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

DEPARTMENT OF COMMERCE

15 CFR Part 14

[Docket No. 980422101-8101-01]

RIN 0605-AA09

Uniform Administrative Requirements for Grants and Agreements

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

Commercial Organizations

AGENCY: Department of Commerce (DoC).

ACTION: Interim Final Rule.

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SUMMARY: This interim final rule implements the revisions to the Office

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

Requirements for Grants and Agreements With Institutions of Higher

Education, Hospitals, and Other Non-Profit Organizations'' which was

published in the Federal Register on November 29, 1993. The revised

Circular was developed by an interagency task force for governmentwide

use in a model rule format to facilitate regulatory adoption by

executive departments and agencies. In the published revised Circular,

OMB specified as ``required action'' that Federal agencies responsible

for awarding and administering grants and other agreements to

recipients described therein, shall adopt the language of the Circular

unless other provisions are required by Federal statute or exceptions

or deviations are approved by OMB. This interim final rule adopts the

provisions of the Circular and its language to the maximum extent

feasible. However, minor changes were made to update the procedures,

clarify the language, and make the language apply specifically to the

DoC and its operating units. No changes are intended to deviate from

the substance of Circular A-110. The Circular covers both grants and

cooperative agreements made by Federal agencies and subawards, unless

sections of the Circular specifically exclude subrecipients from

coverage. Consistent with guidance provided in the Circular, DoC will

apply its provisions to grants and agreements with institutions of

higher education, hospitals, other nonprofit, and commercial

organizations. The provisions of the interim final rule will also apply

to foreign governments, organizations under the jurisdiction of foreign

governments, and international organizations when appropriate.

DATES: This regulation is effective October 1, 1998. Written and signed

comments must be received on or before November 3, 1998.

ADDRESSES: Interested persons should submit written and signed comments

to Docket No. 980422101-8101-01, U.S. Department of Commerce, Office of

Executive Assistance Management, Room 6020, 14th and Constitution

Avenue, Washington, D.C. 20230.

FOR FURTHER INFORMATION CONTACT: John J. Phelan, III, Director, Office

of Executive Assistance Management, Telephone Number 202-482-4115.

SUPPLEMENTARY INFORMATION: This interim final rule incorporates and

reflects the provisions of the OMB issuance of the revised OMB Circular

A-110, published at 58 FR 62992, to be codified at 15 CFR part 14 of

the DoC regulatory requirements for financial assistance awards. OMB

Circular A-110 was originally issued by OMB in 1976, and except for a

minor revision in 1987 it remained unchanged until this revision was

issued. The standards it contained were structured into 15 attachments

lettered A through O. An interagency task force also reviewed the

circular in 1987 and recommended that it be combined with OMB Circular

A-102, ``Uniform Requirements for Grants and Agreements with State and

Local Governments,'' as a consolidated ``common rule.'' In November

1988, a proposed consolidated ``common rule'' was published in the

Federal Register (53 FR 44716) but, due to adverse concerns by some

university groups and Federal agencies, it was not finalized and issued

by OMB. In November 1990, another interagency task force was convened

to review Circular A-110 and a revision in a ``common rule'' format was

proposed and developed. This revision was published for comment in the

Federal Register (57 FR 39018) in August 1992 and over 200 comments

were received by OMB from many sources. All comments were considered in

developing the final revision of Circular A-110 which was issued for

governmentwide use in the Federal Register on November 29, 1993.

Consequently, this rule is published as an interim final rule because

of the previous request for comment process used in the development of

the Circular, the large number of comments already received and

considered by OMB and the Federal agencies, and the limited flexibility

to revise the requirements prescribed by OMB. This interim final rule

contains the following updates to procedures and clarifying language:

Foreign governments, organizations under the jurisdiction

of foreign governments, and international

[[Page 47156]]

organizations will be covered by this interim final rule.

Taxpayer identification numbers will be required of

applicants in accordance with the provisions of the Debt Collection

Improvement Act of 1996.

Federal payments to recipients shall be made by electronic

funds transfer in accordance with the Debt Collection Improvement Act

of 1996, unless waived in accordance with the provisions of the Act.

The recipient may not transfer funds among direct cost

categories or programs, functions and activities for construction or

nonconstruction awards in which the cumulative amount of such transfers

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

approved by the Grants Officer. This restriction applies to all awards,

regardless of the amount of Federal funding, and it does not prohibit

the recipient from requesting Grants Officer approval for revisions to

the budget.

Recipients and subrecipients that are institutions of

higher education or other non-profit organizations (including

hospitals) shall be subject to the requirements contained in the Single

Audit Act Amendments of 1996 and OMB Circular A-133. Subrecipients that

are state and local governments shall also be subject to the

requirements contained in the Single Audit Act Amendments of 1996 and

OMB Circular A-133. Commercial organizations, foreign governments,

organizations under the jurisdiction of foreign governments, and

international organizations shall be subject to the audit requirements

as stipulated in the award document.

If there is a residual inventory of supplies exceeding

$5000 in total aggregate value upon termination or completion of a

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-Federally sponsored activities or sell them,

but shall, in either case, compensate the Federal Government for its

cost share. This encompasses a residual inventory of both used and

unused supplies exceeding $5000 in total aggregate value.

The small purchase threshold (previously $25,000) fixed at

41 U.S.C. 403 (11) reflects the simplified acquisition threshold

(currently $100,000) established at 41 U.S.C. 4031 (11) by the Federal

Acquisition Streamlining Act of 1994.

For purposes of this interim final rule, ``DoC'' is a term

referring to the Department of Commerce collectively. For purposes of

decision making or actions affecting outside entities, ``DoC'' is also

an eclectic term which refers to the organizational entity exercising

authority in the specific subject matter under discussion. Within the

language of the rule, when the Economic Development Administration

(EDA) enters into awards under which it is contemplated that the

recipient will dispose of real property improved with Federal funds,

EDA may impose conditions for its approval of such disposition.

Executive Orders 12866 and 12875

This interim final rule has been determined to be ``significant''

for purposes of Executive Order 12866, ``Regulatory Planning and

Review.'' In addition, it has been determined that, consistent with the

requirements of Executive Order 12875, ``Enhancing Intergovernmental

Partnership,'' this interim final rule will not impose any unfunded

mandates upon State, local, and tribal governments.

Administrative Procedure Act and Regulatory Flexibility Act

Because notice and comment is not required under 5 U.S.C. 553, or

any other law, for this rule relating to public property, loans, grants

benefits or contracts (5 U.S.C. 553(a)), a Regulatory Flexibility

Analysis is not required and has not been prepared for this interim

final rule. As stated above, this rule is based on the revised OMB

Circular A-110 that was developed by an interagency task force and

received extensive public comment. The revised Circular specifies that

Federal agencies responsible for awarding and administering grants and

other agreements to recipients described therein, shall adopt the

language in the Circular unless different provisions are required by

Federal statute or are approved by OMB. This interim final rule

essentially adopts the provisions of the Circular word-for-word to the

maximum extent feasible.

Executive Order 12612 (Federalism Assessment)

This action has been reviewed in accordance with the principles and

criteria contained in Executive Order 12612. The rule primarily applies

to organizations other than State and local governments, but for some

programs State or local governments are required to pass on these

requirements to subrecipients covered by this rule. The rule was

drafted to be as consistent as possible with requirements imposed on

State and local governments. Accordingly, it has been determined that

this proposal does not have sufficient Federalism implications to

warrant a full Federalism Assessment under the principles and criteria

contained in Executive Order 12612.

Paperwork Reduction Act

These regulatory actions do not impose any new reporting or

recordkeeping requirements under the Paperwork Reduction Act. Reporting

and recordkeeping requirements in 15 CFR Part 14 are those required by

OMB Circular A-110 and have already been cleared by OMB.

Catalog of Federal Domestic Assistance

This rule affects all of the grant and cooperative agreement

programs with institutions of higher education, hospitals, other non-

profit, and commercial organizations administered by DoC.

List of Subjects in 15 CFR Part 14

Accounting, Administrative practice and procedure, Colleges and

universities, Grants administration, Grant programs--economic

development, Grant programs--oceans and atmosphere, Grant programs--

minority businesses, Grant programs--travel and tourism, Grant

programs--technology, Grant programs--telecommunications, Grant

programs--international, Hospitals, Nonprofit organizations, Reporting

and recordkeeping requirements.

Issued this 19th day of August, 1998, at Washington, D.C.

John J. Phelan,

Director for Executive Assistance Management.

Accordingly, 15 CFR subtitle A is amended by adding part 14 to read

as follows:

PART 14--UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND

AGREEMENTS WITH INSTITUTIONS OF HIGHER EDUCATION, HOSPITALS, OTHER

NON-PROFIT, AND COMMERCIAL ORGANIZATIONS

Subpart A--General

Sec.

14.1 Purpose.

14.2 Definitions.

14.3 Effect on other issuances.

14.4 Deviations.

14.5 Subawards.

Subpart B--Pre-Award Requirements

14.10 Purpose.

14.11 Pre-award policies.

14.12 Forms for applying for Federal assistance.

14.13 Debarment and suspension.

14.14 High risk special award conditions.

14.15 Metric system of measurement.

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14.16 Resource Conservation and Recovery Act (RCRA).

14.17 Certifications and representations.

14.18 Taxpayer identification number.

Subpart C--Post-Award Requirements

Financial and Program Management

14.20 Purpose of financial and program management.

14.21 Standards for financial management systems.

14.22 Payment.

14.23 Cost sharing or matching.

14.24 Program income.

14.25 Revision of budget and program plans.

14.26 Non-Federal audits.

14.27 Allowable costs.

14.28 Period of availability of funds.

Property Standards

14.30 Purpose of property standards.

14.31 Insurance coverage.

14.32 Real property.

14.33 Federally-owned and exempt property.

14.34 Equipment.

14.35 Supplies and other expendable property.

14.36 Intangible property.

14.37 Property trust relationship.

Procurement Standards

14.40 Purpose of procurement standards.

14.41 Recipient responsibilities.

14.42 Codes of conduct.

14.43 Competition.

14.44 Procurement procedures.

14.45 Cost and price analysis.

14.46 Procurement records.

14.47 Contract administration.

14.48 Contract provisions.

Reports and Records

14.50 Purpose of reports and records.

14.51 Monitoring and reporting program performance.

14.52 Financial reporting.

14.53 Retention and access requirements for records.

Termination and Enforcement

14.60 Purpose of termination and enforcement.

14.61 Termination.

14.62 Enforcement.

Subpart D--After-the-Award Requirements

14.70 Purpose.

14.71 Closeout procedures.

14.72 Subsequent adjustments and continuing responsibilities.

14.73 Collection of amounts due.

Appendix A to Part 14--Contract Provisions

Authority: 5 U.S.C. 301.

Subpart A--General

Sec. 14.1 Purpose.

This Part establishes uniform administrative requirements for

Department of Commerce (DoC) grants and agreements awarded to

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

commercial organizations. The Grants Officer shall incorporate this

Part by reference into financial assistance awards made to

organizations to which it will be applied. The DoC shall not impose

additional or inconsistent requirements, except as provided in

Secs. 14.4, and 14.14 or unless specifically required by Federal

statute or executive order. This part applies to grants and agreements

awarded to foreign governments, organizations under the jurisdiction of

foreign governments, and international organizations unless otherwise

determined by the Grants Officer after coordination with the

appropriate program officials. Uniform requirements for State, local,

and tribal governments are in 15 CFR Part 24, Uniform Administrative

Requirements for Grants and Cooperative Agreements to State and Local

Governments. Non-profit organizations that implement Federal programs

for the States are also subject to State requirements.

Sec. 14.2 Definitions.

(a) Accrued expenditures means the charges incurred by the

recipient during a given period requiring the provision of funds for:

(1) Goods and other tangible property received;

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

and other payees; and

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

services or performance is required.

(b) Accrued income means the sum of:

(1) Earnings during a given period from 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.

(c) Acquisition cost of equipment means the net invoice price of

the equipment, including the cost of modifications, attachments,

accessories, or auxiliary apparatus necessary to make the property

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

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

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

acquisition cost in accordance with the recipient's regular accounting

practices.

(d) Advance means a payment made by electronic funds transfer,

Treasury check, or other appropriate payment mechanism to a recipient

upon its request either before outlays are made by the recipient or

through the use of predetermined payment schedules.

(e) Assistant Secretary means the DoC Chief Financial Officer and

Assistant Secretary for Administration who has been delegated by the

Secretary of Commerce the responsibility for developing and

implementing policies, standards, and procedures for the administration

of financial assistance programs of the DoC.

(f) Award means financial assistance that provides support or

stimulation to accomplish a public purpose. Awards include grants and

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

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

include: technical assistance, 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.

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

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

(h) Closeout means the process by which the Grants Officer

determines that all applicable administrative actions and all required

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

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

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

subrecipient's contract.

(j) Cost sharing or matching means that portion of project or

program costs not borne by the Federal Government.

(k) Date of completion means the date on which all work under an

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

or amendment thereto, on which Federal sponsorship ends.

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

Grants Officer determines to be unallowable, in accordance with the

applicable Federal cost principles or other terms and conditions

contained in the award.

(m) DoC operating unit means an organizational unit of the

Department that has the authority to fund financial assistance awards.

(n) Equipment means tangible nonexpendable personal property

including exempt property charged directly to the award having a useful

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

unit. However, consistent with recipient policy, lower limits may be

established.

(o) Excess property means property under the control of the DoC

that, as determined by the Grants Officer after

[[Page 47158]]

coordination with the authorized property official, is no longer

required for DoC needs or the discharge of its responsibilities.

(p) Exempt property means tangible personal property acquired in

whole or in part with Federal funds, where the DoC 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.

(q) Federal awarding agency means the Federal agency that provides

an award to the recipient.

(r) 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.

(s) 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.

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

available for obligation by the recipient.

(u) Grants Officer means the DoC official with the delegated

authority to award, amend, administer, closeout, suspend, and/or

terminate grants and cooperative agreements and make related

determinations and findings.

(v) 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.

(w) 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.

(x) Outlays or expenditures means charges made to the project or

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

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

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

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

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

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

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

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

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

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

contractors, subrecipients and other payees and other amounts becoming

owed under programs for which no current services or performance are

required.

(y) 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.

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

evidencing prior consent.

(aa) Program income means gross income earned by the recipient that

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

the award (see exclusions in Sec. 14.24 (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 DoC 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.

(bb) 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.

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

document during which Federal sponsorship begins and ends.

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

equipment, intangible property and debt instruments.

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

structures and appurtenances thereto, but excludes movable machinery

and equipment.

(ff) Recipient means an organization receiving financial assistance

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

includes public and private institutions of higher education, public

and private hospitals, and other quasi-public and private non-profit

organizations such as, but not limited to, community action agencies,

research institutes, educational associations, and health centers. The

term may include commercial organizations, foreign or international

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

recipients, subrecipients, or contractors or subcontractors of

recipients or subrecipients at the discretion of the DoC. 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.

(gg) Research and development means all research activities, both

basic and applied, and all development activities that are supported at

universities, colleges, other non-profit, and commercial 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.

(hh) Small awards means a grant or cooperative agreement not

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

(currently $100,000).

(ii) 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 paragraph (f) of this section.

(jj) Subrecipient means the legal entity to which a subaward is

made and which

[[Page 47159]]

is accountable to the recipient for the use of the funds provided. The

term may include foreign or international organizations (such as

agencies of the United Nations) at the discretion of the DoC.

(kk) 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.''

(ll) Suspension means an action taken by the Grants Officer after

coordination with the DoC operating unit that temporarily withdraws

Federal sponsorship under an award, pending corrective action by the

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

Officer. Suspension of an award is a separate action from suspension

under DoC regulations at 15 CFR Part 26 implementing E.O.s 12549 and

12689, ``Debarment and Suspension.''

(mm) Termination means the cancellation by the Grants Officer of

Federal sponsorship, in whole or in part, under an agreement at any

time prior to the date of completion.

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

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

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

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

services directly benefiting and specifically identifiable to the

project or program.

(oo) 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.

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

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

determined by deducting the cumulative obligations from the cumulative

funds authorized.

(qq) 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.

(rr) 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. 14.3 Effect on other issuances.

For awards subject to this part, all administrative requirements of

codified program regulations, program manuals, handbooks and other

nonregulatory materials which are inconsistent with the requirements of

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

by statute, or authorized in accordance with the deviations provision

in Sec. 14.4.

Sec. 14.4 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. The

Assistant Secretary may apply more restrictive requirements to a class

of recipients when approved by OMB. The Assistant Secretary 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 Assistant Secretary. An exception made on

a case-by-case basis will apply to a single award.

Sec. 14.5 Subawards.

Unless sections of this part specifically exclude subrecipients

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

subrecipients performing work under awards if such subrecipients are

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

commercial organizations. This part also applies to subrecipients

performing work under awards if the subrecipients are foreign

governments, organizations under the jurisdiction of foreign

governments, and international organizations unless otherwise

determined by the Grants Officer. 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,'' (15 CFR Part 24).

Sec. 14.6 Availability of OMB circulars.

OMB circulars cited in this part are available from the Office of

Management and Budget (OMB) by writing to the Executive Office of the

President, Publications Service, 725 17th Street, NW, Suite 200,

Washington DC 20503.

Subpart B--Pre-Award Requirements

Sec. 14.10 Purpose.

Sections 14.11 through 14.18 prescribe forms and instructions and

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

Sec. 14.11 Pre-award policies.

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

each instance, the Grants Officer after coordination with the DoC

operating unit shall decide on the appropriate award instrument (i.e.,

grant, cooperative agreement, or contract). The Federal Grant and

Cooperative Agreement Act (31 U.S.C. 6301-08) governs the use of

grants, cooperative agreements and contracts. A grant or cooperative

agreement shall be used only when the principal purpose of a

transaction is to accomplish a public purpose of support or stimulation

authorized by Federal statute. The statutory criterion for choosing

between grants and cooperative agreements is that for the latter,

``substantial involvement is expected between the executive agency and

the State, local government, or other recipient when carrying out the

activity contemplated in the agreement.'' Contracts shall be used when

the principal purpose is acquisition of property or services for the

direct benefit or use of the Federal Government.

(b) Public notice and priority setting. The DoC operating units

shall notify the public of their intended funding priorities for

discretionary grant programs, unless funding priorities are established

by Federal statute. At a minimum, public notices shall be published in

the Federal Register.

Sec. 14.12 Forms for applying for Federal assistance.

(a) The DoC operating units shall comply with the applicable report

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

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

operating units in place of or as a supplement to the Standard Form 424

(SF-424) series.

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

instructions prescribed by the DoC.

(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).

[[Page 47160]]

The name and address of the SPOC for a particular State can be obtained

from the DoC 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) DoC operating units 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. 14.13 Debarment and suspension.

The DoC and recipients shall comply with the nonprocurement

debarment and suspension common rule implementing E.O.s 12549 and

12689, ``Debarment and Suspension,'' which is implemented by DoC at 15

CFR Part 26. 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. 14.14 High risk 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

Grants 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 shall be promptly removed once the

conditions that prompted them have been corrected.

Sec. 14.15 Metric system of measurement.

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

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

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

requires each Federal agency to establish a date or dates in

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

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

other business-related activities. Metric implementation may take

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

to cause significant inefficiencies in the accomplishment of federally-

funded activities. The DoC shall follow the provisions of E.O. 12770,

``Metric Usage in Federal Government Programs.''

Sec. 14.16 Resource Conservation and Recovery Act (RCRA).

Under RCRA (Pub. L. 94-580, 42 U.S.C. 6962), any State agency or

agency of a political subdivision of a State which is using

appropriated Federal funds must comply with section 6002. Section 6002

requires that preference be given in procurement programs to the

purchase of specific products containing recycled materials identified

in guidelines developed by the Environmental Protection Agency (EPA)

(40 CFR parts 247-254). Accordingly, State and local institutions of

higher education, hospitals, non-profit, and commercial organizations

that receive direct Federal awards or other Federal funds shall give

preference in their procurement programs funded with Federal funds to

the purchase of recycled products pursuant to the EPA guidelines.

Sec. 14.17 Certifications and representations.

Unless prohibited by statute or codified regulation, Grants

Officers may 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. When authorized, annual certifications

and representations shall be signed by responsible officials with the

authority to ensure recipients' compliance with the pertinent

requirements.

Sec. 14.18 Taxpayer identification number.

In accordance with the provisions of the Debt Collection

Improvement Act of 1996 (31 U.S.C. 7701), the taxpayer identifying

number will be required from applicants for grants and cooperative

agreements funded by the DoC. This number may be used for purposes of

collecting and reporting on any delinquent amounts arising from awards

made under this part.

Subpart C--Post-Award Requirements

Financial and Program Management

Sec. 14.20 Purpose of financial and program management.

Sections 14.21 through 14.28 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, conducting audits,

determining allowability of cost, and establishing fund availability.

Sec. 14.21 Standards for financial management systems.

(a) The Grants Officer shall require recipients to relate financial

data to performance data and develop unit cost information whenever

practical.

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

following:

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

results of each federally-sponsored project or program in accordance

with the reporting requirements set forth in Sec. 14.52. If the Grants

Officer requires reporting on an accrual basis from a recipient that

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

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

recipients may develop such accrual data for its reports on the basis

of an analysis of the documentation on hand.

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

funds for federally-sponsored activities. These records shall contain

information pertaining to Federal awards, authorizations, obligations,

unobligated balances, assets, outlays, income and interest.

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

property and other assets. Recipients shall adequately safeguard all

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

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

Whenever appropriate, financial information should be related to

performance and unit cost data.

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

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

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

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

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

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

fiscal agents shall be consistent with CMIA Treasury-State Agreements

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

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

and Other Programs.''

(6) Written procedures for determining the reasonableness,

allocability and allowability of costs in accordance with the

provisions of the applicable Federal cost principles and the terms and

conditions of the award.

[[Page 47161]]

(7) Accounting records including cost accounting records that are

supported by source documentation.

(c) Where the DoC guarantees or insures the repayment of money

borrowed by the recipient, the Grants Officer may require adequate

bonding and insurance if the bonding and insurance requirements of the

recipient are not deemed adequate to protect the interest of the

Federal Government.

(d) The Grants Officer 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. 14.22 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. Federal payments to recipients

shall be made by electronic funds transfer in accordance with the Debt

Collection Improvement Act of 1996, unless waived in accordance with

the provisions of this Act.

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

demonstrate the willingness to maintain: written procedures that

minimize the time elapsing between the transfer of funds and

disbursement by the recipient, and financial management systems that

meet the standards for fund control and accountability as established

in Sec. 14.21. Advances of funds 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 advances of funds 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 may be consolidated to cover

anticipated cash needs for all awards made by the DoC operating unit to

the recipient.

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

electronic funds transfer and Treasury check when the electronic funds

transfer requirement is waived.

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

(3) Recipients may submit requests for advances and reimbursements

on a monthly basis.

(d) Requests for 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 advance payments

are made to the recipient automatically through the use of a

predetermined payment schedule or if precluded by special DoC

instructions for electronic funds transfer.

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

paragraph (b) of this section cannot be met. The Grants Officer may

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

portion of the construction project is accomplished through private

market financing or Federal loans, and the Federal assistance

constitutes a minor portion of the project.

(1) When the reimbursement method is used, the DoC shall make

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

is improper.

(2) Recipients are authorized to submit request for reimbursement

at least monthly when electronic funds transfers are not used.

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

and the Grants Officer after coordination with the operating unit has

determined that reimbursement is not feasible because the recipient

lacks sufficient working capital, the Grants Officer may authorize

payment on a working capital advance basis. Under this procedure, the

Grants Officer shall provide for advancing funds to the recipient to

cover its estimated disbursement needs for an initial period generally

geared to the awardee's disbursing cycle. Thereafter, payments shall be

provided by reimbursing the recipient for its actual cash

disbursements. The working capital advance method of payment shall not

be used for recipients unwilling or unable to provide timely advances

to their subrecipient to meet the subrecipient's actual cash

disbursements.

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

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

program income, rebates, refunds, contract settlements, audit

recoveries and interest earned on such funds before requesting

additional payments.

(h) Unless otherwise required by statute, Grants Officers shall not

withhold payments for proper charges made by recipients at any time

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

section apply.

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

the terms and conditions of the award, or Federal reporting

requirements.

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

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

Credit Programs.'' Under such conditions, the Grants Officer 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, the DoC shall not require separate depository accounts for

funds provided to a recipient or establish any eligibility requirements

for depositories for funds provided to a recipient. However, recipients

must be able to account for the receipt, obligation and expenditure of

funds.

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

insured accounts whenever possible.

(j) Consistent with the national goal of expanding the

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

recipients shall be encouraged to use women-owned and minority-owned

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

group members).

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

bearing accounts, unless paragraph (k) (1), (2) or (3) of this section

apply.

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

year.

(2) The best reasonably available interest bearing account would

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

cash balances.

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

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

Federal cash resources.

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

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

bearing accounts shall be remitted annually to

[[Page 47162]]

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 Grants Officer, 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. Grants Officers shall not require more than an original

and two copies of these forms.

(1) SF-270, Request for Advance or Reimbursement. DoC has adopted

the SF-270 as a standard form for all nonconstruction programs when

predetermined advance methods are not used. The Grants Officer,

however, may waive the requirement to use the SF-270 for requesting

funds under grants and cooperative agreements. Grants Officers have the

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

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

Programs.''

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

Construction Programs. DoC has adopted the SF-271 as the standard form

to be used for requesting reimbursement for construction programs.

However, the Grants Officer may substitute the SF-270 when the Grants

Officer determines that the SF-270 provides adequate information to

meet Federal needs.

Sec. 14.23 Cost sharing or matching.

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

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

when such contributions meet all of the following criteria:

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

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

assisted project or program.

(3) Are necessary and reasonable for proper and efficient

accomplishment of project or program objectives.

(4) Are allowable under the applicable cost principles.

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

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

or matching.

(6) Are provided for in the approved budget.

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

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

sharing or matching only with the prior approval of the Grants Officer.

(c) Values for recipient contributions of services and property

shall be established in accordance with the applicable cost principles.

If DoC authorizes recipients to donate buildings or land for

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

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

lesser of paragraph (c) (1) or (2).

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

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

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

sufficient justification, the Grants 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 organization. In those instances in which the required

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

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

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

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

allocable may be included in the valuation.

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

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

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

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

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

employee is normally paid.

(f) Donated supplies may include such items as 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

paragraph (g) (1) or (2) of this section applies.

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

acquisition of equipment, buildings or land, the total value of the

donated property may be claimed as cost sharing or matching.

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

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

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

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

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

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.

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

supporting records for in-kind contributions from third parties:

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

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

own employees.

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

material, equipment, buildings and land shall be documented.

Sec. 14.24 Program income.

(a) The standards set forth in this section shall apply in

requiring recipient organizations to account for program income related

to projects financed in whole or in part with Federal funds.

[[Page 47163]]

(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 DoC regulations or the terms and

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

listed in the following:

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

recipient and used to further eligible project objectives.

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

(3) Deducted from the total project allowable cost in determining

the net allowable costs on which the Federal share of costs is based.

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

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

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

paragraph (b)(3) of this section.

(d) In the event that the DoC does not specify in its regulations

or the terms and conditions of the award how program income is to be

used, paragraph (b)(1) of this section shall apply automatically to all

projects or programs.

(e) Unless DoC regulations or the terms and conditions of the award

provide otherwise, recipients shall have no obligation to the Federal

Government regarding program income earned after the end of the project

period.

(f) Costs incident to the generation of program income may be

deducted from gross income to determine program income, provided these

costs have not been charged to the award.

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

accordance with the requirements of the Property Standards (See

Secs. 14.30 through 14.37).

(h) Unless DoC regulations or the terms and conditions 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. 14.25 Revision of budget and program plans.

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

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

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

upon DoC requirements. It shall be related to performance for program

evaluation purposes whenever appropriate.

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

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

revisions, in accordance with this section.

(c) For nonconstruction awards, recipients shall request prior

approvals from the Grants Officer for one or more of the following

program or budget related reasons. Approvals will be provided in

writing by the Grants Officer.

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

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

approval).

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

document.

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

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

director or principal investigator.

(4) The need for additional Federal funding.

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

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

the DoC.

(6) The inclusion, unless waived by the DoC, of costs that require

prior approval in accordance with OMB Circular A-21, ``Cost Principles

for Educational Institutions,'' OMB Circular A-122, ``Cost Principles

for Non-Profit Organizations,'' 45 CFR part 74 Appendix E, ``Principles

for Determining Costs Applicable to Research and Development under

Grants and Contracts with Hospitals,'' or 48 CFR part 31, ``Contract

Cost Principles and Procedures,'' as applicable.

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

payment to trainees) to other categories of expense.

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

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

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

material, equipment or general support services.

(d) For nonconstruction awards, no other prior approval

requirements for specific items may be imposed unless a deviation has

been approved by OMB.

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

of this section, the Grants Officer may waive cost-related and

administrative prior written approvals required by this part and OMB

Circulars A-21 and A-122. Such waivers may include authorizing

recipients to do any one or more of the following:

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

than 90 calendar days with the prior approval of the Grants Officer

after coordination with the DoC operating unit. All pre-award costs are

incurred at the recipient's risk (i.e., the DoC is under no obligation

to reimburse such costs if for any reason the recipient does not

receive an award or if the award is less than anticipated and

inadequate to cover such costs).

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

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

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

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.

(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) For awards that support research, unless the DoC provides

otherwise in the award or in the DoC regulations, the prior approval

requirements described in paragraph (e) 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) The recipient may not transfer funds among direct cost

categories or programs, functions and activities for construction or

nonconstruction awards in which the cumulative amount of such transfers

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

approved by the Grants Officer. This does not prohibit the recipient

from requesting Grants Officer approval for revisions to the budget. No

transfers are permitted 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 nonconstruction 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 Grants Officer for budget revisions whenever

paragraph (h) (1), (2) or (3) apply.

[[Page 47164]]

Approvals will be provided in writing by the Grants Officer.

(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.

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

prior written approval requirements may be imposed consistent with

applicable OMB cost principles listed in Sec. 14.27.

(i) For construction awards, no other prior approval requirements

for specific items may be imposed unless a deviation has been approved

by OMB.

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

construction and nonconstruction work, the Grants Officer may require

the recipient to request prior approval from the Grants Officer before

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

supported. Approvals will be provided in writing by the Grants Officer.

(k) For both construction and nonconstruction awards, the DoC shall

require recipients to notify the Grants 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

Grants Officer indicates a letter of request suffices.

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

for budget revisions, DoC shall review the request and the Grants

Officer shall notify the recipient in writing whether the budget

revisions have been approved. If the revision is still under

consideration at the end of 30 calendar days, the Grants Officer shall

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

expect the decision.

Sec. 14.26 Non-Federal audits.

(a) Recipients and subrecipients that are institutions of higher

education or other non-profit organizations (including hospitals) shall

be subject to the audit requirements contained in the Single Audit Act

Amendments of 1996 (31 U.S.C. 7501-7507) and revised OMB Circular A-

133, ``Audits of States, Local Governments, and Non-Profit

Organizations.''

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

requirements contained in the Single Audit Act Amendments of 1996 (31

U.S.C. 7501-7507) and revised OMB Circular A-133, ``Audits of States,

Local Governments, and Non-Profit Organizations.''

(c) For-profit hospitals not covered by the audit provisions of

revised OMB Circular A-133 shall be subject to the audit requirements

as stipulated in the award document.

(d) Commercial and other organizations not covered by paragraph

(a), (b), or (c) of this section shall be subject to the audit

requirements as stipulated in the award document or the prime recipient

as stipulated in the sub-award document.

Sec. 14.27 Allowable costs.

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

for determining allowable costs. Allowability of costs shall be

determined 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, Local and Indian Tribal 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. 14.28 Period of availability of funds.

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

grant only allowable costs resulting from obligations incurred during

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

Officer.

Property Standards

Sec. 14.30 Purpose of property standards.

Sections 14.31 through 14.37 set forth uniform standards governing

management and disposition of property furnished by the Federal

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

award. The DoC shall require recipients to observe these standards

under awards and shall not impose additional requirements, unless

specifically required by Federal statute. The recipient may use its own

property management standards and procedures provided it observes the

provisions of Secs. 14.31 through 14.37.

Sec. 14.31 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. 14.32 Real property.

The DoC award shall prescribe requirements for recipients

concerning the use and disposition of real property acquired in whole

or in part under awards. Unless otherwise provided by statute, such

requirements, at a minimum, shall contain the following:

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

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

authorized purpose of the project as long as it is needed, provided

that, in lieu of title, with the approval of the Grants Officer, the

recipient may hold a leasehold or other interest in the property

appropriate to the project purpose. The recipient shall not dispose of

or encumber the property or any interest therein without approval of

the Grants Officer.

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

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 the DoC.

(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 DoC or its successor Federal awarding

agency. The responsible Federal agency shall observe one or more of the

following disposition instructions:

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

obligation to the Federal Government after it compensates the Federal

Government for that percentage of the current fair

[[Page 47165]]

market value of the property attributable to the Federal participation

in the project.

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

guidelines provided by the Grants Officer 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. 14.33 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 the DoC operating unit. Upon completion of the award or when

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

property to the DoC operating unit for further Federal agency

utilization.

(2) If the DoC operating unit has no further need for the property,

it shall be declared excess and reported to the General Services

Administration, unless the DoC has statutory authority to dispose of

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

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

research equipment to educational and non-profit organizations in

accordance with E.O. 12821, ``Improving Mathematics and Science

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

instructions shall be issued to the recipient by the Grants Officer.

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

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

recipient without further obligation to the Federal Government and

under conditions the DoC considers appropriate. Such property is

``exempt property.'' Should the DoC not establish conditions, title to

exempt property upon acquisition shall vest in the recipient without

further obligation to the Federal Government.

Sec. 14.34 Equipment.

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

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

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

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

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

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

Federal Government retains an interest in the equipment.

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

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

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

encumber the property without approval of the DoC. When no longer

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

equipment in connection with its other federally-sponsored activities,

in the following order of priority:

(1) Activities sponsored by the DoC operating unit which funded the

original project;

(2) Activities sponsored by other DoC operating units; then

(3) Activities sponsored by other Federal awarding agencies.

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

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

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

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

equipment was originally acquired. First preference for such other use

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

operating unit that financed the equipment; second preference shall be

given to projects or programs sponsored by other DoC operating units,

and third preference shall be given to projects or programs sponsored

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

Federal Government, use on other activities not sponsored by the

Federal Government shall be permissible if authorized by the Grants

Officer after coordination with the DoC operating unit. User charges

shall be treated as program income.

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

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

proceeds to offset the costs of the replacement equipment subject to

the approval of the Grants Officer after coordination with the DoC

operating unit.

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

acquired with Federal funds and federally-owned equipment shall include

all of the following:

(1) Equipment records shall be maintained accurately and shall

include the following information:

(i) A description of the equipment.

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

number, national stock number, or other identification number.

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

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

Government.

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

furnished by the Federal Government) and cost.

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

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

equipment furnished by the Federal Government).

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

information was reported.

(viii) Unit acquisition cost.

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

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

where a recipient compensates the DoC 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 Grants Officer.

(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

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accordance with the following standards. Equipment with a current per-

unit fair market value of less than $5000 may be retained, sold, or

otherwise disposed of with no further obligation to the awarding

agency. 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 DoC operating unit or its

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

percentage of Federal participation in the cost of the original project

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

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

disposition instructions from the Grants Officer. The Grants Officer

shall determine whether the equipment can be used to meet the agency's

requirements. If no requirement exists within that agency, the

availability of the equipment shall be reported to the General Services

Administration by the Grants Officer to determine whether a requirement

for the equipment exists in other Federal agencies. The Grants 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 the DoC 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 shall be reimbursed by the DoC for such costs

incurred in its disposition.

(h) The DoC 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) The Grants Officer shall issue disposition instructions within

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

inventory shall list all equipment acquired with grant funds and

federally-owned equipment. If the Grants Officer fails to issue written

disposition instructions within the 120 calendar day period, the

recipient shall apply the standards of this section, as appropriate.

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

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

Sec. 14.35 Supplies and other expendable property.

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

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

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. 14.36 Intangible property.

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

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

under an award. The DoC 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 DoC at 37 CFR part 401, ``Rights to Inventions Made by Nonprofit

Organizations and Small Business Firms Under Government Grants,

Contracts and Cooperative Agreements.''

(c) Unless waived by the DoC, 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

written approval from the Grants Officer. When no longer needed for the

originally authorized purpose, disposition of the intangible property

shall occur in accordance with the provisions of Sec. 14.34(g).

Sec. 14.37 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. The Grants

Officer may require recipients to record liens or other appropriate

notices of record to indicate that personal or real property has been

acquired or improved with Federal funds and that use and disposition

conditions apply to the property.

Procurement Standards

Sec. 14.40 Purpose of procurement standards.

Sections 14.41 through 14.48 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 the DoC upon recipients, unless

specifically required by Federal statute or executive order or approved

by OMB.

Sec. 14.41 Recipient responsibilities.

The standards contained in this section do not relieve the

recipient of the contractual responsibilities arising under its

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

recourse to the DoC, regarding the settlement and satisfaction of all

contractual and administrative issues arising out of procurements

entered into

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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. 14.42 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. 14.43 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 set forth all requirements that the bidder or offeror

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

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

recipient's interest to do so.

Sec. 14.44 Procurement procedures.

(a) All recipients shall establish written procurement procedures.

These procedures shall provide for, 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 to be used in evaluating bids or proposals.

(iii) A description, whenever practicable, of technical

requirements in terms of functions to be performed or performance

required, including the range of acceptable characteristics or minimum

acceptable standards.

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

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

solicitation.

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

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

measurement.

(vi) Preference, to the extent practicable and economically

feasible, for products and services that conserve natural resources and

protect the environment and are energy efficient.

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

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

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

following steps to further this goal:

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

business enterprises are used to the fullest extent practicable.

(2) Make information on forthcoming opportunities available and

arrange time frames for purchases and contracts to encourage and

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

women's business enterprises.

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

larger contracts intend to subcontract with small businesses, minority-

owned firms, and women's business enterprises.

(4) Encourage contracting with consortiums of small businesses,

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

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

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

organizations as the Small Business Administration and the DoC'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,'' as implemented by DoC

regulations at 15 CFR Part 26.

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

Officer, 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) (currently $100,000) and is to be

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

response to a solicitation.

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

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

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

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

procurement.

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

contract or

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

purchase threshold.

Sec. 14.45 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. 14.46 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. 14.47 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. 14.48 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 contract or subcontract exceeds $100,000.

For those contracts or subcontracts exceeding $100,000, the DoC may

accept the bonding policy and requirements of the recipient, provided

the Grants Officer has made a determination that the Federal

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

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

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

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

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

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

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

within the time specified.

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

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

in connection with a contract to secure fulfillment of all the

contractor's obligations under such contract.

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

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

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

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

in the contract.

(4) Where bonds are required in the situations described in this

part, the bonds shall be obtained from companies holding certificates

of authority as acceptable sureties pursuant to 31 CFR part 223,

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

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

purchase threshold) awarded by recipients shall include a provision to

the effect that the recipient, the DoC, 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.

Reports and Records

Sec. 14.50 Purpose of reports and records.

Sections 14.51 through 14.53 set forth the procedures for

monitoring and reporting on the recipient's financial and program

performance and the necessary standard reporting forms. They also set

forth record retention requirements.

Sec. 14.51 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 Sec. 14.26.

(b) The Grants Officer after coordination with the DoC operating

unit shall prescribe the frequency with which the performance reports

shall be submitted. Except as provided in paragraph (f) of this

section, performance reports shall not be required more frequently than

quarterly or, less frequently than annually. Annual reports shall be

due 90 calendar days after the grant year; quarterly or semi-annual

reports shall be due 30 days after the reporting period. The Grants

Officer 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) When required, performance reports shall generally contain, for

each award, brief information on each of the following:

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

objectives established for the period, the findings of the

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

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

related to cost data for computation of unit costs.

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

(3) Other pertinent information including, when appropriate,

analysis and explanation of cost overruns or high unit costs.

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

original and two copies of performance reports.

(f) Recipients shall immediately notify the DoC operating unit of

developments that have a significant impact on the award-supported

activities. Also,

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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) The DoC may make site visits, as needed.

(h) Federal awarding agencies shall comply with clearance

requirements of 5 CFR part 1320 when requesting performance data from

recipients.

Sec. 14.52 Financial reporting.

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

OMB are authorized for obtaining financial information from recipients:

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

(i) Each DoC award shall require recipients to use the SF-269 or

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

or programs. The DoC, however, has 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 DoC shall prescribe whether the report shall be on a cash

or accrual basis. If the DoC 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) The DoC shall determine the frequency of the Financial Status

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

of the particular project or program. However, the report shall not be

required more frequently than quarterly or less frequently than

annually. A final report shall be required at the completion of the

agreement.

(iv) The DoC shall require recipients to submit the SF-269 or SF-

269A (an original and no more than two copies) no later than 30 days

after the end of each specified reporting period for quarterly and

semi-annual reports, and 90 calendar days for annual and final reports.

Extensions of reporting due dates may be approved by the Grants Officer

upon request of the recipient.

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

(i) When funds are advanced to recipients the DoC shall require

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

continuation sheet, SF-272a. The DoC shall use this report to monitor

funds advanced to recipients and to obtain disbursement information for

each agreement with the recipients.

(ii) The DoC may require forecasts of Federal funds requirements in

the ``Remarks'' section of the report.

(iii) When practical and deemed necessary, the DoC may require

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

received in excess of three days. Recipients shall provide short

narrative explanations of actions taken to reduce the excess balances.

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

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

end of each quarter. The Grants Officer may require a monthly report

from those recipients receiving advances totaling $1 million or more

per year.

(v) The Grants Officer 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 the Grants Officer's opinion, the recipient's accounting

controls are adequate to minimize excessive Federal advances; or

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

(b) When the DoC needs additional information or more frequent

reports, the following shall be observed:

(1) When additional information is needed to comply with

legislative requirements, the Grants Officer shall issue instructions

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

section of the reports.

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

does not meet the standards in Sec. 14.21, 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. The DoC, in obtaining this information, shall comply with

report clearance requirements of 5 CFR part 1320.

(3) Grants Officers are encouraged to shade out any line item on

any report if not necessary.

(4) The DoC may accept the identical information from the

recipients in machine readable format or computer printouts or

electronic outputs in lieu of prescribed formats.

(5) The DoC may provide computer or electronic outputs to

recipients when such expedites or contributes to the accuracy of

reporting.

Sec. 14.53 Retention and access requirements for records.

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

access to records for awards to recipients. The DoC 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 the DoC. The only exceptions are the

following:

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

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

all litigation, claims or audit findings involving the records have

been resolved and final action taken.

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

funds shall be retained for 3 years after final disposition.

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

3-year retention requirement is not applicable to the recipient.

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

specified in paragraph (g) of this section.

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

records if authorized by the DoC.

(d) The Grants Officer after coordination with the DoC operating

unit 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, a

DoC operating unit or Grants Officer may make arrangements for

recipients to retain any records that are continuously needed for joint

use.

(e) The DoC, 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

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access to a recipient's personnel for the purpose of interview and

discussion related to such documents. The rights of access in this

paragraph are not limited to the required retention period, but shall

last as long as records are retained.

(f) Unless required by statute, no DoC operating unit shall place

restrictions on recipients that limit public access to the records of

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

operating unit can demonstrate that such records shall be kept

confidential and would have been exempted from disclosure pursuant to

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

belonged to the DoC operating unit.

(g) 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 the recipient submits to the Federal awarding agency

responsible for negotiating the recipient's indirect cost rate 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 the recipient is not required to submit to the cognizant

Federal awarding agency or the subrecipient is not required to submit

to the recipient the proposal, plan, or other computation for

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

proposal, plan, or other computation and its supporting records starts

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

the proposal, plan, or other computation.

Termination and Enforcement

Sec. 14.60 Purpose of termination and enforcement.

Sections 14.61 and 14.62 set forth uniform suspension, termination

and enforcement procedures.

Sec. 14.61 Termination.

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

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

(1) By the Grants Officer, if a recipient materially fails to

comply with the terms and conditions of an award.

(2) By the Grants Officer with the consent of the recipient, in

which case the two parties shall agree upon the termination conditions,

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

the portion to be terminated.

(3) By the recipient upon sending to the Grants Officer written

notification setting forth the reasons for such termination, the

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

be terminated. However, if the Grants Officer determines in the case of

partial termination that the reduced or modified portion of the grant

will not accomplish the purposes for which the grant was made, it may

terminate the grant in its entirety under either paragraph (a)(1) or

(2).

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

the recipient referred to in Sec. 14.71(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. 14.62 Enforcement.

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

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

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

award, the Grants Officer may, in addition to imposing any of the

special conditions outlined in Sec. 14.14, take one or more of the

following actions, as appropriate in the circumstances:

(1) Temporarily withhold payments of funds pending correction of

the deficiency by the recipient or more severe enforcement action by

the Grants Officer after coordination with the DoC operating unit.

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

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

not in compliance.

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

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

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

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

awarding agency shall provide the recipient an opportunity for hearing,

appeal, or other administrative proceeding to which the recipient is

entitled under any statute or regulation applicable to the action

involved.

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

resulting from obligations incurred by the recipient during a

suspension or after termination of an award are not allowable unless

the awarding agency expressly authorizes them in the notice of

suspension or termination or subsequently. Other recipient costs during

suspension or after termination which are necessary and not reasonably

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

apply.

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

by the recipient before the effective date of suspension or

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

termination, are noncancellable.

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

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

termination takes effect.

(d) Relationship to debarment and suspension. The enforcement

remedies identified in this section, including suspension and

termination, do not preclude a recipient from being subject to

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

implementing regulations (see Sec. 14.13) at 15 CFR Part 26.

Subpart D--After-the-Award Requirements

Sec. 14.70 Purpose.

Sections 14.71 through 14.73 contain closeout procedures and other

procedures for subsequent disallowances and adjustments.

Sec. 14.71 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. The

Grants Officer may approve extensions when requested by the recipient.

(b) Unless the Grants Officer authorizes an extension, a recipient

shall liquidate all obligations incurred under the award not later than

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

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

implementing instructions.

(c) The Grants Officer shall authorize and the DoC shall 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

funds that the DoC has advanced or paid and that is not authorized to

be retained by the recipient for use in other projects. OMB Circular A-

129 governs unreturned amounts that become delinquent debts.

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

Grants

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Officer 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. 14.31 through 14.37.

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

closeout of an award, the DoC shall retain the right to recover an

appropriate amount after fully considering the recommendations on

disallowed costs resulting from the final audit.

Sec. 14.72 Subsequent adjustments and continuing responsibilities.

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

(1) The right of the DoC to disallow costs and recover funds on the

basis of a later audit or other review.

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

result of later refunds, corrections, or other transactions.

(3) Audit requirements in Sec. 14.26.

(4) Property management requirements in Secs. 14.31 through 14.37.

(5) Records retention as required in Sec. 14.53.

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

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

the DoC and the recipient, provided the responsibilities of the

recipient referred to in Sec. 14.73(a), including those for property

management as applicable, are considered and provisions made for

continuing responsibilities of the recipient, as appropriate.

Sec. 14.73 Collection of amounts due.

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

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

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

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

Grants Officer may reduce the debt by:

(1) Making an administrative offset against other requests for

reimbursements;

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

(3) Taking other action permitted by statute.

(b) Except as otherwise provided by law, the DoC shall charge

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

``Federal Claims Collection Standards.''

Appendix A to Part 14--Contract Provisions

All contracts, awarded by a recipient including small purchases,

shall contain the following provisions as applicable:

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

provision requiring compliance with E.O. 11246, ``Equal Employment

Opportunity,'' as amended by E.O. 11375, ``Amending Executive Order

11246 Relating to Equal Employment Opportunity,'' and as

supplemented by regulations at 41 CFR part 60, ``Office of Federal

Contract Compliance Programs, Equal Employment Opportunity,

Department of Labor.''

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

276c)--All contracts and subgrants in excess of $2000 for

construction or repair awarded by recipients and subrecipients shall

include a provision for compliance with the Copeland ``Anti-

Kickback'' Act (18 U.S.C. 874), as supplemented by Department of

Labor regulations (29 CFR part 3, ``Contractors and Subcontractors

on Public Building or Public Work Financed in Whole or in Part by

Loans or Grants from the United States''). The Act provides that

each contractor or subrecipient shall be prohibited from inducing,

by any means, any person employed in the construction, completion,

or repair of public work, to give up any part of the compensation to

which he is otherwise entitled. The recipient shall report all

suspected or reported violations to the DoC operating unit.

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

required by Federal program legislation, all construction contracts

awarded by the recipients and subrecipients of more than $2000 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 DoC operating unit.

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

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

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

for other contracts that involve the employment of mechanics or

laborers shall include a provision for compliance with Sections 102

and 107 of the Contract Work Hours and Safety Standards Act (40

U.S.C. 327-333), as supplemented by Department of Labor regulations

(29 CFR part 5). Under Section 102 of the Act, each contractor shall

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

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

standard work week is permissible provided that the worker is

compensated at a rate of not less than 1\1/2\ times the basic rate

of pay for all hours worked in excess of 40 hours in the work week.

Section 107 of the Act is applicable to construction work and

provides that no laborer or mechanic shall be required to work in

surroundings or under working conditions which are unsanitary,

hazardous or dangerous. These requirements do not apply to the

purchases of supplies or materials or articles ordinarily available

on the open market, or contracts for transportation or transmission

of intelligence.

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

Contracts or agreements for the performance of experimental,

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

Federal Government and the recipient in any resulting invention in

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

Nonprofit Organizations and Small Business Firms Under Government

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

regulations issued by the awarding agency.

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

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

Contracts and subgrants of amounts in excess of $100,000 shall

contain a provision that requires the recipient to agree to comply

with all applicable standards, orders or regulations issued pursuant

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

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

Violations shall be reported to the DoC operating unit and the

Regional Office of the Environmental Protection Agency (EPA).

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

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

required certification. Each tier certifies to the tier above that

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

person or organization for influencing or attempting to influence an

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

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

connection with obtaining any Federal contract, grant or any other

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

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

obtaining any Federal award. Such disclosures are forwarded from

tier to tier up to the recipient.

8. Debarment and Suspension (E.O.s 12549 and 12689)--No contract

shall be made to parties listed on the General Services

Administration's List of Parties Excluded from Federal Procurement

or Nonprocurement Programs in accordance with E.O.s 12549 and 12689,

``Debarment and Suspension'' as implemented by DoC regulations at 15

CFR Part 26. This list contains the names of parties debarred,

suspended, or otherwise excluded by

[[Page 47172]]

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

principal employees.

[FR Doc. 98-22725 Filed 9-3-98; 8:45 am]

BILLING CODE 3510-FA-P