Section 1.APPENDIX A Office of Management and Budget Circular A-102

on with a contract to secure fulfillment of all contractor's

obligations under such contract.

c.         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 law of all persons

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

contract.

3.         Where the Federal Government guarantees or insures the

repayment of money borrowed by the grantee, the Federal agency, at its

discretion, may require adequate bonding and insurance if the bonding and

insurance requirements of the grantee are not deemed adequate to protect the interest

of the Federal Government.  (See 47 Ill. Adm. Code 1.50(c), Cash Management)

4.         Where bonds are required in the situations described above,

the bonds shall be obtained from companies holding certificates of authority as

acceptable sureties (31 CFR 223).

Attachment C:  Retention and

Custodial Requirements for Records

1.         This Attachment sets forth record retention requirements for

grants. Federal grantor agencies shall not impose any record retention

requirements upon grantees other than those described below.

2.         Financial records, supporting documents, statistical records,

and all other records pertinent to a grant shall be retained for a period of

three years, with the following qualifications.

a.         If any litigation, claim or audit is started before the

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

litigations, claims, or audit findings involving the records have been

resolved.

b.         Records for nonexpendable property acquired with Federal funds

shall be retained for 3 years after its final disposition.

c.         When records are transferred to or maintained by the Federal

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

grantee.

3

be retained until all

litigations, claims, or audit findings involving the records have been

resolved.

b.         Records for nonexpendable property acquired with Federal funds

shall be retained for 3 years after its final disposition.

c.         When records are transferred to or maintained by the Federal

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

grantee.

3.         The retention period starts from the date of the submission of

the final expenditure report or, for grants that are renewed annually, from the

date of the submission of the annual financial status report.

4.         Grantees should be authorized by the Federal grantor agency,

if they so desire, to substitute microfilm copies in lieu of original records.

(The Department will forward all requests to microfilm records to the Secretary

of State's Record Commission, which will render a decision based on the Secretary

of State Regulations (44 Ill. Adm. Code 4000) of the Local Records Commission

and Local Records Act (Ill. Rev. Stat. 1983, ch. 116, pars. 43.102 et seq.).)

5.         The Federal grantor agency shall request transfer of certain

records to its custody from grantees when it determines that the records

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

record-keeping, a Federal grantor agency may make arrangements with grantees to

retain any records that are continuously needed for joint use.  (The Department

will take possession of grant records only when the Grantee no longer exists.)

6.         The head of the Federal grantor agency and the Comptroller

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

shall have access to any pertinent books, documents, papers, and records of

grantees and subgrantees to make audits, examinations, excerpts and

transcripts.

7

) and advances made to tribal organizations

pursuant to section 102, 103, or 104 of the Indian Self Determination Act

(Public Law 93-638).

3.         Proceeds from the sale of real and personal property, either

provided by the Federal Government or purchased in whole or part with Federal

funds, shall be handled in accordance with Attachment N to this Circular

pertaining to Property Management.

4.         Unless the grant agreement provides otherwise, grantees shall

have no obligation to the Federal Government with, respect to royalties

received as a result of copyrights or patents produced under the grant or other

agreement.  (See paragraph 7, Attachment N.)

5.         All other program income earned during the grant period shall

be retained by the grantee and, in accordance with the grant agreement, shall

be:

a.         Added to funds committed to the project by the grantor and

grantee and be used to further eligible program objectives.

b.         Used to finance the non-Federal share of the project when

approved by the Federal Sponsoring agency; or

c.         Deducted from the total project costs for the purpose of

determining the net costs on which the Federal share of costs will be based.

6.         Federal grantor agencies shall require the grantees to record

the receipt and expenditure of revenues (such as taxes, special assessments, levies,

fines, etc.) as a part of grant project transactions when such revenues are

specifically earmarked for a grant project in accordance with grant agreements.

Attachment F:  Matching Share

1.         This Attachment sets forth criteria and procedures for the

allowability of cash in-kind contributions made by grantees, subgrantees or

third parties in satisfying cost sharing and matching requirements of Federal

grantor agencies.

2.         The following definitions apply for the purpose of this

Attachment:

a.         Project Costs.  Project costs are all allowable costs as set

forth in Federal Management Circular No

criteria and procedures for the

allowability of cash in-kind contributions made by grantees, subgrantees or

third parties in satisfying cost sharing and matching requirements of Federal

grantor agencies.

2.         The following definitions apply for the purpose of this

Attachment:

a.         Project Costs.  Project costs are all allowable costs as set

forth in Federal Management Circular No. 74-4 incurred by a grantee and the

value of the in-kind contribution made by the grantee or third parties in

accomplishing the objectives of the grant during the project or program period.

b.         Cost Sharing and Matching.  In general, cost sharing and

matching represents that portion of project costs not borne by the Federal

Government. Usually, a minimum percentage for matching share is prescribed by

program legislation, and matching share requirements are included in the grant

agreements.

c.         Cash Contributions.  Cash contributions represent the

grantee's cash outlay, including the outlay of money contributed to the grantee

by other public agencies and institutions, and private organizations and

individuals.  When authorized by Federal legislation, Federal funds received

from other grants may be considered as grantees' cash contributions.

d.         In-kind Contributions.  In-kind contributions represent the

value of noncash contributions provided by the grantee, and non-Federal

parties. Only when authorized by Federal legislation may property purchased

with Federal funds be considered as the grantee's in-kind contributions.

In-kind contributions may be in the form of charges for real property and

nonexpendable personal property and the value of goods and services directly

benefiting and specifically identifiable to the project or program.

3.         General guidelines for computing cost sharing or matching are

as follows:

a.         Cost sharing or matching share may consist of:

1)         Charges incurred by the grantee as project costs

y be in the form of charges for real property and

nonexpendable personal property and the value of goods and services directly

benefiting and specifically identifiable to the project or program.

3.         General guidelines for computing cost sharing or matching are

as follows:

a.         Cost sharing or matching share may consist of:

1)         Charges incurred by the grantee as project costs.  (Not all

charges require cash outlays during the grant period by the grantee; examples

are depreciation and use charges for buildings and equipment.)

2)         Project costs financed with cash contributed or donated to the

grantee by other non-Federal public agencies and institutions, and private

organizations and individuals.

3)         Project costs represented by services and real or personal

property, or use thereof, donated by other public agencies and institutions,

and private organizations and individuals.

b.         All contributions, both cash and in-kind, shall be accepted as

part of the grantee's matching share when such contributions meet all of the

following criteria:

1)         Are verifiable from the grantee's records;

2)         Are not included as contributions for any other

federally-assisted program;

3)         Are necessary and reasonable for proper and efficient

accomplishment of project objectives;

4)         Are types of charges that would be allowable under FMC 74-4.

5)         Are not paid by the Federal Government under another

assistance agreement unless authorized under the other agreement and the laws

and regulations it is subject to.

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

Federal agency; and

7)         Conform to other provisions of this Attachment.

4.         Values for grantee in-kind contributions will be established

at the grantee's actual cost in accordance with FMC 74-4.

5.         Specific procedures for the grantees in establishing the value

of in-kind contributions from non-Federal third parties are set forth below:

a

pproved budget when required by the

Federal agency; and

7)         Conform to other provisions of this Attachment.

4.         Values for grantee in-kind contributions will be established

at the grantee's actual cost in accordance with FMC 74-4.

5.         Specific procedures for the grantees in establishing the value

of in-kind contributions from non-Federal third parties are set forth below:

a.         Valuation of volunteer services.  Volunteer services may be

furnished by professional and technical personnel, consultants, and other

skilled and unskilled labor.  Volunteered service may be counted as cost

sharing or matching if the service is an integral and necessary part of an

approved program.  ("Integral and necessary" is defined as an

allowable cost for the program if purchased.)

1)         Rates for volunteer services.  Rates for volunteers should be

consistent with those paid for similar work in other activities of the State or

local government.  In those instances in which the required skills are not

found in the grantee organization, rates should be consistent with those paid

for similar work in the labor market in which the grantee competes for the kind

of services involved.  (Rates shall be based on the Department of Employment

Security's Occupational Employment Statistic Survey.)

2)         Volunteers employed by other organizations.  When an employer

other than the grantee furnishes the services of an employee, these services

shall be valued at the employee's regular rate of pay (exclusive of fringe

benefits and overhead cost) provided these services are in the same skill for

which the employee is normally paid.

b.         Valuation of donated expendable personal property.  Donated

expendable personal property includes such items as expendable equipment,

office supplies, laboratory supplies, or workshop and classroom supplies

lued at the employee's regular rate of pay (exclusive of fringe

benefits and overhead cost) provided these services are in the same skill for

which the employee is normally paid.

b.         Valuation of donated expendable personal property.  Donated

expendable personal property includes such items as expendable equipment,

office supplies, laboratory supplies, or workshop and classroom supplies.

Values assessed to expendable personal property included in the cost or matching

share should be reasonable and should not exceed the fair market value of the

property at the time of the donation.

c.         Valuation of donated nonexpendable personal property,

buildings and land or use thereof.

1)         The method used for charging matching share for donated

nonexpendable personal property, buildings, and land may differ depending upon

the purpose of the grant as follows:

a)         If the purpose of the grant is to furnish equipment,

buildings, or land to the grantee or otherwise provide a facility, the total

value of the donated property may be claimed as a matching share.

b)         If the purpose of the grant is to support activities that

require the use of equipment, buildings, or land on a temporary or part-time

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

The full value of equipment or other capital assets and fair rental charges for

land may be made provided that the grantor agency has approved the charges.

2)         The value of donated property will be determined in accordance

with the usual accounting policies of the grantee with the following

qualifications:

a)         Land and Buildings.  The value of donated land and buildings

may not exceed its fair market value, at the time of donation to the grantee as

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

appraiser or GSA representatives) and certified by a responsible official of

the grantee.

b)         Nonexpendable personal property

grantor agencies shall not impose

additional standards on grantees unless specifically provided for in other

Attachments to this Circular.  However, grantor agencies are encouraged to make

suggestions and assist the grantees in establishing or improving financial

management systems when such assistance is needed or requested.

2.         Grantee financial management systems shall provide for:

a.         Accurate, current, and complete disclosure of the financial

results of each grant program in accordance with reporting requirements set

forth in Attachment H to this Circular.  When a Federal grantor agency requires

reporting on an accrual basis, the grantee shall not be required to establish

an accrual accounting system but shall develop such accrual data on its reports

on the basis of an analysis of the documentation on hand.

b.         Records that identify adequately the source and application of

funds for grant-supported activities.  These records shall contain information

pertaining to Federal awards and authorizations, obligations, unobligated

balances, assets, liabilities, outlays, and income.

c.         Effective control over and accountability for all funds,

property, and other assets.  Grantees shall adequately safeguard all such

assets and shall assure that they are used solely for authorized purposes. (See

47 Ill. Adm. Code 1.90, Financial Management Standards.)

d.         Comparison of actual outlays with budgeted amounts for each

grant. Also, relation of financial information with performance or productivity

data, including the production of unit cost information whenever appropriate

and required by the grantor agency.

e.         Procedures to minimize the time elapsing between the transfer

of funds from the U.S. Treasury and the disbursement by the grantee, whenever

funds are advanced by the Federal Government.  When advances are made by a

letter-of-credit method, the grantee shall make drawdowns from the U.S

request advances and

reimbursement when the letter-of-credit method is not used; and promulgates

standard forms incident thereto.  Grantees when obtaining financial information

required by Federal agencies from subgrantees are not required to use the forms

contained in this Attachment.

2.         The following definitions apply for purposes of this

Attachment:

a.         Accrued expenditures.  Accrued expenditures are the charges

incurred by the grantee during a given period requiring the provision of funds

for: (1) goods and other tangible property received; (2) services performed by

employees, contractors, subgrantees, and other payees; and (3) other amounts

becoming owed under programs for which no current services or performance is

required such as annuities, insurance claims, and other benefit payments.

b.         Accrued income.  Accrued income is the sum of (1) earnings

during a given period from (i) services performed by the grantee; and (ii)

goods and other tangible property delivered to purchasers; and (2) amounts

becoming owed to the grantee for which no current services or performance is

required by the grantee.

c.         Federal funds authorized.  Federal funds authorized are the

total amount of Federal funds obligated by the Federal Government for use by

the grantee.  This amount may include any authorized carryover of unobligated

funds from prior fiscal years when permitted by law or agency regulation.

d.         In-kind contributions.  In-kind contributions are defined in

Attachment F to this Circular.

e.         Obligations.  Obligations are the amounts of orders placed,

contracts and grants awarded, services received, and similar transactions

during a given period that will require payment by the grantee during the same

or a future period.

f.          Outlays.  Outlays or expenditures represent charges made to

the project or program.  They may be reported on a cash or accrual basis

rcular.

e.         Obligations.  Obligations are the amounts of orders placed,

contracts and grants awarded, services received, and similar transactions

during a given period that will require payment by the grantee during the same

or a future period.

f.          Outlays.  Outlays or expenditures represent 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 actual cash

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

expense charged, the value of in-kind contributions applied, and the amount of

cash advances and payments made to subgrantees. For reports prepared on an

accrual basis, outlays are the sum of actual 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 grantee for goods and other property received, for

services performed by employees, contractors, subgrantees and other payees and

other amounts becoming owed under programs for which no current services or

performance are required such as annuities, insurance claims, and other benefit

payments.

g.         Program income.  Program income is defined in Attachment E of

this Circular.  It may be reported on a cash or accrual basis, whichever is

used for reporting outlays.

h.         Unobligated balance.  The unobligated balance is the portion

of the funds authorized by the Federal agency that has not been obligated by

the grantee and is determined by deducting the cumulative obligations from the

cumulative funds authorized.

i.          Unliquidated obligations.  For reports prepared on a cash

basis, unliquidated obligations represent the amount of obligations incurred by

the grantee that has not been paid

ed balance is the portion

of the funds authorized by the Federal agency that has not been obligated by

the grantee and is determined by deducting the cumulative obligations from the

cumulative funds authorized.

i.          Unliquidated obligations.  For reports prepared on a cash

basis, unliquidated obligations represent the amount of obligations incurred by

the grantee that has not been paid.  For reports prepared on an accrued

expenditure basis, they represent the amount of obligations incurred by the

grantee for which an outlay has not been recorded.

Attachment I:  Monitoring and

Reporting of Program Performance

1.         This Attachment sets forth the procedures for monitoring and

reporting program performance under Federal grants.  These procedures are

designed to place greater reliance on grantees to manage the day-to-day

operations of the grant-supported activities.

2.         Grantees shall constantly monitor the performance under

grant-supported activities to assure that time schedules are being met,

projected work units by time periods are being accomplished, and other

performance goals are being achieved.  This review shall be made for each

program, function, or activity of each grant as set forth in the approved grant

application or award document.

3.         Grantees shall submit a performance report for each grant

which briefly presents the following for each program, function, or activity

involved as prescribed by the Federal agency:

a.         A comparison of actual accomplishments to the goals

established for the period.  Where the output of grant programs can be readily

quantified, such quantitative data should be related to cost data for

computation of unit costs.

b.         Reasons why established goals were not met.

c.         Other pertinent information including, when appropriate,

analysis and explanation of cost overruns or high unit costs.

4

tual accomplishments to the goals

established for the period.  Where the output of grant programs can be readily

quantified, such quantitative data should be related to cost data for

computation of unit costs.

b.         Reasons why established goals were not met.

c.         Other pertinent information including, when appropriate,

analysis and explanation of cost overruns or high unit costs.

4.         Between the required performance reporting dates, events may

occur which have significant impact upon the project or program.  In such

cases, the grantee shall inform the grantor agency as soon as the following

types of conditions become known:

a.         Problems, delays, or adverse conditions which will materially

affect the ability to attain program objectives, prevent the meeting of time

schedules and goals, or preclude the attainment of project work units by

established time periods.  This disclosure shall be accompanied by a statement

of the action taken, or contemplated, and any Federal assistance needed to resolve

the situation.

b.         Favorable developments or events which enable meeting time

schedules and goals sooner than anticipated or producing more work units than

originally projected.

5.         If any performance review conducted by the grantee discloses

the need for change in the budget estimates, the grantee shall submit a request

for budget revision.

6.         The grantor agency shall make site visits as frequently as

practicable to:

a.         Review program accomplishments and management control systems.

b.         Provide such technical assistance as may be required.

Attachment L:  Grant Closeout

Procedures

1.         This Attachment prescribes uniform closeout procedures for

grantees.

2.         The following definitions shall apply for the purpose of the

Attachment:

a.         Grant closeout

quently as

practicable to:

a.         Review program accomplishments and management control systems.

b.         Provide such technical assistance as may be required.

Attachment L:  Grant Closeout

Procedures

1.         This Attachment prescribes uniform closeout procedures for

grantees.

2.         The following definitions shall apply for the purpose of the

Attachment:

a.         Grant closeout.  The closeout of a grant is the process by

which a Federal grantor agency determines that all applicable administrative

actions and all required work of the grant have been completed by the grantee

and the grantor.

b.         Date of completion.  The date when all work under a grant is

completed or the date in the grant award document, or any supplement or

amendment thereto, on which Federal assistance ends.

c.         Termination.  The termination of a grant means the

cancellation of Federal assistance, in whole or in part, under a grant at any

time prior to the date of completion.

d.         Suspension.  The suspension of a grant is an action by a

Federal grantor agency which temporarily suspends Federal assistance under the

grant pending corrective action by the grantee or pending a decision to

terminate the grant by the grantor agency.

e.         Disallowed costs.  Disallowed costs are those charges to a

grant which the grantor agency or its representative determines to be

unallowable. (See Federal Management Circular No. 74-4.)

3.         All Federal grantor agencies shall establish grant closeout

procedures which include the following requirements:

a.         Upon request, the Federal grantor agency shall make prompt

payments to a grantee for allowable reimbursable costs under the grant being

closed out.

b.         The grantee shall immediately refund to the grantor agency any

balance of unobligated (unencumbered) cash advanced to the grantee that is not

authorized to be retained by the grantee for use on other grants.

c

ce beneficial results commensurate

with the further expenditure of funds.  The two parties shall agree upon the

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

partial terminations, the portions to be terminated. The grantee shall not

incur new obligations for the terminated portion after the effective date, and

shall cancel as many outstanding obligations as possible.  The Federal agency

shall allow full credit to the grantee for the Federal share of the

noncancellable obligations, properly incurred by the grantee prior to

termination.

Attachment N:  Property

Management Standards

1.         This Attachment prescribes uniform standards governing the

utilization and disposition of property furnished by the Federal Government or

acquired in whole or in part with Federal funds or whose cost was charged to a

project supported by a Federal grant.  Federal grantor agencies shall require

grantees to observe these standards under grants from the Federal Government

and shall not impose additional requirements unless specifically required by

Federal law.  The grantees shall be authorized to use their own property management

standards and procedures as long as the provisions of this Attachment are

included.

2.         The following definitions apply for the purpose of this

Attachment:

a.         Real property.  Real property means land, including land

improvements, structures and appurtenances thereto, excluding movable machinery

and equipment.

b.         Personal property.  Personal property of any kind except real

property. It may be tangible -- having physical existence, or intangible --

have no physical existence, such as patents, inventions, and copyrights.

c.         Nonexpendable personal property.  Nonexpendable personal

property means tangible personal property having a useful life of more than one

year and an acquisition cost of $300 or more per unit

y.  Personal property of any kind except real

property. It may be tangible -- having physical existence, or intangible --

have no physical existence, such as patents, inventions, and copyrights.

c.         Nonexpendable personal property.  Nonexpendable personal

property means tangible personal property having a useful life of more than one

year and an acquisition cost of $300 or more per unit.  A grantee may use its

own definition of nonexpendable personal property provided that such definition

would at least include all tangible personal property as defined above.

d.         Expendable personal property.  Expendable personal property

refers to all tangible personal property other than nonexpendable property.

e.         Excess property.  Excess property means property under the

control of any Federal agency which, as determined by the head thereof, is no

longer required for its needs or discharge of its responsibilities.

f.          Acquisition cost of purchased nonexpendable personal

property. Acquisition cost of an item of purchased nonexpendable personal

property means the net invoice unit price of the property 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 grantee's regular accounting practices.

g.         Exempt property.  Exempt property means tangible personal

property acquired in whole or in part with Federal funds, and title to which is

vested in the recipient without further obligation to the Federal Government

except as provided in subparagraph 6a below.  Such unconditional vesting of

title will be pursuant to any Federal legislation that provides the Federal

sponsoring agency with adequate authority.

3.         Real property

tangible personal

property acquired in whole or in part with Federal funds, and title to which is

vested in the recipient without further obligation to the Federal Government

except as provided in subparagraph 6a below.  Such unconditional vesting of

title will be pursuant to any Federal legislation that provides the Federal

sponsoring agency with adequate authority.

3.         Real property.  Each Federal grantor agency shall prescribe

requirements for grantees concerning the use and disposition of real property

funded partly or wholly by the Federal Government.  Unless otherwise provided

by statute, such requirements, as a minimum, shall contain the following:

a.         Title to real property shall vest in the recipient subject to

the condition that the grantee shall use the real property for the authorized

purpose of the original grant as long as needed.

b.         The grantee shall obtain approval by the grantor agency for

the use of the real property in other projects when the grantee determines that

the property is no longer needed for the original grant purposes. Use in other

projects shall be limited to those under other Federal grant programs, or

programs that have purposes consistent with those authorized for support by the

grantor.

c.         When the real property is no longer needed as provided in a

and b above, the grantee shall request disposition instructions from the

Federal agency or its successor Federal agency.  The Federal agency shall

observe the following rules in the disposition instructions:

1)         The grantee may be permitted to retain title after it

compensates the Federal Government in an amount computed by applying the

Federal percentage of participation in the cost of the original project to the

fair market value of the property

is no longer needed, the grantee shall report the property to the

Federal agency for further agency utilization.

If the Federal agency has no further need for the property,

it shall be declared excess and reported to the General Services

Administration. Appropriate disposition instructions will be issued to the

recipient after completion of the Federal agency review.

5.         Exempt property.  When statutory authority exists title to

nonexpendable personal property acquired with project funds shall be vested in

the recipient upon acquisition unless it is determined that to do so is not in

the furtherance of the objectives of the Federal sponsoring agency.  When title

is vested in the recipient the recipient shall have no other obligation or

accountability to the Federal Government for its use or disposition except as

provided in 6a below.

6.         Other nonexpendable property.  When other nonexpendable

tangible property is acquired by a grantee with project funds title shall not

be taken by the Federal Government but shall vest in the grantee subject to the

following conditions:

a.         Right to transfer title.  For items of nonexpendable personal

property having a unit acquisition cost of $1,000 or more, the Federal agency

may reserve 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 reservation shall be subject to the

following standards:

1)         The property shall be appropriately identified in the grant or

otherwise made known to the grantee in writing.

2)         The Federal agency shall issue disposition instructions within

120 calendar days after the end of the Federal support of the project for which

it was acquired.  If the Federal agency fails to issue disposition instructions

within the 120 calendar-day period, the grantee shall apply the standards of subparagraph

6b and 6c as appropriate

ge of Federal

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

fair market value of the property. If the grantee has no need for the property

and the property has further use value, the grantee shall request disposition

instructions from the original grantor agency.

The Federal agency shall determine whether the property can

be used to meet the agency's requirements.  If no requirement exists within

that agency, the availability of the property shall be reported, in accordance

with the guidelines of the Federal Property Management Regulations (FPMR), to

the General Services Administration by the Federal agency to determine whether

a requirement for the property exists in other Federal agencies.  The Federal

agency shall issue instructions to the grantee no later than 120 days after the

grantee request and the following procedures shall govern:

a)         If so instructed or if disposition instructions are not issued

within 120 calendar days after the grantee's request, the grantee shall sell

the property and reimburse the Federal agency an amount computed by applying to

the sales proceeds the percentage of Federal participation in the cost of the

original project or program.  However, the  grantee shall be permitted to

deduct and retail from the Federal share $100 or ten percent of the proceeds,

whichever is greater, for the grantee's selling and handling expenses.

b)         If the grantee is instructed to ship the property elsewhere

the grantee shall be reimbursed by the benefiting Federal agency with an amount

which is computed by applying the percentage of the grantee participation in

the cost of the original grant project or program to the current fair market

value of the property, plus any reasonable shipping or interim storage costs

incurred.

c)         If the grantee is instructed to otherwise dispose of the

property, the grantee shall be reimbursed by the Federal agency for such costs

incurred in its disposition.

d

plying the percentage of the grantee participation in

the cost of the original grant project or program to the current fair market

value of the property, plus any reasonable shipping or interim storage costs

incurred.

c)         If the grantee is instructed to otherwise dispose of the

property, the grantee shall be reimbursed by the Federal agency for such costs

incurred in its disposition.

d.         Property management standards for nonexpendable property.  The

grantee's property management standards for nonexpendable personal property

shall include the following procedural requirements:

1)         Property records shall be maintained accurately and shall

include:

a)         A description of the property.

b)         Manufacturer's serial number, model number, Federal stock

number, national stock number, or other identification number.

c)         Source of the property including grant or other agreement

number.

d)         Whether title vests in the grantee or the Federal Government.

e)         Acquisition date (or date received, if the property was

furnished by the Federal Government) and cost.

f)         Percentage (at the end of the budget year) of Federal

participation in the cost of the project or program for which the property was

acquired. (Not applicable to property furnished by the Federal Government.)

g)         Location, use and condition of the property and the date the

information was reported.

h)         Unit acquisition cost.

i)          Ultimate disposition data, including date of disposal and

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

grantee compensates the Federal agency for its share.

2)         Property owned by the Federal Government must be marked to

indicate Federal ownership.

3)         A physical inventory of property shall be taken and the

results reconciled with the property records at least once every two years

ng date of disposal and

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

grantee compensates the Federal agency for its share.

2)         Property owned by the Federal Government must be marked to

indicate Federal ownership.

3)         A physical inventory of property shall be taken and the

results reconciled with the property 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 grantee shall, in connection with the inventory, verify

the existence, current utilization, and continued need for the property.

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

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

or theft of nonexpendable property shall be investigated and fully documented;

if the property was owned by the Federal Government, the grantee shall promptly

notify the Federal agency.

5)         Adequate maintenance procedures shall be implemented to keep

the property in good condition.

6)         Where the grantee is authorized or required to sell the

property, proper sales procedures shall be established which would provide for

competition to the extent practicable and result in the highest possible

return.

7.         Expendable personal property.  Title to expendable personal

property shall vest in the grantee upon acquisition.  If there is a residual

inventory of such property exceeding $1,000 in total aggregate fair market

value, upon termination or completion of the grant, and if the property is not

needed for any other federally sponsored project or program, the grantee shall

retain the property for use on nonfederally sponsored activities, or sell it,

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

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

personal property.

8

nation or completion of the grant, and if the property is not

needed for any other federally sponsored project or program, the grantee shall

retain the property for use on nonfederally sponsored activities, or sell it,

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

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

personal property.

8.         Intangible property.

a.         Inventions and patents.  If any program produces patentable

items, patent rights, processes, or inventions, in the course of work sponsored

by the Federal Government, such fact shall be promptly and fully reported to

the Federal agency.  Unless there is a prior agreement between the grantee and

the Federal agency on disposition of such items, the Federal agency shall

determine whether protection on the invention or discovery shall be sought.

The Federal agency will also determine how the rights in the invention or

discovery, including rights under any patent issued thereon, shall be allocated

and administrated in order to protect the public interest consistent with

"Government Patent Policy"   (President's Memorandum for Heads of

Executive Department and Agencies, August 23, 1971, and statement of Government

Patent Policy as printed in 36 FR 16889).

b.         Copyrights.  Except as otherwise provided in the terms and

conditions of the agreement the author or the grantee organization is free to

copyright any books, publications, or other copyrightable materials developed

in the course of or under a Federal agreement, but the Federal agency shall

reserve a royalty-free nonexclusive and irrevocable right to reproduce,

publish, or otherwise use, and to authorize others to use the work for

Government purposes.

9.         Excess personal property.  When title to excess property is

vested in grantees such property shall be accounted for and disposed of in

accordance with paragraphs 6c and 6d of this Attachment.

Attachment O:  Procurement

Standards

1

r more significant aspects of this Attachment.  The grantor

agency shall notify the grantee in writing, with a copy of such notification to

the OFPP.

7.         Code of Conduct.  Grantees shall maintain a written code or

standards of conduct which shall govern the performance of their officers,

employees or agents engaged in the award and administration of contracts

supported by Federal funds.  No employee, officer or agent of the grantee shall

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

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

be involved.  Such a conflict would arise when:

a.         The employee, officer or agent;

b.         Any member of his immediate family;

c.         His or her partner; or

d.         An organization which employs, or is about to employ, any of

the above, has a financial or other interest in the firm selected for award.

The grantee's officers, employees or agents shall neither

solicit nor accept gratuities, favors or anything of monetary value from

contractors, potential contractors, or parties to subagreements.  Grantees may

set minimum rules where the financial interest is not substantial or the gift

is an unsolicited item of nominal intrinsic value.

To the extent permitted by the State or local law or

regulations, such standards of conduct shall provide for penalties, sanctions,

or other disciplinary actions for violations of such standards by the grantee's

officers, employees, or agents, or by contractors or their agents.

8.         Procurement Procedures.  The grantee shall establish

procurement procedures which provide that proposed procurement actions shall be

reviewed by grantee officials to avoid the purchase of unnecessary or

duplicative items.  Consideration should be given to consolidation or breaking

out to obtain a more economical purchase

cers, employees, or agents, or by contractors or their agents.

8.         Procurement Procedures.  The grantee shall establish

procurement procedures which provide that proposed procurement actions shall be

reviewed by grantee officials to avoid the purchase of unnecessary or

duplicative items.  Consideration should be given to consolidation or breaking

out to obtain a more economical purchase.  Where appropriate, an analysis shall

be made of lease versus purchase alternatives, and any other appropriate

analysis to determine which approach would be the most economical.  To foster

greater economy and efficiency, grantees are encouraged to enter into State and

local intergovernmental agreements for procurement or use of common goods and

services.

9.         Contracting with Small and Minority Firms, Women's Business

Enterprise and Labor Surplus Area Firms

a.         It is national policy to award a fair share of contracts to

small and minority business firms.  Accordingly, affirmative steps must be

taken to assure that small and minority businesses are utilized when possible

as sources of suppliers, equipment, construction and services. Affirmative

steps shall include the following:

1)         Including qualified small and minority businesses on

solicitation lists.

2)         Assuring that small and minority businesses are solicited

whenever they are potential sources.

3)         When economically feasible, dividing total requirements into

smaller tasks or quantities so as to permit maximum small and minority business

participation.

4)         Where the requirement permits, establishing delivery schedules

which will encourage participation by small and minority business.

5)         Using the services and assistance of the Small Business

Administration, the Office of Minority Business Enterprise of the Department of

Commerce and the Community Services Administration as required

ng requirements.

b.         The grantee shall have written selection procedures which

shall provide, as a minimum, the following procedural requirements:

1)         Solicitations of offers, whether by competitive sealed bids or

competitive negotiation shall:

a)         Incorporate a clear and accurate description of the technical

requirements for the material, product, or service to be procured. Such

description shall not, in competitive procurements, contain features which

unduly restrict competition.  The description may include a statement of the

qualitative nature of the material, product or service to be procured, and when

necessary, shall set forth those minimum essential characteristics and

standards to which it must conform if it is to satisfy its intended use.

Detailed product specifications should be avoided if at all possible.  When it

is impractical or uneconomical to make a clear and accurate description of the

technical requirements, a "brand name or equal" description may  be

used as a means to define the performance or other salient requirements of a

procurement.  The specific features of the named brand which must be met by

offerors shall be clearly stated.

b)         Clearly set forth all requirements which offerors must fulfill

and all other factors to be used in evaluating bids or proposals.

2)         Awards shall be made only to responsible contractors that

possess the potential ability to perform successfully under the terms and

conditions of a proposed procurement.  Consideration shall be given to such

matters as contractor integrity, compliance with public policy, record of past

performance, and financial and technical resources.

11.       Method Procurement.  Procurement under grants shall be made by

one of the following methods, as described herein:  (a) small purchase

procedures; (b) competitive sealed bids (formal advertising); (c) competitive

negotiation; (d) noncompetitive negotiation.

a

ters as contractor integrity, compliance with public policy, record of past

performance, and financial and technical resources.

11.       Method Procurement.  Procurement under grants shall be made by

one of the following methods, as described herein:  (a) small purchase

procedures; (b) competitive sealed bids (formal advertising); (c) competitive

negotiation; (d) noncompetitive negotiation.

a.         Small purchase procedures are those relatively simple and

informal procurement methods that are sound and appropriate for a procurement

of services, supplies or other property, costing in the aggregate not more than

$10,000.  Grantees shall comply with State or local small purchase dollar

limits under $10,000.  If small purchase procedures are used for a procurement

under a grant, price or rate quotations shall be obtained from an adequate

number of qualified sources.

b.         In competitive sealed bids (formal advertising), sealed bids

are publicly solicited and a firm-fixed-price contract (lump sum or unit price)

is awarded to the responsible bidder whose bid, conforming with all the

material terms and conditions of the invitation for bids, is lowest in price.

1)         In order for formal advertising to be feasible, appropriate

conditions must be present, including, as a minimum, the following:

a)         A complete, adequate and realistic specification or purchase

description is available.

b)         Two or more responsible suppliers are willing and able to

compete effectively for the grantee's business.

c)         The procurement lends itself to a firm-fixed-price contract,

and selection of the successful bidder can appropriately be made principally on

the basis of price.

2)         If formal advertising is used for a procurement under a grant

the following requirements shall apply:

a)         A sufficient time prior to the date set for opening of bids,

bids shall be solicited from an adequate number of known suppliers. In

addition, the invitation shall be publicly advertised

of the successful bidder can appropriately be made principally on

the basis of price.

2)         If formal advertising is used for a procurement under a grant

the following requirements shall apply:

a)         A sufficient time prior to the date set for opening of bids,

bids shall be solicited from an adequate number of known suppliers. In

addition, the invitation shall be publicly advertised.

b)         The invitation for bids, including specifications and

pertinent Attachments, shall clearly define the items or services needed in

order for the bidders to properly respond to the invitation.

c)         All bids shall be opened publicly at the time and place stated

in the invitation for bids.

d)         A firm-fixed-price contract award shall be made by written

notice to that responsible bidder whose bid, conforming to the invitation for

bids, is lowest.  Where specified in the bidding documents, factors such as

discounts, transportation costs and life cycle costs shall be considered in

determining which bid is lowest.  Payment discounts may only be used to

determine low bid when prior experience of the grantee indicates that such discounts

are generally taken.

e)         Any or all bids may be rejected when there are sound

documented business reasons in the best interest of the program.

c.         In competitive negotiation, proposals are requested from a

number of sources and the Request for Proposal is publicized, negotiations are

normally conducted with more than one of the sources submitting offers, and

either a fixed-price or cost-reimbursable type contract is awarded, as

appropriate.  Competitive negotiation may be used if conditions are not

appropriate for the use of formal advertising. If competitive negotiation is

used for a procurement under a grant, the following requirements shall apply:

1)         Proposals shall be solicited from an adequate number of

qualified sources to permit reasonable competition consistent with the nature

and requirements of the procurement

ble compensation.

d.         Noncompetitive negotiation is procurement through solicitation

of a proposal from only one source, or after solicitation of a number of

sources, competition is determined inadequate.  Noncompetitive negotiation may

be used when the award of a contract is unfeasible under small purchase,

competitive bidding (formal advertising) or competitive negotiation

procedures.  Circumstances under which a contract may be awarded by

noncompetitive negotiation are limited to the following:

1)         The item is available only from a single source;

2)         Public exigency or emergency when the urgency for the

requirement will not permit a delay incident to competitive solicitation;

3)         The Federal grantor agency authorizes noncompetitive

negotiation; or

4)         After solicitation of a number of sources, competition is

determined inadequate.

e.         Additional innovative procurement methods may be used by

grantees with the approval of the grantor agency.  A copy of such approval

shall be sent to the OFPP.

12.       Contract Pricing.  The cost plus a percentage of cost and

percentage of construction cost method of contracting shall not be used.

Grantees shall perform some form of cost or price analysis in connection with

every procurement action including contract modifications.  Costs or prices

based on estimated costs for contracts under grants shall be allowed only to

the extent that costs incurred or cost estimates included in negotiated prices

are consistent with Federal cost principles.

13.       Grantee Procurement Records.  Grantees shall maintain records

sufficient to detail the significant history of a procurement.  These records

shall include, but are not necessarily limited to information pertinent to the

following:  rationale for the method of procurement, selection of contract

type, contractor selection or rejection, and the basis for the cost or price.

14.       Contract Provision

tee Procurement Records.  Grantees shall maintain records

sufficient to detail the significant history of a procurement.  These records

shall include, but are not necessarily limited to information pertinent to the

following:  rationale for the method of procurement, selection of contract

type, contractor selection or rejection, and the basis for the cost or price.

14.       Contract Provision.  In addition to provisions defining a sound

and complete procurement contract, any recipient of Federal grant funds shall

include the following contract provisions or conditions in all procurement

contracts and subcontracts as required by the provision, Federal law or the

grantor agency.

a.         Contracts other than small purchases shall contain provisions

or conditions which will allow for administrative, contractual, or legal

remedies in instances where contractors violate or breach contract terms, and

provide for such sanctions and penalties as may be appropriate.

b.         All contracts in excess of $10,000 shall contain suitable

provisions for termination by the grantee including the manner by which it will

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.         All contracts awarded in excess of $10,000 by grantees and

their contractors or subgrantees shall contain a provision requiring compliance

with Executive Order 11246, entitled "Equal Employment Opportunity,"

as amended by Executive Order 11375, and as supplemented in Department of Labor

regulations (41 CFR Part 60).

d.         All contracts and subgrants for construction or repair shall

include a provision for compliance with the Copeland "Anti-Kickback"

Act (18 U.S.C. 874) as supplemented in Department of Labor regulations (29 CFR,

Part 3)

notice of grantor agency

requirements and regulations pertaining to reporting and patent rights under

any contract involving research, developmental, experimental or demonstration

work with respect to any discovery or invention which arises or is developed in

the course of or under such contract, and of grantor agency requirements and

regulations pertaining to copyrights and rights in data.

h.         All negotiated contracts (except those awarded by small

purchase procedures) awarded by grantees shall include a provision to the

effect that the grantee, the Federal grantor agency, the Comptroller General of

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

access to any books, documents, papers, and records of the contractor which are

directly pertinent to that specific contract, for the purpose of making audit,

examination, excerpts, and transcriptions.

Grantees shall require contractors to maintain all required

records for three years after grantees make final payments and all other

pending matters are closed.

i.          Contracts, subcontracts, and subgrants of amounts in excess

of $100,000 shall contain a provision which requires compliance with all

applicable standards, orders, or requirements issued under Section 306 of the

Clean Air Act (42 U.S.C. 1857(h)), Section 508 of the Clean Water Act (33

U.S.C. 1368), Executive Order 11738, and Environmental Protectional Agency

(USEPA) regulations (40 CFR, Part 15), which prohibit the use under non-exempt

Federal contracts, grants or loans of facilities included on the EPA List of

Violating Facilities.  The provision shall require reporting of violations to

the grantor agency and to the USEPA Assistant Administrator for Enforcement

(EN-329).

j.          Contracts shall recognize mandatory standards and policies

relating to energy efficiency which are contained in the State energy

conservation plan issued in compliance with the Energy Policy and Conservation

Act (P.L. 94-163)

ss frequently

than every two years.

9.         If the auditor becomes aware of irregularities in the

recipient organization, the auditor shall promptly notify the cognizant agency

and recipient management officials above the level of involvement.

Irregularities include such matters as conflicts of interest, falsification of

records or reports, and misappropriation of funds or other assets.

10.       The audit report shall include:

a.         Financial statements, including footnotes, of the recipient

organization.

b.         The auditors' comments on the financial statements which

should:

1)         Identify the statements examined, and the period covered.

2)         Identify the various programs under which the organization

received Federal funds, and the amount of the awards received.

3)         State that the audit was done in accordance with the standards

in paragraph 5.

4)         Express an opinion as to whether the financial statements are

fairly presented in accordance with generally accepted accounting principles.

If an unqualified opinion cannot be expressed, state the nature of the

qualification.

c.         The auditors' comments on compliance and internal control

should:

1)         Include comments on weaknesses in and noncompliance with the

system of internal control, separately identifying material weaknesses.

2)         Identify the nature and impact of any noted instances of

noncompliance with the terms of agreements and those provisions of Federal law

or regulations that could have a material effect on the financial statements

and reports.

3)         Contain an expression of positive assurance with respect to

compliance with requirements for tested items, and negative assurance for

untested items.

d.         Comments on the accuracy and completeness of financial reports

and claims for advances or reimbursement of Federal agencies.

e.         Comments on the accuracy and completeness of financial reports

and claims for advances or reimbursement to Federal agencies.

11

itive assurance with respect to

compliance with requirements for tested items, and negative assurance for

untested items.

d.         Comments on the accuracy and completeness of financial reports

and claims for advances or reimbursement of Federal agencies.

e.         Comments on the accuracy and completeness of financial reports

and claims for advances or reimbursement to Federal agencies.

11.       Work papers and reports shall be retained for a minimum of

three years from the date of the audit report unless the auditor is notified in

writing by the cognizant agency of the need to extend the retention period.

The audit workpapers shall be made available upon request to the cognizant

agency or its designees and the General Accounting Office or its designees.

12.       The Office of Management and Budget will work with Federal

agencies and State and local governments to assure that recipient audits are

made in accordance with the standards set forth in paragraph 5.

13.       The Office of Management and Budget will designate cognizant

agencies for major recipient organizations.

14.       The cognizant agency shall have the following

responsibilities:

a.         Obtain or make quality assessment reviews of work of

non-Federal audit organizations, and provide the results to other interested

audit agencies.  (If a non-Federal audit organization is responsible for audits

of recipients that have different cognizant audit agencies, a single quality

assessment review should be arranged.)

b.         Assure that all audit reports of recipients that affect

federally assisted programs are received, reviewed, and distributed to

appropriate Federal audit officials.  These officials will be responsible for

distributing audit reports to their program officials.

c.         Whenever significant inadequacies in an audit are disclosed,

the recipient organization will be advised and the auditor will be called upon

to take corrective action