any means, any person employed

in the construction, completion, or repair of public work, to give

up any part of the compensation to which he is otherwise entitled.

The recipient shall report all suspected or reported violations to

the Federal awarding agency.

3. Davis-Bacon Act, as amended (40 U.S.C. 276a to a-7)--When

required by Federal program legislation, all construction,

alteration, and/or repair contracts to be performed in the United

States awarded by the recipients and subrecipients of more than

$2,000 shall include a provision for compliance with the Davis-Bacon

Act (40 U.S.C. 276a to a-7) and as supplemented by Department of

Labor regulations (29 CFR part 5, ``Labor Standards Provisions

Applicable to Contracts Governing Federally Financed and Assisted

Construction''). Under this Act, contractors shall be required to

pay wages to laborers and mechanics at a rate not less than the

minimum wages specified in a wage determination made by the

Secretary of Labor. In addition, contractors shall be required to

pay wages not less than once a week. The recipient shall place a

copy of the current prevailing wage determination issued by the

Department of Labor in each solicitation and the award of a contract

shall be conditioned upon the acceptance of the wage determination.

The recipient shall report all suspected or reported violations to

the Federal awarding agency.

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

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

excess of $2000 for construction contracts to be performed in the

United States and in excess of $2500 for other such contracts that

involve the employment of mechanics or laborers shall include a

provision for compliance with sections 102 and 107 of the Contract

Work Hours and Safety Standards Act (40 U.S.C. 327-333), as

supplemented by Department of Labor regulations (29 CFR part 5).

Under section 102 of the Act, each contractor shall be required to

compute the wages of every mechanic and laborer on the basis of a

standard work week of 40 hours. Work in excess of the standard work

week is permissible provided that the worker is compensated at a

rate of not less than 1\1/2\ times the basic rate of pay for all

hours worked in excess of 40 hours in the work week. Section 107 of

the Act is applicable to construction work and provides that no

laborer or mechanic shall be required to work in surroundings or

under working conditions which are unsanitary, hazardous or

dangerous. These requirements do not apply to the purchases of

supplies or materials or articles ordinarily available on the open

market, or contracts for transportation or transmission of

intelligence.

5. Rights to Inventions Made Under a Contract or Agreement--

Contracts or agreements for the performance of experimental,

developmental, or research work shall provide for the rights of the

Federal Government and the recipient in any resulting invention in

accordance with 37 CFR part 401, ``Rights to Inventions Made by

Nonprofit Organizations and Small Business Firms Under Government

Grants, Contracts and Cooperative Agreements,'' and any implementing

regulations issued by the awarding agency.

6. Clean Air Act (42 U.S.C. 7401 et seq.) and the Federal Water

Pollution Control Act (33 U.S.C. 1251 et seq.), as amended--

Contracts and subawards of amounts in excess of $100,000 to be

performed in the United States shall contain a provision that

requires the recipient to agree to comply with all applicable

standards, orders or regulations issued pursuant to the Clean Air

Act (42

[[Page 3760]]

U.S.C. 7401 et seq.) and the Federal Water Pollution Control Act as

amended (33 U.S.C. 1251 et seq.). Violations shall be reported to

the Federal awarding agency and the Regional Office of the

Environmental Protection Agency (EPA).

7. Byrd Anti-Lobbying Amendment (31 U.S.C. 1352)--Contractors

who apply or bid for an award exceeding $100,000 shall file the

required certification. Each tier certifies to the tier above that

it will not and has not used Federal appropriated funds to pay any

person or organization for influencing or attempting to influence an

officer or employee of any agency, a member of Congress, officer or

employee of Congress, or an employee of a member of Congress in

connection with obtaining any Federal contract, grant or any other

award covered by 31 U.S.C. 1352. Each tier shall also disclose any

lobbying with non-Federal funds that takes place in connection with

obtaining any Federal award. Such disclosures are forwarded from

tier to tier up to the recipient.

8. Debarment and Suspension (E.O.s 12549 and 12689)--Certain

contracts shall not be made to parties listed on the nonprocurement

portion of the General Services Administration's ``Lists of Parties

Excluded from Federal Procurement or Nonprocurement Programs'' in

accordance with E.O.s 12549 and 12689, ``Debarment and Suspension.''

This list contains the names of parties debarred, suspended, or

otherwise excluded by agencies, and contractors declared ineligible

under statutory or regulatory authority other than E.O. 12549.

Contractors with awards that exceed the small purchase threshold

shall provide the required certification regarding its exclusion

status and that of its principals.

9. Contracts which require performance outside the United States

shall contain a provision requiring Worker's Compensation Insurance

(42 U.S.C. 1651, et seq.). As a general rule, Department of Labor

waivers will be obtained for persons employed outside the United

States who are not United States citizens or residents provided

adequate protection will be given such persons. The recipient should

refer questions on this subject to the USAID Agreement Officer.

* * * * *

Dated: January 6, 1995.

Michael D. Sherwin,

Deputy Assistant Administrator for Management.

[FR Doc. 95-975 Filed 1-18-95; 8:45 am]

BILLING CODE 6116-01-M