[Title 2 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2007 Edition]
[From the U.S. Government Printing Office]
[[Page i]]
2
Revised as of January 1, 2007
Grants and Agreements
________________________
Containing a codification of documents of general
applicability and future effect
As of January 1, 2007
With Ancillaries
Published by
Office of the Federal Register
National Archives and Records
Administration
A Special Edition of the Federal Register
[[Page ii]]
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Table of Contents
Page
Explanation................................................. v
Title 2:
Subtitle A--Office of Management and Budget Guidance for
Grants and Agreements 3
Chapter I--Office of Management and Budget
Governmentwide Guidance for Grants and Agreements 9
Chapter II--Office of Management and Budget
Circulars and Guidance 37
Subtitle B--Federal Agency Regulations for Grants and
Agreements 173
Chapter IX--Department of Energy 175
Chapter XIII--Department of Commerce 179
Chapter XXXVII--Peace Corps 185
Finding Aids:
Table of CFR Titles and Chapters........................ 191
Alphabetical List of Agencies Appearing in the CFR...... 209
List of CFR Sections Affected........................... 219
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Cite this Code: CFR
To cite the regulations in
this volume use title,
part and section number.
Thus, 2 CFR 1.100 refers
to title 2, part 1,
section 100.
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[[Page v]]
EXPLANATION
The Code of Federal Regulations is a codification of the general and
permanent rules published in the Federal Register by the Executive
departments and agencies of the Federal Government. The Code is divided
into 50 titles which represent broad areas subject to Federal
regulation. Each title is divided into chapters which usually bear the
name of the issuing agency. Each chapter is further subdivided into
parts covering specific regulatory areas.
Each volume of the Code is revised at least once each calendar year
and issued on a quarterly basis approximately as follows:
Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1
The appropriate revision date is printed on the cover of each
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LEGAL STATUS
The contents of the Federal Register are required to be judicially
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HOW TO USE THE CODE OF FEDERAL REGULATIONS
The Code of Federal Regulations is kept up to date by the individual
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To determine whether a Code volume has been amended since its
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collection request.
[[Page vi]]
Many agencies have begun publishing numerous OMB control numbers as
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Raymond A. Mosley,
Director,
Office of the Federal Register.
January 1, 2007.
[[Page ix]]
THIS TITLE
Title 2--Grants and Agreements is composed of one volume. This
volume is comprised of Subtitle A--Office of Management and Budget
Guidance for Grants and Agreements and Subtitle B--Federal Agency
Regulations for Grants and Agreements. The contents of this volume
represents all current regulations codified under this title of the CFR
as of January 1, 2007.
For this volume, Moja N. Mwaniki and Bonnie Fritts were Chief
Editors. The Code of Federal Regulations publication program is under
the direction of Frances D. McDonald, assisted by Ann Worley.
[[Page 1]]
TITLE 2--GRANTS AND AGREEMENTS
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Part
SUBTITLE A--Office of Management and Budget Guidance for Grants and
Agreements
chapter i--Office of Management and Budget Governmentwide
Guidance for Grants and Agreements........................ 180
chapter ii--Office of Management and Budget Circulars and
Guidance.................................................. 215
SUBTITLE B--Federal Agency Regulations for Grants and Agreements
chapter ix--Department of Energy............................ 901
chapter xiii--Department of Commerce........................ 1326
chapter xxxvii--Peace Corps................................. 3700
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Subtitle A--Office of Management and Budget Guidance for Grants and
Agreements
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1 About Title 2 of the Code of Federal
Regulations and Subtitle A.............. 5
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PART 1_ABOUT TITLE 2 OF THE CODE OF FEDERAL REGULATIONS AND SUBTITLE A--Table of Contents
Subpart A_Introduction to Title 2 of the CFR
Sec.
1.100 Content of this title.
1.105 Organization and subtitle content.
1.110 Issuing authorities.
Subpart B_Introduction to Subtitle A
1.200 Purpose of chapters I and II.
1.205 Applicability to grants and other funding instruments.
1.210 Applicability to Federal agencies and others.
1.215 Relationship to previous issuances.
1.220 Federal agency implementation of this subtitle.
1.230 Maintenance of this subtitle.
Subpart C_Responsibilities of OMB and Federal Agencies
1.300 OMB responsibilities.
1.305 Federal agency responsibilities.
Authority: 31 U.S.C. 503; 31 U.S.C. 1111; 41 U.S.C. 405;
Reorganization Plan No. 2 of 1970; E.O. 11541, 35 FR 10737, 3 CFR, 1966-
1970, p. 939.
Source: 69 FR 26280, May 11, 2004, unless otherwise noted.
Subpart A_Introduction to Title 2 of the CFR
Sec. 1.100 Content of this title.
This title contains--
(a) Office of Management and Budget (OMB) guidance to Federal
agencies on government-wide policies and procedures for the award and
administration of grants and agreements; and
(b) Federal agency regulations implementing that OMB guidance.
Sec. 1.105 Organization and subtitle content.
(a) This title is organized into two subtitles.
(b) The OMB guidance described in Sec. 1.100(a) is published in
subtitle A. Publication of the OMB guidance in the CFR does not change
its nature--it is guidance and not regulation.
(c) Each Federal agency that publishes regulations implementing the
OMB guidance has a chapter in subtitle B in which it issues those
regulations. The Federal agency regulations in subtitle B differ in
nature from the OMB guidance in subtitle A because the OMB guidance is
not regulatory (Federal agency regulations in subtitle B may give
regulatory effect to the OMB guidance, to the extent that the agency
regulations require compliance with all or portions of the guidance).
Sec. 1.110 Issuing authorities.
OMB issues this subtitle. Each Federal agency that has a chapter in
subtitle B of this title issues that chapter.
Subpart B_Introduction to Subtitle A
Sec. 1.200 Purpose of chapters I and II.
(a) Chapters I and II of subtitle A provide OMB guidance to Federal
agencies that helps ensure consistent and uniform government-wide
policies and procedures for management of the agencies' grants and
agreements.
(b) There are two chapters for publication of the guidance because
portions of it may be revised as a result of ongoing efforts to
streamline and simplify requirements for the award and administration of
grants and other financial assistance (and thereby implement the Federal
Financial Assistance Management Improvement Act of 1999, Pub. L. 106-
107).
(c) The OMB guidance in its initial form--before completion of
revisions described in paragraph (b) of this section--is published in
chapter II of this subtitle. When revisions to a part of the guidance
are finalized, that part is published in chapter I and removed from
chapter II.
Sec. 1.205 Applicability to grants and other funding instruments.
The types of instruments that are subject to the guidance in this
subtitle vary from one portion of the guidance to another (note that
each part identifies the types of instruments to which it applies). All
portions of the guidance apply to grants and cooperative agreements,
some portions also apply to other types of financial assistance or
nonprocurement instruments, and some portions also apply to procurement
contracts. For example, the:
[[Page 6]]
(a) Guidance on debarment and suspension in part 180 of this
subtitle applies broadly to all financial assistance and other
nonprocurement transactions, and not just to grants and cooperative
agreements.
(b) Cost principles in parts 220, 225 and 230 of this subtitle apply
to procurement contracts, as well as to financial assistance, although
those principles are implemented for procurement contracts through the
Federal Acquisition Regulation in Title 48 of the CFR, rather than
through Federal agency regulations on grants and agreements in this
title.
[70 FR 51863, Aug. 31, 2005]
Sec. 1.210 Applicability to Federal agencies and others.
(a) This subtitle contains guidance that directly applies only to
Federal agencies.
(b) The guidance in this subtitle may affect others through each
Federal agency's implementation of the guidance, portions of which may
apply to--
(1) The agency's awarding or administering officials;
(2) Non-Federal entities that receive or apply for the agency's
grants or agreements or receive subawards under those grants or
agreements; or
(3) Any other entities involved in agency transactions subject to
the guidance in this chapter.
Sec. 1.215 Relationship to previous issuances.
Although some of the guidance was organized differently within OMB
circulars or other documents, much of the guidance in this subtitle
existed prior to the establishment of title 2 of the CFR. Specifically:
------------------------------------------------------------------------
Previously was in .
Guidance in . . . On . . . . .
------------------------------------------------------------------------
(a) Chapter I, part 180..... Nonprocurement OMB guidance that
debarment and conforms with the
suspension. government-wide
common rule (see 60
FR 33036, June 26,
1995).
(b) Chapter II, part 215.... Administrative OMB Circular A-110.
requirements for
grants and
agreements.
(c) Chapter II, part 220.... Cost principles for OMB Circular A-21.
educational
institutions.
(d) Chapter II, part 225.... Cost principles for OMB Circular A-87.
State, local, and
Indian tribal
governments.
(e) Chapter II, part 230.... Cost principles for OMB Circular A-122.
non-profit
organizations.
(f) [Reserved] ....................
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[70 FR 51863, Aug. 31, 2005]
Sec. 1.220 Federal agency implementation of this subtitle.
A Federal agency that awards grants and agreements subject to the
guidance in this subtitle implements the guidance in agency regulations
in subtitle B of this title and/or in policy and procedural issuances,
such as internal instructions to the agency's awarding and administering
officials. An applicant or recipient would see the effect of that
implementation in the organization and content of the agency's
announcements of funding opportunities and in its award terms and
conditions.
Sec. 1.230 Maintenance of this subtitle.
OMB issues guidance in this subtitle after publication in the
Federal Register. Any portion of the guidance that has a potential
impact on the public is published with an opportunity for public
comment.
Subpart C_Responsibilities of OMB and Federal Agencies
Sec. 1.300 OMB responsibilities.
OMB is responsible for:
(a) Issuing and maintaining the guidance in this subtitle, as
described in Sec. 1.230.
(b) Interpreting the policy requirements in this subtitle.
(c) Reviewing Federal agency regulations implementing the
requirements of this subtitle, as required by Executive Order 12866.
(d) Conducting broad oversight of government-wide compliance with
the guidance in this subtitle.
(e) Performing other OMB functions specified in this subtitle.
[[Page 7]]
Sec. 1.305 Federal agency responsibilities.
The head of each Federal agency that awards and administers grants
and agreements subject to the guidance in this subtitle is responsible
for:
(a) Implementing the guidance in this subtitle.
(b) Ensuring that the agency's components and subcomponents comply
with the agency's implementation of the guidance.
(c) Performing other functions specified in this subtitle.
[[Page 9]]
CHAPTER I--OFFICE OF MANAGEMENT AND BUDGET GOVERNMENTWIDE GUIDANCE FOR
GRANTS AND AGREEMENTS
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Part Page
100-179 [Reserved]
180 OMB guidelines to agencies on governmentwide
debarment and suspension
(nonprocurement)........................ 11
181-199 [Reserved]
[[Page 11]]
PARTS 100-179 [RESERVED]
PART 180_OMB GUIDELINES TO AGENCIES ON GOVERNMENTWIDE DEBARMENT AND SUSPENSION
(NONPROCUREMENT)--Table of Contents
Sec.
180.5 What does this part do?
180.10 How is this part organized?
180.15 To whom do these guidelines apply?
180.20 What must a Federal agency do to implement these guidelines?
180.25 What must a Federal agency address in its implementation of these
guidelines?
180.30 Where does a Federal agency implement these guidelines?
180.35 By when must a Federal agency implement these guidelines?
180.40 How are these guidelines maintained?
180.45 Do these guidelines cover persons who are disqualified, as well
as those who are excluded from nonprocurement transactions?
Subpart A_General
180.100 How are subparts A through I organized?
180.105 How is this part written?
180.110 Do terms in this part have special meanings?
180.115 What do subparts A through I of this part do?
180.120 Do subparts A through I of this part apply to me?
180.125 What is the purpose of the nonprocurement debarment and
suspension system?
180.130 How does an exclusion restrict a person's involvement in covered
transactions?
180.135 May a Federal agency grant an exception to let an excluded
person participate in a covered transaction?
180.140 Does an exclusion under the nonprocurement system affect a
person's eligibility for Federal procurement contracts?
180.145 Does an exclusion under the Federal procurement system affect a
person's eligibility to participate in nonprocurement
transactions?
180.150 Against whom may a Federal agency take an exclusion action?
180.155 How do I know if a person is excluded?
Subpart B_Covered Transactions
180.200 What is a covered transaction?
180.205 Why is it important to know if a particular transaction is a
covered transaction?
180.210 Which nonprocurement transactions are covered transactions?
180.215 Which nonprocurement transactions are not covered transactions?
180.220 Are any procurement contracts included as covered transactions?
180.225 How do I know if a transaction in which I may participate is a
covered transaction?
Subpart C_Responsibilities of Participants Regarding Transactions Doing
Business With Other Persons
180.300 What must I do before I enter into a covered transaction with
another person at the next lower tier?
180.305 May I enter into a covered transaction with an excluded or
disqualified person?
180.310 What must I do if a Federal agency excludes a person with whom I
am already doing business in a covered transaction?
180.315 May I use the services of an excluded person as a principal
under a covered transaction?
180.320 Must I verify that principals of my covered transactions are
eligible to participate?
180.325 What happens if I do business with an excluded person in a
covered transaction?
180.330 What requirements must I pass down to persons at lower tiers
with whom I intend to do business?
Disclosing Information--Primary Tier Participants
180.335 What information must I provide before entering into a covered
transaction with a Federal agency?
180.340 If I disclose unfavorable information required under Sec.
180.335 will I be prevented from participating in the
transaction?
180.345 What happens if I fail to disclose information required under
Sec. 180.335?
180.350 What must I do if I learn of information required under Sec.
180.335 after entering into a covered transaction with a
Federal agency?
Disclosing Information--Lower Tier Participants
180.355 What information must I provide to a higher tier participant
before entering into a covered transaction with that
participant?
[[Page 12]]
180.360 What happens if I fail to disclose information required under
Sec. 180.355?
180.365 What must I do if I learn of information required under Sec.
180.355 after entering into a covered transaction with a
higher tier participant?
Subpart D_Responsibilities of Federal Agency Officials Regarding
Transactions
180.400 May I enter into a transaction with an excluded or disqualified
person?
180.405 May I enter into a covered transaction with a participant if a
principal of the transaction is excluded?
180.410 May I approve a participant's use of the services of an excluded
person?
180.415 What must I do if a Federal agency excludes the participant or a
principal after I enter into a covered transaction?
180.420 May I approve a transaction with an excluded or disqualified
person at a lower tier?
180.425 When do I check to see if a person is excluded or disqualified?
180.430 How do I check to see if a person is excluded or disqualified?
180.435 What must I require of a primary tier participant?
180.440 What action may I take if a primary tier participant knowingly
does business with an excluded or disqualified person?
180.445 What action may I take if a primary tier participant fails to
disclose the information required under Sec. 180.335?
180.450 What may I do if a lower tier participant fails to disclose the
information required under Sec. 180.355 to the next higher
tier?
Subpart E_Excluded Parties List System
180.500 What is the purpose of the Excluded Parties List System (EPLS)?
180.505 Who uses the EPLS?
180.510 Who maintains the EPLS?
180.515 What specific information is in the EPLS?
180.520 Who places the information into the EPLS?
180.525 Whom do I ask if I have questions about a person in the EPLS?
180.530 Where can I find the EPLS?
Subpart F_General Principles Relating to Suspension and Debarment
Actions
180.600 How do suspension and debarment actions start?
180.605 How does suspension differ from debarment?
180.610 What procedures does a Federal agency use in suspension and
debarment actions?
180.615 How does a Federal agency notify a person of a suspension or
debarment action?
180.620 Do Federal agencies coordinate suspension and debarment actions?
180.625 What is the scope of a suspension or debarment?
180.630 May a Federal agency impute the conduct of one person to
another?
180.635 May a Federal agency settle a debarment or suspension action?
180.640 May a settlement include a voluntary exclusion?
180.645 Do other Federal agencies know if an agency agrees to a
voluntary exclusion?
Subpart G_Suspension
180.700 When may the suspending official issue a suspension?
180.705 What does the suspending official consider in issuing a
suspension?
180.710 When does a suspension take effect?
180.715 What notice does the suspending official give me if I am
suspended?
180.720 How may I contest a suspension?
180.725 How much time do I have to contest a suspension?
180.730 What information must I provide to the suspending official if I
contest the suspension?
180.735 Under what conditions do I get an additional opportunity to
challenge the facts on which the suspension is based?
180.740 Are suspension proceedings formal?
180.745 How is fact-finding conducted?
180.750 What does the suspending official consider in deciding whether
to continue or terminate my suspension?
180.755 When will I know whether the suspension is continued or
terminated?
180.760 How long may my suspension last?
Subpart H_Debarment
180.800 What are the causes for debarment?
180.805 What notice does the debarring official give me if I am proposed
for debarment?
180.810 When does a debarment take effect?
180.815 How may I contest a proposed debarment?
180.820 How much time do I have to contest a proposed debarment?
180.825 What information must I provide to the debarring official if I
contest the proposed debarment?
180.830 Under what conditions do I get an additional opportunity to
challenge the facts on which the proposed debarment is based?
180.835 Are debarment proceedings formal?
180.840 How is fact-finding conducted?
180.845 What does the debarring official consider in deciding whether to
debar me?
180.850 What is the standard of proof in a debarment action?
180.855 Who has the burden of proof in a debarment action?
[[Page 13]]
180.860 What factors may influence the debarring official's decision?
180.865 How long may my debarment last?
180.870 When do I know if the debarring official debars me?
180.875 May I ask the debarring official to reconsider a decision to
debar me?
180.880 What factors may influence the debarring official during
reconsideration?
180.885 May the debarring official extend a debarment?
Subpart I_Definitions
180.900 Adequate evidence.
180.905 Affiliate.
180.910 Agent or representative.
180.915 Civil judgment.
180.920 Conviction.
180.925 Debarment.
180.930 Debarring official.
180.935 Disqualified.
180.940 Excluded or exclusion.
180.945 Excluded Parties List System (EPLS).
180.950 Federal agency.
180.955 Indictment.
180.960 Ineligible or ineligibility.
180.965 Legal proceedings.
180.970 Nonprocurement transaction.
180.975 Notice.
180.980 Participant.
180.985 Person.
180.990 Preponderance of the evidence.
180.995 Principal.
180.1000 Respondent.
180.1005 State.
180.1010 Suspending official.
180.1015 Suspension.
180.1020 Voluntary exclusion or voluntarily excluded.
Appendix to Part 180--Covered Transactions
Authority: Sec. 2455, Pub. L. 103-355, 108 Stat. 3327; E.O. 12549, 3
CFR, 1986 Comp., p.189; E.O. 12689, 3 CFR, 1989 Comp., p. 235.
Source: 70 FR 51865, Aug. 31, 2005, unless otherwise noted.
Sec. 180.5 What does this part do?
This part provides Office of Management and Budget (OMB) guidance
for Federal agencies on the governmentwide debarment and suspension
system for nonprocurement programs and activities.
Sec. 180.10 How is this part organized?
This part is organized in two segments.
(a) Sections 180.5 through 180.45 contain general policy direction
for Federal agencies' use of the standards in subparts A through I of
this part.
(b) Subparts A through I of this part contain uniform governmentwide
standards that Federal agencies are to use to specify--
(1) The types of transactions that are covered by the nonprocurement
debarment and suspension system;
(2) The effects of an exclusion under that nonprocurement system,
including reciprocal effects with the governmentwide debarment and
suspension system for procurement;
(3) The criteria and minimum due process to be used in
nonprocurement debarment and suspension actions; and
(4) Related policies and procedures to ensure the effectiveness of
those actions.
Sec. 180.15 To whom does the guidance apply?
The guidance provides OMB guidance only to Federal agencies.
Publication of the guidance in the CFR does not change its nature--it is
guidance and not regulation. Federal agencies' implementation of the
guidance governs the rights and responsibilities of other persons
affected by the nonprocurement debarment and suspension system.
Sec. 180.20 What must a Federal agency do to implement these guidelines?
As required by Section 3 of E.O. 12549, each Federal agency with
nonprocurement programs and activities covered by subparts A through I
of the guidance must issue regulations consistent with those subparts.
Sec. 180.25 What must a Federal agency address in its implementation of the
guidance?
Each Federal agency implementing regulation:
(a) Must establish policies and procedures for that agency's
nonprocurement debarment and suspension programs and activities that are
consistent with the guidance. When adopted by a Federal agency, the
provisions of the guidance has regulatory effect for that agency's
programs and activities.
(b) Must address some matters for which these guidelines give each
Federal agency some discretion. Specifically, the regulation must--
[[Page 14]]
(1) Identify either the Federal agency head or the title of the
designated official who is authorized to grant exceptions under Sec.
180.135 to let an excluded person participate in a covered transaction.
(2) State whether the agency includes as covered transactions an
additional tier of contracts awarded under covered nonprocurement
transactions, as permitted under Sec. 180.220(c).
(3) Identify the method(s) an agency official may use, when entering
into a covered transaction with a primary tier participant, to
communicate to the participant the requirements described in Sec.
180.435. Examples of methods are an award term that requires compliance
as a condition of the award; an assurance of compliance obtained at time
of application; or a certification.
(4) State whether the Federal agency specifies a particular method
that participants must use to communicate compliance requirements to
lower-tier participants, as described in Sec. 180.330(a). If there is a
specified method, the regulation needs to require agency officials, when
entering into covered transactions with primary tier participants, to
communicate that requirement.
(c) May also, at the agency's option:
(1) Identify any specific types of transactions that the Federal
agency includes as ``nonprocurement transactions'' in addition to the
examples provided in Sec. 180.970.
(2) Identify any types of nonprocurement transactions that the
Federal agency exempts from coverage under these guidelines, as
authorized under Sec. 180.215(g)(2).
(3) Identify specific examples of types of individuals who would be
``principals'' under the Federal agency's nonprocurement programs and
transactions, in addition to the types of individuals described at Sec.
180.995.
(4) Specify the Federal agency's procedures, if any, by which a
respondent may appeal a suspension or debarment decision.
(5) Identify by title the officials designated by the Federal agency
head as debarring officials under Sec. 180.930 or suspending officials
under Sec. 180.1010.
(6) Include a subpart covering disqualifications, as authorized in
Sec. 180.45.
(7) Include any provisions authorized by OMB.
[70 FR 51865, Aug. 31, 2005, as amended at 71 FR 66432, Nov. 15, 2006]
Sec. 180.30 Where does a Federal agency implement these guidelines?
Each Federal agency that participates in the governmentwide
nonprocurement debarment and suspension system must issue a regulation
implementing these guidelines within its chapter in subtitle B of this
title of the Code of Federal Regulations.
Sec. 180.35 By when must a Federal agency implement these guidelines?
Federal agencies must submit proposed regulations to the OMB for
review within nine months of the issuance of these guidelines and issue
final regulations within eighteen months of these guidelines.
Sec. 180.40 How are these guidelines maintained?
The Interagency Committee on Debarment and Suspension established by
section 4 of E.O. 12549 recommends to the OMB any needed revisions to
the guidelines in this part. The OMB publishes proposed changes to the
guidelines in the Federal Register for public comment, considers
comments with the help of the Interagency Committee on Debarment and
Suspension, and issues the final guidelines.
Sec. 180.45 Do these guidelines cover persons who are disqualified, as well
as those who are excluded from nonprocurement transactions?
A Federal agency may add a subpart covering disqualifications to its
regulation implementing these guidelines, but the guidelines in subparts
A through I of this part--
(a) Address disqualified persons only to--
(1) Provide for their inclusion in the EPLS; and
(2) State responsibilities of Federal agencies and participants to
check for disqualified persons before entering into covered
transactions.
(b) Do not specify the--
(1) Transactions for which a disqualified person is ineligible.
Those transactions vary on a case-by-case basis,
[[Page 15]]
because they depend on the language of the specific statute, Executive
order or regulation that caused the disqualification;
(2) Entities to which a disqualification applies; or
(3) Process that a Federal agency uses to disqualify a person.
Unlike exclusion under subparts A through I of this part,
disqualification is frequently not a discretionary action that a Federal
agency takes, and may include special procedures.
Subpart A_General
Sec. 180.100 How are subparts A through I organized?
(a) Each subpart contains information related to a broad topic or
specific audience with special responsibilities, as shown in the
following table:
----------------------------------------------------------------------------------------------------------------
In subpart . . . You will find provisions related to . . .
----------------------------------------------------------------------------------------------------------------
A........................................... general information about Subparts A through I of this part.
B........................................... the types of transactions that are covered by the Governmentwide
nonprocurement suspension and debarment system.
C........................................... the responsibilities of persons who participate in covered
transactions.
D........................................... the responsibilities of Federal agency officials who are
authorized to enter into covered transactions.
E........................................... the responsibilities of Federal agencies for entering information
into the EPLS
F........................................... the general principles governing suspension, debarment, voluntary
exclusion and settlement.
G........................................... suspension actions.
H........................................... debarment actions.
I........................................... definitions of terms used in this part.
----------------------------------------------------------------------------------------------------------------
(b) The following table shows which subparts may be of special
interest to you, depending on who you are:
------------------------------------------------------------------------
If you are . . . See Subpart(s) . . .
------------------------------------------------------------------------
(1) a participant or principal in a A, B, C and I.
nonprocurement transaction.
(2) a respondent in a suspension A, B, F, G and I.
action.
(3) a respondent in a debarment A, B, F, H and I.
action.
(4) a suspending official.......... A, B, E, F, G and I.
(5) a debarring official........... A, B, D, F, H and I.
(6) an Federal agency official A, B, D, E and I.
authorized to enter into a covered
transaction.
------------------------------------------------------------------------
Sec. 180.105 How is this part written?
(a) This part uses a ``plain language'' format to make it easier for
the general public and business community to use. The section headings
and text, often in the form of questions and answers, must be read
together.
(b) Pronouns used within this part, such as ``I'' and ``you,''
change from subpart to subpart depending on the audience being
addressed.
(c) The ``Covered Transactions'' diagram in the appendix to this
part shows the levels or ``tiers'' at which a Federal agency may enforce
an exclusion.
Sec. 180.110 Do terms in this part have special meanings?
This part uses terms throughout the text that have special meaning.
Those terms are defined in subpart I of this part. For example, three
important terms are--
(a) Exclusion or excluded, which refers only to discretionary
actions taken by a suspending or debarring official under Executive
Order 12549 and Executive Order 12689 or under the Federal Acquisition
Regulation (48 CFR part 9, subpart 9.4);
(b) Disqualification or disqualified, which refers to prohibitions
under specific statutes, executive orders (other than Executive Order
12549 and Executive Order 12689), or other authorities.
Disqualifications frequently are not subject to the discretion of a
Federal agency official, may have a different scope than exclusions, or
have special conditions that apply to the disqualification; and
(c) Ineligibility or ineligible, which generally refers to a person
who is either excluded or disqualified.
[[Page 16]]
Sec. 180.115 What do Subparts A through I of this part do?
Subparts A through I of this part provide for reciprocal exclusion
of persons who have been excluded under the Federal Acquisition
Regulation, and provide for the consolidated listing of all persons who
are excluded, or disqualified by statute, executive order or other legal
authority.
Sec. 180.120 Do subparts A through I of this part apply to me?
Portions of subparts A through I of this part (see table at Sec.
180.100(b)) apply to you if you are a--
(a) Person who has been, is, or may reasonably be expected to be, a
participant or principal in a covered transaction;
(b) Respondent (a person against whom a Federal agency has initiated
a debarment or suspension action);
(c) Federal agency debarring or suspending official; or
(d) Federal agency official who is authorized to enter into covered
transactions with non-Federal parties.
Sec. 180.125 What is the purpose of the nonprocurement debarment and
suspension system?
(a) To protect the public interest, the Federal Government ensures
the integrity of Federal programs by conducting business only with
responsible persons.
(b) A Federal agency uses the nonprocurement debarment and
suspension system to exclude from Federal programs persons who are not
presently responsible.
(c) An exclusion is a serious action that a Federal agency may take
only to protect the public interest. A Federal agency may not exclude a
person or commodity for the purposes of punishment.
Sec. 180.130 How does an exclusion restrict a person's involvement in
covered transactions?
With the exceptions stated in Sec. Sec. 180.135, 315, and 420, a
person who is excluded by any Federal agency may not:
(a) Be a participant in a Federal agency transaction that is a
covered transaction; or
(b) Act as a principal of a person participating in one of those
covered transactions.
Sec. 180.135 May a Federal agency grant an exception to let an excluded
person participate in a covered transaction?
(a) A Federal agency head or designee may grant an exception
permitting an excluded person to participate in a particular covered
transaction. If the agency head or designee grants an exception, the
exception must be in writing and state the reason(s) for deviating from
the governmentwide policy in Executive Order 12549.
(b) An exception granted by one Federal agency for an excluded
person does not extend to the covered transactions of another Federal
agency.
Sec. 180.140 Does an exclusion under the nonprocurement system affect a
person's eligibility for Federal procurement contracts?
If any Federal agency excludes a person under Executive Order 12549
or Executive Order 12689, on or after August 25, 1995, the excluded
person is also ineligible for Federal procurement transactions under the
FAR. Therefore, an exclusion under this part has reciprocal effect in
Federal procurement transactions.
Sec. 180.145 Does an exclusion under the Federal procurement system affect a
person's eligibility to participate in nonprocurement transactions?
If any Federal agency excludes a person under the FAR on or after
August 25, 1995, the excluded person is also ineligible to participate
in Federal agencies' nonprocurement covered transactions. Therefore, an
exclusion under the FAR has reciprocal effect in Federal nonprocurement
transactions.
Sec. 180.150 Against whom may a Federal agency take an exclusion action?
Given a cause that justifies an exclusion under this part, a Federal
agency may exclude any person who has been, is, or may reasonably be
expected to be a participant or principal in a covered transaction.
[[Page 17]]
Sec. 180.155 How do I know if a person is excluded?
Check the Governmentwide Excluded Parties List System (EPLS) to
determine whether a person is excluded. The General Services
Administration (GSA) maintains the EPLS and makes it available, as
detailed in Subpart E of this part. When a Federal agency takes an
action to exclude a person under the nonprocurement or procurement
debarment and suspension system, the agency enters the information about
the excluded person into the EPLS.
Subpart B_Covered Transactions
Sec. 180.200 What is a covered transaction?
A covered transaction is a nonprocurement or procurement transaction
that is subject to the prohibitions of this part. It may be a
transaction at--
(a) The primary tier, between a Federal agency and a person (see
appendix to this part); or
(b) A lower tier, between a participant in a covered transaction and
another person.
Sec. 180.205 Why is it important if a particular transaction is a covered transaction?
The importance of whether a transaction is a covered transaction
depends upon who you are.
(a) As a participant in the transaction, you have the
responsibilities laid out in subpart C of this part. Those include
responsibilities to the person or Federal agency at the next higher tier
from whom you received the transaction, if any. They also include
responsibilities if you subsequently enter into other covered
transactions with persons at the next lower tier.
(b) As a Federal official who enters into a primary tier
transaction, you have the responsibilities laid out in subpart D of this
part.
(c) As an excluded person, you may not be a participant or principal
in the transaction unless--
(1) The person who entered into the transaction with you allows you
to continue your involvement in a transaction that predates your
exclusion, as permitted under Sec. 180.310 or Sec. 180.415; or
(2) A Federal agency official obtains an exception from the agency
head or designee to allow you to be involved in the transaction, as
permitted under Sec. 180.135.
Sec. 180.210 Which nonprocurement transactions are covered transactions?
All nonprocurement transactions, as defined in Sec. 180.970, are
covered transactions unless listed in the exemptions under Sec.
180.215.
Sec. 180.215 Which nonprocurement transactions are not covered transactions?
The following types of nonprocurement transactions are not covered
transactions:
(a) A direct award to--
(1) A foreign government or foreign governmental entity;
(2) A public international organization;
(3) An entity owned (in whole or in part) or controlled by a foreign
government; or
(4) Any other entity consisting wholly or partially of one or more
foreign governments or foreign governmental entities.
(b) A benefit to an individual as a personal entitlement without
regard to the individual's present responsibility (but benefits received
in an individual's business capacity are not excepted). For example, if
a person receives social security benefits under the Supplemental
Security Income provisions of the Social Security Act, 42 U.S.C. 1301 et
seq., those benefits are not covered transactions and, therefore, are
not affected if the person is excluded.
(c) Federal employment.
(d) A transaction that a Federal agency needs to respond to a
national or agency-recognized emergency or disaster.
(e) A permit, license, certificate or similar instrument issued as a
means to regulate public health, safety or the environment, unless a
Federal agency specifically designates it to be a covered transaction.
(f) An incidental benefit that results from ordinary governmental
operations.
(g) Any other transaction if--
[[Page 18]]
(1) The application of an exclusion to the transaction is prohibited
by law; or
(2) A Federal agency's regulation exempts it from coverage under
this part.
Sec. 180.220 Are any procurement contracts included as covered transactions?
(a) Covered transactions under this part--
(1) Do not include any procurement contracts awarded directly by a
Federal agency; but
(2) Do include some procurement contracts awarded by non-Federal
participants in nonprocurement covered transactions.
(b) Specifically, a contract for goods or services is a covered
transaction if any of the following applies:
(1) The contract is awarded by a participant in a nonprocurement
transaction that is covered under Sec. 180.210, and the amount of the
contract is expected to equal or exceed $25,000.
(2) The contract requires the consent of an official of a Federal
agency. In that case, the contract, regardless of the amount, always is
a covered transaction, and it does not matter who awarded it. For
example, it could be a subcontract awarded by a contractor at a tier
below a nonprocurement transaction, as shown in the appendix to this
part.
(3) The contract is for Federally-required audit services.
(c) A subcontract also is a covered transaction if,--
(1) It is awarded by a participant in a procurement transaction
under a nonprocurement transaction of a Federal agency that extends the
coverage of paragraph (b)(1) of this section to additional tiers of
contracts (see the diagram in the appendix to this part showing that
optional lower tier coverage); and
(2) The value of the subcontract is expected to equal or exceed
$25,000.
[70 FR 51865, Aug. 31, 2005, as amended at 71 FR 66432, Nov. 15, 2006]
Sec. 180.225 How do I know if a transaction in which I may participate is a
covered transaction?
As a participant in a transaction, you will know that it is a
covered transaction because the Federal agency regulations governing the
transaction, the appropriate Federal agency official or participant at
the next higher tier who enters into the transaction with you, will tell
you that you must comply with applicable portions of this part.
Subpart C_Responsibilities of Participants Regarding Transactions Doing
Business With Other Persons
Sec. 180.300 What must I do before I enter into a covered transaction with
another person at the next lower tier?
When you enter into a covered transaction with another person at the
next lower tier, you must verify that the person with whom you intend to
do business is not excluded or disqualified. You do this by:
(a) Checking the EPLS; or
(b) Collecting a certification from that person; or
(c) Adding a clause or condition to the covered transaction with
that person.
[70 FR 51865, Aug. 31, 2005, as amended at 71 FR 66432, Nov. 15, 2006]
Sec. 180.305 May I enter into a covered transaction with an excluded or
disqualified person?
(a) You as a participant may not enter into a covered transaction
with an excluded person, unless the Federal agency responsible for the
transaction grants an exception under Sec. 180.135.
(b) You may not enter into any transaction with a person who is
disqualified from that transaction, unless you have obtained an
exception under the disqualifying statute, Executive order, or
regulation.
Sec. 180.310 What must I do if a Federal agency excludes a person with whom
I am already doing business in a covered transaction?
(a) You as a participant may continue covered transactions with an
excluded person if the transactions were in existence when the agency
excluded the person. However, you are not required to continue the
transactions, and you may consider termination. You should make a
decision about whether to terminate and the type of
[[Page 19]]
termination action, if any, only after a thorough review to ensure that
the action is proper and appropriate.
(b) You may not renew or extend covered transactions (other than no-
cost time extensions) with any excluded person, unless the Federal
agency responsible for the transaction grants an exception under Sec.
180.135.
Sec. 180.315 May I use the services of an excluded person as a principal
under a covered transaction?
(a) You as a participant may continue to use the services of an
excluded person as a principal under a covered transaction if you were
using the services of that person in the transaction before the person
was excluded. However, you are not required to continue using that
person's services as a principal. You should make a decision about
whether to discontinue that person's services only after a thorough
review to ensure that the action is proper and appropriate.
(b) You may not begin to use the services of an excluded person as a
principal under a covered transaction unless the Federal agency
responsible for the transaction grants an exception under Sec. 180.135.
Sec. 180.320 Must I verify that principals of my covered transactions are
eligible to participate?
Yes, you as a participant are responsible for determining whether
any of your principals of your covered transactions is excluded or
disqualified from participating in the transaction.
You may decide the method and frequency by which you do so. You may,
but you are not required to, check the EPLS.
Sec. 180.325 What happens if I do business with an excluded person in a
covered transaction?
If as a participant you knowingly do business with an excluded
person, the Federal agency responsible for your transaction may disallow
costs, annul or terminate the transaction, issue a stop work order,
debar or suspend you, or take other remedies as appropriate.
Sec. 180.330 What requirements must I pass down to persons at lower tiers
with whom I intend to do business?
Before entering into a covered transaction with a participant at the
next lower tier, you must require that participant to--
(a) Comply with this subpart as a condition of participation in the
transaction. You may do so using any method(s), unless the regulation of
the Federal agency responsible for the transaction requires you to use
specific methods.
(b) Pass the requirement to comply with this subpart to each person
with whom the participant enters into a covered transaction at the next
lower tier.
Disclosing Information--Primary Tier Participants
Sec. 180.335 What information must I provide before entering into a covered
transaction with a Federal agency?
Before you enter into a covered transaction at the primary tier, you
as the participant must notify the Federal agency office that is
entering into the transaction with you, if you know that you or any of
the principals for that covered transaction:
(a) Are presently excluded or disqualified;
(b) Have been convicted within the preceding three years of any of
the offenses listed in Sec. 180.800(a) or had a civil judgment rendered
against you for one of those offenses within that time period;
(c) Are presently indicted for or otherwise criminally or civilly
charged by a governmental entity (Federal, State or local) with
commission of any of the offenses listed in Sec. 180.800(a); or
(d) Have had one or more public transactions (Federal, State, or
local) terminated within the preceding three years for cause or default.
Sec. 180.340 If I disclose unfavorable information required under Sec.
180.335, will I be prevented from participating in the transaction?
As a primary tier participant, your disclosure of unfavorable
information about yourself or a principal under Sec. 180.335 will not
necessarily cause a
[[Page 20]]
Federal agency to deny your participation in the covered transaction.
The agency will consider the information when it determines whether to
enter into the covered transaction. The agency will also consider any
additional information or explanation that you elect to submit with the
disclosed information.
Sec. 180.345 What happens if I fail to disclose information required under
Sec. 180.335?
If a Federal agency later determines that you failed to disclose
information under Sec. 180.335 that you knew at the time you entered
into the covered transaction, the agency may--
(a) Terminate the transaction for material failure to comply with
the terms and conditions of the transaction; or
(b) Pursue any other available remedies, including suspension and
debarment.
Sec. 180.350 What must I do if I learn of information required under Sec.
180.335 after entering into a covered transaction with a Federal agency?
At any time after you enter into a covered transaction, you must
give immediate written notice to the Federal agency office with which
you entered into the transaction if you learn either that--
(a) You failed to disclose information earlier, as required by Sec.
180.335; or
(b) Due to changed circumstances, you or any of the principals for
the transaction now meet any of the criteria in Sec. 180.335.
Disclosing Information--Lower Tier Participants
Sec. 180.355 What information must I provide to a higher tier participant
before entering into a covered transaction with that participant?
Before you enter into a covered transaction with a person at the
next higher tier, you as a lower tier participant must notify that
person if you know that you or any of the principals are presently
excluded or disqualified.
Sec. 180.360 What happens if I fail to disclose information required under
Sec. 180.355?
If a Federal agency later determines that you failed to tell the
person at the higher tier that you were excluded or disqualified at the
time you entered into the covered transaction with that person, the
agency may pursue any available remedies, including suspension and
debarment.
Sec. 180.365 What must I do if I learn of information required under Sec.
180.355 after entering into a covered transaction with a higher tier
participant?
At any time after you enter into a lower tier covered transaction
with a person at a higher tier, you must provide immediate written
notice to that person if you learn either that--
(a) You failed to disclose information earlier, as required by Sec.
180.355; or
(b) Due to changed circumstances, you or any of the principals for
the transaction now meet any of the criteria in Sec. 180.355.
Subpart D_Responsibilities of Federal Agency Officials Regarding
Transactions
Sec. 180.400 May I enter into a transaction with an excluded or disqualified
person?
(a) You as a Federal agency official may not enter into a covered
transaction with an excluded person unless you obtain an exception under
Sec. 180.135.
(b) You may not enter into any transaction with a person who is
disqualified from that transaction, unless you obtain a waiver or
exception under the statute, Executive order, or regulation that is the
basis for the person's disqualification.
Sec. 180.405 May I enter into a covered transaction with a participant if a
principal of the transaction is excluded?
As a Federal agency official, you may not enter into a covered
transaction with a participant if you know that a principal of the
transaction is excluded, unless you obtain an exception under Sec.
180.135.
[[Page 21]]
Sec. 180.410 May I approve a participant's use of the services of an
excluded person?
After entering into a covered transaction with a participant, you as
a Federal agency official may not approve a participant's use of an
excluded person as a principal under that transaction, unless you obtain
an exception under Sec. 180.135.
Sec. 180.415 What must I do if a Federal agency excludes the participant or
a principal after I enter into a covered transaction?
(a) You as a Federal agency official may continue covered
transactions with an excluded person, or under which an excluded person
is a principal, if the transactions were in existence when the person
was excluded. You are not required to continue the transactions,
however, and you may consider termination. You should make a decision
about whether to terminate and the type of termination action, if any,
only after a thorough review to ensure that the action is proper.
(b) You may not renew or extend covered transactions (other than no-
cost time extensions) with any excluded person, or under which an
excluded person is a principal, unless you obtain an exception under
Sec. 180.135.
Sec. 180.420 May I approve a transaction with an excluded or disqualified
person at a lower tier?
If a transaction at a lower tier is subject to your approval, you as
a Federal agency official may not approve--
(a) A covered transaction with a person who is currently excluded,
unless you obtain an exception under Sec. 180.135; or
(b) A transaction with a person who is disqualified from that
transaction, unless you obtain a waiver or exception under the statute,
Executive order, or regulation that is the basis for the person's
disqualification.
Sec. 180.425 When do I check to see if a person is excluded or disqualified?
As a Federal agency official, you must check to see if a person is
excluded or disqualified before you--
(a) Enter into a primary tier covered transaction;
(b) Approve a principal in a primary tier covered transaction;
(c) Approve a lower tier participant if your agency's approval of
the lower tier participant is required; or
(d) Approve a principal in connection with a lower tier transaction
if your agency's approval of the principal is required.
Sec. 180.430 How do I check to see if a person is excluded or disqualified?
You check to see if a person is excluded or disqualified in two
ways:
(a) You as a Federal agency official must check the EPLS when you
take any action listed in Sec. 180.425.
(b) You must review information that a participant gives you, as
required by Sec. 180.335, about its status or the status of the
principals of a transaction.
Sec. 180.435 What must I require of a primary tier participant?
You as a Federal agency official must require each participant in a
primary tier covered transaction to--
(a) Comply with subpart C of this part as a condition of
participation in the transaction; and
(b) Communicate the requirement to comply with Subpart C of this
part to persons at the next lower tier with whom the primary tier
participant enters into covered transactions.
Sec. 180.440 What action may I take if a primary tier participant knowingly
does business with an excluded or disqualified person?
If a participant knowingly does business with an excluded or
disqualified person, you as a Federal agency official may refer the
matter for suspension and debarment consideration. You may also disallow
costs, annul or terminate the transaction, issue a stop work order, or
take any other appropriate remedy.
Sec. 180.445 What action may I take if a primary tier participant fails to
disclose the information required under Sec. 180.335?
If you as a Federal agency official determine that a participant
failed to disclose information, as required by Sec. 180.335, at the
time it entered into a covered transaction with you, you may--
[[Page 22]]
(a) Terminate the transaction for material failure to comply with
the terms and conditions of the transaction; or
(b) Pursue any other available remedies, including suspension and
debarment.
Sec. 180.450 What action may I take if a lower tier participant fails to
disclose the information required under Sec. 180.355 to the next higher tier?
If you as a Federal agency official determine that a lower tier
participant failed to disclose information, as required by Sec.
180.355, at the time it entered into a covered transaction with a
participant at the next higher tier, you may pursue any remedies
available to you, including the initiation of a suspension or debarment
action.
Subpart E_Excluded Parties List System
Sec. 180.500 What is the purpose of the Excluded Parties List System (EPLS)?
The EPLS is a widely available source of the most current
information about persons who are excluded or disqualified from covered
transactions.
Sec. 180.505 Who uses the EPLS?
(a) Federal agency officials use the EPLS to determine whether to
enter into a transaction with a person, as required under Sec. 180.430.
(b) Participants also may, but are not required to, use the EPLS to
determine if--
(1) Principals of their transactions are excluded or disqualified,
as required under Sec. 180.320; or
(2) Persons with whom they are entering into covered transactions at
the next lower tier are excluded or disqualified.
(c) The EPLS is available to the general public.
Sec. 180.510 Who maintains the EPLS?
The General Services Administration (GSA) maintains the EPLS. When a
Federal agency takes an action to exclude a person under the
nonprocurement or procurement debarment and suspension system, the
agency enters the information about the excluded person into the EPLS.
Sec. 180.515 What specific information is in the EPLS?
(a) At a minimum, the EPLS indicates--
(1) The full name (where available) and address of each excluded and
disqualified person, in alphabetical order, with cross references if
more than one name is involved in a single action;
(2) The type of action;
(3) The cause for the action;
(4) The scope of the action;
(5) Any termination date for the action;
(6) The Federal agency and name and telephone number of the agency
point of contact for the action; and
(7) The Dun and Bradstreet Number (DUNS), or other similar code
approved by the GSA, of the excluded or disqualified person, if
available.
(b)(1) The database for the EPLS includes a field for the Taxpayer
Identification Number (TIN) (the social security number (SSN) for an
individual) of an excluded or disqualified person.
(2) Agencies disclose the SSN of an individual to verify the
identity of an individual, only if permitted under the Privacy Act of
1974 and, if appropriate, the Computer Matching and Privacy Protection
Act of 1988, as codified in 5 U.S.C. 552(a).
Sec. 180.520 Who places the information into the EPLS?
Federal agency officials who take actions to exclude persons under
this part or officials who are responsible for identifying disqualified
persons must enter the following information about those persons into
the EPLS:
(a) Information required by Sec. 180.515(a);
(b) The Taxpayer Identification Number (TIN) of the excluded or
disqualified person, including the social security number (SSN) for an
individual, if the number is available and may be disclosed under law;
(c) Information about an excluded or disqualified person, generally
within five working days, after--
(1) Taking an exclusion action;
(2) Modifying or rescinding an exclusion action;
[[Page 23]]
(3) Finding that a person is disqualified; or
(4) Finding that there has been a change in the status of a person
who is listed as disqualified.
Sec. 180.525 Whom do I ask if I have questions about a person in the EPLS?
If you have questions about a listed person in the EPLS, ask the
point of contact for the Federal agency that placed the person's name
into the EPLS. You may find the agency point of contact from the EPLS.
Sec. 180.530 Where can I find the EPLS?
You may access the EPLS through the Internet, currently at http://
epls.arnet.gov or http://www.epls.gov.
Subpart F_General Principles Relating to Suspension and Debarment
Actions
Sec. 180.600 How do suspension and debarment actions start?
When Federal agency officials receive information from any source
concerning a cause for suspension or debarment, they will promptly
report it and the agency will investigate. The officials refer the
question of whether to suspend or debar you to their suspending or
debarring official for consideration, if appropriate.
Sec. 180.605 How does suspension differ from debarment?
Suspension differs from debarment in that--
------------------------------------------------------------------------
A suspending official . . . A debarring official . . .
------------------------------------------------------------------------
(a) Imposes suspension as a temporary Imposes debarment for a
status of in eligibility for specified period as a final
procurement and nonprocurement determination that a person is
transactions, pending completion of an not presently responsible.
investigation or legal proceedings.
(b) Must--
(1) Have adequate evidence that
there may be a cause for debarment
of a person; and
(2) Conclude that immediate action Must conclude, based on a
is necessary to protect the preponderance of the evidence,
Federal interest that the person has engaged in
conduct that warrants
debarment.
(c) Usually imposes the suspension Imposes debarment after giving
first, and then promptly notifies the the respondent notice of the
suspended person, giving the person an action and an opportunity to
opportunity to contest the suspension contest the proposed
and have it lifted. debarment.
------------------------------------------------------------------------
Sec. 180.610 What procedures does a Federal agency use in suspension and
debarment actions?
In deciding whether to suspend or debar you, a Federal agency
handles the actions as informally as practicable, consistent with
principles of fundamental fairness.
(a) For suspension actions, a Federal agency uses the procedures in
this subpart and Subpart G of this part.
(b) For debarment actions, a Federal agency uses the procedures in
this subpart and Subpart H of this part.
Sec. 180.615 How does a Federal agency notify a person of a suspension or
debarment action?
(a) The suspending or debarring official sends a written notice to
the last known street address, facsimile number, or e-mail address of--
(1) You or your identified counsel; or
(2) Your agent for service of process, or any of your partners,
officers, directors, owners, or joint venturers.
(b) The notice is effective if sent to any of these persons.
Sec. 180.620 Do Federal agencies coordinate suspension and debarment
actions?
Yes, when more than one Federal agency has an interest in a
suspension or debarment, the agencies may consider designating one
agency as the lead agency for making the decision. Agencies are
encouraged to establish methods and procedures for coordinating their
suspension and debarment actions.
Sec. 180.625 What is the scope of a suspension or debarment?
If you are suspended or debarred, the suspension or debarment is
effective as follows:
[[Page 24]]
(a) Your suspension or debarment constitutes suspension or debarment
of all of your divisions and other organizational elements from all
covered transactions, unless the suspension or debarment decision is
limited--
(1) By its terms to one or more specifically identified individuals,
divisions, or other organizational elements; or
(2) To specific types of transactions.
(b) Any affiliate of a participant may be included in a suspension
or debarment action if the suspending or debarring official--
(1) Officially names the affiliate in the notice; and
(2) Gives the affiliate an opportunity to contest the action.
Sec. 180.630 May a Federal agency impute the conduct of one person to
another?
For purposes of actions taken under this part, a Federal agency may
impute conduct as follows:
(a) Conduct imputed from an individual to an organization. A Federal
agency may impute the fraudulent, criminal, or other improper conduct of
any officer, director, shareholder, partner, employee, or other
individual associated with an organization, to that organization when
the improper conduct occurred in connection with the individual's
performance of duties for or on behalf of that organization, or with the
organization's knowledge, approval or acquiescence. The organization's
acceptance of the benefits derived from the conduct is evidence of
knowledge, approval or acquiescence.
(b) Conduct imputed from an organization to an individual, or
between individuals. A Federal agency may impute the fraudulent,
criminal, or other improper conduct of any organization to an
individual, or from one individual to another individual, if the
individual to whom the improper conduct is imputed either participated
in, had knowledge of, or reason to know of the improper conduct.
(c) Conduct imputed from one organization to another organization. A
Federal agency may impute the fraudulent, criminal, or other improper
conduct of one organization to another organization when the improper
conduct occurred in connection with a partnership, joint venture, joint
application, association or similar arrangement, or when the
organization to whom the improper conduct is imputed has the power to
direct, manage, control or influence the activities of the organization
responsible for the improper conduct. Acceptance of the benefits derived
from the conduct is evidence of knowledge, approval or acquiescence.
Sec. 180.635 May a Federal agency settle a debarment or suspension action?
Yes, a Federal agency may settle a debarment or suspension action at
any time if it is in the best interest of the Federal Government.
Sec. 180.640 May a settlement include a voluntary exclusion?
Yes, if a Federal agency enters into a settlement with you in which
you agree to be excluded, it is called a voluntary exclusion and has
governmentwide effect.
Sec. 180.645 Do other Federal agencies know if an agency agrees to a
voluntary exclusion?
(a) Yes, the Federal agency agreeing to the voluntary exclusion
enters information about it into the EPLS.
(b) Also, any agency or person may contact the Federal agency that
agreed to the voluntary exclusion to find out the details of the
voluntary exclusion.
Subpart G_Suspension
Sec. 180.700 When may the suspending official issue a suspension?
Suspension is a serious action. Using the procedures of this subpart
and Subpart F of this part, the suspending official may impose
suspension only when that official determines that--
(a) There exists an indictment for, or other adequate evidence to
suspect, an offense listed under Sec. 180.800(a), or
(b) There exists adequate evidence to suspect any other cause for
debarment listed under Sec. 180.800(b) through (d); and
(c) Immediate action is necessary to protect the public interest.
[[Page 25]]
Sec. 180.705 What does the suspending official consider in issuing a
suspension?
(a) In determining the adequacy of the evidence to support the
suspension, the suspending official considers how much information is
available, how credible it is given the circumstances, whether or not
important allegations are corroborated, and what inferences can
reasonably be drawn as a result. During this assessment, the suspending
official may examine the basic documents, including grants, cooperative
agreements, loan authorizations, contracts, and other relevant
documents.
(b) An indictment, conviction, civil judgment, or other official
findings by Federal, State, or local bodies that determine factual and/
or legal matters, constitutes adequate evidence for purposes of
suspension actions.
(c) In deciding whether immediate action is needed to protect the
public interest, the suspending official has wide discretion. For
example, the suspending official may infer the necessity for immediate
action to protect the public interest either from the nature of the
circumstances giving rise to a cause for suspension or from potential
business relationships or involvement with a program of the Federal
Government.
Sec. 180.710 When does a suspension take effect?
A suspension is effective when the suspending official signs the
decision to suspend.
Sec. 180.715 What notice does the suspending official give me if I am
suspended?
After deciding to suspend you, the suspending official promptly
sends you a Notice of Suspension advising you--
(a) That you have been suspended;
(b) That your suspension is based on--
(1) An indictment;
(2) A conviction;
(3) Other adequate evidence that you have committed irregularities
which seriously reflect on the propriety of further Federal Government
dealings with you; or
(4) Conduct of another person that has been imputed to you, or your
affiliation with a suspended or debarred person;
(c) Of any other irregularities in terms sufficient to put you on
notice without disclosing the Federal Government's evidence;
(d) Of the cause(s) upon which the suspending official relied under
Sec. 180.700 for imposing suspension;
(e) That your suspension is for a temporary period pending the
completion of an investigation or resulting legal or debarment
proceedings;
(f) Of the applicable provisions of this subpart, Subpart F of this
part, and any other agency procedures governing suspension
decisionmaking; and
(g) Of the governmentwide effect of your suspension from procurement
and nonprocurement programs and activities.
Sec. 180.720 How may I contest a suspension?
If you as a respondent wish to contest a suspension, you or your
representative must provide the suspending official with information in
opposition to the suspension. You may do this orally or in writing, but
any information provided orally that you consider important must also be
submitted in writing for the official record.
Sec. 180.725 How much time do I have to contest a suspension?
(a) As a respondent you or your representative must either send, or
make arrangements to appear and present, the information and argument to
the suspending official within 30 days after you receive the Notice of
Suspension.
(b) The Federal agency taking the action considers the notice to be
received by you--
(1) When delivered, if the agency mails the notice to the last known
street address, or five days after the agency sends it if the letter is
undeliverable;
(2) When sent, if the agency sends the notice by facsimile or five
days after the agency sends it if the facsimile is undeliverable; or
(3) When delivered, if the agency sends the notice by e-mail or five
days after the agency sends it if the e-mail is undeliverable.
[[Page 26]]
Sec. 180.730 What information must I provide to the suspending official if I
contest the suspension?
(a) In addition to any information and argument in opposition, as a
respondent your submission to the suspending official must identify--
(1) Specific facts that contradict the statements contained in the
Notice of Suspension. A general denial is insufficient to raise a
genuine dispute over facts material to the suspension;
(2) All existing, proposed, or prior exclusions under regulations
implementing Executive Order 12549 and all similar actions taken by
Federal, State, or local agencies, including administrative agreements
that affect only those agencies;
(3) All criminal and civil proceedings not included in the Notice of
Suspension that grew out of facts relevant to the cause(s) stated in the
notice; and
(4) All of your affiliates.
(b) If you fail to disclose this information, or provide false
information, the Federal agency taking the action may seek further
criminal, civil or administrative action against you, as appropriate.
Sec. 180.735 Under what conditions do I get an additional opportunity to
challenge the facts on which the suspension is based?
(a) You as a respondent will not have an additional opportunity to
challenge the facts if the suspending official determines that--
(1) Your suspension is based upon an indictment, conviction, civil
judgment, or other finding by a Federal, State, or local body for which
an opportunity to contest the facts was provided;
(2) Your presentation in opposition contains only general denials to
information contained in the Notice of Suspension;
(3) The issues raised in your presentation in opposition to the
suspension are not factual in nature, or are not material to the
suspending official's initial decision to suspend, or the official's
decision whether to continue the suspension; or
(4) On the basis of advice from the Department of Justice, an office
of the United States Attorney, a State attorney general's office, or a
State or local prosecutor's office, that substantial interests of the
government in pending or contemplated legal proceedings based on the
same facts as the suspension would be prejudiced by conducting fact-
finding.
(b) You will have an opportunity to challenge the facts if the
suspending official determines that--
(1) The conditions in paragraph (a) of this section do not exist;
and
(2) Your presentation in opposition raises a genuine dispute over
facts material to the suspension.
(c) If you have an opportunity to challenge disputed material facts
under this section, the suspending official or designee must conduct
additional proceedings to resolve those facts.
Sec. 180.740 Are suspension proceedings formal?
(a) Suspension proceedings are conducted in a fair and informal
manner. The suspending official may use flexible procedures to allow you
to present matters in opposition. In so doing, the suspending official
is not required to follow formal rules of evidence or procedure in
creating an official record upon which the official will base a final
suspension decision.
(b) You as a respondent or your representative must submit any
documentary evidence you want the suspending official to consider.
Sec. 180.745 How is fact-finding conducted?
(a) If fact-finding is conducted--
(1) You may present witnesses and other evidence, and confront any
witness presented; and
(2) The fact-finder must prepare written findings of fact for the
record.
(b) A transcribed record of fact-finding proceedings must be made,
unless you as a respondent and the Federal agency agree to waive it in
advance. If you want a copy of the transcribed record, you may purchase
it.
Sec. 180.750 What does the suspending official consider in deciding whether
to continue or terminate my suspension?
(a) The suspending official bases the decision on all information
contained
[[Page 27]]
in the official record. The record includes--
(1) All information in support of the suspending official's initial
decision to suspend you;
(2) Any further information and argument presented in support of, or
opposition to, the suspension; and
(3) Any transcribed record of fact-finding proceedings.
(b) The suspending official may refer disputed material facts to
another official for findings of fact. The suspending official may
reject any resulting findings, in whole or in part, only after
specifically determining them to be arbitrary, capricious, or clearly
erroneous.
Sec. 180.755 When will I know whether the suspension is continued or
terminated?
The suspending official must make a written decision whether to
continue, modify, or terminate your suspension within 45 days of closing
the official record. The official record closes upon the suspending
official's receipt of final submissions, information and findings of
fact, if any. The suspending official may extend that period for good
cause.
Sec. 180.760 How long may my suspension last?
(a) If legal or debarment proceedings are initiated at the time of,
or during your suspension, the suspension may continue until the
conclusion of those proceedings. However, if proceedings are not
initiated, a suspension may not exceed 12 months.
(b) The suspending official may extend the 12 month limit under
paragraph (a) of this section for an additional 6 months if an office of
a U.S. Assistant Attorney General, U.S. Attorney, or other responsible
prosecuting official requests an extension in writing. In no event may a
suspension exceed 18 months without initiating proceedings under
paragraph (a) of this section.
(c) The suspending official must notify the appropriate officials
under paragraph (b) of this section of an impending termination of a
suspension at least 30 days before the 12 month period expires to allow
the officials an opportunity to request an extension.
Subpart H_Debarment
Sec. 180.800 What are the causes for debarment?
A Federal agency may debar a person for--
(a) Conviction of or civil judgment for--
(1) Commission of fraud or a criminal offense in connection with
obtaining, attempting to obtain, or performing a public or private
agreement or transaction;
(2) Violation of Federal or State antitrust statutes, including
those proscribing price fixing between competitors, allocation of
customers between competitors, and bid rigging;
(3) Commission of embezzlement, theft, forgery, bribery,
falsification or destruction of records, making false statements, tax
evasion, receiving stolen property, making false claims, or obstruction
of justice; or
(4) Commission of any other offense indicating a lack of business
integrity or business honesty that seriously and directly affects your
present responsibility;
(b) Violation of the terms of a public agreement or transaction so
serious as to affect the integrity of an agency program, such as--
(1) A willful failure to perform in accordance with the terms of one
or more public agreements or transactions;
(2) A history of failure to perform or of unsatisfactory performance
of one or more public agreements or transactions; or
(3) A willful violation of a statutory or regulatory provision or
requirement applicable to a public agreement or transaction;
(c) Any of the following causes:
(1) A nonprocurement debarment by any Federal agency taken before
October 1, 1988, or a procurement debarment by any Federal agency taken
pursuant to 48 CFR part 9, subpart 9.4, before August 25, 1995;
(2) Knowingly doing business with an ineligible person, except as
permitted under Sec. 180.135;
(3) Failure to pay a single substantial debt, or a number of
outstanding debts (including disallowed costs and overpayments, but not
including sums owed
[[Page 28]]
the Federal Government under the Internal Revenue Code) owed to any
Federal agency or instrumentality, provided the debt is uncontested by
the debtor or, if contested, provided that the debtor's legal and
administrative remedies have been exhausted;
(4) Violation of a material provision of a voluntary exclusion
agreement entered into under Sec. 180.640 or of any settlement of a
debarment or suspension action; or
(5) Violation of the provisions of the Drug-Free Workplace Act of
1988 (41 U.S.C. 701); or
(d) Any other cause of so serious or compelling a nature that it
affects your present responsibility.
Sec. 180.805 What notice does the debarring official give me if I am
proposed for debarment?
After consideration of the causes in Sec. 180.800, if the debarring
official proposes to debar you, the official sends you a Notice of
Proposed Debarment, pursuant to Sec. 180.615, advising you--
(a) That the debarring official is considering debarring you;
(b) Of the reasons for proposing to debar you in terms sufficient to
put you on notice of the conduct or transactions upon which the proposed
debarment is based;
(c) Of the cause(s) under Sec. 180.800 upon which the debarring
official relied for proposing your debarment;
(d) Of the applicable provisions of this subpart, Subpart F of this
part, and any other agency procedures governing debarment; and
(e) Of the governmentwide effect of a debarment from procurement and
nonprocurement programs and activities.
Sec. 180.810 When does a debarment take effect?
Unlike suspension, a debarment is not effective until the debarring
official issues a decision. The debarring official does not issue a
decision until the respondent has had an opportunity to contest the
proposed debarment.
Sec. 180.815 How may I contest a proposed debarment?
If you as a respondent wish to contest a proposed debarment, you or
your representative must provide the debarring official with information
in opposition to the proposed debarment. You may do this orally or in
writing, but any information provided orally that you consider important
must also be submitted in writing for the official record.
Sec. 180.820 How much time do I have to contest a proposed debarment?
(a) As a respondent you or your representative must either send, or
make arrangements to appear and present, the information and argument to
the debarring official within 30 days after you receive the Notice of
Proposed Debarment.
(b) The Federal agency taking the action considers the Notice of
Proposed Debarment to be received by you--
(1) When delivered, if the agency mails the notice to the last known
street address, or five days after the agency sends it if the letter is
undeliverable;
(2) When sent, if the agency sends the notice by facsimile or five
days after the agency sends it if the facsimile is undeliverable; or
(3) When delivered, if the agency sends the notice by e-mail or five
days after the agency sends it if the e-mail is undeliverable.
Sec. 180.825 What information must I provide to the debarring official if I
contest the proposed debarment?
(a) In addition to any information and argument in opposition, as a
respondent your submission to the debarring official must identify--
(1) Specific facts that contradict the statements contained in the
Notice of Proposed Debarment. Include any information about any of the
factors listed in Sec. 180.860. A general denial is insufficient to
raise a genuine dispute over facts material to the debarment;
(2) All existing, proposed, or prior exclusions under regulations
implementing Executive Order 12549 and all similar actions taken by
Federal, State, or local agencies, including administrative agreements
that affect only those agencies;
(3) All criminal and civil proceedings not included in the Notice of
Proposed
[[Page 29]]
Debarment that grew out of facts relevant to the cause(s) stated in the
notice; and
(4) All of your affiliates.
(b) If you fail to disclose this information, or provide false
information, the Federal agency taking the action may seek further
criminal, civil or administrative action against you, as appropriate.
Sec. 180.830 Under what conditions do I get an additional opportunity to
challenge the facts on which the proposed debarment is based?
(a) You as a respondent will not have an additional opportunity to
challenge the facts if the debarring official determines that--
(1) Your debarment is based upon a conviction or civil judgment;
(2) Your presentation in opposition contains only general denials to
information contained in the Notice of Proposed Debarment; or
(3) The issues raised in your presentation in opposition to the
proposed debarment are not factual in nature, or are not material to the
debarring official's decision whether to debar.
(b) You will have an additional opportunity to challenge the facts
if the debarring official determines that--
(1) The conditions in paragraph (a) of this section do not exist;
and
(2) Your presentation in opposition raises a genuine dispute over
facts material to the proposed debarment.
(c) If you have an opportunity to challenge disputed material facts
under this section, the debarring official or designee must conduct
additional proceedings to resolve those facts.
Sec. 180.835 Are debarment proceedings formal?
(a) Debarment proceedings are conducted in a fair and informal
manner. The debarring official may use flexible procedures to allow you
as a respondent to present matters in opposition. In so doing, the
debarring official is not required to follow formal rules of evidence or
procedure in creating an official record upon which the official will
base the decision whether to debar.
(b) You or your representative must submit any documentary evidence
you want the debarring official to consider.
Sec. 180.840 How is fact-finding conducted?
(a) If fact-finding is conducted--
(1) You may present witnesses and other evidence, and confront any
witness presented; and
(2) The fact-finder must prepare written findings of fact for the
record.
(b) A transcribed record of fact-finding proceedings must be made,
unless you as a respondent and the Federal agency agree to waive it in
advance. If you want a copy of the transcribed record, you may purchase
it.
Sec. 180.845 What does the debarring official consider in deciding whether
to debar me?
(a) The debarring official may debar you for any of the causes in
Sec. 180.800. However, the official need not debar you even if a cause
for debarment exists. The official may consider the seriousness of your
acts or omissions and the mitigating or aggravating factors set forth at
Sec. 180.860.
(b) The debarring official bases the decision on all information
contained in the official record. The record includes--
(1) All information in support of the debarring official's proposed
debarment;
(2) Any further information and argument presented in support of, or
in opposition to, the proposed debarment; and
(3) Any transcribed record of fact-finding proceedings.
(c) The debarring official may refer disputed material facts to
another official for findings of fact. The debarring official may reject
any resultant findings, in whole or in part, only after specifically
determining them to be arbitrary, capricious, or clearly erroneous.
Sec. 180.850 What is the standard of proof in a debarment action?
(a) In any debarment action, the Federal agency must establish the
cause for debarment by a preponderance of the evidence.
(b) If the proposed debarment is based upon a conviction or civil
judgment, the standard of proof is met.
[[Page 30]]
Sec. 180.855 Who has the burden of proof in a debarment action?
(a) The Federal agency has the burden to prove that a cause for
debarment exists.
(b) Once a cause for debarment is established, you as a respondent
have the burden of demonstrating to the satisfaction of the debarring
official that you are presently responsible and that debarment is not
necessary.
Sec. 180.860 What factors may influence the debarring official's decision?
This section lists the mitigating and aggravating factors that the
debarring official may consider in determining whether to debar you and
the length of your debarment period. The debarring official may consider
other factors if appropriate in light of the circumstances of a
particular case. The existence or nonexistence of any factor, such as
one of those set forth in this section, is not necessarily determinative
of your present responsibility. In making a debarment decision, the
debarring official may consider the following factors:
(a) The actual or potential harm or impact that results or may
result from the wrongdoing.
(b) The frequency of incidents and/or duration of the wrongdoing.
(c) Whether there is a pattern or prior history of wrongdoing. For
example, if you have been found by another Federal agency or a State
agency to have engaged in wrongdoing similar to that found in the
debarment action, the existence of this fact may be used by the
debarring official in determining that you have a pattern or prior
history of wrongdoing.
(d) Whether you are or have been excluded or disqualified by an
agency of the Federal Government or have not been allowed to participate
in State or local contracts or assistance agreements on a basis of
conduct similar to one or more of the causes for debarment specified in
this part.
(e) Whether you have entered into an administrative agreement with a
Federal agency or a State or local government that is not governmentwide
but is based on conduct similar to one or more of the causes for
debarment specified in this part.
(f) Whether and to what extent you planned, initiated, or carried
out the wrongdoing.
(g) Whether you have accepted responsibility for the wrongdoing and
recognize the seriousness of the misconduct that led to the cause for
debarment.
(h) Whether you have paid or agreed to pay all criminal, civil and
administrative liabilities for the improper activity, including any
investigative or administrative costs incurred by the government, and
have made or agreed to make full restitution.
(i) Whether you have cooperated fully with the government agencies
during the investigation and any court or administrative action. In
determining the extent of cooperation, the debarring official may
consider when the cooperation began and whether you disclosed all
pertinent information known to you.
(j) Whether the wrongdoing was pervasive within your organization.
(k) The kind of positions held by the individuals involved in the
wrongdoing.
(l) Whether your organization took appropriate corrective action or
remedial measures, such as establishing ethics training and implementing
programs to prevent recurrence.
(m) Whether your principals tolerated the offense.
(n) Whether you brought the activity cited as a basis for the
debarment to the attention of the appropriate government agency in a
timely manner.
(o) Whether you have fully investigated the circumstances
surrounding the cause for debarment and, if so, made the result of the
investigation available to the debarring official.
(p) Whether you had effective standards of conduct and internal
control systems in place at the time the questioned conduct occurred.
(q) Whether you have taken appropriate disciplinary action against
the individuals responsible for the activity which constitutes the cause
for debarment.
(r) Whether you have had adequate time to eliminate the
circumstances within your organization that led to the cause for the
debarment.
[[Page 31]]
(s) Other factors that are appropriate to the circumstances of a
particular case.
Sec. 180.865 How long may my debarment last?
(a) If the debarring official decides to debar you, your period of
debarment will be based on the seriousness of the cause(s) upon which
your debarment is based. Generally, debarment should not exceed three
years. However, if circumstances warrant, the debarring official may
impose a longer period of debarment.
(b) In determining the period of debarment, the debarring official
may consider the factors in Sec. 180.860. If a suspension has preceded
your debarment, the debarring official must consider the time you were
suspended.
(c) If the debarment is for a violation of the provisions of the
Drug-Free Workplace Act of 1988, your period of debarment may not exceed
five years.
Sec. 180.870 When do I know if the debarring official debars me?
(a) The debarring official must make a written decision whether to
debar within 45 days of closing the official record. The official record
closes upon the debarring official's receipt of final submissions,
information and findings of fact, if any. The debarring official may
extend that period for good cause.
(b) The debarring official sends you written notice, pursuant to
Sec. 180.615 that the official decided, either--
(1) Not to debar you; or
(2) To debar you. In this event, the notice:
(i) Refers to the Notice of Proposed Debarment;
(ii) Specifies the reasons for your debarment;
(iii) States the period of your debarment, including the effective
dates; and
(iv) Advises you that your debarment is effective for covered
transactions and contracts that are subject to the Federal Acquisition
Regulation (48 CFR chapter 1), throughout the executive branch of the
Federal Government unless an agency head or an authorized designee
grants an exception.
Sec. 180.875 May I ask the debarring official to reconsider a decision to
debar me?
Yes, as a debarred person you may ask the debarring official to
reconsider the debarment decision or to reduce the time period or scope
of the debarment. However, you must put your request in writing and
support it with documentation.
Sec. 180.880 What factors may influence the debarring official during
reconsideration?
The debarring official may reduce or terminate your debarment based
on--
(a) Newly discovered material evidence;
(b) A reversal of the conviction or civil judgment upon which your
debarment was based;
(c) A bona fide change in ownership or management;
(d) Elimination of other causes for which the debarment was imposed;
or
(e) Other reasons the debarring official finds appropriate.
Sec. 180.885 May the debarring official extend a debarment?
(a) Yes, the debarring official may extend a debarment for an
additional period, if that official determines that an extension is
necessary to protect the public interest.
(b) However, the debarring official may not extend a debarment
solely on the basis of the facts and circumstances upon which the
initial debarment action was based.
(c) If the debarring official decides that a debarment for an
additional period is necessary, the debarring official must follow the
applicable procedures in this subpart, and Subpart F of this part, to
extend the debarment.
Subpart I_Definitions
Sec. 180.900 Adequate evidence.
Adequate evidence means information sufficient to support the
reasonable belief that a particular act or omission has occurred.
Sec. 180.905 Affiliate.
Persons are affiliates of each other if, directly or indirectly,
either one controls or has the power to control the
[[Page 32]]
other or a third person controls or has the power to control both. The
ways a Federal agency may determine control include, but are not limited
to--
(a) Interlocking management or ownership;
(b) Identity of interests among family members;
(c) Shared facilities and equipment;
(d) Common use of employees; or
(e) A business entity which has been organized following the
exclusion of a person which has the same or similar management,
ownership, or principal employees as the excluded person.
Sec. 180.910 Agent or representative.
Agent or representative means any person who acts on behalf of, or
who is authorized to commit a participant in a covered transaction.
Sec. 180.915 Civil judgment.
Civil judgment means the disposition of a civil action by any court
of competent jurisdiction, whether by verdict, decision, settlement,
stipulation, other disposition which creates a civil liability for the
complained of wrongful acts, or a final determination of liability under
the Program Fraud Civil Remedies Act of 1988 (31 U.S.C. 3801-3812).
Sec. 180.920 Conviction.
Conviction means--
(a) A judgment or any other determination of guilt of a criminal
offense by any court of competent jurisdiction, whether entered upon a
verdict or plea, including a plea of nolo contendere; or
(b) Any other resolution that is the functional equivalent of a
judgment, including probation before judgment and deferred prosecution.
A disposition without the participation of the court is the functional
equivalent of a judgment only if it includes an admission of guilt.
Sec. 180.925 Debarment.
Debarment means an action taken by a debarring official under
Subpart H of this part to exclude a person from participating in covered
transactions and transactions covered under the Federal Acquisition
Regulation (48 CFR chapter 1). A person so excluded is debarred.
Sec. 180.930 Debarring official.
Debarring official means an agency official who is authorized to
impose debarment. A debarring official is either--
(a) The agency head; or
(b) An official designated by the agency head.
Sec. 180.935 Disqualified.
Disqualified means that a person is prohibited from participating in
specified Federal procurement or nonprocurement transactions as required
under a statute, Executive order (other than Executive Orders 12549 and
12689) or other authority. Examples of disqualifications include persons
prohibited under--
(a) The Davis-Bacon Act (40 U.S.C. 276(a));
(b) The equal employment opportunity acts and Executive orders; or
(c) The Clean Air Act (42 U.S.C. 7606), Clean Water Act (33 U.S.C.
1368) and Executive Order 11738 (3 CFR, 1973 Comp., p. 799).
Sec. 180.940 Excluded or exclusion.
Excluded or exclusion means--
(a) That a person or commodity is prohibited from being a
participant in covered transactions, whether the person has been
suspended; debarred; proposed for debarment under 48 CFR part 9, subpart
9.4; voluntarily excluded; or
(b) The act of excluding a person.
Sec. 180.945 Excluded Parties List System (EPLS).
Excluded Parties List System (EPLS) means the list maintained and
disseminated by the General Services Administration (GSA) containing the
names and other information about persons who are ineligible.
Sec. 180.950 Federal agency.
Federal agency means any United States executive department,
military department, defense agency or any other agency of the executive
branch. Other agencies of the Federal government are not considered
``agencies'' for the purposes of this part unless they issue regulations
adopting the governmentwide Debarment and Suspension system under
Executive Orders 12549 and 12689.
[[Page 33]]
Sec. 180.955 Indictment.
Indictment means an indictment for a criminal offense. A
presentment, information, or other filing by a competent authority
charging a criminal offense shall be given the same effect as an
indictment.
Sec. 180.960 Ineligible or ineligibility.
Ineligible or ineligibility means that a person or commodity is
prohibited from covered transactions because of an exclusion or
disqualification.
Sec. 180.965 Legal proceedings.
Legal proceedings means any criminal proceeding or any civil
judicial proceeding, including a proceeding under the Program Fraud
Civil Remedies Act (31 U.S.C. 3801-3812), to which the Federal
Government or a State or local government or quasi-governmental
authority is a party. The term also includes appeals from those
proceedings.
Sec. 180.970 Nonprocurement transaction.
(a) Nonprocurement transaction means any transaction, regardless of
type (except procurement contracts), including, but not limited to the
following:
(1) Grants.
(2) Cooperative agreements.
(3) Scholarships.
(4) Fellowships.
(5) Contracts of assistance.
(6) Loans.
(7) Loan guarantees.
(8) Subsidies.
(9) Insurances.
(10) Payments for specified uses.
(11) Donation agreements.
(b) A nonprocurement transaction at any tier does not require the
transfer of Federal funds.
Sec. 180.975 Notice.
Notice means a written communication served in person, sent by
certified mail or its equivalent, or sent electronically by e-mail or
facsimile. (See Sec. 180. 615.)
Sec. 180.980 Participant.
Participant means any person who submits a proposal for or who
enters into a covered transaction, including an agent or representative
of a participant.
Sec. 180.985 Person.
Person means any individual, corporation, partnership, association,
unit of government, or legal entity, however organized.
Sec. 180.990 Preponderance of the evidence.
Preponderance of the evidence means proof by information that,
compared with information opposing it, leads to the conclusion that the
fact at issue is more probably true than not.
Sec. 180.995 Principal.
Principal means--
(a) An officer, director, owner, partner, principal investigator, or
other person within a participant with management or supervisory
responsibilities related to a covered transaction; or
(b) A consultant or other person, whether or not employed by the
participant or paid with Federal funds, who--
(1) Is in a position to handle Federal funds;
(2) Is in a position to influence or control the use of those funds;
or,
(3) Occupies a technical or professional position capable of
substantially influencing the development or outcome of an activity
required to perform the covered transaction.
Sec. 180.1000 Respondent.
Respondent means a person against whom an agency has initiated a
debarment or suspension action.
Sec. 180.1005 State.
(a) State means--
(1) Any of the states of the United States;
(2) The District of Columbia;
(3) The Commonwealth of Puerto Rico;
(4) Any territory or possession of the United States; or
(5) Any agency or instrumentality of a state.
(b) For purposes of this part, State does not include institutions
of higher education, hospitals, or units of local government.
Sec. 180.1010 Suspending official.
(a) Suspending official means an agency official who is authorized
to impose
[[Page 34]]
suspension. The suspending official is either:
(1) The agency head; or
(2) An official designated by the agency head.
Sec. 180.1015 Suspension.
Suspension is an action taken by a suspending official under subpart
G of this part that immediately prohibits a person from participating in
covered transactions and transactions covered under the Federal
Acquisition Regulation (48 CFR chapter 1) for a temporary period,
pending completion of an agency investigation and any judicial or
administrative proceedings that may ensue. A person so excluded is
suspended.
Sec. 180.1020 Voluntary exclusion or voluntarily excluded.
(a) Voluntary exclusion means a person's agreement to be excluded
under the terms of a settlement between the person and one or more
agencies. Voluntary exclusion must have governmentwide effect.
(b) Voluntarily excluded means the status of a person who has agreed
to a voluntary exclusion.
Appendix to Part 180--Covered Transactions
[[Page 35]]
[GRAPHIC] [TIFF OMITTED] TR31AU05.000
PARTS 181-199 [RESERVED]
[[Page 37]]
CHAPTER II--OFFICE OF MANAGEMENT AND BUDGET CIRCULARS AND GUIDANCE
--------------------------------------------------------------------
Part Page
200-214 [Reserved]
215 Uniform administrative requirements for
grants and agreements with institutions
of higher education, hospitals, and
other non-profit organizations (OMB
Circular A-110)......................... 39
216-219 [Reserved]
220 Cost principles for educational institutions
(OMB Circular A-21)..................... 68
221-224 [Reserved]
225 Cost principles for state, local, and Indian
tribal governments (OMB Circular A-87).. 115
226-229 [Reserved]
230 Cost principles for non-profit organizations
(OMB Circular A-122).................... 144
231-299 [Reserved]
[[Page 39]]
PARTS 200-214 [RESERVED]
PART 215_UNIFORM ADMINISTRATIVE REQUIREMENTS FOR GRANTS AND AGREEMENTS WITH
INSTITUTIONS OF HIGHER EDUCATION, HOSPITALS, AND OTHER NON-PROFIT
ORGANIZATIONS (OMB CIRCULAR A-110)--Table of Contents
Sec.
215.0 About this part.
Subpart A_General
215.1 Purpose.
215.2 Definitions.
215.3 Effect on other issuances.
215.4 Deviations.
215.5 Subawards.
Subpart B_Pre-Award Requirements
215.10 Purpose.
215.11 Pre-award policies.
215.12 Forms for applying for Federal assistance.
215.13 Debarment and suspension.
215.14 Special award conditions.
215.15 Metric system of measurement.
215.16 Resource Conservation and Recovery Act.
215.17 Certifications and representations.
Subpart C_Post-Award Requirements
Financial and Program Management
215.20 Purpose of financial and program management.
215.21 Standards for financial management systems.
215.22 Payment.
215.23 Cost sharing or matching.
215.24 Program income.
215.25 Revision of budget and program plans.
215.26 Non-Federal audits.
215.27 Allowable costs.
215.28 Period of availability of funds.
215.29 Conditional exemptions.
Property Standards
215.30 Purpose of property standards.
215.31 Insurance coverage.
215.32 Real property.
215.33 Federally-owned and exempt property.
215.34 Equipment.
215.35 Supplies and other expendable property.
215.36 Intangible property.
215.37 Property trust relationship.
Procurement Standards
215.40 Purpose of procurement standards.
215.41 Recipient responsibilities.
215.42 Codes of conduct.
215.43 Competition.
215.44 Procurement procedures.
215.45 Cost and price analysis.
215.46 Procurement records.
215.47 Contract administration.
215.48 Contract provisions.
Reports and Records
215.50 Purpose of reports and records.
215.51 Monitoring and reporting program performance.
215.52 Financial reporting.
215.53 Retention and access requirements for records.
Termination and Enforcement
215.60 Purpose of termination and enforcement.
215.61 Termination.
215.62 Enforcement.
Subpart D_After-the-Award Requirements
215.70 Purpose.
215.71 Closeout procedures.
215.72 Subsequent adjustments and continuing responsibilities.
215.73 Collection of amounts due.
Appendix A to Part 215--Contract Provisions
Authority: 31 U.S.C. 503; 31 U.S.C. 1111; 41 U.S.C. 405;
Reorganization Plan No. 2 of 1970; E.O. 11541, 35 FR 10737, 3 CFR, 1966-
1970, p. 939.
Source: 69 FR 26281, May 11, 2004, unless otherwise noted.
Sec. 215.0 About this part.
(a) Purpose. This part contains OMB guidance to Federal agencies on
the administration of grants to and agreements with institutions of
higher education, hospitals, and other non-profit organizations. The
guidance sets forth standards for obtaining consistency and uniformity
in the agencies' administration of those grants and agreements.
(b) Applicability. (1) Except as provided herein, the standards set
forth in this part are applicable to all Federal agencies. If any
statute specifically
[[Page 40]]
prescribes policies or specific requirements that differ from the
standards provided in this part, the provisions of the statute shall
govern.
(2) The provisions of subparts A through D of this part shall be
applied by Federal agencies to recipients. Recipients shall apply the
provisions of those subparts to subrecipients performing substantive
work under grants and agreements that are passed through or awarded by
the primary recipient, if such subrecipients are organizations described
in paragraph (a) of this section.
(3) This part does not apply to grants, contracts, or other
agreements between the Federal Government and units of State or local
governments covered by OMB Circular A-102, ``Grants and Cooperative
Agreements with State and Local Governments'' \1\ and the Federal
agencies' grants management common rule (see Sec. 215.5) which
standardize the administrative requirements Federal agencies impose on
State and local grantees. In addition, subawards and contracts to State
or local governments are not covered by this part. However, this part
applies to subawards made by State and local governments to
organizations covered by this part.
---------------------------------------------------------------------------
\1\ See 5 CFR 1310.9 for availability of OMB circulars.
---------------------------------------------------------------------------
(4) Federal agencies may apply the provisions of subparts A through
D of this part to commercial organizations, foreign governments,
organizations under the jurisdiction of foreign governments, and
international organizations.
(c) OMB responsibilities. OMB is responsible for:
(1) Issuing and maintaining the guidance in this part.
(2) Interpreting the policy requirements in this part and providing
assistance to ensure effective and efficient implementation.
(3) Reviewing Federal agency regulations implementing the guidance
in this part, as required by Executive Order 12866.
(4) Granting any deviations to Federal agencies from the guidance in
this part, as provided in Sec. 215.4. Exceptions will only be made in
particular cases where adequate justification is presented.
(5) Conducting broad oversight of government-wide compliance with
the guidance in this part.
(d) Federal agency responsibilities. The head of each Federal agency
that awards and administers grants and agreements subject to the
guidance in this part is responsible for:
(1) Implementing the guidance in subparts A through D of this part
by adopting the language in those subparts unless different provisions
are required by Federal statute or are approved by OMB.
(2) Ensuring that the agency's components and subcomponents comply
with the agency's implementation of the guidance in subparts A through D
of this part.
(3) Requesting approval from OMB for deviations from the guidance in
subparts A through D of this part in situations where the guidance
requires that approval.
(4) Performing other functions specified in this part.
(e) Relationship to previous issuance. The guidance in this part
previously was issued as OMB Circular A-110. Subparts A through D of
this part contain the guidance that was in the attachment to the OMB
circular. Appendix A to this part contains the guidance that was in the
appendix to the attachment.
(f) Information Contact. Further information concerning this part
may be obtained by contacting the Office of Federal Financial
Management, Office of Management and Budget, Washington, DC 20503,
telephone (202) 395-3993.
(g) Termination Review Date. This part will have a policy review
three years from the date of issuance.
Subpart A_General
Sec. 215.1 Purpose.
This part establishes uniform administrative requirements for
Federal grants and agreements awarded to institutions of higher
education, hospitals, and other non-profit organizations. Federal
awarding agencies shall not impose additional or inconsistent
requirements, except as provided in Sec. 215.4, and Sec. 215.14 or
unless specifically
[[Page 41]]
required by Federal statute or executive order. Non-profit organizations
that implement Federal programs for the States are also subject to State
requirements.
Sec. 215.2 Definitions.
(a) Accrued expenditures means the charges incurred by the recipient
during a given period requiring the provision of funds for:
(1) Goods and other tangible property received;
(2) Services performed by employees, contractors, subrecipients, and
other payees; and,
(3) Other amounts becoming owed under programs for which no current
services or performance is required.
(b) Accrued income means the sum of:
(1) Earnings during a given period from:
(i) Services performed by the recipient, and
(ii) Goods and other tangible property delivered to purchasers, and
(2) Amounts becoming owed to the recipient for which no current
services or performance is required by the recipient.
(c) Acquisition cost of equipment means the net invoice price of the
equipment, including the cost of modifications, attachments,
accessories, or auxiliary apparatus necessary to make the property
usable for the purpose for which it was acquired. Other charges, such as
the cost of installation, transportation, taxes, duty or protective in-
transit insurance, shall be included or excluded from the unit
acquisition cost in accordance with the recipient's regular accounting
practices.
(d) Advance means a payment made by Treasury check or other
appropriate payment mechanism to a recipient upon its request either
before outlays are made by the recipient or through the use of
predetermined payment schedules.
(e) Award means financial assistance that provides support or
stimulation to accomplish a public purpose. Awards include grants and
other agreements in the form of money or property in lieu of money, by
the 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.
(f) Cash contributions means the recipient's cash outlay, including
the outlay of money contributed to the recipient by third parties.
(g) Closeout means the process by which a Federal awarding agency
determines that all applicable administrative actions and all required
work of the award have been completed by the recipient and Federal
awarding agency.
(h) Contract means a procurement contract under an award or
subaward, and a procurement subcontract under a recipient's or
subrecipient's contract.
(i) Cost sharing or matching means that portion of project or
program costs not borne by the Federal Government.
(j) 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.
(k) Disallowed costs means those charges to an award that the
Federal awarding agency determines to be unallowable, in accordance with
the applicable Federal cost principles or other terms and conditions
contained in the award.
(l) Equipment means tangible nonexpendable personal property
including exempt property charged directly to the award having a useful
life of more than one year and an acquisition cost of $5,000 or more per
unit. However, consistent with recipient policy, lower limits may be
established.
(m) Excess property means property under the control of any Federal
awarding agency that, as determined by the head thereof, is no longer
required for its needs or the discharge of its responsibilities.
(n) Exempt property means tangible personal property acquired in
whole or in part with Federal funds, where the Federal awarding agency
has statutory authority to vest title in the recipient
[[Page 42]]
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.
(o) Federal awarding agency means the Federal agency that provides
an award to the recipient.
(p) Federal funds authorized means the total amount of Federal funds
obligated by the Federal Government for use by the recipient. This
amount may include any authorized carryover of unobligated funds from
prior funding periods when permitted by agency regulations or agency
implementing instructions.
(q) Federal share of real property, equipment, or supplies means
that percentage of the property's acquisition costs and any improvement
expenditures paid with Federal funds.
(r) Funding period means the period of time when Federal funding is
available for obligation by the recipient.
(s) 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.
(t) 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.
(u) 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.
(v) 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.
(w) Prior approval means written approval by an authorized official
evidencing prior consent.
(x) 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. 215.24(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
Federal awarding agency 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.
(y) 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.
(z) Project period means the period established in the award
document during which Federal sponsorship begins and ends.
(aa) Property means, unless otherwise stated, real property,
equipment, intangible property and debt instruments.
[[Page 43]]
(bb) Real property means land, including land improvements,
structures and appurtenances thereto, but excludes movable machinery and
equipment.
(cc) Recipient means an organization receiving financial assistance
directly from Federal awarding agencies 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 Federal awarding
agency. 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.
(dd) Research and development means all research activities, both
basic and applied, and all development activities that are supported at
universities, colleges, and other non-profit institutions. ``Research''
is defined as a systematic study directed toward fuller scientific
knowledge or understanding of the subject studied. ``Development'' is
the systematic use of knowledge and understanding gained from research
directed toward the production of useful materials, devices, systems, or
methods, including design and development of prototypes and processes.
The term research also includes activities involving the training of
individuals in research techniques where such activities utilize the
same facilities as other research and development activities and where
such activities are not included in the instruction function.
(ee) Small awards means a grant or cooperative agreement not
exceeding the small purchase threshold fixed at 41 U.S.C. 403(11)
(currently $25,000).
(ff) Subaward means an award of financial assistance in the form of
money, or property in lieu of money, made under an award by a recipient
to an eligible subrecipient or by a subrecipient to a lower tier
subrecipient. The term includes financial assistance when provided by
any legal agreement, even if the agreement is called a contract, but
does not include procurement of goods and services nor does it include
any form of assistance which is excluded from the definition of
``award'' in Sec. 215.2(e).
(gg) Subrecipient means the legal entity to which a subaward is made
and which is accountable to the recipient for the use of the funds
provided. The term may include foreign or international organizations
(such as agencies of the United Nations) at the discretion of the
Federal awarding agency.
(hh) 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.''
(ii) Suspension means an action by a Federal awarding agency that
temporarily withdraws Federal sponsorship under an award, pending
corrective action by the recipient or pending a decision to terminate
the award by the Federal awarding agency. Suspension of an award is a
separate action from suspension under Federal agency regulations
implementing E.O. 12549 (51 FR 6370, 3 CFR, 1986 Comp., p. 189) and E.O.
12689 (54 FR 34131, 3 CFR, 1989 Comp., p. 235), ``Debarment and
Suspension.''
(jj) Termination means the cancellation of Federal sponsorship, in
whole or in part, under an agreement at any time prior to the date of
completion.
(kk) 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
[[Page 44]]
and specifically identifiable to the project or program.
(ll) 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.
(mm) Unobligated balance means the portion of the funds authorized
by the Federal awarding agency that has not been obligated by the
recipient and is determined by deducting the cumulative obligations from
the cumulative funds authorized.
(nn) 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.
(oo) 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. 215.3 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. 215.4.
Sec. 215.4 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. Federal awarding
agencies may apply more restrictive requirements to a class of
recipients when approved by OMB. Federal awarding agencies 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 Federal awarding agencies.
Sec. 215.5 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 or other non-profit organizations. State and
local government subrecipients are subject to the provisions of
regulations implementing the grants management common rule, ``Uniform
Administrative Requirements for Grants and Cooperative Agreements to
State and Local Governments,'' published at 7 CFR parts 3015 and 3016,
10 CFR part 600, 13 CFR part 143, 15 CFR part 24, 20 CFR part 437, 22
CFR part 135, 24 CFR parts 44, 85, 111, 511, 570, 571, 575, 590, 850,
882, 905, 941, 968, 970, and 990, 28 CFR part 66, 29 CFR parts 97 and
1470, 32 CFR part 278, 34 CFR parts 74 and 80, 36 CFR part 1207, 38 CFR
part 43, 40 CFR parts 30, 31, and 33, 43 CFR part 12, 44 CFR part 13, 45
CFR parts 74, 92, 602, 1157, 1174, 1183, 1234, and 2015, and 49 CFR part
18.
[69 FR 26281, May 11, 2004, as amended at 70 FR 51880, Aug. 31, 2005]
Subpart B_Pre-Award Requirements
Sec. 215.10 Purpose.
Sections 215.11 through 215.17 prescribe forms and instructions and
other pre-award matters to be used in applying for Federal awards.
Sec. 215.11 Pre-award policies.
(a) Use of Grants and Cooperative Agreements, and Contracts. In each
instance, the Federal awarding agency 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
[[Page 45]]
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. Federal awarding agencies
shall notify the public of its intended funding priorities for
discretionary grant programs, unless funding priorities are established
by Federal statute.
Sec. 215.12 Forms for applying for Federal assistance.
(a) Federal awarding agencies 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
Federal awarding agency 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 Federal awarding agency.
(c) For Federal programs covered by E.O. 12372, ``Intergovernmental
Review of Federal Programs,'' (47 FR 30959, 3 CFR, 1982 Comp., p. 197)
the applicant shall complete the appropriate sections of the SF-424
(Application for Federal Assistance) indicating whether the application
was subject to review by the State Single Point of Contact (SPOC). The
name and address of the SPOC for a particular State can be obtained from
the Federal awarding agency or the Catalog of Federal Domestic
Assistance. The SPOC shall advise the applicant whether the program for
which application is made has been selected by that State for review.
(d) Federal awarding agencies that do not use the SF-424 form should
indicate whether the application is subject to review by the State under
E.O. 12372.
Sec. 215.13 Debarment and suspension.
Federal awarding agencies and recipients shall comply with Federal
agency regulations implementing E.O.s 12549 and 12689, ``Debarment and
Suspension.'' Under those regulations, certain parties who are debarred,
suspended or otherwise excluded may not be participants or principals in
Federal assistance awards and subawards, and in certain contracts under
those awards and subawards.
[70 FR 51879, Aug. 31, 2005]
Sec. 215.14 Special award conditions.
If an applicant or recipient: has a history of poor performance, is
not financially stable, has a management system that does not meet the
standards prescribed in this part, has not conformed to the terms and
conditions of a previous award, or is not otherwise responsible, Federal
awarding agencies 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. 215.15 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. Federal awarding agencies shall follow the provisions of
E.O. 12770, ``Metric Usage in Federal Government Programs'' (56 FR
35801, 3 CFR, 1991 Comp., p. 343).
[[Page 46]]
Sec. 215.16 Resource Conservation and Recovery Act.
Under the Act, any State agency or agency of a political subdivision
of a State which is using appropriated Federal funds must comply with
section 6002. Section 6002 requires that preference be given in
procurement programs to the purchase of specific products containing
recycled materials identified in guidelines developed by the
Environmental Protection Agency (EPA) (40 CFR parts 247-254).
Accordingly, State and local institutions of higher education,
hospitals, and non-profit organizations that receive direct Federal
awards or other Federal funds shall give preference in their procurement
programs funded with Federal funds to the purchase of recycled products
pursuant to the EPA guidelines.
Sec. 215.17 Certifications and representations.
Unless prohibited by statute or codified regulation, each Federal
awarding agency is authorized and encouraged to allow recipients to
submit certifications and representations required by statute, executive
order, or regulation on an annual basis, if the recipients have ongoing
and continuing relationships with the agency. Annual certifications and
representations shall be signed by responsible officials with the
authority to ensure recipients' compliance with the pertinent
requirements.
Subpart C_Post Award Requirements
Financial and Program Management
Sec. 215.20 Purpose of financial and program management.
Sections 215.21 through 215.28 prescribe standards for financial
management systems, methods for making payments and rules for:
satisfying cost sharing and matching requirements, accounting for
program income, budget revision approvals, making audits, determining
allowability of cost, and establishing fund availability.
Sec. 215.21 Standards for financial management systems.
(a) Federal awarding agencies 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. 215.52. If a Federal
awarding agency 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
[[Page 47]]
Federal cost principles and the terms and conditions of the award.
(7) Accounting records including cost accounting records that are
supported by source documentation.
(c) Where the Federal Government guarantees or insures the repayment
of money borrowed by the recipient, the Federal awarding agency, at its
discretion, may require adequate bonding and insurance if the bonding
and insurance requirements of the recipient are not deemed adequate to
protect the interest of the Federal Government.
(d) The Federal awarding agency 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. 215.22 Payment.
(a) Payment methods shall minimize the time elapsing between the
transfer of funds from the United States Treasury and the issuance or
redemption of checks, warrants, or payment by other means by the
recipients. Payment methods of State agencies or instrumentalities shall
be consistent with Treasury-State CMIA agreements or default procedures
codified at 31 CFR part 205.
(b) Recipients are to be paid in advance, provided they maintain or
demonstrate the willingness to maintain:
(1) Written procedures that minimize the time elapsing between the
transfer of funds and disbursement by the recipient, and
(2) Financial management systems that meet the standards for fund
control and accountability as established in Sec. 215.21. Cash advances
to a recipient organization shall be limited to the minimum amounts
needed and be timed to be in accordance with the actual, immediate cash
requirements of the recipient organization in carrying out the purpose
of the approved program or project. The timing and amount of cash
advances shall be as close as is administratively feasible to the actual
disbursements by the recipient organization for direct program or
project costs and the proportionate share of any allowable indirect
costs.
(c) Whenever possible, advances shall be consolidated to cover
anticipated cash needs for all awards made by the Federal awarding
agency to the recipient.
(1) Advance payment mechanisms include, but are not limited to,
Treasury check and electronic funds transfer.
(2) Advance payment mechanisms are subject to 31 CFR part 205.
(3) Recipients shall be authorized to submit requests for advances
and reimbursements at least monthly when electronic fund transfers are
not used.
(d) Requests for Treasury check advance payment shall be submitted
on SF-270, ``Request for Advance or Reimbursement,'' or other forms as
may be authorized by OMB. This form is not to be used when Treasury
check advance payments are made to the recipient automatically through
the use of a predetermined payment schedule or if precluded by special
Federal awarding agency instructions for electronic funds transfer.
(e) Reimbursement is the preferred method when the requirements in
Sec. 215.12(b) cannot be met. Federal awarding agencies 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 Federal awarding
agency shall make payment within 30 days after receipt of the billing,
unless the billing is improper.
(2) Recipients shall be 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 Federal awarding agency has determined that reimbursement is not
feasible because the recipient lacks sufficient working capital, the
Federal awarding agency may provide cash on a working capital advance
basis. Under this procedure, the Federal awarding
[[Page 48]]
agency shall advance cash to the recipient to cover its estimated
disbursement needs for an initial period generally geared to the
awardee's disbursing cycle. Thereafter, the Federal awarding agency
shall reimburse 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 cash
payments.
(h) Unless otherwise required by statute, Federal awarding agencies
shall not withhold payments for proper charges made by recipients at any
time during the project period unless paragraphs (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 Federal awarding agency
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, Federal awarding agencies 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 paragraphs (k)(1), (2) or (3) of this section
apply.
(1) The recipient receives less than $120,000 in Federal awards per
year.
(2) The best reasonably available interest bearing account would not
be expected to earn interest in excess of $250 per year on Federal cash
balances.
(3) The depository would require an average or minimum balance so
high that it would not be feasible within the expected Federal and non-
Federal cash resources.
(l) For those entities where CMIA and its implementing regulations
at 31 CFR part 205 do not apply, interest earned on Federal advances
deposited in interest bearing accounts shall be remitted annually to
Department of Health and Human Services, Payment Management System,
Rockville, MD 20852. Interest amounts up to $250 per year may be
retained by the recipient for administrative expense. State universities
and hospitals shall comply with CMIA, as it pertains to interest. If an
entity subject to CMIA uses its own funds to pay pre-award costs for
discretionary awards without prior written approval from the Federal
awarding agency, it waives its right to recover the interest under CMIA.
(m) Except as noted elsewhere in this part, only the following forms
shall be authorized for the recipients in requesting advances and
reimbursements. Federal agencies shall not require more than an original
and two copies of these forms.
(1) SF-270, Request for Advance or Reimbursement. Each Federal
awarding agency shall adopt the SF-270 as a standard form for all
nonconstruction programs when electronic funds transfer or predetermined
advance methods
[[Page 49]]
are not used. Federal awarding agencies, however, 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. Each Federal awarding agency shall adopt the SF-
271 as the standard form to be used for requesting reimbursement for
construction programs. However, a Federal awarding agency may substitute
the SF-270 when the Federal awarding agency determines that it provides
adequate information to meet Federal needs.
Sec. 215.23 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 when required by the
Federal awarding agency.
(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 Federal awarding
agency.
(c) Values for recipient contributions of services and property
shall be established in accordance with the applicable cost principles.
If a Federal awarding agency 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 paragraphs (c)(1) or (2) of this section.
(1) The certified value of the remaining life of the property
recorded in the recipient's accounting records at the time of donation.
(2) The current fair market value. However, when there is sufficient
justification, the Federal awarding agency 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
paragraphs (g)(1) or (2) of this section apply.
(1) If the purpose of the award is to assist the recipient in the
acquisition
[[Page 50]]
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 Federal
awarding agency 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. 215.24 Program income.
(a) Federal awarding agencies shall apply the standards set forth in
this section in requiring recipient organizations to account for program
income related to projects financed in whole or in part with Federal
funds.
(b) Except as provided in paragraph (h) of this section, program
income earned during the project period shall be retained by the
recipient and, in accordance with Federal awarding agency 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 Federal awarding
agency and recipient and used to further eligible project or program
objectives.
(2) Used to finance the non-Federal share of the project or program.
(3) Deducted from the total project or program allowable cost in
determining the net allowable costs on which the Federal share of costs
is based.
(c) When an agency authorizes the disposition of program income as
described in paragraphs (b)(1) or (b)(2) of this section, program income
in excess of any limits stipulated shall be used in accordance with
paragraph (b)(3) of this section.
(d) In the event that the Federal awarding agency does not specify
in its regulations or the terms and conditions of the award how program
income is to be used, paragraph (b)(3) of this section shall apply
automatically to all projects or programs except research. For awards
that support research, paragraph (b)(1) of this section shall apply
automatically unless the awarding agency indicates in the terms and
conditions another alternative on the award or the recipient is subject
to special award conditions, as indicated in Sec. 215.14.
(e) Unless Federal awarding agency 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) If authorized by Federal awarding agency regulations or the
terms and conditions of the award, costs incident to the generation of
program income may be deducted from gross income to determine program
income, provided these costs have not been charged to the award.
[[Page 51]]
(g) Proceeds from the sale of property shall be handled in
accordance with the requirements of the Property Standards (see Sec.
215.30 through Sec. 215.37).
(h) Unless Federal awarding agency regulations or the terms and
condition of the award provide otherwise, recipients shall have no
obligation to the Federal Government with respect to program income
earned from license fees and royalties for copyrighted material,
patents, patent applications, trademarks, and inventions produced under
an award. However, Patent and Trademark Amendments (35 U.S.C. 18) apply
to inventions made under an experimental, developmental, or research
award.
Sec. 215.25 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
Federal awarding agency 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 Federal awarding agencies for one or more of the
following program or budget related reasons.
(1) Change in the scope or the objective of the project or program
(even if there is no associated budget revision requiring prior written
approval).
(2) Change in a key person specified in the application or award
document.
(3) The absence for more than three months, or a 25 percent
reduction in time devoted to the project, by the approved project
director or principal investigator.
(4) The need for additional Federal funding.
(5) The transfer of amounts budgeted for indirect costs to absorb
increases in direct costs, or vice versa, if approval is required by the
Federal awarding agency.
(6) The inclusion, unless waived by the Federal awarding agency, of
costs that require prior approval in accordance with any of the
following, as applicable:
(i) 2 CFR part 220, ``Cost Principles for Educational Institutions
(OMB Circular A-21);''
(ii) 2 CFR part 230, ``Cost Principles for Non-Profit Organizations
(OMB Circular A-122);''
(iii) 45 CFR part 74, Appendix E, ``Principles for Determining Costs
Applicable to Research and Development under Grants and Contracts with
Hospitals;'' and
(iv) 48 CFR part 31, ``Contract Cost Principles and Procedures.''
(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) 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, Federal awarding agencies are authorized, at their
option, to waive cost-related and administrative prior written approvals
required by 2 CFR parts 220 and 230 (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 Federal awarding
agency. All pre-award costs are incurred at the recipient's risk (i.e.,
the Federal awarding agency 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-
[[Page 52]]
time extensions, the recipient must notify the Federal awarding agency
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 Federal awarding
agency provides otherwise in the award or in the agency's regulations,
the prior approval requirements described in this paragraph (e) are
automatically waived (i.e., recipients need not obtain such prior
approvals) unless one of the conditions included in paragraph (e)(2)
applies.
(f) The Federal awarding agency may, at its option, restrict the
transfer of funds among direct cost categories or programs, functions
and activities for awards in which the Federal share of the project
exceeds $100,000 and the cumulative amount of such transfers exceeds or
is expected to exceed 10 percent of the total budget as last approved by
the Federal awarding agency. No Federal awarding agency shall permit a
transfer that would cause any Federal appropriation or part thereof to
be used for purposes other than those consistent with the original
intent of the appropriation.
(g) All other changes to 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 Federal awarding agencies for budget revisions
whenever paragraphs (h)(1), (2) or (3) of this section apply.
(1) The revision results from changes in the scope or the objective
of the project or program.
(2) The need arises for additional 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. 215.27.
(i) No other prior approval requirements for specific items may be
imposed unless a deviation has been approved by OMB.
(j) When a Federal awarding agency makes an award that provides
support for both construction and nonconstruction work, the Federal
awarding agency may require the recipient to request prior approval from
the Federal awarding agency before making any fund or budget transfers
between the two types of work supported.
(k) For both construction and nonconstruction awards, Federal
awarding agencies shall require recipients to notify the Federal
awarding agency 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
Federal awarding agency indicates a letter of request suffices.
(m) Within 30 calendar days from the date of receipt of the request
for budget revisions, Federal awarding agencies shall review the request
and notify the recipient whether the budget revisions have been
approved. If the revision is still under consideration at the end of 30
calendar days, the Federal awarding agency shall inform the recipient in
writing of the date when the recipient may expect the decision.
[69 FR 26281, May 11, 2004, as amended at 70 FR 51880, Aug. 31, 2005]
Sec. 215.26 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
[[Page 53]]
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 of
the Federal awarding agencies.
(d) Commercial organizations shall be subject to the audit
requirements of the Federal awarding agency or the prime recipient as
incorporated into the award document.
Sec. 215.27 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 2 CFR part 225, ``Cost Principles for
State, Local, and Indian Tribal Governments (OMB Circular A-87.'' The
allowability of costs incurred by non-profit organizations is determined
in accordance with the provisions of 2 CFR part 230, ``Cost Principles
for Non-Profit Organizations (OMB Circular A-122).'' The allowability of
costs incurred by institutions of higher education is determined in
accordance with the provisions of 2 CFR part 220, ``Cost Principles for
Educational Institutions (OMB Circular A-21).'' 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.
[70 FR 51880, Aug. 31, 2005]
Sec. 215.28 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 Federal
awarding agency.
Sec. 215.29 Conditional exemptions.
(a) OMB authorizes conditional exemption from OMB administrative
requirements and cost principles circulars for certain Federal programs
with statutorily-authorized consolidated planning and consolidated
administrative funding, that are identified by a Federal agency and
approved by the head of the Executive department or establishment. A
Federal agency shall consult with OMB during its consideration of
whether to grant such an exemption.
(b) To promote efficiency in State and local program administration,
when Federal non-entitlement programs with common purposes have specific
statutorily-authorized consolidated planning and consolidated
administrative funding and where most of the State agency's resources
come from non-Federal sources, Federal agencies may exempt these covered
State-administered, non-entitlement grant programs from certain OMB
grants management requirements. The exemptions would be from:
(1) The requirements in 2 CFR part 225, ``Cost Principles for State,
Local, and Indian Tribal Governments (OMB Circular A-87)'' other than
the allocability of costs provisions that are contained in subsection
C.3 of Appendix A to that part;
(2) The requirements in 2 CFR part 220, ``Cost Principles for
Educational Institutions (OMB Circular A-21)'' other than the
allocability of costs provisions that are contained in paragraph C.4 in
section C of the Appendix to that part;
(3) The requirements in 2 CFR part 230, ``Cost Principles for Non-
Profit Organizations (OMB Circular A-122)''
[[Page 54]]
other than the allocability of costs provisions that are in paragraph
A.4 in section A of Appendix A to that part;
(4) The administrative requirements provisions of part 215 (OMB
Circular A-110, ``Uniform Administrative Requirements for Grants and
Agreements with Institutions of Higher Education, Hospitals, and Other
Non-Profit Organizations,''); and
(5) The agencies' grants management common rule (see Sec. 215.5).
(c) When a Federal agency provides this flexibility, as a
prerequisite to a State's exercising this option, a State must adopt its
own written fiscal and administrative requirements for expending and
accounting for all funds, which are consistent with the provisions of 2
CFR part 225, ``Cost Principles for State, Local, and Indian Tribal
Governments (OMB Circular A-87)'' and extend such policies to all
subrecipients. These fiscal and administrative requirements must be
sufficiently specific to ensure that: funds are used in compliance with
all applicable Federal statutory and regulatory provisions, costs are
reasonable and necessary for operating these programs, and funds are not
be used for general expenses required to carry out other
responsibilities of a State or its subrecipients.
[69 FR 26281, May 11, 2004, as amended at 70 FR 51881, Aug. 31, 2005]
Property Standards
Sec. 215.30 Purpose of property standards.
Sections 215.31 through 215.37 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. Federal awarding agencies 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 Sec. 215.31 through Sec.
215.37.
Sec. 215.31 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. 215.32 Real property.
Each Federal awarding agency 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 and shall not
encumber the property without approval of the Federal awarding agency.
(b) The recipient shall obtain written approval by the Federal
awarding agency 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 Federal awarding agency.
(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 Federal awarding agency or its
successor Federal awarding agency. The Federal awarding 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 market value of the
property attributable to the Federal participation in the project.
[[Page 55]]
(2) The recipient may be directed to sell the property under
guidelines provided by the Federal awarding agency 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. 215.33 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 Federal awarding agency. Upon completion of the award or
when the property is no longer needed, the recipient shall report the
property to the Federal awarding agency for further Federal agency
utilization.
(2) If the Federal awarding agency has no further need for the
property, it shall be declared excess and reported to the General
Services Administration, unless the Federal awarding agency 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'' (57 FR 54285, 3 CFR, 1992 Comp., p. 323)). Appropriate
instructions shall be issued to the recipient by the Federal awarding
agency.
(b) Exempt property. When statutory authority exists, the Federal
awarding agency 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 Federal awarding agency considers
appropriate. Such property is ``exempt property.'' Should a Federal
awarding agency not establish conditions, title to exempt property upon
acquisition shall vest in the recipient without further obligation to
the Federal Government.
Sec. 215.34 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 Federal awarding agency.
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 Federal awarding agency which funded
the original project, then
(2) Activities sponsored by other Federal awarding agencies.
(d) During the time that equipment is used on the project or program
for which it was acquired, the recipient 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 Federal awarding agency
that financed the equipment;
[[Page 56]]
second 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 Federal awarding
agency. 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 Federal awarding agency.
(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 Federal awarding agency for its share.
(2) Equipment owned by the Federal Government shall be identified to
indicate Federal ownership.
(3) A physical inventory of equipment shall be taken and the results
reconciled with the equipment records at least once every two years. Any
differences between quantities determined by the physical inspection and
those shown in the accounting records shall be investigated to determine
the causes of the difference. The recipient shall, in connection with
the inventory, verify the existence, current utilization, and continued
need for the equipment.
(4) A control system shall be in effect to insure adequate
safeguards to prevent loss, damage, or theft of the equipment. Any loss,
damage, or theft of equipment shall be investigated and fully
documented; if the equipment was owned by the Federal Government, the
recipient shall promptly notify the Federal awarding agency.
(5) Adequate maintenance procedures shall be implemented to keep the
equipment in good condition.
(6) Where the recipient is authorized or required to sell the
equipment, proper sales procedures shall be established which provide
for competition to the extent practicable and result in the highest
possible return.
(g) When the recipient no longer needs the equipment, the equipment
may be used for other activities in accordance with the following
standards. For equipment with a current per unit fair market value of
$5000 or more, the recipient may retain the equipment for other uses
provided that compensation is made to the original Federal awarding
agency or its successor. The amount of compensation shall be computed by
applying the percentage of Federal participation in the cost of the
original project or program to the current fair market value of the
equipment. If the recipient has no need for the equipment, the recipient
shall request disposition instructions from the Federal awarding agency.
The Federal awarding agency 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 Federal awarding agency to
determine whether a requirement for the equipment exists in other
Federal agencies. The Federal awarding agency shall issue instructions
to the recipient no later than 120 calendar
[[Page 57]]
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 Federal awarding 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 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 Federal awarding
agency for such costs incurred in its disposition.
(4) The Federal awarding 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 transfer shall be subject to the following
standards.
(i) The equipment shall be appropriately identified in the award or
otherwise made known to the recipient in writing.
(ii) The Federal awarding agency 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 Federal awarding
agency fails to issue disposition instructions within the 120 calendar
day period, the recipient shall apply the standards of this section, as
appropriate.
(iii) When the Federal awarding agency exercises its right to take
title, the equipment shall be subject to the provisions for federally-
owned equipment.
Sec. 215.35 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
unused supplies exceeding $5000 in total aggregate value upon
termination or completion of the project or program and the supplies are
not needed for any other federally-sponsored project or program, the
recipient shall retain the supplies for use on non-Federal sponsored
activities or sell them, but shall, in either case, compensate the
Federal Government for its share. The amount of compensation shall be
computed in the same manner as for equipment.
(b) The recipient shall not use supplies acquired with Federal funds
to provide services to non-Federal outside organizations for a fee that
is less than private companies charge for equivalent services, unless
specifically authorized by Federal statute as long as the Federal
Government retains an interest in the supplies.
Sec. 215.36 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 Federal awarding agency(ies) reserve a royalty-free,
nonexclusive and irrevocable right to reproduce, publish, or otherwise
use the work for Federal purposes, and to authorize others to do so.
(b) Recipients are subject to applicable regulations governing
patents and inventions, including government-wide regulations issued by
the Department of Commerce at 37 CFR part 401, ``Rights to Inventions
Made by Nonprofit Organizations and Small Business Firms Under
Government Grants, Contracts and Cooperative Agreements.''
(c) The Federal Government has the right to:
(1) Obtain, reproduce, publish or otherwise use the data first
produced under an award.
[[Page 58]]
(2) Authorize others to receive, reproduce, publish, or otherwise
use such data for Federal purposes.
(d) (1) In addition, in response to a Freedom of Information Act
(FOIA) request for research data relating to published research findings
produced under an award that was used by the Federal Government in
developing an agency action that has the force and effect of law, the
Federal awarding agency shall request, and the recipient shall provide,
within a reasonable time, the research data so that they can be made
available to the public through the procedures established under the
FOIA. If the Federal awarding agency obtains the research data solely in
response to a FOIA request, the agency may charge the requester a
reasonable fee equaling the full incremental cost of obtaining the
research data. This fee should reflect costs incurred by the agency, the
recipient, and the applicable subrecipients. This fee is in addition to
any fees the agency may assess under the FOIA (5 U.S.C. 552(a)(4)(A)).
(2) The following definitions apply for purposes of paragraph (d) of
this section:
(i) Research data is defined as the recorded factual material
commonly accepted in the scientific community as necessary to validate
research findings, but not any of the following: Preliminary analyses,
drafts of scientific papers, plans for future research, peer reviews, or
communications with colleagues. This ``recorded'' material excludes
physical objects (e.g., laboratory samples). Research data also do not
include:
(A) Trade secrets, commercial information, materials necessary to be
held confidential by a researcher until they are published, or similar
information which is protected under law; and
(B) Personnel and medical information and similar information the
disclosure of which would constitute a clearly unwarranted invasion of
personal privacy, such as information that could be used to identify a
particular person in a research study.
(ii) Published is defined as either when:
(A) Research findings are published in a peer-reviewed scientific or
technical journal; or
(B) A Federal agency publicly and officially cites the research
findings in support of an agency action that has the force and effect of
law.
(iii) Used by the Federal Government in developing an agency action
that has the force and effect of law is defined as when an agency
publicly and officially cites the research findings in support of an
agency action that has the force and effect of law.
(e) Title to intangible property and debt instruments acquired under
an award or subaward vests upon acquisition in the recipient. The
recipient shall use that property for the originally-authorized purpose,
and the recipient shall not encumber the property without approval of
the Federal awarding agency. When no longer needed for the originally
authorized purpose, disposition of the intangible property shall occur
in accordance with the provisions of Sec. 215.34(g).
[69 FR 26281, May 11, 2004, as amended at 70 FR 51881, Aug. 31, 2005]
Sec. 215.37 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. Agencies 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. 215.40 Purpose of procurement standards.
Sections 215.41 through 215.48 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
[[Page 59]]
of applicable Federal statutes and executive orders. No additional
procurement standards or requirements shall be imposed by the Federal
awarding agencies upon recipients, unless specifically required by
Federal statute or executive order or approved by OMB.
Sec. 215.41 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 Federal
awarding agency, regarding the settlement and satisfaction of all
contractual and administrative issues arising out of procurements
entered into in support of an award or other agreement. This includes
disputes, claims, protests of award, source evaluation or other matters
of a contractual nature. Matters concerning violation of statute are to
be referred to such Federal, State or local authority as may have proper
jurisdiction.
Sec. 215.42 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. 215.43 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. 215.44 Procurement procedures.
(a) All recipients shall establish written procurement procedures.
These procedures shall provide for, at a minimum, that paragraphs
(a)(1), (2) and (3) of this section apply.
(1) Recipients avoid purchasing unnecessary items.
(2) Where appropriate, an analysis is made of lease and purchase
alternatives to determine which would be the most economical and
practical procurement for the Federal Government.
(3) Solicitations for goods and services provide for all of the
following.
(i) A clear and accurate description of the technical requirements
for the material, product or service to be procured. In competitive
procurements, such a description 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
[[Page 60]]
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 Department of
Commerce's Minority Business Development Agency in the solicitation and
utilization of small businesses, minority-owned firms and women's
business enterprises.
(c) The type of procuring instruments used (e.g., fixed price
contracts, cost reimbursable contracts, purchase orders, and incentive
contracts) shall be determined by the recipient but shall be appropriate
for the particular procurement and for promoting the best interest of
the program or project involved. The ``cost-plus-a-percentage-of-cost''
or ``percentage of construction cost'' methods of contracting shall not
be used.
(d) Contracts shall be made only with responsible contractors who
possess the potential ability to perform successfully under the terms
and conditions of the proposed procurement. Consideration shall be given
to such matters as contractor integrity, record of past performance,
financial and technical resources or accessibility to other necessary
resources. In certain circumstances, contracts with certain parties are
restricted by agencies' implementation of E.O.s 12549 and 12689,
``Debarment and Suspension.''
(e) Recipients shall, on request, make available for the Federal
awarding agency, pre-award review and procurement documents, such as
request for proposals or invitations for bids, independent cost
estimates, etc., when any of the following conditions apply.
(1) A recipient's procurement procedures or operation fails to
comply with the procurement standards in the Federal awarding agency's
implementation of this part.
(2) The procurement is expected to exceed the small purchase
threshold fixed at 41 U.S.C. 403 (11) (currently $25,000) and is to be
awarded without competition or only one bid or offer is received in
response to a solicitation.
(3) The procurement, which is expected to exceed the small purchase
threshold, specifies a ``brand name'' product.
(4) The proposed award over the small purchase threshold is to be
awarded to other than the apparent low bidder under a sealed bid
procurement.
(5) A proposed contract modification changes the scope of a contract
or increases the contract amount by more than the amount of the small
purchase threshold.
Sec. 215.45 Cost and price analysis.
Some form of cost or price analysis shall be made and documented in
the procurement files in connection with
[[Page 61]]
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. 215.46 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. 215.47 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. 215.48 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 Federal
awarding agency may accept the bonding policy and requirements of the
recipient, provided the Federal awarding agency 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 herein, 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
[[Page 62]]
the recipient, the Federal awarding 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 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. 215.50 Purpose of reports and records.
Sections 215.51 through 215.53 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. 215.51 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. 215.26.
(b) The Federal awarding agency shall prescribe the frequency with
which the performance reports shall be submitted. Except as provided in
Sec. 215.51(f), 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
Federal awarding agency 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 Federal awarding agency
of developments that have a significant impact on the award-supported
activities. Also, notification shall be given in the case of problems,
delays, or adverse conditions which materially impair the ability to
meet the objectives of the award. This notification shall include a
statement of the action taken or contemplated, and any assistance needed
to resolve the situation.
(g) Federal awarding agencies 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. 215.52 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 Federal awarding agency shall require recipients to use the
SF-269 or SF-269A to report the status of funds for all nonconstruction
projects or programs. A Federal awarding agency may, however, have the
option of not requiring the SF-269 or SF-269A when the SF-270, Request
for Advance or Reimbursement, or SF-272, Report of Federal Cash
Transactions, is determined to provide adequate information
[[Page 63]]
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 Federal awarding agency shall prescribe whether the report
shall be on a cash or accrual basis. If the Federal awarding agency
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 Federal awarding agency 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 Federal awarding agency 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
Federal awarding agency upon request of the recipient.
(2) SF-272, Report of Federal Cash Transactions.
(i) When funds are advanced to recipients the Federal awarding
agency shall require each recipient to submit the SF-272 and, when
necessary, its continuation sheet, SF-272a. The Federal awarding agency
shall use this report to monitor cash advanced to recipients and to
obtain disbursement information for each agreement with the recipients.
(ii) Federal awarding agencies may require forecasts of Federal cash
requirements in the ``Remarks'' section of the report.
(iii) When practical and deemed necessary, Federal awarding agencies
may require recipients to report in the ``Remarks'' section the amount
of cash advances received in excess of three days. Recipients shall
provide short narrative explanations of actions taken to reduce the
excess balances.
(iv) Recipients shall be required to submit not more than the
original and two copies of the SF-272 15 calendar days following the end
of each quarter. The Federal awarding agencies may require a monthly
report from those recipients receiving advances totaling $1 million or
more per year.
(v) Federal awarding agencies 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 Federal awarding agency'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 Federal awarding agency needs additional information or
more frequent reports, the following shall be observed.
(1) When additional information is needed to comply with legislative
requirements, Federal awarding agencies shall issue instructions to
require recipients to submit such information under the ``Remarks''
section of the reports.
(2) When a Federal awarding agency determines that a recipient's
accounting system does not meet the standards in Sec. 215.21,
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 Federal awarding agency, in
obtaining this information, shall comply with report clearance
requirements of 5 CFR part 1320.
(3) Federal awarding agencies are encouraged to shade out any line
item on any report if not necessary.
(4) Federal awarding agencies may accept the identical information
from the recipients in machine readable format or computer printouts or
electronic outputs in lieu of prescribed formats.
[[Page 64]]
(5) Federal awarding agencies may provide computer or electronic
outputs to recipients when such expedites or contributes to the accuracy
of reporting.
Sec. 215.53 Retention and access requirements for records.
(a) This section sets forth requirements for record retention and
access to records for awards to recipients. Federal awarding agencies
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 Federal awarding agency. 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 Federal
awarding agency, the 3-year retention requirement is not applicable to
the recipient.
(4) Indirect cost rate proposals, cost allocations plans, etc. as
specified in Sec. 215.53(g).
(c) Copies of original records may be substituted for the original
records if authorized by the Federal awarding agency.
(d) The Federal awarding agency 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 Federal awarding agency may make arrangements
for recipients to retain any records that are continuously needed for
joint use.
(e) The Federal awarding agency, the Inspector General, Comptroller
General of the United States, or any of their duly authorized
representatives, have the right of timely and unrestricted access to any
books, documents, papers, or other records of recipients that are
pertinent to the awards, in order to make audits, examinations,
excerpts, transcripts and copies of such documents. This right also
includes timely and reasonable access to a recipient's personnel for the
purpose of interview and discussion related to such documents. The
rights of access in this paragraph are not limited to the required
retention period, but shall last as long as records are retained.
(f) Unless required by statute, no Federal awarding agency shall
place restrictions on recipients that limit public access to the records
of recipients that are pertinent to an award, except when the Federal
awarding agency 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 Federal awarding agency.
(g) Indirect cost rate proposals, cost allocations plans, etc.
Paragraphs (g)(1) and (g)(2) of this section apply to the following
types of documents, and their supporting records: indirect cost rate
computations or proposals, cost allocation plans, and any similar
accounting computations of the rate at which a particular group of costs
is chargeable (such as computer usage chargeback rates or composite
fringe benefit rates).
(1) If submitted for negotiation. If the recipient submits to the
Federal awarding agency or the subrecipient submits to the recipient the
proposal, plan, or other computation to form the basis for negotiation
of the rate, then the 3-year retention period for its supporting records
starts on the date of such submission.
(2) If not submitted for negotiation. If the recipient is not
required to submit to the Federal awarding agency or the subrecipient is
not required to submit to the recipient the proposal, plan, or
[[Page 65]]
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. 215.60 Purpose of termination and enforcement.
Sections 215.61 and 215.62 set forth uniform suspension, termination
and enforcement procedures.
Sec. 215.61 Termination.
(a) Awards may be terminated in whole or in part only if paragraphs
(a)(1), (2) or (3) of this section apply.
(1) By the Federal awarding agency, if a recipient materially fails
to comply with the terms and conditions of an award.
(2) By the Federal awarding agency 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 Federal awarding agency
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 Federal awarding agency 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 paragraphs (a)(1)
or (2) of this section.
(b) If costs are allowed under an award, the responsibilities of the
recipient referred to in Sec. 215.71(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. 215.62 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 Federal awarding agency may, in addition to imposing any of the
special conditions outlined in Sec. 215.14, take one or more of the
following actions, as appropriate in the circumstances.
(1) Temporarily withhold cash payments pending correction of the
deficiency by the recipient or more severe enforcement action by the
Federal awarding agency.
(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
[[Page 66]]
suspension and termination, do not preclude a recipient from being
subject to debarment and suspension under E.O.s 12549 and 12689 and the
Federal awarding agency implementing regulations (see Sec. 215.13).
Subpart D_After-the-Award Requirements
Sec. 215.70 Purpose.
Sections 215.71 through 215.73 contain closeout procedures and other
procedures for subsequent disallowances and adjustments.
Sec. 215.71 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
Federal awarding agency may approve extensions when requested by the
recipient.
(b) Unless the Federal awarding agency 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 Federal awarding agency 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
cash that the Federal awarding agency 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
Federal awarding agency 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 Sec. 215.31 through Sec. 215.37.
(g) In the event a final audit has not been performed prior to the
closeout of an award, the Federal awarding agency shall retain the right
to recover an appropriate amount after fully considering the
recommendations on disallowed costs resulting from the final audit.
Sec. 215.72 Subsequent adjustments and continuing responsibilities.
(a) The closeout of an award does not affect any of the following:
(1) The right of the Federal awarding agency 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. 215.26.
(4) Property management requirements in Sec. 215.31 through Sec.
215.37.
(5) Records retention as required in Sec. 215.53.
(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 Federal awarding agency and the recipient, provided the
responsibilities of the recipient referred to in paragraph (a) of this
section, including those for property management as applicable, are
considered and provisions made for continuing responsibilities of the
recipient, as appropriate.
[69 FR 26281, May 11, 2004, as amended at 70 FR 51881, Aug. 31, 2005]
Sec. 215.73 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
Federal awarding agency may reduce the debt by paragraphs (a)(1), (2) or
(3) of this section.
(1) Making an administrative offset against other requests for
reimbursements.
(2) Withholding advance payments otherwise due to the recipient.
(3) Taking other action permitted by statute.
(b) Except as otherwise provided by law, the Federal awarding agency
shall
[[Page 67]]
charge interest on an overdue debt in accordance with 4 CFR Chapter II,
``Federal Claims Collection Standards.''
Appendix A to Part 215--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'' (30 FR 12319, 12935, 3 CFR, 1964-1965 Comp., p. 339), 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 Federal
awarding agency.
3. Davis-Bacon Act, as amended (40 U.S.C. 276a to a-7)--When
required by Federal program legislation, all construction 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 Federal awarding agency.
4. Contract Work Hours and Safety Standards Act (40 U.S.C. 327-
333)--Where applicable, all contracts awarded by recipients in excess of
$2000 for construction contracts 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
Federal awarding agency and the Regional Office of the Environmental
Protection Agency (EPA).
7. Byrd Anti-Lobbying Amendment (31 U.S.C. 1352)--Contractors who
apply or bid for an award 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
[[Page 68]]
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)--A contract
award with an amount expected to equal or exceed $25,000 and certain
other contract awards (see 2 CFR 180.220) shall not be made to parties
listed on the government-wide Excluded Parties List System, in
accordance with the OMB guidelines at 2 CFR part 180 that implement
E.O.s 12549 (3 CFR, 1986 Comp., p. 189) and 12689 (3 CFR, 1989 Comp., p.
235), ``Debarment and Suspension.'' The Excluded Parties List System
contains the names of parties debarred, suspended, or otherwise excluded
by agencies, as well as parties declared ineligible under statutory or
regulatory authority other than E.O. 12549.
[69 FR 26281, May 11, 2004, as amended at 70 FR 51879, Aug. 31, 2005]
PARTS 216-219 [RESERVED]
PART 220_COST PRINCIPLES FOR EDUCATIONAL INSTITUTIONS (OMB CIRCULAR
A-21)--Table of Contents
Sec.
220.5 Purpose.
220.10 Scope.
220.15 Policy.
220.20 Applicability.
220.25 OMB responsibilities.
220.30 Federal agency responsibilities.
220.35 Effective date of changes.
220.40 Relationship to previous issuance.
220.45 Information contact.
Appendix A to Part 220--Principles for Determining Costs Applicable to
Grants, Contracts, and Other Agreements with Educational
Institutions
Authority: 31 U.S.C. 503; 31 U.S.C. 1111; 41 U.S.C. 405;
Reorganization Plan No. 2 of 1970; E.O. 11541, 35 FR 10737, 3 CFR, 1966-
1970, p. 939.
Source: 70 FR 51881, Aug. 31, 2005, unless otherwise noted.
Sec. 220.5 Purpose.
This part establishes principles for determining costs applicable to
grants, contracts, and other agreements with educational institutions.
Sec. 220.10 Scope.
The principles in this part deal with the subject of cost
determination, and make no attempt to identify the circumstances or
dictate the extent of agency and institutional participation in the
financing of a particular project. Provision for profit or other
increment above cost is outside the scope of this part.
Sec. 220.15 Policy.
The principles in this part are designed to provide that the Federal
Government bear its fair share of total costs, determined in accordance
with generally accepted accounting principles, except where restricted
or prohibited by law. Agencies are not expected to place additional
restrictions on individual items of cost. The successful application of
cost accounting principles requires development of mutual understanding
between representatives of educational institutions and of the Federal
Government as to their scope, implementation, and interpretation.
Sec. 220.20 Applicability.
(a) All Federal agencies that sponsor research and development,
training, and other work at educational institutions shall apply the
provisions of Appendix A to this part in determining the costs incurred
for such work. The principles shall also be used as a guide in the
pricing of fixed price or lump sum agreements.
(b) Each federal agency that awards defense-related contracts to a
Federally Funded Research and Development Center (FFRDC) associated with
an educational institution shall require the FFRDC to comply with the
Cost Accounting Standards and with the rules and regulations issued by
the Cost Accounting Standards Board and set forth in 47 CFR part 99.
Sec. 220.25 OMB responsibilities.
OMB is responsible for:
(a) Issuing and maintaining the guidance in this part.
(b) Interpreting the policy requirements in this part and providing
assistance to ensure effective and efficient implementation.
[[Page 69]]
(c) Granting any deviations to Federal agencies from the guidance in
this part, as provided in Appendix A to this part. Exceptions will only
be made in particular cases where adequate justification is presented.
(d) Conducting broad oversight of government-wide compliance with
the guidance in this part.
Sec. 220.30 Federal Agency responsibilities.
The head of each Federal agency that awards and administers grants
and agreements subject to this part is responsible for requesting
approval from and/or consulting with OMB (as applicable) for deviations
from the guidance in Appendix A to this part and performing the
applicable functions specified in Appendix A to this part.
Sec. 220.35 Effective date for changes.
Institutions as of the start of their first fiscal year beginning
after that date shall implement the provisions. Earlier implementation,
or a delay in implementation of individual provisions, is permitted by
mutual agreement between an institution and the cognizant Federal
agency.
Sec. 220.40 Relationship to previous issuance.
(a) The guidance in this part previously was issued as OMB Circular
A-21. Designations of the attachment to the Circular and the appendices
to that attachment have changed, as shown in the following table:
------------------------------------------------------------------------
The portion of OMB Circular A-21 that Is designated in this part as .
was designated as . . . . .
------------------------------------------------------------------------
(1) The Attachment to the circular, Appendix A to Part 220--
entitled ``Principles For Determining Principles For Determining
Costs Applicable to Grants, Contracts, Costs Applicable to Grants,
and Other Agreements with Educational Contracts, and Other
Institutions,''. Agreements with Educational
Institutions.
(2) Exhibit A in the attachment to the Exhibit A, List of Colleges and
circular, entitled ``List of Colleges Universities Subject to
and Universities Subject to Section Section J.12.h of Circular A-
J.12.h of Circular A-21,''. 21, to Appendix A.
(3) Exhibit B in the attachment to the Exhibit B, Listing of
circular, entitled ``Listing of Institutions that are eligible
Institutions that are eligible for the for the utility cost
utility cost adjustment,''. adjustment, to Appendix A.
(4) Exhibit C in the attachment to the Exhibit C, Examples of ``major
circular, entitled ``Examples of project'' where direct
`major project' where direct charging charging of administrative or
of administrative or clerical staff clerical staff salaries may be
salaries may be appropriate,''. appropriate, to Appendix A.
(5) Appendix A to the attachment to the Attachment A, CASB's Cost
circular, entitled ``CASB's Cost Accounting Standards (CAS), to
Accounting Standards (CAS),''. Appendix A.
(6) Appendix B to the attachment to the Attachment B, CASB's Disclosure
circular, entitled ``CASB's Disclosure Statement (DS-2), to Appendix
Statement (DS-2),''. A.
(7) Appendix C to the attachment to the Attachment C, Documentation
circular, entitled ``Documentation Requirements for Facilities
Requirements for Facilities and and Administrative (F&A) Rate
Administrative (F&A) Rate Proposals,''. Proposals, to Appendix A.
------------------------------------------------------------------------
(b) Historically, OMB Circular A-21 superseded Federal Management
Circular 73-8, dated December 19, 1973. FMC 73-8 was revised and
reissued under its original designation of OMB Circular No. A-21. The
provisions of A-21 were effective October 1, 1979, except for subsequent
amendments incorporated herein for which the effective dates were
specified in these revisions (47 FR 33658, 51 FR 20908, 51 FR 43487, 56
FR 50224, 58 FR 39996, 61 FR 20880, 63 FR 29786, 63 FR 57332, 65 FR
48566 and 69 FR 25970).
Sec. 220.45 Information contact.
Further information concerning this part may be obtained by
contacting the Office of Federal Financial Management, Office of
Management and Budget, Washington, DC 20503, telephone (202) 395-3993.
Appendix A to Part 220--Principles for Determining Costs Applicable to
Grants, Contracts, and Other Agreements With Educational Institutions
Table of Contents
A. Purpose and Scope
1. Objectives
2. Policy guides
3. Application
4. Inquiries
B. Definition of Terms
1. Major functions of an institution
2. Sponsored agreement
3. Allocation
[[Page 70]]
4. Facilities and administrative (F&A) costs
C. Basic Considerations
1. Composition of total costs
2. Factors affecting allowability of costs
3. Reasonable costs
4. Allocable costs
5. Applicable credits
6. Costs incurred by State and local governments
7. Limitations on allowance of costs
8. Collection of unallowable costs
9. Adjustment of previously negotiated F&A cost rates containing
unallowable costs
10. Consistency in estimating, accumulating and reporting costs
11. Consistency in allocating costs incurred for the same purpose
12. Accounting for unallowable costs
13. Cost accounting period
14. Disclosure statement
D. Direct Costs
1. General
2. Application to sponsored agreements
E. F&A Costs
1. General
2. Criteria for distribution
F. Identification and Assignment of F&A Costs
1. Definition of Facilities and Administration.
2. Depreciation and use allowances
3. Interest
4. Operation and maintenance expenses
5. General administration and general expenses
6. Departmental administration expenses
7. Sponsored projects administration
8. Library expenses
9. Student administration and services
10. Offset for F&A expenses otherwise provided for by the Federal
Government
G. Determination and Application of F&A Cost Rate or Rates
1. F&A cost pools
2. The distribution basis
3. Negotiated lump sum for F&A costs
4. Predetermined rates for F&A costs
5. Negotiated fixed rates and carry-forward provisions
6. Provisional and final rates for F&A costs
7. Fixed rates for the life of the sponsored agreement
8. Limitation on reimbursement of administrative costs
9. Alternative method for administrative costs
10. Individual rate components
11. Negotiation and approval of F&A rate
12. Standard format for submission
H. Simplified Method for Small Institutions
1. General
2. Simplified procedure
I. Reserved
J. General Provisions for Selected Items of Cost
1. Advertising and public relations costs
2. Advisory councils
3. Alcoholic beverages
4. Alumni/ae activities
5. Audit and related services
6. Bad debts
7. Bonding costs
8. Commencement and convocation costs
9. Communication costs
10. Compensation for personal services
11. Contingency provisions
12. Deans of faculty and graduate schools
13. Defense and prosecution of criminal and civil proceedings, claims,
appeals and patent infringement
14. Depreciation and use allowances
15. Donations and contributions
16. Employee morale, health, and welfare costs
17. Entertainment costs
18. Equipment and other capital expenditures
19. Fines and penalties
20. Fund raising and investment costs
21. Gains and losses on depreciable assets
22. Goods or services for personal use
23. Housing and personal living expenses
24. Idle facilities and idle capacity
25. Insurance and indemnification
26. Interest
27. Labor relations costs
28. Lobbying
29. Losses on other sponsored agreements or contracts
30. Maintenance and repair costs
31. Material and supplies costs
32. Meetings and conferences
33. Memberships, subscriptions and professional activity costs
34. Patent costs
35. Plant and homeland security costs
36. Pre-agreement costs
37. Professional service costs
38. Proposal costs
39. Publication and printing costs
40. Rearrangement and alteration costs
41. Reconversion costs
42. Recruiting costs
43. Rental costs of buildings and equipment
44. Royalties and other costs for use of patents
45. Scholarships and student aid costs
46. Selling and marketing
47. Specialized service facilities
48. Student activity costs
49. Taxes
50. Termination costs applicable to sponsored agreements
51. Training costs
52. Transportation costs
53. Travel costs
54. Trustees
K. Certification of Charges
Exhibit A to Appendix A--List of Colleges and Universities Subject to
Section J.12.h of Appendix A
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Exhibit B to Appendix A--Listing of Institutions That are Eligible for
the Utility Cost Adjustment
Exhibit C to Appendix A--Examples of ``major project'' Where Direct
Charging of Administrative or Clerical Staff Salaries May Be
Appropriate
Attachment A to Appendix A--Cost Accounting Standards (CAS) for
Educational Institutions
Attachment B to Appendix A--CASB's Disclosure Statement (DS-2)
Attachment C to Appendix A--Documentation Requirements for Facilities
and Administrative (F&A) Rate Proposals
A. Purpose and Scope
1. Objectives. This Appendix provides principles for determining the
costs applicable to research and development, training, and other
sponsored work performed by colleges and universities under grants,
contracts, and other agreements with the Federal Government. These
agreements are referred to as sponsored agreements.
2. Policy guides. The successful application of these cost
accounting principles requires development of mutual understanding
between representatives of universities and of the Federal Government as
to their scope, implementation, and interpretation. It is recognized
that--
a. The arrangements for Federal agency and institutional
participation in the financing of a research, training, or other project
are properly subject to negotiation between the agency and the
institution concerned, in accordance with such governmentwide criteria
or legal requirements as may be applicable.
b. Each institution, possessing its own unique combination of staff,
facilities, and experience, should be encouraged to conduct research and
educational activities in a manner consonant with its own academic
philosophies and institutional objectives.
c. The dual role of students engaged in research and the resulting
benefits to sponsored agreements are fundamental to the research effort
and shall be recognized in the application of these principles.
d. Each institution, in the fulfillment of its obligations, should
employ sound management practices.
e. The application of these cost accounting principles should
require no significant changes in the generally accepted accounting
practices of colleges and universities. However, the accounting
practices of individual colleges and universities must support the
accumulation of costs as required by the principles, and must provide
for adequate documentation to support costs charged to sponsored
agreements.
f. Cognizant Federal agencies involved in negotiating facilities and
administrative (F&A) cost rates and auditing should assure that
institutions are generally applying these cost accounting principles on
a consistent basis. Where wide variations exist in the treatment of a
given cost item among institutions, the reasonableness and equitableness
of such treatments should be fully considered during the rate
negotiations and audit.
3. Application. These principles shall be used in determining the
allowable costs of work performed by colleges and universities under
sponsored agreements. The principles shall also be used in determining
the costs of work performed by such institutions under subgrants, cost-
reimbursement subcontracts, and other awards made to them under
sponsored agreements. They also shall be used as a guide in the pricing
of fixed-price contracts and subcontracts where costs are used in
determining the appropriate price. The principles do not apply to:
a. Arrangements under which Federal financing is in the form of
loans, scholarships, fellowships, traineeships, or other fixed amounts
based on such items as education allowance or published tuition rates
and fees of an institution.
b. Capitation awards.
c. Other awards under which the institution is not required to
account to the Federal Government for actual costs incurred.
d. Conditional exemptions.
(1) OMB authorizes conditional exemption from OMB administrative
requirements and cost principles for certain Federal programs with
statutorily-authorized consolidated planning and consolidated
administrative funding, that are identified by a Federal agency and
approved by the head of the Executive department or establishment. A
Federal agency shall consult with OMB during its consideration of
whether to grant such an exemption.
(2) To promote efficiency in State and local program administration,
when Federal non-entitlement programs with common purposes have specific
statutorily-authorized consolidated planning and consolidated
administrative funding and where most of the State agency's resources
come from non-Federal sources, Federal agencies may exempt these covered
State-administered, non-entitlement grant programs from certain OMB
grants management requirements. The exemptions would be from all but the
allocability of costs provisions of subsection C.3 of Appendix A to 2
CFR part 225 Cost Principles for State, Local, and Indian Tribal
Governments (OMB Circular A-87), Section C, subpart 4 to 2 CFR part 220
Cost Principles for Educational Institutions (OMB Circular A-21), and
subsection A.4 of Appendix A to 2 CFR part 230 Cost Principles for Non-
Profit Organizations,'' (OMB Circular A-122), and from all of the
administrative requirements provisions of 2 CFR part 215, Uniform
Administrative Requirements for Grants and
[[Page 72]]
Agreements with Institutions of Higher Education, Hospitals, and Other
Non-Profit Organizations (OMB Circular A-110), and the agencies' grants
management common rule (see Sec. 215.5 of this subtitle).
(3) When a Federal agency provides this flexibility, as a
prerequisite to a State's exercising this option, a State must adopt its
own written fiscal and administrative requirements for expending and
accounting for all funds, which are consistent with the provisions of 2
CFR part 225 (OMB Circular A-87), and extend such policies to all
subrecipients. These fiscal and administrative requirements must be
sufficiently specific to ensure that: Funds are used in compliance with
all applicable Federal statutory and regulatory provisions, costs are
reasonable and necessary for operating these programs, and funds are not
to be used for general expenses required to carry out other
responsibilities of a State or its subrecipients.
4. Inquiries.
All inquiries from Federal agencies concerning the cost principles
contained in this Appendix to 2 CFR part 220, including the
administration and implementation of the Cost Accounting Standards (CAS)
(described in Sections C.10 through C.13) and disclosure statement (DS-
2) requirements, shall be addressed by the Office of Management and
Budget (OMB), Office of Federal Financial Management, in coordination
with the Cost Accounting Standard Board (CASB) with respect to inquiries
concerning CAS. Educational institutions' inquiries should be addressed
to the cognizant agency.
B. Definition of Terms
1. Major functions of an institution refers to instruction,
organized research, other sponsored activities and other institutional
activities as defined below:
a. Instruction means the teaching and training activities of an
institution. Except for research training as provided in subsection b,
this term includes all teaching and training activities, whether they
are offered for credits toward a degree or certificate or on a non-
credit basis, and whether they are offered through regular academic
departments or separate divisions, such as a summer school division or
an extension division. Also considered part of this major function are
departmental research, and, where agreed to, university research.
(1) Sponsored instruction and training means specific instructional
or training activity established by grant, contract, or cooperative
agreement. For purposes of the cost principles, this activity may be
considered a major function even though an institution's accounting
treatment may include it in the instruction function.
(2) Departmental research means research, development and scholarly
activities that are not organized research and, consequently, are not
separately budgeted and accounted for. Departmental research, for
purposes of this document, is not considered as a major function, but as
a part of the instruction function of the institution.
b. Organized research means all research and development activities
of an institution that are separately budgeted and accounted for. It
includes:
(1) Sponsored research means all research and development activities
that are sponsored by Federal and non-Federal agencies and
organizations. This term includes activities involving the training of
individuals in research techniques (commonly called research training)
where such activities utilize the same facilities as other research and
development activities and where such activities are not included in the
instruction function.
(2) University research means all research and development
activities that are separately budgeted and accounted for by the
institution under an internal application of institutional funds.
University research, for purposes of this document, shall be combined
with sponsored research under the function of organized research.
c. Other sponsored activities means programs and projects financed
by Federal and non-Federal agencies and organizations which involve the
performance of work other than instruction and organized research.
Examples of such programs and projects are health service projects, and
community service programs. However, when any of these activities are
undertaken by the institution without outside support, they may be
classified as other institutional activities.
d. Other institutional activities means all activities of an
institution except:
(1) Instruction, departmental research, organized research, and
other sponsored activities, as defined above;
(2) F&A cost activities identified in Section F of this Appendix;
and
(3) Specialized service facilities described in Section J.47 of this
Appendix. Other institutional activities include operation of residence
halls, dining halls, hospitals and clinics, student unions,
intercollegiate athletics, bookstores, faculty housing, student
apartments, guest houses, chapels, theaters, public museums, and other
similar auxiliary enterprises. This definition also includes any other
categories of activities, costs of which are ``unallowable'' to
sponsored agreements, unless otherwise indicated in the agreements.
2. Sponsored agreement, for purposes of this Appendix, means any
grant, contract, or other agreement between the institution and the
Federal Government.
3. Allocation means the process of assigning a cost, or a group of
costs, to one or more cost objective, in reasonable and realistic
proportion to the benefit provided or other
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equitable relationship. A cost objective may be a major function of the
institution, a particular service or project, a sponsored agreement, or
an F&A cost activity, as described in Section F of this Appendix. The
process may entail assigning a cost(s) directly to a final cost
objective or through one or more intermediate cost objectives.
4. Facilities and administrative (F&A) costs, for the purpose of
this Appendix, means costs that are incurred for common or joint
objectives and, therefore, cannot be identified readily and specifically
with a particular sponsored project, an instructional activity, or any
other institutional activity. F&A costs are synonymous with ``indirect''
costs, as previously used in this Appendix and as currently used in
attachments A and B to this Appendix. The F&A cost categories are
described in Section F.1 of this Appendix.
C. Basic Considerations
1. Composition of total costs. The cost of a sponsored agreement is
comprised of the allowable direct costs incident to its performance,
plus the allocable portion of the allowable F&A costs of the
institution, less applicable credits as described in subsection C.5 of
this Appendix.
2. Factors affecting allowability of costs. The tests of
allowability of costs under these principles are: they must be
reasonable; they must be allocable to sponsored agreements under the
principles and methods provided herein; they must be given consistent
treatment through application of those generally accepted accounting
principles appropriate to the circumstances; and they must conform to
any limitations or exclusions set forth in these principles or in the
sponsored agreement as to types or amounts of cost items.
3. Reasonable costs. A cost may be considered reasonable if the
nature of the goods or services acquired or applied, and the amount
involved therefore, reflect the action that a prudent person would have
taken under the circumstances prevailing at the time the decision to
incur the cost was made. Major considerations involved in the
determination of the reasonableness of a cost are: whether or not the
cost is of a type generally recognized as necessary for the operation of
the institution or the performance of the sponsored agreement; the
restraints or requirements imposed by such factors as arm's-length
bargaining, Federal and State laws and regulations, and sponsored
agreement terms and conditions; whether or not the individuals concerned
acted with due prudence in the circumstances, considering their
responsibilities to the institution, its employees, its students, the
Federal Government, and the public at large; and, the extent to which
the actions taken with respect to the incurrence of the cost are
consistent with established institutional policies and practices
applicable to the work of the institution generally, including sponsored
agreements.
4. Allocable costs.
a. A cost is allocable to a particular cost objective (i.e., a
specific function, project, sponsored agreement, department, or the
like) if the goods or services involved are chargeable or assignable to
such cost objective in accordance with relative benefits received or
other equitable relationship. Subject to the foregoing, a cost is
allocable to a sponsored agreement if it is incurred solely to advance
the work under the sponsored agreement; it benefits both the sponsored
agreement and other work of the institution, in proportions that can be
approximated through use of reasonable methods, or it is necessary to
the overall operation of the institution and, in light of the principles
provided in this Appendix, is deemed to be assignable in part to
sponsored projects. Where the purchase of equipment or other capital
items is specifically authorized under a sponsored agreement, the
amounts thus authorized for such purchases are assignable to the
sponsored agreement regardless of the use that may subsequently be made
of the equipment or other capital items involved.
b. Any costs allocable to a particular sponsored agreement under the
standards provided in this Appendix may not be shifted to other
sponsored agreements in order to meet deficiencies caused by overruns or
other fund considerations, to avoid restrictions imposed by law or by
terms of the sponsored agreement, or for other reasons of convenience.
c. Any costs allocable to activities sponsored by industry, foreign
governments or other sponsors may not be shifted to federally-sponsored
agreements.
d. Allocation and documentation standard.
(1) Cost principles. The recipient institution is responsible for
ensuring that costs charged to a sponsored agreement are allowable,
allocable, and reasonable under these cost principles.
(2) Internal controls. The institution's financial management system
shall ensure that no one person has complete control over all aspects of
a financial transaction.
(3) Direct cost allocation principles. If a cost benefits two or
more projects or activities in proportions that can be determined
without undue effort or cost, the cost should be allocated to the
projects based on the proportional benefit. If a cost benefits two or
more projects or activities in proportions that cannot be determined
because of the interrelationship of the work involved, then,
notwithstanding subsection b, the costs may be allocated or transferred
to benefited projects on any reasonable basis, consistent with
subsections C.4.d. (1) and (2) of this Appendix.
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(4) Documentation. Federal requirements for documentation are
specified in this Appendix, 2 CFR Part 215, ``Uniform Administrative
Requirements for Grants and Agreements with Institutions of Higher
Education, Hospitals, and Other Non-Profit Organizations,'' and specific
agency policies on cost transfers. If the institution authorizes the
principal investigator or other individual to have primary
responsibility, given the requirements of subsection C.4.d. (2) of this
Appendix, for the management of sponsored agreement funds, then the
institution's documentation requirements for the actions of those
individuals (e.g., signature or initials of the principal investigator
or designee or use of a password) will normally be considered
sufficient.
5. Applicable credits.
a. The term ``applicable credits'' refers to those receipts or
negative expenditures that operate to offset or reduce direct or F&A
cost items. Typical examples of such transactions are: purchase
discounts, rebates, or allowances; recoveries or indemnities on losses;
and adjustments of overpayments or erroneous charges. This term also
includes ``educational discounts'' on products or services provided
specifically to educational institutions, such as discounts on computer
equipment, except where the arrangement is clearly and explicitly
identified as a gift by the vendor.
b. In some instances, the amounts received from the Federal
Government to finance institutional activities or service operations
should be treated as applicable credits. Specifically, the concept of
netting such credit items against related expenditures should be applied
by the institution in determining the rates or amounts to be charged to
sponsored agreements for services rendered whenever the facilities or
other resources used in providing such services have been financed
directly, in whole or in part, by Federal funds. (See Sections F.10,
J.14, and J.47 of this Appendix for areas of potential application in
the matter of direct Federal financing.)
6. Costs incurred by State and local governments. Costs incurred or
paid by State or local governments on behalf of their colleges and
universities for fringe benefit programs, such as pension costs and FICA
and any other costs specifically incurred on behalf of, and in direct
benefit to, the institutions, are allowable costs of such institutions
whether or not these costs are recorded in the accounting records of the
institutions, subject to the following:
a. The costs meet the requirements of subsections C.1 through 5 of
this Appendix.
b. The costs are properly supported by cost allocation plans in
accordance with applicable Federal cost accounting principles.
c. The costs are not otherwise borne directly or indirectly by the
Federal Government.
7. Limitations on allowance of costs. Sponsored agreements may be
subject to statutory requirements that limit the allowance of costs.
When the maximum amount allowable under a limitation is less than the
total amount determined in accordance with the principles in this
Appendix, the amount not recoverable under a sponsored agreement may not
be charged to other sponsored agreements.
8. Collection of unallowable costs, excess costs due to
noncompliance with cost policies, increased costs due to failure to
follow a disclosed accounting practice and increased costs resulting
from a change in cost accounting practice. The following costs shall be
refunded (including interest) in accordance with applicable Federal
agency regulations:
a. Costs specifically identified as unallowable in Section J of this
Appendix, either directly or indirectly, and charged to the Federal
Government.
b. Excess costs due to failure by the educational institution to
comply with the cost policies in this Appendix.
c. Increased costs due to a noncompliant cost accounting practice
used to estimate, accumulate, or report costs.
d. Increased costs resulting from a change in accounting practice.
9. Adjustment of previously negotiated F&A cost rates containing
unallowable costs. Negotiated F&A cost rates based on a proposal later
found to have included costs that are unallowable as specified by law or
regulation, Section J of this Appendix, terms and conditions of
sponsored agreements, or, are unallowable because they are clearly not
allocable to sponsored agreements, shall be adjusted, or a refund shall
be made, in accordance with the requirements of this section. These
adjustments or refunds are designed to correct the proposals used to
establish the rates and do not constitute a reopening of the rate
negotiation. The adjustments or refunds will be made regardless of the
type of rate negotiated (predetermined, final, fixed, or provisional).
a. For rates covering a future fiscal year of the institution, the
unallowable costs will be removed from the F&A cost pools and the rates
appropriately adjusted.
b. For rates covering a past period, the Federal share of the
unallowable costs will be computed for each year involved and a cash
refund (including interest chargeable in accordance with applicable
regulations) will be made to the Federal Government. If cash refunds are
made for past periods covered by provisional or fixed rates, appropriate
adjustments will be made when the rates are finalized to avoid duplicate
recovery of the unallowable costs by the Federal Government.
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c. For rates covering the current period, either a rate adjustment
or a refund, as described in subsections a and b, shall be required by
the cognizant agency. The choice of method shall be at the discretion of
the cognizant agency, based on its judgment as to which method would be
most practical.
d. The amount or proportion of unallowable costs included in each
year's rate will be assumed to be the same as the amount or proportion
of unallowable costs included in the base year proposal used to
establish the rate.
10. Consistency in estimating, accumulating and reporting costs.
a. An educational institution's practices used in estimating costs
in pricing a proposal shall be consistent with the educational
institution's cost accounting practices used in accumulating and
reporting costs.
b. An educational institution's cost accounting practices used in
accumulating and reporting actual costs for a sponsored agreement shall
be consistent with the educational institution's practices used in
estimating costs in pricing the related proposal or application.
c. The grouping of homogeneous costs in estimates prepared for
proposal purposes shall not per se be deemed an inconsistent application
of cost accounting practices under subsection a when such costs are
accumulated and reported in greater detail on an actual cost basis
during performance of the sponsored agreement.
d. Attachment A to this Appendix also reflects this requirement,
along with the purpose, definitions, and techniques for application, all
of which are authoritative.
11. Consistency in allocating costs incurred for the same purpose.
a. All costs incurred for the same purpose, in like circumstances,
are either direct costs only or F&A costs only with respect to final
cost objectives. No final cost objective shall have allocated to it as a
cost any cost, if other costs incurred for the same purpose, in like
circumstances, have been included as a direct cost of that or any other
final cost objective. Further, no final cost objective shall have
allocated to it as a direct cost any cost, if other costs incurred for
the same purpose, in like circumstances, have been included in any F&A
cost pool to be allocated to that or any other final cost objective.
b. Attachment A to this Appendix reflects this requirement along
with its purpose, definitions, and techniques for application,
illustrations and interpretations, all of which are authoritative.
12. Accounting for unallowable costs.
a. Costs expressly unallowable or mutually agreed to be unallowable,
including costs mutually agreed to be unallowable directly associated
costs, shall be identified and excluded from any billing, claim,
application, or proposal applicable to a sponsored agreement.
b. Costs which specifically become designated as unallowable as a
result of a written decision furnished by a Federal official pursuant to
sponsored agreement disputes procedures shall be identified if included
in or used in the computation of any billing, claim, or proposal
applicable to a sponsored agreement. This identification requirement
applies also to any costs incurred for the same purpose under like
circumstances as the costs specifically identified as unallowable under
either this subsection or subsection a.
c. Costs which, in a Federal official's written decision furnished
pursuant to sponsored agreement disputes procedures, are designated as
unallowable directly associated costs of unallowable costs covered by
either subsection a or b shall be accorded the identification required
by subsection b.
d. The costs of any work project not contractually authorized by a
sponsored agreement, whether or not related to performance of a proposed
or existing sponsored agreement, shall be accounted for, to the extent
appropriate, in a manner which permits ready separation from the costs
of authorized work projects.
e. All unallowable costs covered by subsections a through d shall be
subject to the same cost accounting principles governing cost
allocability as allowable costs. In circumstances where these
unallowable costs normally would be part of a regular F&A cost
allocation base or bases, they shall remain in such base or bases. Where
a directly associated cost is part of a category of costs normally
included in a F&A cost pool that shall be allocated over a base
containing the unallowable cost with which it is associated, such a
directly associated cost shall be retained in the F&A cost pool and be
allocated through the regular allocation process.
f. Where the total of the allocable and otherwise allowable costs
exceeds a limitation-of-cost or ceiling-price provision in a sponsored
agreement, full direct and F&A cost allocation shall be made to the
sponsored agreement cost objective, in accordance with established cost
accounting practices and standards which regularly govern a given
entity's allocations to sponsored agreement cost objectives. In any
determination of a cost overrun, the amount thereof shall be identified
in terms of the excess of allowable costs over the ceiling amount,
rather than through specific identification of particular cost items or
cost elements.
g. Attachment A reflects this requirement, along with its purpose,
definitions, techniques for application, and illustrations of this
standard, all of which are authoritative.
13. Cost accounting period.
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a. Educational institutions shall use their fiscal year as their
cost accounting period, except that:
(1) Costs of a F&A function which exists for only a part of a cost
accounting period may be allocated to cost objectives of that same part
of the period on the basis of data for that part of the cost accounting
period if the cost is material in amount, accumulated in a separate F&A
cost pool or expense pool, and allocated on the basis of an appropriate
direct measure of the activity or output of the function during that
part of the period.
(2) An annual period other than the fiscal year may, upon mutual
agreement with the Federal Government, be used as the cost accounting
period if the use of such period is an established practice of the
educational institution and is consistently used for managing and
controlling revenues and disbursements, and appropriate accruals,
deferrals or other adjustments are made with respect to such annual
periods.
(3) A transitional cost accounting period other than a year shall be
used whenever a change of fiscal year occurs.
b. An educational institution shall follow consistent practices in
the selection of the cost accounting period or periods in which any
types of expense and any types of adjustment to expense (including
prior-period adjustments) are accumulated and allocated.
c. The same cost accounting period shall be used for accumulating
costs in a F&A cost pool as for establishing its allocation base, except
that the Federal Government and educational institution may agree to use
a different period for establishing an allocation base, provided:
(1) The practice is necessary to obtain significant administrative
convenience,
(2) The practice is consistently followed by the educational
institution,
(3) The annual period used is representative of the activity of the
cost accounting period for which the F&A costs to be allocated are
accumulated, and
(4) The practice can reasonably be estimated to provide a
distribution to cost objectives of the cost accounting period not
materially different from that which otherwise would be obtained.
d. Attachment A reflects this requirement, along with its purpose,
definitions, techniques for application and illustrations, all of which
are authoritative.
14. Disclosure Statement.
a. Educational institutions that received aggregate sponsored
agreements totaling $25 million or more subject to this Appendix during
their most recently completed fiscal year shall disclose their cost
accounting practices by filing a Disclosure Statement (DS-2), which is
reproduced in Attachment B to this Appendix. With the approval of the
cognizant agency, an educational institution may meet the DS-2
submission by submitting the DS-2 for each business unit that received
$25 million or more in sponsored agreements.
b. The DS-2 shall be submitted to the cognizant agency with a copy
to the educational institution's audit cognizant office.
c. Educational institutions receiving $25 million or more in
sponsored agreements that are not required to file a DS-2 pursuant to 48
CFR 9903.202-1 shall file a DS-2 covering the first fiscal year
beginning after the publication date of this revision, within six months
after the end of that fiscal year. Extensions beyond the above due date
may be granted by the cognizant agency on a case-by-case basis.
d. Educational institutions are responsible for maintaining an
accurate DS-2 and complying with disclosed cost accounting practices.
Educational institutions must file amendments to the DS-2 when disclosed
practices are changed to comply with a new or modified standard, or when
practices are changed for other reasons. Amendments of a DS-2 may be
submitted at any time. If the change is expected to have a material
impact on the educational institution's negotiated F&A cost rates, the
revision shall be approved by the cognizant agency before it is
implemented. Resubmission of a complete, updated DS-2 is discouraged
except when there are extensive changes to disclosed practices.
e. Cost and funding adjustments. Cost adjustments shall be made by
the cognizant agency if an educational institution fails to comply with
the cost policies in this Appendix or fails to consistently follow its
established or disclosed cost accounting practices when estimating,
accumulating or reporting the costs of sponsored agreements, if
aggregate cost impact on sponsored agreements is material. The cost
adjustment shall normally be made on an aggregate basis for all affected
sponsored agreements through an adjustment of the educational
institution's future F&A costs rates or other means considered
appropriate by the cognizant agency. Under the terms of CAS-covered
contracts, adjustments in the amount of funding provided may also be
required when the estimated proposal costs were not determined in
accordance with established cost accounting practices.
f. Overpayments. Excess amounts paid in the aggregate by the Federal
Government under sponsored agreements due to a noncompliant cost
accounting practice used to estimate, accumulate, or report costs shall
be credited or refunded, as deemed appropriate by the cognizant agency.
Interest applicable to the excess amounts paid in the aggregate during
the period of noncompliance shall also be determined and collected in
accordance with applicable Federal agency regulations.
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g. Compliant cost accounting practice changes. Changes from one
compliant cost accounting practice to another compliant practice that
are approved by the cognizant agency may require cost adjustments if the
change has a material effect on sponsored agreements and the changes are
deemed appropriate by the cognizant agency.
h. Responsibilities. The cognizant agency shall:
(1) Determine cost adjustments for all sponsored agreements in the
aggregate on behalf of the Federal Government. Actions of the cognizant
agency official in making cost adjustment determinations shall be
coordinated with all affected Federal agencies to the extent necessary.
(2) Prescribe guidelines and establish internal procedures to
promptly determine on behalf of the Federal Government that a DS-2
adequately discloses the educational institution's cost accounting
practices and that the disclosed practices are compliant with applicable
CAS and the requirements of Attachment A to this Appendix.
(3) Distribute to all affected agencies any DS-2 determination of
adequacy and/or noncompliance.
D. Direct Costs
1. General. Direct costs are those costs that can be identified
specifically with a particular sponsored project, an instructional
activity, or any other institutional activity, or that can be directly
assigned to such activities relatively easily with a high degree of
accuracy. Costs incurred for the same purpose in like circumstances must
be treated consistently as either direct or F&A costs. Where an
institution treats a particular type of cost as a direct cost of
sponsored agreements, all costs incurred for the same purpose in like
circumstances shall be treated as direct costs of all activities of the
institution.
2. Application to sponsored agreements. Identification with the
sponsored work rather than the nature of the goods and services involved
is the determining factor in distinguishing direct from F&A costs of
sponsored agreements. Typical costs charged directly to a sponsored
agreement are the compensation of employees for performance of work
under the sponsored agreement, including related fringe benefit costs to
the extent they are consistently treated, in like circumstances, by the
institution as direct rather than F&A costs; the costs of materials
consumed or expended in the performance of the work; and other items of
expense incurred for the sponsored agreement, including extraordinary
utility consumption. The cost of materials supplied from stock or
services rendered by specialized facilities or other institutional
service operations may be included as direct costs of sponsored
agreements, provided such items are consistently treated, in like
circumstances, by the institution as direct rather than F&A costs, and
are charged under a recognized method of computing actual costs, and
conform to generally accepted cost accounting practices consistently
followed by the institution.
E. F&A Costs
1. General. F&A costs are those that are incurred for common or
joint objectives and therefore cannot be identified readily and
specifically with a particular sponsored project, an instructional
activity, or any other institutional activity. See Section F.1 of this
Appendix for a discussion of the components of F&A costs.
2. Criteria for distribution.
a. Base period. A base period for distribution of F&A costs is the
period during which the costs are incurred. The base period normally
should coincide with the fiscal year established by the institution, but
in any event the base period should be so selected as to avoid
inequities in the distribution of costs.
b. Need for cost groupings. The overall objective of the F&A cost
allocation process is to distribute the F&A costs described in Section F
of this Appendix to the major functions of the institution in
proportions reasonably consistent with the nature and extent of their
use of the institution's resources. In order to achieve this objective,
it may be necessary to provide for selective distribution by
establishing separate groupings of cost within one or more of the F&A
cost categories referred to in subsection E.1 of this Appendix. In
general, the cost groupings established within a category should
constitute, in each case, a pool of those items of expense that are
considered to be of like nature in terms of their relative contribution
to (or degree of remoteness from) the particular cost objectives to
which distribution is appropriate. Cost groupings should be established
considering the general guides provided in subsection E.2.c. of this
Appendix. Each such pool or cost grouping should then be distributed
individually to the related cost objectives, using the distribution base
or method most appropriate in the light of the guides set forth in
subsection E.2.d. of this Appendix.
c. General considerations on cost groupings. The extent to which
separate cost groupings and selective distribution would be appropriate
at an institution is a matter of judgment to be determined on a case-by-
case basis. Typical situations which may warrant the establishment of
two or more separate cost groupings (based on account classification or
analysis) within an F&A cost category include but are not limited to the
following:
(1) Where certain items or categories of expense relate solely to
one of the major functions of the institution or to less than all
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functions, such expenses should be set aside as a separate cost grouping
for direct assignment or selective allocation in accordance with the
guides provided in subsections b and d.
(2) Where any types of expense ordinarily treated as general
administration or departmental administration are charged to sponsored
agreements as direct costs, expenses applicable to other activities of
the institution when incurred for the same purposes in like
circumstances must, through separate cost groupings, be excluded from
the F&A costs allocable to those sponsored agreements and included in
the direct cost of other activities for cost allocation purposes.
(3) Where it is determined that certain expenses are for the support
of a service unit or facility whose output is susceptible of measurement
on a workload or other quantitative basis, such expenses should be set
aside as a separate cost grouping for distribution on such basis to
organized research, instructional, and other activities at the
institution or within the department.
(4) Where activities provide their own purchasing, personnel
administration, building maintenance or similar service, the
distribution of general administration and general expenses, or
operation and maintenance expenses to such activities should be
accomplished through cost groupings which include only that portion of
central F&A costs (such as for overall management) which are properly
allocable to such activities.
(5) Where the institution elects to treat fringe benefits as F&A
charges, such costs should be set aside as a separate cost grouping for
selective distribution to related cost objectives.
(6) The number of separate cost groupings within a category should
be held within practical limits, after taking into consideration the
materiality of the amounts involved and the degree of precision
attainable through less selective methods of distribution.
d. Selection of distribution method.
(1) Actual conditions must be taken into account in selecting the
method or base to be used in distributing individual cost groupings. The
essential consideration in selecting a base is that it be the one best
suited for assigning the pool of costs to cost objectives in accordance
with benefits derived; a traceable cause and effect relationship; or
logic and reason, where neither benefit nor cause and effect
relationship is determinable.
(2) Where a cost grouping can be identified directly with the cost
objective benefited, it should be assigned to that cost objective.
(3) Where the expenses in a cost grouping are more general in
nature, the distribution may be based on a cost analysis study which
results in an equitable distribution of the costs. Such cost analysis
studies may take into consideration weighting factors, population, or
space occupied if appropriate. Cost analysis studies, however, must be
appropriately documented in sufficient detail for subsequent review by
the cognizant Federal agency, distribute the costs to the related cost
objectives in accordance with the relative benefits derived, be
statistically sound, be performed specifically at the institution at
which the results are to be used, and be reviewed periodically, but not
less frequently than every two years, updated if necessary, and used
consistently. Any assumptions made in the study must be stated and
explained. The use of cost analysis studies and periodic changes in the
method of cost distribution must be fully justified.
(4) If a cost analysis study is not performed, or if the study does
not result in an equitable distribution of the costs, the distribution
shall be made in accordance with the appropriate base cited in Section
F, unless one of the following conditions is met: it can be demonstrated
that the use of a different base would result in a more equitable
allocation of the costs, or that a more readily available base would not
increase the costs charged to sponsored agreements, or the institution
qualifies for, and elects to use, the simplified method for computing
F&A cost rates described in Section H of this Appendix.
(5) Notwithstanding subsection E.2.d.(3) of this Appendix, effective
July 1, 1998, a cost analysis or base other than that in Section F of
this Appendix shall not be used to distribute utility or student
services costs. Instead, subsections F.4.c and F.4.d may be used in the
recovery of utility costs.
e. Order of distribution.
(1) F&A costs are the broad categories of costs discussed in Section
F.1 of this Appendix.
(2) Depreciation and use allowances, operation and maintenance
expenses, and general administrative and general expenses should be
allocated in that order to the remaining F&A cost categories as well as
to the major functions and specialized service facilities of the
institution. Other cost categories may be allocated in the order
determined to be most appropriate by the institutions. When cross
allocation of costs is made as provided in subsection (3), this order of
allocation does not apply.
(3) Normally an F&A cost category will be considered closed once it
has been allocated to other cost objectives, and costs may not be
subsequently allocated to it. However, a cross allocation of costs
between two or more F&A cost categories may be used if such allocation
will result in a more equitable allocation of costs. If a cross
allocation is used, an appropriate modification to the composition of
the F&A cost categories described in Section F of this Appendix is
required.
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F. Identification and Assignment of F&A Costs
1. Definition of Facilities and Administration. F&A costs are broad
categories of costs. ``Facilities'' is defined as depreciation and use
allowances, interest on debt associated with certain buildings,
equipment and capital improvements, operation and maintenance expenses,
and library expenses. ``Administration'' is defined as general
administration and general expenses, departmental administration,
sponsored projects administration, student administration and services,
and all other types of expenditures not listed specifically under one of
the subcategories of Facilities (including cross allocations from other
pools).
2. Depreciation and use allowances.
a. The expenses under this heading are the portion of the costs of
the institution's buildings, capital improvements to land and buildings,
and equipment which are computed in accordance with Section J.14 of this
Appendix.
b. In the absence of the alternatives provided for in Section E.2.d
of this Appendix, the expenses included in this category shall be
allocated in the following manner:
(1) Depreciation or use allowances on buildings used exclusively in
the conduct of a single function, and on capital improvements and
equipment used in such buildings, shall be assigned to that function.
(2) Depreciation or use allowances on buildings used for more than
one function, and on capital improvements and equipment used in such
buildings, shall be allocated to the individual functions performed in
each building on the basis of usable square feet of space, excluding
common areas such as hallways, stairwells, and rest rooms.
(3) Depreciation or use allowances on buildings, capital
improvements and equipment related to space (e.g., individual rooms,
laboratories) used jointly by more than one function (as determined by
the users of the space) shall be treated as follows. The cost of each
jointly used unit of space shall be allocated to benefiting functions on
the basis of:
(a) The employee full-time equivalents (FTEs) or salaries and wages
of those individual functions benefiting from the use of that space; or
(b) Institution-wide employee FTEs or salaries and wages applicable
to the benefiting major functions (see Section B.1 of this Appendix) of
the institution.
(4) Depreciation or use allowances on certain capital improvements
to land, such as paved parking areas, fences, sidewalks, and the like,
not included in the cost of buildings, shall be allocated to user
categories of students and employees on a full-time equivalent basis.
The amount allocated to the student category shall be assigned to the
instruction function of the institution. The amount allocated to the
employee category shall be further allocated to the major functions of
the institution in proportion to the salaries and wages of all employees
applicable to those functions.
c. Large research facilities. The following provisions apply to
large research facilities that are included in F&A rate proposals
negotiated after January 1, 2000, and on which the design and
construction begin after July 1, 1998. Large facilities, for this
provision, are defined as buildings with construction costs of more than
$10 million. The determination of the Federal participation (use)
percentage in a building is based on institution's estimates of building
use over its life, and is made during the planning phase for the
building.
(1) When an institution has large research facilities, of which 40
percent or more of total assignable space is expected for Federal use,
the institution must maintain an adequate review and approval process to
ensure that construction costs are reasonable.
(a)The review process shall address and document relevant factors
affecting construction costs, such as:
i. Life cycle costs
ii. Unique research needs
iii. Special building needs
iv. Building site preparation
v. Environmental consideration
vi. Federal construction code requirements
vii. Competitive procurement practices
(b) The approval process shall include review and approval of the
projects by the institution's Board of Trustees (which can also be
called Board of Directors, Governors or Regents) or other independent
entities.
(2) For research facilities costing more than $25 million, of which
50 percent or more of total assignable space is expected for Federal
use, the institution must document the review steps performed to assure
that construction costs are reasonable. The review should include an
analysis of construction costs and a comparison of these costs with
relevant construction data, including the National Science Foundation
data for research facilities based on its biennial survey, ``Science and
Engineering Facilities at Colleges and Universities.'' The documentation
must be made available for review by Federal negotiators, when
requested.
3. Interest. Interest on debt associated with certain buildings,
equipment and capital improvements, as defined in Section J.25 of this
Appendix, shall be classified as an expenditure under the category
Facilities. These costs shall be allocated in the same manner as the
depreciation or use allowances on the buildings, equipment and capital
improvements to which the interest relates.
4. Operation and maintenance expenses.
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a. The expenses under this heading are those that have been incurred
for the administration, supervision, operation, maintenance,
preservation, and protection of the institution's physical plant. They
include expenses normally incurred for such items as janitorial and
utility services; repairs and ordinary or normal alterations of
buildings, furniture and equipment; care of grounds; maintenance and
operation of buildings and other plant facilities; security; earthquake
and disaster preparedness; environmental safety; hazardous waste
disposal; property, liability and all other insurance relating to
property; space and capital leasing; facility planning and management;
and, central receiving. The operation and maintenance expense category
should also include its allocable share of fringe benefit costs,
depreciation and use allowances, and interest costs.
b. In the absence of the alternatives provided for in Section E.2.d
of this Appendix, the expenses included in this category shall be
allocated in the same manner as described in subsection E.2.b for
depreciation and use allowances.
c. For F&A rates negotiated on or after July 1, 1998, an institution
that previously employed a utility special cost study in its most
recently negotiated F&A rate proposal in accordance with Section E.2.d
of this Appendix, may add a utility cost adjustment (UCA) of 1.3
percentage points to its negotiated overall F&A rate for organized
research. Exhibit B to this Appendix displays the list of eligible
institutions. The allocation of utility costs to the benefiting
functions shall otherwise be made in the same manner as described in
subsection F.4.b of this Appendix. Beginning on July 1, 2002, Federal
agencies shall reassess periodically the eligibility of institutions to
receive the UCA.
d. Beginning on July 1, 2002, Federal agencies may receive
applications for utilization of the UCA from institutions not subject to
the provisions of subsection F.4.c of this Appendix.
5. General administration and general expenses.
a. The expenses under this heading are those that have been incurred
for the general executive and administrative offices of educational
institutions and other expense of a general character which do not
relate solely to any major function of the institution; i.e., solely to
instruction, organized research, other sponsored activities, or other
institutional activities. The general administration and general expense
category should also include its allocable share of fringe benefit
costs, operation and maintenance expense, depreciation and use
allowances, and interest costs. Examples of general administration and
general expenses include: those expenses incurred by administrative
offices that serve the entire university system of which the institution
is a part; central offices of the institution such as the President's or
Chancellor's office, the offices for institution-wide financial
management, business services, budget and planning, personnel
management, and safety and risk management; the office of the General
Counsel; and, the operations of the central administrative management
information systems. General administration and general expenses shall
not include expenses incurred within non-university-wide deans' offices,
academic departments, organized research units, or similar
organizational units. (See subsection F.6. of this Appendix,
Departmental administration expenses.)
b. In the absence of the alternatives provided for in Section E.2.d
of this Appendix, the expenses included in this category shall be
grouped first according to common major functions of the institution to
which they render services or provide benefits. The aggregate expenses
of each group shall then be allocated to serviced or benefited functions
on the modified total cost basis. Modified total costs consist of the
same elements as those in Section G.2 of this Appendix. When an activity
included in this F&A cost category provides a service or product to
another institution or organization, an appropriate adjustment must be
made to either the expenses or the basis of allocation or both, to
assure a proper allocation of costs.
6. Departmental administration expenses.
a. The expenses under this heading are those that have been incurred
for administrative and supporting services that benefit common or joint
departmental activities or objectives in academic deans' offices,
academic departments and divisions, and organized research units.
Organized research units include such units as institutes, study
centers, and research centers. Departmental administration expenses are
subject to the following limitations.
(1) Academic deans' offices. Salaries and operating expenses are
limited to those attributable to administrative functions.
(2) Academic departments:
(a) Salaries and fringe benefits attributable to the administrative
work (including bid and proposal preparation) of faculty (including
department heads), and other professional personnel conducting research
and/or instruction, shall be allowed at a rate of 3.6 percent of
modified total direct costs. This category does not include professional
business or professional administrative officers. This allowance shall
be added to the computation of the F&A cost rate for major functions in
Section G of this Appendix; the expenses covered by the allowance shall
be excluded from the departmental administration cost pool. No
documentation is required to support this allowance.
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(b) Other administrative and supporting expenses incurred within
academic departments are allowable provided they are treated
consistently in like circumstances. This would include expenses such as
the salaries of secretarial and clerical staffs, the salaries of
administrative officers and assistants, travel, office supplies,
stockrooms, and the like.
(3) Other fringe benefit costs applicable to the salaries and wages
included in subsections F.6.a.(1) and (2) of this Appendix are
allowable, as well as an appropriate share of general administration and
general expenses, operation and maintenance expenses, and depreciation
and/or use allowances.
(4) Federal agencies may authorize reimbursement of additional costs
for department heads and faculty only in exceptional cases where an
institution can demonstrate undue hardship or detriment to project
performance.
b. The following guidelines apply to the determination of
departmental administrative costs as direct or F&A costs.
(1) In developing the departmental administration cost pool, special
care should be exercised to ensure that costs incurred for the same
purpose in like circumstances are treated consistently as either direct
or F&A costs. For example, salaries of technical staff, laboratory
supplies (e.g., chemicals), telephone toll charges, animals, animal care
costs, computer costs, travel costs, and specialized shop costs shall be
treated as direct cost wherever identifiable to a particular cost
objective. Direct charging of these costs may be accomplished through
specific identification of individual costs to benefiting cost
objectives, or through recharge centers or specialized service
facilities, as appropriate under the circumstances.
(2) The salaries of administrative and clerical staff should
normally be treated as F&A costs. Direct charging of these costs may be
appropriate where a major project or activity explicitly budgets for
administrative or clerical services and individuals involved can be
specifically identified with the project or activity. ``Major project''
is defined as a project that requires an extensive amount of
administrative or clerical support, which is significantly greater than
the routine level of such services provided by academic departments.
Some examples of major projects are described in Exhibit C to this
Appendix.
(3) Items such as office supplies, postage, local telephone costs,
and memberships shall normally be treated as F&A costs.
c. In the absence of the alternatives provided for in Section E.2.d
of this Appendix, the expenses included in this category shall be
allocated as follows:
(1) The administrative expenses of the dean's office of each college
and school shall be allocated to the academic departments within that
college or school on the modified total cost basis.
(2) The administrative expenses of each academic department, and the
department's share of the expenses allocated in subsection F.6.b.(1) of
this Appendix shall be allocated to the appropriate functions of the
department on the modified total cost basis.
7. Sponsored projects administration.
a. The expenses under this heading are limited to those incurred by
a separate organization(s) established primarily to administer sponsored
projects, including such functions as grant and contract administration
(Federal and non-Federal), special security, purchasing, personnel,
administration, and editing and publishing of research and other
reports. They include the salaries and expenses of the head of such
organization, assistants, and immediate staff, together with the
salaries and expenses of personnel engaged in supporting activities
maintained by the organization, such as stock rooms, stenographic pools
and the like. This category also includes an allocable share of fringe
benefit costs, general administration and general expenses, operation
and maintenance expenses, depreciation/use allowances. Appropriate
adjustments will be made for services provided to other functions or
organizations.
b. In the absence of the alternatives provided for in Section E.2.d
of this Appendix, the expenses included in this category shall be
allocated to the major functions of the institution under which the
sponsored projects are conducted on the basis of the modified total cost
of sponsored projects.
c. An appropriate adjustment shall be made to eliminate any
duplicate charges to sponsored agreements when this category includes
similar or identical activities as those included in the general
administration and general expense category or other F&A cost items,
such as accounting, procurement, or personnel administration.
8. Library expenses.
a. The expenses under this heading are those that have been incurred
for the operation of the library, including the cost of books and
library materials purchased for the library, less any items of library
income that qualify as applicable credits under Section C.5 of this
Appendix. The library expense category should also include the fringe
benefits applicable to the salaries and wages included therein, an
appropriate share of general administration and general expense,
operation and maintenance expense, and depreciation and use allowances.
Costs incurred in the purchases of rare books (museum-type books) with
no value to sponsored agreements should not be allocated to them.
b. In the absence of the alternatives provided for in Section E.2.d
of this Appendix, the expenses included in this category shall
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be allocated first on the basis of primary categories of users,
including students, professional employees, and other users.
(1) The student category shall consist of full-time equivalent
students enrolled at the institution, regardless of whether they earn
credits toward a degree or certificate.
(2) The professional employee category shall consist of all faculty
members and other professional employees of the institution, on a full-
time equivalent basis.
(3) The other users category shall consist of all other users of
library facilities.
c. Amount allocated in subsection E.8.b of this Appendix shall be
assigned further as follows:
(1) The amount in the student category shall be assigned to the
instruction function of the institution.
(2) The amount in the professional employee category shall be
assigned to the major functions of the institution in proportion to the
salaries and wages of all faculty members and other professional
employees applicable to those functions.
(3) The amount in the other users category shall be assigned to the
other institutional activities function of the institution.
9. Student administration and services.
a. The expenses under this heading are those that have been incurred
for the administration of student affairs and for services to students,
including expenses of such activities as deans of students, admissions,
registrar, counseling and placement services, student advisers, student
health and infirmary services, catalogs, and commencements and
convocations. The salaries of members of the academic staff whose
responsibilities to the institution require administrative work that
benefits sponsored projects may also be included to the extent that the
portion charged to student administration is determined in accordance
with Section J.10 of this Appendix. This expense category also includes
the fringe benefit costs applicable to the salaries and wages included
therein, an appropriate share of general administration and general
expenses, operation and maintenance, and use allowances and/or
depreciation.
b. In the absence of the alternatives provided for in Section E.2.d
of this Appendix, the expenses in this category shall be allocated to
the instruction function, and subsequently to sponsored agreements in
that function.
10. Offset for F&A expenses otherwise provided for by the Federal
Government.
a. The items to be accumulated under this heading are the
reimbursements and other payments from the Federal Government that are
made to the institution to support solely, specifically, and directly,
in whole or in part, any of the administrative or service activities
described in subsections F.2 through 9 of this Appendix.
b. The items in this group shall be treated as a credit to the
affected individual F&A cost category before that category is allocated
to benefiting functions.
G. Determination and Application of F&A Cost Rate or Rates
1. F&A cost pools.
a. (1) Subject to subsection b, the separate categories of F&A costs
allocated to each major function of the institution as prescribed in
Section F shall be aggregated and treated as a common pool for that
function. The amount in each pool shall be divided by the distribution
base described in subsection G.2 of this Appendix to arrive at a single
F&A cost rate for each function.
(2) The rate for each function is used to distribute F&A costs to
individual sponsored agreements of that function. Since a common pool is
established for each major function of the institution, a separate F&A
cost rate would be established for each of the major functions described
in Section B.1 of this Appendix under which sponsored agreements are
carried out.
(3) Each institution's F&A cost rate process must be appropriately
designed to ensure that Federal sponsors do not in any way subsidize the
F&A costs of other sponsors, specifically activities sponsored by
industry and foreign governments. Accordingly, each allocation method
used to identify and allocate the F&A cost pools, as described in
Sections E.2 and F.2 through F.9 of this Appendix, must contain the full
amount of the institution's modified total costs or other appropriate
units of measurement used to make the computations. In addition, the
final rate distribution base (as defined in subsection G.2 of this
Appendix) for each major function (organized research, instruction,
etc., as described in Section B.1 of this Appendix) shall contain all
the programs or activities that utilize the F&A costs allocated to that
major function. At the time a F&A cost proposal is submitted to a
cognizant Federal agency, each institution must describe the process it
uses to ensure that Federal funds are not used to subsidize industry and
foreign government funded programs.
b. In some instances a single rate basis for use across the board on
all work within a major function at an institution may not be
appropriate. A single rate for research, for example, might not take
into account those different environmental factors and other conditions
which may affect substantially the F&A costs applicable to a particular
segment of research at the institution. A particular segment of research
may be that performed under a single sponsored agreement or it may
consist of research under a group of sponsored agreements performed in a
common environment. The environmental factors are not limited to the
physical location of the work. Other important factors are the
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level of the administrative support required, the nature of the
facilities or other resources employed, the scientific disciplines or
technical skills involved, the organizational arrangements used, or any
combination thereof. Where a particular segment of a sponsored agreement
is performed within an environment which appears to generate a
significantly different level of F&A costs, provisions should be made
for a separate F&A cost pool applicable to such work. The separate F&A
cost pool should be developed during the regular course of the rate
determination process and the separate F&A cost rate resulting therefrom
should be utilized; provided it is determined that such F&A cost rate
differs significantly from that which would have been obtained under
subsection G.1.a of this Appendix, and the volume of work to which such
rate would apply is material in relation to other sponsored agreements
at the institution.
2. The distribution basis. F&A costs shall be distributed to
applicable sponsored agreements and other benefiting activities within
each major function (see Section B.1) on the basis of modified total
direct costs, consisting of all salaries and wages, fringe benefits,
materials and supplies, services, travel, and subgrants and subcontracts
up to the first $25,000 of each subgrant or subcontract (regardless of
the period covered by the subgrant or subcontract). Equipment, capital
expenditures, charges for patient care and tuition remission, rental
costs, scholarships, and fellowships as well as the portion of each
subgrant and subcontract in excess of $25,000 shall be excluded from
modified total direct costs. Other items may only be excluded where
necessary to avoid a serious inequity in the distribution of F&A costs.
For this purpose, a F&A cost rate should be determined for each of the
separate F&A cost pools developed pursuant to subsection G.1 of this
Appendix. The rate in each case should be stated as the percentage that
the amount of the particular F&A cost pool is of the modified total
direct costs identified with such pool.
3. Negotiated lump sum for F&A costs. A negotiated fixed amount in
lieu of F&A costs may be appropriate for self-contained, off-campus, or
primarily subcontracted activities where the benefits derived from an
institution's F&A services cannot be readily determined. Such negotiated
F&A costs will be treated as an offset before allocation to instruction,
organized research, other sponsored activities, and other institutional
activities. The base on which such remaining expenses are allocated
should be appropriately adjusted.
4. Predetermined rates for F&A costs. Public Law 87-638 (76 Stat.
437) authorizes the use of predetermined rates in determining the
``indirect costs'' (F&A costs in this Appendix) applicable under
research agreements with educational institutions. The stated objectives
of the law are to simplify the administration of cost-type research and
development contracts (including grants) with educational institutions,
to facilitate the preparation of their budgets, and to permit more
expeditious closeout of such contracts when the work is completed. In
view of the potential advantages offered by this procedure, negotiation
of predetermined rates for F&A costs for a period of two to four years
should be the norm in those situations where the cost experience and
other pertinent facts available are deemed sufficient to enable the
parties involved to reach an informed judgment as to the probable level
of F&A costs during the ensuing accounting periods.
5. Negotiated fixed rates and carry-forward provisions. When a fixed
rate is negotiated in advance for a fiscal year (or other time period),
the over- or under-recovery for that year may be included as an
adjustment to the F&A cost for the next rate negotiation. When the rate
is negotiated before the carry-forward adjustment is determined, the
carry-forward amount may be applied to the next subsequent rate
negotiation. When such adjustments are to be made, each fixed rate
negotiated in advance for a given period will be computed by applying
the expected F&A costs allocable to sponsored agreements for the
forecast period plus or minus the carry-forward adjustment (over- or
under-recovery) from the prior period, to the forecast distribution
base. Unrecovered amounts under lump-sum agreements or cost-sharing
provisions of prior years shall not be carried forward for consideration
in the new rate negotiation. There must, however, be an advance
understanding in each case between the institution and the cognizant
Federal agency as to whether these differences will be considered in the
rate negotiation rather than making the determination after the
differences are known. Further, institutions electing to use this carry-
forward provision may not subsequently change without prior approval of
the cognizant Federal agency. In the event that an institution returns
to a postdetermined rate, any over- or under-recovery during the period
in which negotiated fixed rates and carry-forward provisions were
followed will be included in the subsequent postdetermined rates. Where
multiple rates are used, the same procedure will be applicable for
determining each rate.
6. Provisional and final rates for F&A costs. Where the cognizant
agency determines that cost experience and other pertinent facts do not
justify the use of predetermined rates, or a fixed rate with a carry-
forward, or if the parties cannot agree on an equitable rate, a
provisional rate shall be established. To prevent substantial
overpayment or underpayment, the provisional rate may be adjusted by the
cognizant agency
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during the institution's fiscal year. Predetermined or fixed rates may
replace provisional rates at any time prior to the close of the
institution's fiscal year. If a provisional rate is not replaced by a
predetermined or fixed rate prior to the end of the institution's fiscal
year, a final rate will be established and upward or downward
adjustments will be made based on the actual allowable costs incurred
for the period involved.
7. Fixed rates for the life of the sponsored agreement.
a. Federal agencies shall use the negotiated rates for F&A costs in
effect at the time of the initial award throughout the life of the
sponsored agreement. ``Life'' for the purpose of this subsection means
each competitive segment of a project. A competitive segment is a period
of years approved by the Federal funding agency at the time of the
award. If negotiated rate agreements do not extend through the life of
the sponsored agreement at the time of the initial award, then the
negotiated rate for the last year of the sponsored agreement shall be
extended through the end of the life of the sponsored agreement. Award
levels for sponsored agreements may not be adjusted in future years as a
result of changes in negotiated rates.
b. When an educational institution does not have a negotiated rate
with the Federal Government at the time of the award (because the
educational institution is a new grantee or the parties cannot reach
agreement on a rate), the provisional rate used at the time of the award
shall be adjusted once a rate is negotiated and approved by the
cognizant agency.
8. Limitation on reimbursement of administrative costs.
a. Notwithstanding the provisions of subsection G.1.a of this
Appendix, the administrative costs charged to sponsored agreements
awarded or amended (including continuation and renewal awards) with
effective dates beginning on or after the start of the institution's
first fiscal year which begins on or after October 1, 1991, shall be
limited to 26% of modified total direct costs (as defined in subsection
G.2 of this Appendix) for the total of General Administration and
General Expenses, Departmental Administration, Sponsored Projects
Administration, and Student Administration and Services (including their
allocable share of depreciation and/or use allowances, interest costs,
operation and maintenance expenses, and fringe benefits costs, as
provided by Sections F.5, F.6, F.7 and F.9 of this Appendix) and all
other types of expenditures not listed specifically under one of the
subcategories of facilities in Section F of this Appendix.
b. Existing F&A cost rates that affect institutions' fiscal years
which begin on or after October 1, 1991, shall be unilaterally amended
by the cognizant Federal agency to reflect the cost limitation in
subsection G.8.a of this Appendix.
c. Permanent rates established prior to this revision that have been
amended in accordance with subsection G.8.b of this Appendix may be
renegotiated. However, no such renegotiated rate may exceed the rate
which would have been in effect if the agreement had remained in effect;
nor may the administrative portion of any renegotiated rate exceed the
limitation in subsection a.
d. Institutions should not change their accounting or cost
allocation methods which were in effect on May 1, 1991, if the effect is
to change the charging of a particular type of cost from F&A to direct,
or reclassify costs, or increase allocations, from the administrative
pools identified in subsection to the other F&A cost pools or fringe
benefits. Cognizant Federal agencies are authorized to permit changes
where an institution's charging practices are at variance with
acceptable practices followed by a substantial majority of other
institutions.
9. Alternative method for administrative costs.
a. Notwithstanding the provisions of subsection 1.a, an institution
may elect to claim fixed allowance for the ``Administration'' portion of
F&A costs. The allowance could be either 24% of modified total direct
costs or a percentage equal to 95% of the most recently negotiated fixed
or predetermined rate for the cost pools included under
``Administration'' as defined in Section F.1 of this Appendix, whichever
is less, provided that no accounting or cost allocation changes with the
effects described in subsection G.8.d of this Appendix have occurred.
Under this alternative, no cost proposal need be prepared for the
``Administration'' portion of the F&A cost rate nor is further
identification or documentation of these costs required (see subsection
G.9.c of this Appendix). Where a negotiated F&A cost agreement includes
this alternative, an institution shall make no further charges for the
expenditure categories described in Sections F.5, F.6, F.7 and F.9 of
this Appendix.
b. In negotiations of rates for subsequent periods, an institution
that has elected the option of subsection a may continue to exercise it
at the same rate without further identification or documentation of
costs, provided that no accounting or cost allocation changes with the
effects described in subsection G.8.d of this Appendix have occurred.
c. If an institution elects to accept a threshold rate, it is not
required to perform a detailed analysis of its administrative costs.
However, in order to compute the facilities components of its F&A cost
rate, the institution must reconcile its F&A cost proposal to its
financial statements and make appropriate adjustments and
reclassifications to identify the costs of each major
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function as defined in Section B.1 of this Appendix, as well as to
identify and allocate the facilities components. Administrative costs
that are not identified as such by the institution's accounting system
(such as those incurred in academic departments) will be classified as
instructional costs for purposes of reconciling F&A cost proposals to
financial statements and allocating facilities costs.
10. Individual rate components.
In order to satisfy the requirements of Section J.14 of this
Appendix and to provide mutually agreed upon information for management
purposes, each F&A cost rate negotiation or determination shall include
development of a rate for each F&A cost pool as well as the overall F&A
cost rate.
11. Negotiation and approval of F&A rate.
a. Cognizant agency assignments. ``A cognizant agency'' means the
Federal agency responsible for negotiating and approving F&A rates for
an educational institution on behalf of all Federal agencies.
(1) Cost negotiation cognizance is assigned to the Department of
Health and Human Services (HHS) or the Department of Defense's Office of
Naval Research (DOD), normally depending on which of the two agencies
(HHS or DOD) provides more funds to the educational institution for the
most recent three years. Information on funding shall be derived from
relevant data gathered by the National Science Foundation. In cases
where neither HHS nor DOD provides Federal funding to an educational
institution, the cognizant agency assignment shall default to HHS.
Notwithstanding the method for cognizance determination described above,
other arrangements for cognizance of a particular educational
institution may also be based in part on the types of research performed
at the educational institution and shall be decided based on mutual
agreement between HHS and DOD.
(2) Cognizant assignments as of December 31, 1995, shall continue in
effect through educational institutions' fiscal years ending during
1997, or the period covered by negotiated agreements in effect on
December 31, 1995, whichever is later, except for those educational
institutions with cognizant agencies other than HHS or DOD. Cognizance
for these educational institutions shall transfer to HHS or DOD at the
end of the period covered by the current negotiated rate agreement.
After cognizance is established, it shall continue for a five-year
period.
b. Acceptance of rates. The negotiated rates shall be accepted by
all Federal agencies. Only under special circumstances, when required by
law or regulation, may an agency use a rate different from the
negotiated rate for a class of sponsored agreements or a single
sponsored agreement.
c. Correcting deficiencies. The cognizant agency shall negotiate
changes needed to correct systems deficiencies relating to
accountability for sponsored agreements. Cognizant agencies shall
address the concerns of other affected agencies, as appropriate.
d. Resolving questioned costs. The cognizant agency shall conduct
any necessary negotiations with an educational institution regarding
amounts questioned by audit that are due the Federal Government related
to costs covered by a negotiated agreement.
e. Reimbursement. Reimbursement to cognizant agencies for work
performed under Part 220 may be made by reimbursement billing under the
Economy Act, 31 U.S.C. 1535.
f. Procedure for establishing facilities and administrative rates.
The cognizant agency shall arrange with the educational institution to
provide copies of rate proposals to all interested agencies. Agencies
wanting such copies should notify the cognizant agency. Rates shall be
established by one of the following methods:
(1) Formal negotiation. The cognizant agency is responsible for
negotiating and approving rates for an educational institution on behalf
of all Federal agencies. Non-cognizant Federal agencies, which award
sponsored agreements to an educational institution, shall notify the
cognizant agency of specific concerns (i.e., a need to establish special
cost rates) that could affect the negotiation process. The cognizant
agency shall address the concerns of all interested agencies, as
appropriate. A pre-negotiation conference may be scheduled among all
interested agencies, if necessary. The cognizant agency shall then
arrange a negotiation conference with the educational institution.
(2) Other than formal negotiation. The cognizant agency and
educational institution may reach an agreement on rates without a formal
negotiation conference; for example, through correspondence or use of
the simplified method described in this Appendix.
g. Formalizing determinations and agreements. The cognizant agency
shall formalize all determinations or agreements reached with an
educational institution and provide copies to other agencies having an
interest.
h. Disputes and disagreements. Where the cognizant agency is unable
to reach agreement with an educational institution with regard to rates
or audit resolution, the appeal system of the cognizant agency shall be
followed for resolution of the disagreement.
12. Standard Format for Submission. For facilities and
administrative (F&A) rate proposals submitted on or after July 1, 2001,
educational institutions shall use the standard format, shown in
Attachment C to this Appendix, to submit their F&A rate proposal to the
cognizant agency. The cognizant agency may, on an institution-by-
institution basis, grant exceptions from all or portions of Part II of
the standard format requirement. This requirement does not apply to
educational institutions that use the simplified method
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for calculating F&A rates, as described in Section H of this Appendix.
H. Simplified Method for Small Institutions
1. General.
a. Where the total direct cost of work covered by Part 220 at an
institution does not exceed $10 million in a fiscal year, the use of the
simplified procedure described in subsections H.2 or 3 of this Appendix,
may be used in determining allowable F&A costs. Under this simplified
procedure, the institution's most recent annual financial report and
immediately available supporting information shall be utilized as basis
for determining the F&A cost rate applicable to all sponsored
agreements. The institution may use either the salaries and wages (see
subsection H.2 of this Appendix) or modified total direct costs (see
subsection H.3 of this Appendix) as distribution basis.
b. The simplified procedure should not be used where it produces
results that appear inequitable to the Federal Government or the
institution. In any such case, F&A costs should be determined through
use of the regular procedure.
2. Simplified procedure--Salaries and wages base.
a. Establish the total amount of salaries and wages paid to all
employees of the institution.
b. Establish an F&A cost pool consisting of the expenditures
(exclusive of capital items and other costs specifically identified as
unallowable) that customarily are classified under the following titles
or their equivalents:
(1) General administration and general expenses (exclusive of costs
of student administration and services, student activities, student aid,
and scholarships). In those cases where expenditures have previously
been allocated to other institutional activities, they may be included
in the F&A cost pool. The total amount of salaries and wages included in
the F&A cost pool must be separately identified.
(2) Operation and maintenance of physical plant; and depreciation
and use allowances; after appropriate adjustment for costs applicable to
other institutional activities.
(3) Library.
(4) Department administration expenses, which will be computed as 20
percent of the salaries and expenses of deans and heads of departments.
c. Establish a salary and wage distribution base, determined by
deducting from the total of salaries and wages as established in
subsection a the amount of salaries and wages included under subsection
H.2.b of this Appendix.
d. Establish the F&A cost rate, determined by dividing the amount in
the F&A cost pool, subsection H.2.b of this Appendix, by the amount of
the distribution base, subsection H.2.c of this Appendix.
e. Apply the F&A cost rate to direct salaries and wages for
individual agreements to determine the amount of F&A costs allocable to
such agreements.
3. Simplified procedure--Modified total direct cost base.
a. Establish the total costs incurred by the institution for the
base period.
b. Establish a F&A cost pool consisting of the expenditures
(exclusive of capital items and other costs specifically identified as
unallowable) that customarily are classified under the following titles
or their equivalents:
(1) General administration and general expenses (exclusive of costs
of student administration and services, student activities, student aid,
and scholarships). In those cases where expenditures have previously
been allocated to other institutional activities, they may be included
in the F&A cost pool. The modified total direct costs amount included in
the F&A cost pool must be separately identified.
(2) Operation and maintenance of physical plant; and depreciation
and use allowances; after appropriate adjustment for costs applicable to
other institutional activities.
(3) Library.
(4) Department administration expenses, which will be computed as 20
percent of the salaries and expenses of deans and heads of departments.
c. Establish a modified total direct cost distribution base, as
defined in Section G.2 of this Appendix, that consists of all
institution's direct functions.
d. Establish the F&A cost rate, determined by dividing the amount in
the F&A cost pool, subsection b, by the amount of the distribution base,
subsection c.
e. Apply the F&A cost rate to the modified total direct costs for
individual agreements to determine the amount of F&A costs allocable to
such agreements.
I. Reserved
J. General Provisions for Selected Items of Cost
Sections J.1 through 54 of this Appendix provide principles to be
applied in establishing the allowability of certain items involved in
determining cost. These principles should apply irrespective of whether
a particular item of cost is properly treated as direct cost or F&A
cost. Failure to mention a particular item of cost is not intended to
imply that it is either allowable or unallowable; rather, determination
as to allowability in each case should be based on the treatment
provided for similar or related items of cost. In case of a discrepancy
between the provisions of a specific sponsored
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agreement and the provisions below, the agreement should govern.
1. Advertising and public relations costs.
a. The term advertising costs means the costs of advertising media
and corollary administrative costs. Advertising media include magazines,
newspapers, radio and television, direct mail, exhibits, electronic or
computer transmittals, and the like.
b. The term public relations includes community relations and means
those activities dedicated to maintaining the image of the institution
or maintaining or promoting understanding and favorable relations with
the community or public at large or any segment of the public.
c. The only allowable advertising costs are those that are solely
for:
(1) The recruitment of personnel required for the performance by the
institution of obligations arising under a sponsored agreement (See also
section J.42.b of this Appendix, Recruiting);
(2) The procurement of goods and services for the performance of a
sponsored agreement;
(3) The disposal of scrap or surplus materials acquired in the
performance of a sponsored agreement except when non-Federal entities
are reimbursed for disposal costs at a predetermined amount; or
(4) Other specific purposes necessary to meet the requirements of
the sponsored agreement.
d. The only allowable public relations costs are:
(1) Costs specifically required by the sponsored agreement;
(2) Costs of communicating with the public and press pertaining to
specific activities or accomplishments which result from performance of
sponsored agreements (these costs are considered necessary as part of
the outreach effort for the sponsored agreement); or
(3) Costs of conducting general liaison with news media and
government public relations officers, to the extent that such activities
are limited to communication and liaison necessary keep the public
informed on matters of public concern, such as notices of Federal
contract/grant awards, financial matters, etc.
e. Costs identified in subsections c and d if incurred for more than
one sponsored agreement or for both sponsored work and other work of the
institution, are allowable to the extent that the principles in sections
D. (``Direct Costs'') and E. (``F & A Costs'') of this Appendix are
observed.
f. Unallowable advertising and public relations costs include the
following:
(1) All advertising and public relations costs other than as
specified in subsections J.1.c, 1.d and 1.e of this Appendix.
(2) Costs of meetings, conventions, convocations, or other events
related to other activities of the institution, including:
(a) Costs of displays, demonstrations, and exhibits;
(b) Costs of meeting rooms, hospitality suites, and other special
facilities used in conjunction with shows and other special events; and
(c) Salaries and wages of employees engaged in setting up and
displaying exhibits, making demonstrations, and providing briefings;
(3) Costs of promotional items and memorabilia, including models,
gifts, and souvenirs;
(4) Costs of advertising and public relations designed solely to
promote the institution.
2. Advisory councils.
Costs incurred by advisory councils or committees are allowable as a
direct cost where authorized by the Federal awarding agency or as an
indirect cost where allocable to sponsored agreements.
3. Alcoholic beverages.
Costs of alcoholic beverages are unallowable.
4. Alumni/ae activities.
Costs incurred for, or in support of, alumni/ae activities and
similar services are unallowable.
5. Audit costs and related services.
a. The costs of audits required by, and performed in accordance
with, the Single Audit Act, as implemented by Circular A-133, ``Audits
of States, Local Governments, and Non-Profit Organizations'' are
allowable. Also see 31 U.S.C. 7505(b) and section ----.230 (``Audit
Costs'') of Circular A-133.
b. Other audit costs are allowable if included in an indirect cost
rate proposal, or if specifically approved by the awarding agency as a
direct cost to an award.
c. The cost of agreed-upon procedures engagements to monitor
subrecipients who are exempted from A-133 under section ----.200(d) are
allowable, subject to the conditions listed in A-133, section ----.230
(b)(2).
6. Bad Debt.
Bad debts, including losses (whether actual or estimated) arising
from uncollectable accounts and other claims, related collection costs,
and related legal costs, are unallowable.
7. Bonding costs.
a. Bonding costs arise when the Federal Government requires
assurance against financial loss to itself or others by reason of the
act or default of the institution. They arise also in instances where
the institution requires similar assurance. Included are such bonds as
bid, performance, payment, advance payment, infringement, and fidelity
bonds.
b. Costs of bonding required pursuant to the terms of the award are
allowable.
c. Costs of bonding required by the institution in the general
conduct of its operations are allowable to the extent that such bonding
is in accordance with sound business
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practice and the rates and premiums are reasonable under the
circumstances.
8. Commencement and convocation costs.
Costs incurred for commencements and convocations are unallowable,
except as provided for in Section F.9 of this Appendix.
9. Communication costs.
Costs incurred for telephone services, local and long distance
telephone calls, telegrams, postage, messenger, electronic or computer
transmittal services and the like are allowable.
10. Compensation for personal services.
a. General. Compensation for personal services covers all amounts
paid currently or accrued by the institution for services of employees
rendered during the period of performance under sponsored agreements.
Such amounts include salaries, wages, and fringe benefits (see
subsection J.10.f of this Appendix). These costs are allowable to the
extent that the total compensation to individual employees conforms to
the established policies of the institution, consistently applied, and
provided that the charges for work performed directly on sponsored
agreements and for other work allocable as F&A costs are determined and
supported as provided below. Charges to sponsored agreements may include
reasonable amounts for activities contributing and intimately related to
work under the agreements, such as delivering special lectures about
specific aspects of the ongoing activity, writing reports and articles,
participating in appropriate seminars, consulting with colleagues and
graduate students, and attending meetings and conferences. Incidental
work (that in excess of normal for the individual), for which
supplemental compensation is paid by an institution under institutional
policy, need not be included in the payroll distribution systems
described below, provided such work and compensation are separately
identified and documented in the financial management system of the
institution.
b. Payroll distribution.
(1) General Principles.
(a) The distribution of salaries and wages, whether treated as
direct or F&A costs, will be based on payrolls documented in accordance
with the generally accepted practices of colleges and universities.
Institutions may include in a residual category all activities that are
not directly charged to sponsored agreements, and that need not be
distributed to more than one activity for purposes of identifying F&A
costs and the functions to which they are allocable. The components of
the residual category are not required to be separately documented.
(b) The apportionment of employees' salaries and wages which are
chargeable to more than one sponsored agreement or other cost objective
will be accomplished by methods which will--
(1) Be in accordance with Sections A.2 and C of this Appendix;
(2) Produce an equitable distribution of charges for employee's
activities; and
(3) Distinguish the employees' direct activities from their F&A
activities.
(c) In the use of any methods for apportioning salaries, it is
recognized that, in an academic setting, teaching, research, service,
and administration are often inextricably intermingled. A precise
assessment of factors that contribute to costs is not always feasible,
nor is it expected. Reliance, therefore, is placed on estimates in which
a degree of tolerance is appropriate.
(d) There is no single best method for documenting the distribution
of charges for personal services. Methods for apportioning salaries and
wages, however, must meet the criteria specified in subsection
J.10.b.(2) of this Appendix. Examples of acceptable methods are
contained in subsection c. Other methods that meet the criteria
specified in subsection J.10.b.(2) of this Appendix also shall be deemed
acceptable, if a mutually satisfactory alternative agreement is reached.
(2) Criteria for Acceptable Methods.
(a) The payroll distribution system will be incorporated into the
official records of the institution; reasonably reflect the activity for
which the employee is compensated by the institution; and encompass both
sponsored and all other activities on an integrated basis, but may
include the use of subsidiary records. (Compensation for incidental work
described in subsection a need not be included.)
(b) The method must recognize the principle of after-the-fact
confirmation or determination so that costs distributed represent actual
costs, unless a mutually satisfactory alternative agreement is reached.
Direct cost activities and F&A cost activities may be confirmed by
responsible persons with suitable means of verification that the work
was performed. Confirmation by the employee is not a requirement for
either direct or F&A cost activities if other responsible persons make
appropriate confirmations.
(c) The payroll distribution system will allow confirmation of
activity allocable to each sponsored agreement and each of the
categories of activity needed to identify F&A costs and the functions to
which they are allocable. The activities chargeable to F&A cost
categories or the major functions of the institution for employees whose
salaries must be apportioned (see subsection J.10.b.(1)(b) of this
Appendix), if not initially identified as separate categories, may be
subsequently distributed by any reasonable method mutually agreed to,
including, but not limited to, suitably conducted surveys, statistical
sampling procedures, or the application of negotiated fixed rates.
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(d) Practices vary among institutions and within institutions as to
the activity constituting a full workload. Therefore, the payroll
distribution system may reflect categories of activities expressed as a
percentage distribution of total activities.
(e) Direct and F&A charges may be made initially to sponsored
agreements on the basis of estimates made before services are performed.
When such estimates are used, significant changes in the corresponding
work activity must be identified and entered into the payroll
distribution system. Short-term (such as one or two months) fluctuation
between workload categories need not be considered as long as the
distribution of salaries and wages is reasonable over the longer term,
such as an academic period.
(f) The system will provide for independent internal evaluations to
ensure the system's effectiveness and compliance with the above
standards.
(g) For systems which meet these standards, the institution will not
be required to provide additional support or documentation for the
effort actually performed.
c. Examples of Acceptable Methods for Payroll Distribution:
(1) Plan-Confirmation: Under this method, the distribution of
salaries and wages of professorial and professional staff applicable to
sponsored agreements is based on budgeted, planned, or assigned work
activity, updated to reflect any significant changes in work
distribution. A plan-confirmation system used for salaries and wages
charged directly or indirectly to sponsored agreements will meet the
following standards:
(a) A system of budgeted, planned, or assigned work activity will be
incorporated into the official records of the institution and encompass
both sponsored and all other activities on an integrated basis. The
system may include the use of subsidiary records.
(b) The system will reasonably reflect only the activity for which
the employee is compensated by the institution (compensation for
incidental work described in subsection a need not be included).
Practices vary among institutions and within institutions as to the
activity constituting a full workload. Hence, the system will reflect
categories of activities expressed as a percentage distribution of total
activities. (See Section H of this Appendix for treatment of F&A costs
under the simplified method for small institutions.)
(c) The system will reflect activity applicable to each sponsored
agreement and to each category needed to identify F&A costs and the
functions to which they are allocable. The system may treat F&A cost
activities initially within a residual category and subsequently
determine them by alternate methods as discussed in subsection
J.10.c.(2)(c) of this Appendix.
(d) The system will provide for modification of an individual's
salary or salary distribution commensurate with a significant change in
the employee's work activity. Short-term (such as one or two months)
fluctuation between workload categories need not be considered as long
as the distribution of salaries and wages is reasonable over the longer
term, such as an academic period. Whenever it is apparent that a
significant change in work activity that is directly or indirectly
charged to sponsored agreements will occur or has occurred, the change
will be documented over the signature of a responsible official and
entered into the system.
(e) At least annually a statement will be signed by the employee,
principal investigator, or responsible official(s) using suitable means
of verification that the work was performed, stating that salaries and
wages charged to sponsored agreements as direct charges, and to
residual, F&A cost or other categories are reasonable in relation to
work performed.
(f) The system will provide for independent internal evaluation to
ensure the system's integrity and compliance with the above standards.
(g) In the use of this method, an institution shall not be required
to provide additional support or documentation for the effort actually
performed.
(2) After-the-fact Activity Records: Under this system the
distribution of salaries and wages by the institution will be supported
by activity reports as prescribed below.
(a) Activity reports will reflect the distribution of activity
expended by employees covered by the system (compensation for incidental
work as described in subsection a need not be included).
(b) These reports will reflect an after-the-fact reporting of the
percentage distribution of activity of employees. Charges may be made
initially on the basis of estimates made before the services are
performed, provided that such charges are promptly adjusted if
significant differences are indicated by activity records.
(c) Reports will reasonably reflect the activities for which
employees are compensated by the institution. To confirm that the
distribution of activity represents a reasonable estimate of the work
performed by the employee during the period, the reports will be signed
by the employee, principal investigator, or responsible official(s)
using suitable means of verification that the work was performed.
(d) The system will reflect activity applicable to each sponsored
agreement and to each category needed to identify F&A costs and the
functions to which they are allocable. The system may treat F&A cost
activities initially within a residual category and subsequently
determine them by alternate methods as discussed in subsection
J.10.b.(2)(c) of this Appendix.
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(e) For professorial and professional staff, the reports will be
prepared each academic term, but no less frequently than every six
months. For other employees, unless alternate arrangements are agreed
to, the reports will be prepared no less frequently than monthly and
will coincide with one or more pay periods.
(f) Where the institution uses time cards or other forms of after-
the-fact payroll documents as original documentation for payroll and
payroll charges, such documents shall qualify as records for this
purpose, provided that they meet the requirements in subsections
J.10.c.(2)(a) through (e) of this Appendix.
(3) Multiple Confirmation Records: Under this system, the
distribution of salaries and wages of professorial and professional
staff will be supported by records which certify separately for direct
and F&A cost activities as prescribed below.
(a) For employees covered by the system, there will be direct cost
records to reflect the distribution of that activity expended which is
to be allocable as direct cost to each sponsored agreement. There will
also be F&A cost records to reflect the distribution of that activity to
F&A costs. These records may be kept jointly or separately (but are to
be certified separately, see below).
(b) Salary and wage charges may be made initially on the basis of
estimates made before the services are performed, provided that such
charges are promptly adjusted if significant differences occur.
(c) Institutional records will reasonably reflect only the activity
for which employees are compensated by the institution (compensation for
incidental work as described in subsection a need not be included).
(d) The system will reflect activity applicable to each sponsored
agreement and to each category needed to identify F&A costs and the
functions to which they are allocable.
(e) To confirm that distribution of activity represents a reasonable
estimate of the work performed by the employee during the period, the
record for each employee will include:
(1) The signature of the employee or of a person having direct
knowledge of the work, confirming that the record of activities
allocable as direct costs of each sponsored agreement is appropriate;
and,
(2) The record of F&A costs will include the signature of
responsible person(s) who use suitable means of verification that the
work was performed and is consistent with the overall distribution of
the employee's compensated activities. These signatures may all be on
the same document.
(f) The reports will be prepared each academic term, but no less
frequently than every six months.
(g) Where the institution uses time cards or other forms of after-
the-fact payroll documents as original documentation for payroll and
payroll charges, such documents shall qualify as records for this
purpose, provided they meet the requirements in subsections
J.10.c.(3)(a) through (f) of this Appendix.
d. Salary rates for faculty members.
(1) Salary rates for academic year. Charges for work performed on
sponsored agreements by faculty members during the academic year will be
based on the individual faculty member's regular compensation for the
continuous period which, under the policy of the institution concerned,
constitutes the basis of his salary. Charges for work performed on
sponsored agreements during all or any portion of such period are
allowable at the base salary rate. In no event will charges to sponsored
agreements, irrespective of the basis of computation, exceed the
proportionate share of the base salary for that period. This principle
applies to all members of the faculty at an institution. Since intra-
university consulting is assumed to be undertaken as a university
obligation requiring no compensation in addition to full-time base
salary, the principle also applies to faculty members who function as
consultants or otherwise contribute to a sponsored agreement conducted
by another faculty member of the same institution. However, in unusual
cases where consultation is across departmental lines or involves a
separate or remote operation, and the work performed by the consultant
is in addition to his regular departmental load, any charges for such
work representing extra compensation above the base salary are allowable
provided that such consulting arrangements are specifically provided for
in the agreement or approved in writing by the sponsoring agency.
(2) Periods outside the academic year.
(a) Except as otherwise specified for teaching activity in
subsection J.10.d.(2)(b) of this Appendix, charges for work performed by
faculty members on sponsored agreements during the summer months or
other period not included in the base salary period will be determined
for each faculty member at a rate not in excess of the base salary
divided by the period to which the base salary relates, and will be
limited to charges made in accordance with other parts of this section.
The base salary period used in computing charges for work performed
during the summer months will be the number of months covered by the
faculty member's official academic year appointment.
(b) Charges for teaching activities performed by faculty members on
sponsored agreements during the summer months or other periods not
included in the base salary period will be based on the normal policy of
the institution governing compensation to faculty members for teaching
assignments during such periods.
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(3) Part-time faculty. Charges for work performed on sponsored
agreements by faculty members having only part-time appointments will be
determined at a rate not in excess of that regularly paid for the part-
time assignments. For example, an institution pays $5000 to a faculty
member for half-time teaching during the academic year. He devoted one-
half of his remaining time to a sponsored agreement. Thus, his
additional compensation, chargeable by the institution to the agreement,
would be one-half of $5000, or $2500.
e. Noninstitutional professional activities. Unless an arrangement
is specifically authorized by a Federal sponsoring agency, an
institution must follow its institution-wide policies and practices
concerning the permissible extent of professional services that can be
provided outside the institution for noninstitutional compensation.
Where such institution-wide policies do not exist or do not adequately
define the permissible extent of consulting or other noninstitutional
activities undertaken for extra outside pay, the Federal Government may
require that the effort of professional staff working on sponsored
agreements be allocated between institutional activities, and
noninstitutional professional activities. If the sponsoring agency
considers the extent of noninstitutional professional effort excessive,
appropriate arrangements governing compensation will be negotiated on a
case-by-case basis.
f. Fringe benefits.
(1) Fringe benefits in the form of regular compensation paid to
employees during periods of authorized absences from the job, such as
for annual leave, sick leave, military leave, and the like, are
allowable, provided such costs are distributed to all institutional
activities in proportion to the relative amount of time or effort
actually devoted by the employees. See subsection J.11.f.(4) of this
Appendix for treatment of sabbatical leave.
(2) Fringe benefits in the form of employer contributions or
expenses for social security, employee insurance, workmen's compensation
insurance, tuition or remission of tuition for individual employees are
allowable, provided such benefits are granted in accordance with
established educational institutional policies, and are distributed to
all institutional activities on an equitable basis. Tuition benefits for
family members other than the employee are unallowable for fiscal years
beginning after September 30, 1998. See Section J.45.b, Scholarships and
student aid costs, of this Appendix for treatment of tuition remission
provided to students.
(3) Rules for pension plan costs are as follows:
(a) Costs of the institution's pension plan which are incurred in
accordance with the established policies of the institution are
allowable, provided such policies meet the test of reasonableness, the
methods of cost allocation are equitable for all activities, the amount
of pension cost assigned to each fiscal year is determined in accordance
with subsection (b), and the cost assigned to a given fiscal year is
paid or funded for all plan participants within six months after the end
of that year. However, increases to normal and past service pension
costs caused by a delay in funding the actuarial liability beyond 30
days after each quarter of the year to which such costs are assignable
are unallowable.
(b) The amount of pension cost assigned to each fiscal year shall be
determined in accordance with generally accepted accounting principles.
Institutions may elect to follow the ``Cost Accounting Standard for
Composition and Measurement of Pension Cost'' (48 Part 9904-412).
(c) Premiums paid for pension plan termination insurance pursuant to
the Employee Retirement Income Security Act (ERISA) of 1974 (Pub. L. 93-
406) are allowable. Late payment charges on such premiums are
unallowable. Excise taxes on accumulated funding deficiencies and
prohibited transactions of pension plan fiduciaries imposed under ERISA
are also unallowable.
(4) Rules for sabbatical leave are as follows:
(a) Costs of leave of absence by employees for performance of
graduate work or sabbatical study, travel, or research are allowable
provided the institution has a uniform policy on sabbatical leave for
persons engaged in instruction and persons engaged in research. Such
costs will be allocated on an equitable basis among all related
activities of the institution.
(b) Where sabbatical leave is included in fringe benefits for which
a cost is determined for assessment as a direct charge, the aggregate
amount of such assessments applicable to all work of the institution
during the base period must be reasonable in relation to the
institution's actual experience under its sabbatical leave policy.
(5) Fringe benefits may be assigned to cost objectives by
identifying specific benefits to specific individual employees or by
allocating on the basis of institution-wide salaries and wages of the
employees receiving the benefits. When the allocation method is used,
separate allocations must be made to selective groupings of employees,
unless the institution demonstrates that costs in relationship to
salaries and wages do not differ significantly for different groups of
employees. Fringe benefits shall be treated in the same manner as the
salaries and wages of the employees receiving the benefits. The benefits
related to salaries and wages treated as direct costs shall also be
treated as direct costs; the benefits related to salaries and wages
treated as F&A costs shall be treated as F&A costs.
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g. Institution-furnished automobiles.
That portion of the cost of institution-furnished automobiles that
relates to personal use by employees (including transportation to and
from work) is unallowable regardless of whether the cost is reported as
taxable income to the employees.
h. Severance pay.
(1) Severance pay is compensation in addition to regular salary and
wages which is paid by an institution to employees whose services are
being terminated. Costs of severance pay are allowable only to the
extent that such payments are required by law, by employer-employee
agreement, by established policy that constitutes in effect an implied
agreement on the institution's part, or by circumstances of the
particular employment.
(2) Severance payments that are due to normal recurring turnover and
which otherwise meet the conditions of subsection J.10.h.(1) of this
Appendix may be allowed provided the actual costs of such severance
payments are regarded as expenses applicable to the current fiscal year
and are equitably distributed among the institution's activities during
that period.
(3) Severance payments that are due to abnormal or mass terminations
are of such conjectural nature that allowability must be determined on a
case-by-case basis. However, the Federal Government recognizes its
obligation to participate, to the extent of its fair share, in any
specific payment.
(4) Costs incurred in excess of the institution's normal severance
pay policy applicable to all persons employed by the institution upon
termination of employment are unallowable.
11. Contingency provisions.
Contributions to a contingency reserve or any similar provision made
for events the occurrence of which cannot be foretold with certainty as
to time, intensity, or with an assurance of their happening, are
unallowable, except as noted in the cost principles in this Appendix
regarding self-insurance, pensions, severance and post-retirement health
costs.
12. Deans of faculty and graduate schools.
The salaries and expenses of deans of faculty and graduate schools,
or their equivalents, and their staffs, are allowable.
13. Defense and prosecution of criminal and civil proceedings,
claims, appeals and patent infringement.
a. Definitions.
``Conviction,'' as used herein, means a judgment or conviction of a
criminal offense by any court of competent jurisdiction, whether entered
upon verdict or a plea, including a conviction due to a plea of nolo
contendere.
``Costs,'' include, but are not limited to, administrative and
clerical expenses; the cost of legal services, whether performed by in-
house or private counsel; the costs of the services of accountants,
consultants, or others retained by the institution to assist it; costs
of employees, officers and trustees, and any similar costs incurred
before, during, and after commencement of a judicial or administrative
proceeding that bears a direct relationship to the proceedings.
``Fraud,'' as used herein, means--
(1) Acts of fraud or corruption or attempts to defraud the Federal
Government or to corrupt its agents;
(2) Acts that constitute a cause for debarment or suspension (as
specified in agency regulations), and
(3) Acts which violate the False Claims Act, 31 U.S.C., sections
3729-3731, or the Anti-kickback Act, 41 U.S.C., sections 51 and 54.
``Penalty,'' does not include restitution, reimbursement, or
compensatory damages.
``Proceeding,'' includes an investigation.
b. (1) Except as otherwise described herein, costs incurred in
connection with any criminal, civil or administrative proceeding
(including filing of a false certification) commenced by the Federal
Government, or a State, local or foreign government, are not allowable
if the proceeding
(a) Relates to a violation of, or failure to comply with, a Federal,
State, local or foreign statute or regulation, by the institution
(including its agents and employees); and
(b) Results in any of the following dispositions:
(i) In a criminal proceeding, a conviction.
(ii) In a civil or administrative proceeding involving an allegation
of fraud or similar misconduct, a determination of institutional
liability.
(iii) In the case of any civil or administrative proceeding, the
imposition of a monetary penalty.
(iv) A final decision by an appropriate Federal official to debar or
suspend the institution, to rescind or void an award, or to terminate an
award for default by reason of a violation or failure to comply with a
law or regulation.
(v) A disposition by consent or compromise, if the action could have
resulted in any of the dispositions described in subsections
J.13.b.(1)(b)(i) through (iv) of this Appendix.
(2) If more than one proceeding involves the same alleged
misconduct, the costs of all such proceedings shall be unallowable if
any one of them results in one of the dispositions shown in subsection
b.
c. If a proceeding referred to in subsection J.13.b. of this
Appendix is commenced by the Federal Government and is resolved by
consent or compromise pursuant to an agreement entered into by the
institution and the Federal Government, then the costs incurred by the
institution in connection with such proceedings that are otherwise not
allowable under subsection b. may be allowed to the
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extent specifically provided in such agreement.
d. If a proceeding referred to in subsection J.13.b. of this
Appendix is commenced by a State, local or foreign government, the
authorized Federal official may allow the costs incurred by the
institution for such proceedings, if such authorized official determines
that the costs were incurred as a result of--
(1) A specific term or condition of a federally-sponsored agreement;
or
(2) Specific written direction of an authorized official of the
sponsoring agency.
e. Costs incurred in connection with proceedings described in
subsection J.13.b of this Appendix, but which are not made unallowable
by that subsection, may be allowed by the Federal Government, but only
to the extent that:
(1) The costs are reasonable in relation to the activities required
to deal with the proceeding and the underlying cause of action;
(2) Payment of the costs incurred, as allowable and allocable costs,
is not prohibited by any other provision(s) of the sponsored agreement;
(3) The costs are not otherwise recovered from the Federal
Government or a third party, either directly as a result of the
proceeding or otherwise; and,
(4) The percentage of costs allowed does not exceed the percentage
determined by an authorized Federal official to be appropriate
considering the complexity of procurement litigation, generally accepted
principles governing the award of legal fees in civil actions involving
the United States as a party, and such other factors as may be
appropriate. Such percentage shall not exceed 80 percent. However, if an
agreement reached under subsection c has explicitly considered this 80
percent limitation and permitted a higher percentage, then the full
amount of costs resulting from that agreement shall be allowable.
f. Costs incurred by the institution in connection with the defense
of suits brought by its employees or ex-employees under section 2 of the
Major Fraud Act of 1988 (Pub. L. 100-700), including the cost of all
relief necessary to make such employee whole, where the institution was
found liable or settled, are unallowable.
g. Costs of legal, accounting, and consultant services, and related
costs, incurred in connection with defense against Federal Government
claims or appeals, or the prosecution of claims or appeals against the
Federal Government, are unallowable.
h. Costs of legal, accounting, and consultant services, and related
costs, incurred in connection with patent infringement litigation, are
unallowable unless otherwise provided for in the sponsored agreements.
i. Costs, which may be unallowable under this section, including
directly associated costs, shall be segregated and accounted for by the
institution separately. During the pendency of any proceeding covered by
subsections J.13.b and f of this Appendix, the Federal Government shall
generally withhold payment of such costs. However, if in the best
interests of the Federal Government, the Federal Government may provide
for conditional payment upon provision of adequate security, or other
adequate assurance, and agreement by the institution to repay all
unallowable costs, plus interest, if the costs are subsequently
determined to be unallowable.
14. Depreciation and use allowances.
a. Institutions may be compensated for the use of their buildings,
capital improvements, and equipment, provided that they are used, needed
in the institutions' activities, and properly allocable to sponsored
agreements. Such compensation shall be made by computing either
depreciation or use allowance. Use allowances are the means of providing
such compensation when depreciation or other equivalent costs are not
computed. The allocation for depreciation or use allowance shall be made
in accordance with Section F.2 of this Appendix. Depreciation and use
allowances are computed applying the following rules:
b. The computation of depreciation or use allowances shall be based
on the acquisition cost of the assets involved. The acquisition cost of
an asset donated to the institution by a third party shall be its fair
market value at the time of the donation.
c. For this purpose, the acquisition cost will exclude:
(1) The cost of land;
(2) Any portion of the cost of buildings and equipment borne by or
donated by the Federal Government, irrespective of where title was
originally vested or where it is presently located; and
(3) Any portion of the cost of buildings and equipment contributed
by or for the institution where law or agreement prohibits recovery.
d. In the use of the depreciation method, the following shall be
observed:
(1) The period of useful service (useful life) established in each
case for usable capital assets must take into consideration such factors
as type of construction, nature of the equipment, technological
developments in the particular area, and the renewal and replacement
policies followed for the individual items or classes of assets
involved.
(2) The depreciation method used to charge the cost of an asset (or
group of assets) to accounting periods shall reflect the pattern of
consumption of the asset during its useful life. In the absence of clear
evidence indicating that the expected consumption of the asset will be
significantly greater in the early portions than in the later portions
of its useful life, the straight-line method shall
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be presumed to be the appropriate method. Depreciation methods once used
shall not be changed unless approved in advance by the cognizant Federal
agency. The depreciation methods used to calculate the depreciation
amounts for F&A rate purposes shall be the same methods used by the
institution for its financial statements. This requirement does not
apply to those institutions (e.g., public institutions of higher
education) which are not required to record depreciation by applicable
generally accepted accounting principles (GAAP).
(3) Where the depreciation method is introduced to replace the use
allowance method, depreciation shall be computed as if the asset had
been depreciated over its entire life (i.e., from the date the asset was
acquired and ready for use to the date of disposal or withdrawal from
service). The aggregate amount of use allowances and depreciation
attributable to an asset (including imputed depreciation applicable to
periods prior to the conversion to the use allowance method as well as
depreciation after the conversion) may be less than, and in no case,
greater than the total acquisition cost of the asset.
(4) The entire building, including the shell and all components, may
be treated as a single asset and depreciated over a single useful life.
A building may also be divided into multiple components. Each component
item may then be depreciated over its estimated useful life. The
building components shall be grouped into three general components of a
building: building shell (including construction and design costs),
building services systems (e.g., elevators, HVAC, plumbing system and
heating and air-conditioning system) and fixed equipment (e.g.,
sterilizers, casework, fume hoods, cold rooms and glassware/washers). In
exceptional cases, a Federal cognizant agency may authorize an
institution to use more than these three groupings. When an institution
elects to depreciate its buildings by its components, the same
depreciation methods must be used for F&A purposes and financial
statement purposes, as described in subsection d.2.
(5) Where the depreciation method is used for a particular class of
assets, no depreciation may be allowed on any such assets that have
outlived their depreciable lives. (See also subsection J.14.e.(3) of
this Appendix)
e. Under the use allowance method, the following shall be observed:
(1) The use allowance for buildings and improvements (including
improvements such as paved parking areas, fences, and sidewalks) shall
be computed at an annual rate not exceeding two percent of acquisition
cost. The use allowance for equipment shall be computed at an annual
rate not exceeding six and two-thirds percent of acquisition cost. Use
allowance recovery is limited to the acquisition cost of the assets. For
donated assets, use allowance recovery is limited to the fair market
value of the assets at the time of donation.
(2) In contrast to the depreciation method, the entire building must
be treated as a single asset without separating its ``shell'' from other
building components under the use allowance method. The entire building
must be treated as a single asset, and the two-percent use allowance
limitation must be applied to all parts of the building. The two-percent
limitation, however, need not be applied to equipment or other assets
that are merely attached or fastened to the building but not permanently
fixed and are used as furnishings, decorations or for specialized
purposes (e.g., dentist chairs and dental treatment units, counters,
laboratory benches bolted to the floor, dishwashers, modular furniture,
and carpeting). Such equipment and assets will be considered as not
being permanently fixed to the building if they can be removed without
the need for costly or extensive alterations or repairs to the building
to make the space usable for other purposes. Equipment and assets that
meet these criteria will be subject to the 6\2/3\ percent equipment use
allowance.
(3) A reasonable use allowance may be negotiated for any assets that
are considered to be fully depreciated, after taking into consideration
the amount of depreciation previously charged to the Federal Government,
the estimated useful life remaining at the time of negotiation, the
effect of any increased maintenance charges, decreased efficiency due to
age, and any other factors pertinent to the utilization of the asset for
the purpose contemplated.
(4) Notwithstanding subsection J.14.e.(3) of this Appendix, once an
institution converts from one cost recovery methodology to another,
acquisition costs not recovered may not be used in the calculation of
the use allowance in subsection J.14.e.(3) of this Appendix.
f. Except as otherwise provided in subsections J.14.b. through e. of
this Appendix, a combination of the depreciation and use allowance
methods may not be used, in like circumstances, for a single class of
assets (e.g., buildings, office equipment, and computer equipment).
g. Charges for use allowances or depreciation must be supported by
adequate property records, and physical inventories must be taken at
least once every two years to ensure that the assets exist and are
usable, used, and needed. Statistical sampling techniques may be used in
taking these inventories. In addition, when the depreciation method is
used, adequate depreciation records showing the amount of depreciation
taken each period must also be maintained.
h. This section applies to the largest college and university
recipients of Federal research and development funds as displayed in
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Exhibit A, List of Colleges and Universities Subject to Section J.14.h
of this Appendix.
(1) Institutions shall expend currently, or reserve for expenditure
within the next five years, the portion of F&A cost payments made for
depreciation or use allowances under sponsored research agreements,
consistent with Section F.2 of this Appendix, to acquire or improve
research facilities. This provision applies only to Federal agreements,
which reimburse F&A costs at a full negotiated rate. These funds may
only be used for liquidation of the principal of debts incurred to
acquire assets that are used directly for organized research activities,
or payments to acquire, repair, renovate, or improve buildings or
equipment directly used for organized research. For buildings or
equipment not exclusively used for organized research activity, only
appropriately proportionate amounts will be considered to have been
expended for research facilities.
(2) An assurance that an amount equal to the Federal reimbursements
has been appropriately expended or reserved to acquire or improve
research facilities shall be submitted as part of each F&A cost proposal
submitted to the cognizant Federal agency which is based on costs
incurred on or after October 1, 1991. This assurance will cover the
cumulative amounts of funds received and expended during the period
beginning after the period covered by the previous assurance and ending
with the fiscal year on which the proposal is based. The assurance shall
also cover any amounts reserved from a prior period in which the funds
received exceeded the amounts expended.
15. Donations and contributions.
a. Contributions or Donations rendered.
Contributions or donations, including cash, property, and services,
made by the institution, regardless of the recipient, are unallowable.
b. Donated services received.
Donated or volunteer services may be furnished to an institution by
professional and technical personnel, consultants, and other skilled and
unskilled labor. The value of these services is not reimbursable either
as a direct or F&A cost. However, the value of donated services may be
used to meet cost sharing or matching requirements in accordance with 2
CFR Part 215.
c. Donated property.
The value of donated property is not reimbursable either as a direct
or F&A cost, except that depreciation or use allowances on donated
assets are permitted in accordance with Section J.14. The value of
donated property may be used to meet cost sharing or matching
requirements, in accordance with 2 CFR Part 215.
16. Employee morale, health, and welfare costs and costs.
a. The costs of employee information publications, health or first-
aid clinics and/or infirmaries, recreational activities, employee
counseling services, and any other expenses incurred in accordance with
the institution's established practice or custom for the improvement of
working conditions, employer-employee relations, employee morale, and
employee performance are allowable.
b. Such costs will be equitably apportioned to all activities of the
institution. Income generated from any of these activities will be
credited to the cost thereof unless such income has been irrevocably set
over to employee welfare organizations.
c. Losses resulting from operating food services are allowable only
if the institution's objective is to operate such services on a break-
even basis. Losses sustained because of operating objectives other than
the above are allowable only where the institution can demonstrate
unusual circumstances, and with the approval of the cognizant Federal
agency.
17. Entertainment costs.
Costs of entertainment, including amusement, diversion, and social
activities and any costs directly associated with such costs (such as
tickets to shows or sports events, meals, lodging, rentals,
transportation, and gratuities) are unallowable.
18. Equipment and other capital expenditures.
a. For purposes of this subsection, the following definitions apply:
(1) ``Capital Expenditures'' means expenditures for the acquisition
cost of capital assets (equipment, buildings, and land), or expenditures
to make improvements to capital assets that materially increase their
value or useful life. Acquisition cost means the cost of the asset
including the cost to put it in place. Acquisition cost for equipment,
for example, means the net invoice price of the equipment, including the
cost of any modifications, attachments, accessories, or auxiliary
apparatus necessary to make it usable for the purpose for which it is
acquired. Ancillary charges, such as taxes, duty, protective in transit
insurance, freight, and installation may be included in, or excluded
from the acquisition cost in accordance with the institution's regular
accounting practices.
(2) ``Equipment'' means an article of nonexpendable, tangible
personal property having a useful life of more than one year and an
acquisition cost which equals or exceeds the lesser of the
capitalization level established by the institution for financial
statement purposes, or $5000.
(3) ``Special purpose equipment'' means equipment which is used only
for research, medical, scientific, or other technical activities.
Examples of special purpose equipment include microscopes, x-ray
machines, surgical instruments, and spectrometers.
(4) ``General purpose equipment'' means equipment, which is not
limited to research,
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medical, scientific or other technical activities. Examples include
office equipment and furnishings, modular offices, telephone networks,
information technology equipment and systems, air conditioning
equipment, reproduction and printing equipment, and motor vehicles.
b. The following rules of allowability shall apply to equipment and
other capital expenditures:
(1) Capital expenditures for general purpose equipment, buildings,
and land are unallowable as direct charges, except where approved in
advance by the awarding agency.
(2) Capital expenditures for special purpose equipment are allowable
as direct costs, provided that items with a unit cost of $5000 or more
have the prior approval of the awarding agency.
(3) Capital expenditures for improvements to land, buildings, or
equipment which materially increase their value or useful life are
unallowable as a direct cost except with the prior approval of the
awarding agency.
(4) When approved as a direct charge pursuant to subsections
J.18.b(1) through (3) of this Appendix, capital expenditures will be
charged in the period in which the expenditure is incurred, or as
otherwise determined appropriate by and negotiated with the awarding
agency.
(5) Equipment and other capital expenditures are unallowable as
indirect costs. However, see section J.14 of this Appendix, Depreciation
and use allowances, for rules on the allowability of use allowances or
depreciation on buildings, capital improvements, and equipment. Also,
see section J.43 of this Appendix, Rental costs of buildings and
equipment, for rules on the allowability of rental costs for land,
buildings, and equipment.
(6) The unamortized portion of any equipment written off as a result
of a change in capitalization levels may be recovered by continuing to
claim the otherwise allowable use allowances or depreciation on the
equipment, or by amortizing the amount to be written off over a period
of years negotiated with the cognizant agency.
19. Fines and penalties.
Costs resulting from violations of, or failure of the institution to
comply with, Federal, State, and local or foreign laws and regulations
are unallowable, except when incurred as a result of compliance with
specific provisions of the sponsored agreement, or instructions in
writing from the authorized official of the sponsoring agency
authorizing in advance such payments.
20. Fund raising and investment costs.
a. Costs of organized fund raising, including financial campaigns,
endowment drives, solicitation of gifts and bequests, and similar
expenses incurred solely to raise capital or obtain contributions, are
unallowable.
b. Costs of investment counsel and staff and similar expenses
incurred solely to enhance income from investments are unallowable.
c. Costs related to the physical custody and control of monies and
securities are allowable.
21. Gain and losses on depreciable assets.
a. (1) Gains and losses on the sale, retirement, or other
disposition of depreciable property shall be included in the year in
which they occur as credits or charges to the asset cost grouping(s) in
which the property was included. The amount of the gain or loss to be
included as a credit or charge to the appropriate asset cost grouping(s)
shall be the difference between the amount realized on the property and
the undepreciated basis of the property.
(2) Gains and losses on the disposition of depreciable property
shall not be recognized as a separate credit or charge under the
following conditions:
(a) The gain or loss is processed through a depreciation account and
is reflected in the depreciation allowable under Section J.14 of this
Appendix.
(b) The property is given in exchange as part of the purchase price
of a similar item and the gain or loss is taken into account in
determining the depreciation cost basis of the new item.
(c) A loss results from the failure to maintain permissible
insurance, except as otherwise provided in Section J.25 of this
Appendix.
(d) Compensation for the use of the property was provided through
use allowances in lieu of depreciation.
b. Gains or losses of any nature arising from the sale or exchange
of property other than the property covered in subsection a shall be
excluded in computing sponsored agreement costs.
c. When assets acquired with Federal funds, in part or wholly, are
disposed of, the distribution of the proceeds shall be made in
accordance with 2 CFR Part 215, Uniform Administrative Requirements for
Grants and Agreements with Institutions of Higher Education, Hospitals,
and Other Non-Profit Organizations (OMB Circular A-110).
22. Goods or services for personal use.
Costs of goods or services for personal use of the institution's
employees are unallowable regardless of whether the cost is reported as
taxable income to the employees.
23. Housing and personal living expenses.
a. Costs of housing (e.g., depreciation, maintenance, utilities,
furnishings, rent, etc.), housing allowances and personal living
expenses for/of the institution's officers are unallowable regardless of
whether the cost is reported as taxable income to the employees.
b. The term ``officers'' includes current and past officers.
24. Idle facilities and idle capacity.
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a. As used in this section the following terms have the meanings set
forth below:
(1) ``Facilities'' means land and buildings or any portion thereof,
equipment individually or collectively, or any other tangible capital
asset, wherever located, and whether owned or leased by the institution.
(2) ``Idle facilities'' means completely unused facilities that are
excess to the institution's current needs.
(3) ``Idle capacity'' means the unused capacity of partially used
facilities. It is the difference between:
(a) That which a facility could achieve under 100 percent operating
time on a one-shift basis less operating interruptions resulting from
time lost for repairs, setups, unsatisfactory materials, and other
normal delays; and
(b) The extent to which the facility was actually used to meet
demands during the accounting period. A multi-shift basis should be used
if it can be shown that this amount of usage would normally be expected
for the type of facility involved.
(4) ``Cost of idle facilities or idle capacity'' means costs such as
maintenance, repair, housing, rent, and other related costs, e.g.,
insurance, interest, property taxes and depreciation or use allowances.
b. The costs of idle facilities are unallowable except to the extent
that:
(1) They are necessary to meet fluctuations in workload; or
(2) Although not necessary to meet fluctuations in workload, they
were necessary when acquired and are now idle because of changes in
program requirements, efforts to achieve more economical operations,
reorganization, termination, or other causes which could not have been
reasonably foreseen. Under the exception stated in this subsection,
costs of idle facilities are allowable for a reasonable period of time,
ordinarily not to exceed one year, depending on the initiative taken to
use, lease, or dispose of such facilities.
c. The costs of idle capacity are normal costs of doing business and
are a factor in the normal fluctuations of usage or indirect cost rates
from period to period. Such costs are allowable, provided that the
capacity is reasonably anticipated to be necessary or was originally
reasonable and is not subject to reduction or elimination by use on
other sponsored agreements, subletting, renting, or sale, in accordance
with sound business, economic, or security practices. Widespread idle
capacity throughout an entire facility or among a group of assets having
substantially the same function may be considered idle facilities.
25. Insurance and indemnification.
a. Costs of insurance required or approved, and maintained, pursuant
to the sponsored agreement, are allowable.
b. Costs of other insurance maintained by the institution in
connection with the general conduct of its activities, are allowable
subject to the following limitations:
(1) Types and extent and cost of coverage must be in accordance with
sound institutional practice;
(2) Costs of insurance or of any contributions to any reserve
covering the risk of loss of or damage to federally-owned property are
unallowable, except to the extent that the Federal Government has
specifically required or approved such costs; and
(3) Costs of insurance on the lives of officers or trustees are
unallowable except where such insurance is part of an employee plan
which is not unduly restricted.
c. Contributions to a reserve for a self-insurance program are
allowable, to the extent that the types of coverage, extent of coverage,
and the rates and premiums would have been allowed had insurance been
purchased to cover the risks.
d. Actual losses which could have been covered by permissible
insurance (whether through purchased insurance or self-insurance) are
unallowable, unless expressly provided for in the sponsored agreement,
except that costs incurred because of losses not covered under existing
deductible clauses for insurance coverage provided in keeping with sound
management practice as well as minor losses not covered by insurance,
such as spoilage, breakage and disappearance of small hand tools, which
occur in the ordinary course of operations, are allowable.
e. Indemnification includes securing the institution against
liabilities to third persons and other losses not compensated by
insurance or otherwise. The Federal Government is obligated to indemnify
the institution only to the extent expressly provided for in the
sponsored agreement, except as provided in subsection J.25.d of this
Appendix.
f. Insurance against defects. Costs of insurance with respect to any
costs incurred to correct defects in the institution's materials or
workmanship are unallowable.
g. Medical liability (malpractice) insurance is an allowable cost of
research programs only to the extent that the research involves human
subjects. Medical liability insurance costs shall be treated as a direct
cost and shall be assigned to individual projects based on the manner in
which the insurer allocates the risk to the population covered by the
insurance.
26. Interest.
a. Costs incurred for interest on borrowed capital, temporary use of
endowment funds, or the use of the institution's own funds, however
represented, are unallowable. However, interest on debt incurred after
July 1, 1982 to acquire buildings, major reconstruction and remodeling,
or the acquisition or
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fabrication of capital equipment costing $10,000 or more, is allowable.
b. Interest on debt incurred after May 8, 1996 to acquire or replace
capital assets (including construction, renovations, alterations,
equipment, land, and capital assets acquired through capital leases)
acquired after that date and used in support of sponsored agreements is
allowable, subject to the following conditions:
(1) For facilities costing over $500,000, the institution shall
prepare, prior to acquisition or replacement of the facility, a lease-
purchase analysis in accordance with the provisions of Sec. Sec. 215.30
through 215.37 of 2 CFR part 215 (OMB Circular A-110), which shows that
a financed purchase, including a capital lease is less costly to the
institution than other operating lease alternatives, on a net present
value basis. Discount rates used shall be equal to the institution's
anticipated interest rates and shall be no higher than the fair market
rate available to the institution from an unrelated (``arm's length'')
third-party. The lease-purchase analysis shall include a comparison of
the net present value of the projected total cost comparisons of both
alternatives over the period the asset is expected to be used by the
institution. The cost comparisons associated with purchasing the
facility shall include the estimated purchase price, anticipated
operating and maintenance costs (including property taxes, if
applicable) not included in the debt financing, less any estimated asset
salvage value at the end of the defined period. The cost comparison for
a capital lease shall include the estimated total lease payments, any
estimated bargain purchase option, operating and maintenance costs, and
taxes not included in the capital leasing arrangement, less any
estimated credits due under the lease at the end of the defined period.
Projected operating lease costs shall be based on the anticipated cost
of leasing comparable facilities at fair market rates under rental
agreements that would be renewed or reestablished over the period
defined above, and any expected maintenance costs and allowable property
taxes to be borne by the institution directly or as part of the lease
arrangement.
(2) The actual interest cost claimed is predicated upon interest
rates that are no higher than the fair market rate available to the
institution from an unrelated (arm's length) third party.
(3) Investment earnings, including interest income on bond or loan
principal, pending payment of the construction or acquisition costs, are
used to offset allowable interest cost. Arbitrage earnings reportable to
the Internal Revenue Service are not required to be offset against
allowable interest costs.
(4) Reimbursements are limited to the least costly alternative based
on the total cost analysis required under subsection J.26.b.(1) of this
Appendix. For example, if an operating lease is determined to be less
costly than purchasing through debt financing, then reimbursement is
limited to the amount determined if leasing had been used. In all cases
where a lease-purchase analysis is required to be performed, Federal
reimbursement shall be based upon the least expensive alternative.
(5) For debt arrangements over $1 million, unless the institution
makes an initial equity contribution to the asset purchase of 25 percent
or more, the institution shall reduce claims for interest expense by an
amount equal to imputed interest earnings on excess cash flow, which is
to be calculated as follows. Annually, non-Federal entities shall
prepare a cumulative (from the inception of the project) report of
monthly cash flows that includes inflows and outflows, regardless of the
funding source. Inflows consist of depreciation expense, amortization of
capitalized construction interest, and annual interest cost. For cash
flow calculations, the annual inflow figures shall be divided by the
number of months in the year (i.e., usually 12) that the building is in
service for monthly amounts. Outflows consist of initial equity
contributions, debt principal payments (less the pro rata share
attributable to the unallowable costs of land) and interest payments.
Where cumulative inflows exceed cumulative outflows, interest shall be
calculated on the excess inflows for that period and be treated as a
reduction to allowable interest cost. The rate of interest to be used to
compute earnings on excess cash flows shall be the three-month Treasury
bill closing rate as of the last business day of that month.
(6) Substantial relocation of federally-sponsored activities from a
facility financed by indebtedness, the cost of which was funded in whole
or part through Federal reimbursements, to another facility prior to the
expiration of a period of 20 years requires notice to the cognizant
agency. The extent of the relocation, the amount of the Federal
participation in the financing, and the depreciation and interest
charged to date may require negotiation and/or downward adjustments of
replacement space charged to Federal programs in the future.
(7) The allowable costs to acquire facilities and equipment are
limited to a fair market value available to the institution from an
unrelated (arm's length) third party.
c. Institutions are also subject to the following conditions:
(1) Interest on debt incurred to finance or refinance assets re-
acquired after the applicable effective dates stipulated above is
unallowable.
(2) Interest attributable to fully depreciated assets is
unallowable.
d. The following definitions are to be used for purposes of this
section:
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(1) ``Re-acquired'' assets means assets held by the institution
prior to the applicable effective dates stipulated above that have again
come to be held by the institution, whether through repurchase or
refinancing. It does not include assets acquired to replace older
assets.
(2) ``Initial equity contribution'' means the amount or value of
contributions made by non-Federal entities for the acquisition of the
asset prior to occupancy of facilities.
(3) ``Asset costs'' means the capitalizable costs of an asset,
including construction costs, acquisition costs, and other such costs
capitalized in accordance with Generally Accepted Accounting Principles
(GAAP).
27. Labor relations costs.
Costs incurred in maintaining satisfactory relations between the
institution and its employees, including costs of labor management
committees, employees' publications, and other related activities, are
allowable.
28. Lobbying.
Reference is made to the common rule published at 7 CFR part 3018,
10 CFR parts 600 and 601, 12 CFR part 411, 13 CFR part 146, 14 CFR part
1271, 15 CFR part 28, 18 CFR part 1315, 22 CFR parts 138, 227, 311, 519
and 712, 24 CFR part 87, 28 CFR part 69, 29 CFR part 93, 31 CFR part 21,
32 CFR part 282, 34 CFR part 82, 38 CFR part 85, 40 CFR part 34, 41 CFR
part 105-69, 43 CFR part 18, 44 CFR part 18, 45 CFR parts 93, 604, 1158,
1168 and 1230, and 49 CFR part 20, and OMB's governmentwide guidance,
amendments to OMB's governmentwide guidance, and OMB's clarification
notices published at 54 FR 52306 (12/20/89), 61 FR 1412 (1/19/96), 55 FR
24540 (6/15/90) and 57 FR 1772 (1/15/92), respectively. In addition, the
following restrictions shall apply:
a. Notwithstanding other provisions of this Appendix, costs
associated with the following activities are unallowable:
(1) Attempts to influence the outcomes of any Federal, State, or
local election, referendum, initiative, or similar procedure, through in
kind or cash contributions, endorsements, publicity, or similar
activity;
(2) Establishing, administering, contributing to, or paying the
expenses of a political party, campaign, political action committee, or
other organization established for the purpose of influencing the
outcomes of elections;
(3) Any attempt to influence The introduction of Federal or State
legislation; The enactment or modification of any pending Federal or
State legislation through communication with any member or employee of
the Congress or State legislature, including efforts to influence State
or local officials to engage in similar lobbying activity; or any
government official or employee in connection with a decision to sign or
veto enrolled legislation;
(4) Any attempt to influence The introduction of Federal or State
legislation; or The enactment or modification of any pending Federal or
State legislation by preparing, distributing, or using publicity or
propaganda, or by urging members of the general public, or any segment
thereof, to contribute to or participate in any mass demonstration,
march, rally, fund raising drive, lobbying campaign or letter writing or
telephone campaign; or
(5) Legislative liaison activities, including attendance at
legislative sessions or committee hearings, gathering information
regarding legislation, and analyzing the effect of legislation, when
such activities are carried on in support of or in knowing preparation
for an effort to engage in unallowable lobbying.
b. The following activities are excepted from the coverage of
subsection J.28.a of this Appendix:
(1) Technical and factual presentations on topics directly related
to the performance of a grant, contract, or other agreement (through
hearing testimony, statements, or letters to the Congress or a State
legislature, or subdivision, member, or cognizant staff member thereof),
in response to a documented request (including a Congressional Record
notice requesting testimony or statements for the record at a regularly
scheduled hearing) made by the recipient member, legislative body or
subdivision, or a cognizant staff member thereof, provided such
information is readily obtainable and can be readily put in deliverable
form, and further provided that costs under this section for travel,
lodging or meals are unallowable unless incurred to offer testimony at a
regularly scheduled Congressional hearing pursuant to a written request
for such presentation made by the Chairman or Ranking Minority Member of
the Committee or Subcommittee conducting such hearings;
(2) Any lobbying made unallowable by subsection J.28.a.(3) of this
Appendix to influence State legislation in order to directly reduce the
cost, or to avoid material impairment of the institution's authority to
perform the grant, contract, or other agreement; or
(3) Any activity specifically authorized by statute to be undertaken
with funds from the grant, contract, or other agreement.
c. When an institution seeks reimbursement for F&A costs, total
lobbying costs shall be separately identified in the F&A cost rate
proposal, and thereafter treated as other unallowable activity costs in
accordance with the procedures of Section B.1.d of this Appendix.
d. Institutions shall submit as part of their annual F&A cost rate
proposal a certification that the requirements and standards of this
section have been complied with.
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e. Institutions shall maintain adequate records to demonstrate that
the determination of costs as being allowable or unallowable pursuant to
this section complies with the requirements of this Appendix.
f. Time logs, calendars, or similar records shall not be required to
be created for purposes of complying with this section during any
particular calendar month when:
(1) the employee engages in lobbying (as defined in subsections
J.28.a and b of this Appendix) 25 percent or less of the employee's
compensated hours of employment during that calendar month; and
(2) within the preceding five-year period, the institution has not
materially misstated allowable or unallowable costs of any nature,
including legislative lobbying costs. When conditions in subsections
J.28.f.(1) and (2) of this Appendix are met, institutions are not
required to establish records to support the allowability of claimed
costs in addition to records already required or maintained. Also, when
conditions in subsections J.28.f. (1) and (2) of this Appendix are met,
the absence of time logs, calendars, or similar records will not serve
as a basis for disallowing costs by contesting estimates of lobbying
time spent by employees during a calendar month.
g. Agencies shall establish procedures for resolving in advance, in
consultation with OMB, any significant questions or disagreements
concerning the interpretation or application of this section. Any such
advance resolutions shall be binding in any subsequent settlements,
audits, or investigations with respect to that grant or contract for
purposes of interpretation of this Appendix, provided, however, that
this shall not be construed to prevent a contractor or grantee from
contesting the lawfulness of such a determination.
h. Executive lobbying costs.
Costs incurred in attempting to improperly influence either directly
or indirectly, an employee or officer of the Executive Branch of the
Federal Government to give consideration or to act regarding a sponsored
agreement or a regulatory matter are unallowable. Improper influence
means any influence that induces or tends to induce a Federal employee
or officer to give consideration or to act regarding a federally-
sponsored agreement or regulatory matter on any basis other than the
merits of the matter.
29. Losses on other sponsored agreements or contracts.
Any excess of costs over income under any other sponsored agreement
or contract of any nature is unallowable. This includes, but is not
limited to, the institution's contributed portion by reason of cost-
sharing agreements or any under-recoveries through negotiation of flat
amounts for F&A costs.
30. Maintenance and repair costs.
Costs incurred for necessary maintenance, repair, or upkeep of
buildings and equipment (including Federal property unless otherwise
provided for) which neither add to the permanent value of the property
nor appreciably prolong its intended life, but keep it in an efficient
operating condition, are allowable. Costs incurred for improvements
which add to the permanent value of the buildings and equipment or
appreciably prolong their intended life shall be treated as capital
expenditures (see section J.18.a(1) of this Appendix).
31. Material and supplies costs.
a. Costs incurred for materials, supplies, and fabricated parts
necessary to carry out a sponsored agreement are allowable.
b. Purchased materials and supplies shall be charged at their actual
prices, net of applicable credits. Withdrawals from general stores or
stockrooms should be charged at their actual net cost under any
recognized method of pricing inventory withdrawals, consistently
applied. Incoming transportation charges are a proper part of materials
and supplies costs.
c. Only materials and supplies actually used for the performance of
a sponsored agreement may be charged as direct costs.
d. Where federally-donated or furnished materials are used in
performing the sponsored agreement, such materials will be used without
charge.
32. Meetings and Conferences.
Costs of meetings and conferences, the primary purpose of which is
the dissemination of technical information, are allowable. This includes
costs of meals, transportation, rental of facilities, speakers' fees,
and other items incidental to such meetings or conferences. But see
section J.17 of this Appendix, Entertainment costs.
33. Memberships, subscriptions and professional activity costs.
a. Costs of the institution's membership in business, technical, and
professional organizations are allowable.
b. Costs of the institution's subscriptions to business,
professional, and technical periodicals are allowable.
c. Costs of membership in any civic or community organization are
unallowable.
d. Costs of membership in any country club or social or dining club
or organization are unallowable.
34. Patent costs.
a. The following costs relating to patent and copyright matters are
allowable:
(1) Cost of preparing disclosures, reports, and other documents
required by the sponsored agreement and of searching the art to the
extent necessary to make such disclosures;
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(2) Cost of preparing documents and any other patent costs in
connection with the filing and prosecution of a United States patent
application where title or royalty-free license is required by the
Federal Government to be conveyed to the Federal Government; and
(3) General counseling services relating to patent and copyright
matters, such as advice on patent and copyright laws, regulations,
clauses, and employee agreements (but see sections J.37, Professional
service costs, and J.44, Royalties and other costs for use of patents,
of this Appendix).
b. The following costs related to patent and copyright matter are
unallowable:
(1) Cost of preparing disclosures, reports, and other documents and
of searching the art to the extent necessary to make disclosures not
required by the award
(2) Costs in connection with filing and prosecuting any foreign
patent application, or any United States patent application, where the
sponsored agreement award does not require conveying title or a royalty-
free license to the Federal Government, (but see section J.44, Royalties
and other costs for use of patents, of this Appendix).
35. Plant and homeland security costs.
Necessary and reasonable expenses incurred for routine and homeland
security to protect facilities, personnel, and work products are
allowable. Such costs include, but are not limited to, wages and
uniforms of personnel engaged in security activities; equipment;
barriers; contractual security services; consultants; etc. Capital
expenditures for homeland and plant security purposes are subject to
section J.18, Equipment and other capital expenditures, of this
Appendix.
36. Preagreement costs. Costs incurred prior to the effective date
of the sponsored agreement, whether or not they would have been
allowable thereunder if incurred after such date, are unallowable unless
approved by the sponsoring agency.
37. Professional service costs.
a. Costs of professional and consultant services rendered by persons
who are members of a particular profession or possess a special skill,
and who are not officers or employees of the institution, are allowable,
subject to subparagraphs J.37.b and c of this Appendix when reasonable
in relation to the services rendered and when not contingent upon
recovery of the costs from the Federal Government. In addition, legal
and related services are limited under section J.13 of this Appendix.
b. In determining the allowability of costs in a particular case, no
single factor or any special combination of factors is necessarily
determinative. However, the following factors are relevant:
(1) The nature and scope of the service rendered in relation to the
service required.
(2) The necessity of contracting for the service, considering the
institution's capability in the particular area.
(3) The past pattern of such costs, particularly in the years prior
to sponsored agreements.
(4) The impact on the institution's business (i.e., what new
problems have arisen).
(5) Whether the proportion of Federal work to the institution's
total business is such as to influence the institution in favor of
incurring the cost, particularly where the services rendered are not of
a continuing nature and have little relationship to work under Federal
grants and contracts.
(6) Whether the service can be performed more economically by direct
employment rather than contracting.
(7) The qualifications of the individual or concern rendering the
service and the customary fees charged, especially on non-sponsored
agreements.
(8) Adequacy of the contractual agreement for the service (e.g.,
description of the service, estimate of time required, rate of
compensation, and termination provisions).
c. In addition to the factors in subparagraph J.37.b of this
Appendix, retainer fees to be allowable must be supported by evidence of
bona fide services available or rendered.
38. Proposal costs.
Proposal costs are the costs of preparing bids or proposals on
potential federally and non-federally-funded sponsored agreements or
projects, including the development of data necessary to support the
institution's bids or proposals. Proposal costs of the current
accounting period of both successful and unsuccessful bids and proposals
normally should be treated as F&A costs and allocated currently to all
activities of the institution, and no proposal costs of past accounting
periods will be allocable to the current period. However, the
institution's established practices may be to treat proposal costs by
some other recognized method. Regardless of the method used, the results
obtained may be accepted only if found to be reasonable and equitable.
39. Publication and printing costs.
a. Publication costs include the costs of printing (including the
processes of composition, plate-making, press work, binding, and the end
products produced by such processes), distribution, promotion, mailing,
and general handling. Publication costs also include page charges in
professional publications.
b. If these costs are not identifiable with a particular cost
objective, they should be allocated as indirect costs to all benefiting
activities of the institution.
c. Page charges for professional journal publications are allowable
as a necessary part of research costs where:
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(1) The research papers report work supported by the Federal
Government: and
(2) The charges are levied impartially on all research papers
published by the journal, whether or not by federally-sponsored authors.
40. Rearrangement and alteration costs.
Costs incurred for ordinary or normal rearrangement and alteration
of facilities are allowable. Special arrangement and alteration costs
incurred specifically for the project are allowable with the prior
approval of the sponsoring agency.
41. Reconversion costs.
Costs incurred in the restoration or rehabilitation of the
institution's facilities to approximately the same condition existing
immediately prior to commencement of a sponsored agreement, fair wear
and tear excepted, are allowable.
42. Recruiting costs.
a. Subject to subsections J.42.b, c, and d of this Appendix, and
provided that the size of the staff recruited and maintained is in
keeping with workload requirements, costs of ``help wanted''
advertising, operating costs of an employment office necessary to secure
and maintain an adequate staff, costs of operating an aptitude and
educational testing program, travel costs of employees while engaged in
recruiting personnel, travel costs of applicants for interviews for
prospective employment, and relocation costs incurred incident to
recruitment of new employees, are allowable to the extent that such
costs are incurred pursuant to a well-managed recruitment program. Where
the institution uses employment agencies, costs not in excess of
standard commercial rates for such services are allowable.
b. In publications, costs of help wanted advertising that includes
color, includes advertising material for other than recruitment
purposes, or is excessive in size (taking into consideration recruitment
purposes for which intended and normal institutional practices in this
respect), are unallowable.
c. Costs of help wanted advertising, special emoluments, fringe
benefits, and salary allowances incurred to attract professional
personnel from other institutions that do not meet the test of
reasonableness or do not conform with the established practices of the
institution, are unallowable.
d. Where relocation costs incurred incident to recruitment of a new
employee have been allowed either as an allocable direct or F&A cost,
and the newly hired employee resigns for reasons within his control
within 12 months after hire, the institution will be required to refund
or credit such relocation costs to the Federal Government.
43. Rental costs of buildings and equipment.
a. Subject to the limitations described in subsections b. through d.
of this section, rental costs are allowable to the extent that the rates
are reasonable in light of such factors as: rental costs of comparable
property, if any; market conditions in the area; alternatives available;
and, the type, life expectancy, condition, and value of the property
leased. Rental arrangements should be reviewed periodically to determine
if circumstances have changed and other options are available.
b. Rental costs under ``sale and lease back'' arrangements are
allowable only up to the amount that would be allowed had the
institution continued to own the property. This amount would include
expenses such as depreciation or use allowance, maintenance, taxes, and
insurance.
c. Rental costs under ``less-than-arms-length'' leases are allowable
only up to the amount (as explained in subsection J.43.b of this
Appendix) that would be allowed had title to the property vested in the
institution. For this purpose, a less-than-arms-length lease is one
under which one party to the lease agreement is able to control or
substantially influence the actions of the other. Such leases include,
but are not limited to those between--
(1) Divisions of an institution;
(2) Non-Federal entities under common control through common
officers, directors, or members; and
(3) An institution and a director, trustee, officer, or key employee
of the institution or his immediate family, either directly or through
corporations, trusts, or similar arrangements in which they hold a
controlling interest. For example, an institution may establish a
separate corporation for the sole purpose of owning property and leasing
it back to the institution.
d. Rental costs under leases which are required to be treated as
capital leases under GAAP are allowable only up to the amount (as
explained in subsection J.43.b of this Appendix) that would be allowed
had the institution purchased the property on the date the lease
agreement was executed. The provisions of Financial Accounting Standards
Board Statement 13, Accounting for Leases, shall be used to determine
whether a lease is a capital lease. Interest costs related to capital
leases are allowable to the extent they meet the criteria in section
J.26 of this Appendix. Unallowable costs include amounts paid for
profit, management fees, and taxes that would not have been incurred had
the institution purchased the facility.
44. Royalties and other costs for use of patents.
a. Royalties on a patent or copyright or amortization of the cost of
acquiring by purchase a copyright, patent, or rights thereto, necessary
for the proper performance of the award are allowable unless:
(1) The Federal Government has a license or the right to free use of
the patent or copyright.
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(2) The patent or copyright has been adjudicated to be invalid, or
has been administratively determined to be invalid.
(3) The patent or copyright is considered to be unenforceable.
(4) The patent or copyright is expired.
b. Special care should be exercised in determining reasonableness
where the royalties may have been arrived at as a result of less-than-
arm's-length bargaining, e.g.:
(1) Royalties paid to persons, including corporations, affiliated
with the institution.
(2) Royalties paid to unaffiliated parties, including corporations,
under an agreement entered into in contemplation that a sponsored
agreement award would be made.
(3) Royalties paid under an agreement entered into after an award is
made to an institution.
c. In any case involving a patent or copyright formerly owned by the
institution, the amount of royalty allowed should not exceed the cost
which would have been allowed had the institution retained title
thereto.
45. Scholarships and student aid costs.
a. Costs of scholarships, fellowships, and other programs of student
aid are allowable only when the purpose of the sponsored agreement is to
provide training to selected participants and the charge is approved by
the sponsoring agency. However, tuition remission and other forms of
compensation paid as, or in lieu of, wages to students performing
necessary work are allowable provided that--
(1) The individual is conducting activities necessary to the
sponsored agreement;
(2) Tuition remission and other support are provided in accordance
with established educational institutional policy and consistently
provided in a like manner to students in return for similar activities
conducted in nonsponsored as well as sponsored activities; and
(3) During the academic period, the student is enrolled in an
advanced degree program at the institution or affiliated institution and
the activities of the student in relation to the Federally-sponsored
research project are related to the degree program;
(4) The tuition or other payments are reasonable compensation for
the work performed and are conditioned explicitly upon the performance
of necessary work; and
(5) It is the institution's practice to similarly compensate
students in nonsponsored as well as sponsored activities.
b. Charges for tuition remission and other forms of compensation
paid to students as, or in lieu of, salaries and wages shall be subject
to the reporting requirements stipulated in Section J.10 of this
Appendix, and shall be treated as direct or F&A cost in accordance with
the actual work being performed. Tuition remission may be charged on an
average rate basis.
46. Selling and marketing.
Costs of selling and marketing any products or services of the
institution are unallowable (unless allowed under subsection J.1 of this
Appendix as allowable public relations costs or under subsection J.38 of
this Appendix as allowable proposal costs).
47. Specialized service facilities.
a. The costs of services provided by highly complex or specialized
facilities operated by the institution, such as computers, wind tunnels,
and reactors are allowable, provided the charges for the services meet
the conditions of either subsection J.47.b. or 47.c. of this Appendix
and, in addition, take into account any items of income or Federal
financing that qualify as applicable credits under subsection C.5. of
this Appendix.
b. The costs of such services, when material, must be charged
directly to applicable awards based on actual usage of the services on
the basis of a schedule of rates or established methodology that:
(1) Does not discriminate against federally-supported activities of
the institution, including usage by the institution for internal
purposes, and
(2) Is designed to recover only the aggregate costs of the services.
The costs of each service shall consist normally of both its direct
costs and its allocable share of all F&A costs. Rates shall be adjusted
at least biennially, and shall take into consideration over/under
applied costs of the previous period(s).
c. Where the costs incurred for a service are not material, they may
be allocated as F&A costs.
d. Under some extraordinary circumstances, where it is in the best
interest of the Federal Government and the institution to establish
alternative costing arrangements, such arrangements may be worked out
with the cognizant Federal agency.
48. Student activity costs.
Costs incurred for intramural activities, student publications,
student clubs, and other student activities, are unallowable, unless
specifically provided for in the sponsored agreements.
49. Taxes.
a. In general, taxes which the institution is required to pay and
which are paid or accrued in accordance with generally accepted
accounting principles are allowable. Payments made to local governments
in lieu of taxes which are commensurate with the local government
services received are allowable, except for--
(1) Taxes from which exemptions are available to the institution
directly or which are available to the institution based on an exemption
afforded the Federal Government, and in the latter case when the
sponsoring agency makes available the necessary exemption certificates;
and
(2) Special assessments on land which represent capital
improvements.
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b. Any refund of taxes, interest, or penalties, and any payment to
the institution of interest thereon, attributable to taxes, interest, or
penalties which were allowed as sponsored agreement costs, will be
credited or paid to the Federal Government in the manner directed by the
Federal Government. However, any interest actually paid or credited to
an institution incident to a refund of tax, interest, and penalty will
be paid or credited to the Federal Government only to the extent that
such interest accrued over the period during which the institution has
been reimbursed by the Federal Government for the taxes, interest, and
penalties.
50. Termination costs applicable to sponsored agreements.
Termination of awards generally gives rise to the incurrence of
costs, or the need for special treatment of costs, which would not have
arisen had the sponsored agreement not been terminated. Cost principles
covering these items are set forth below. They are to be used in
conjunction with the other provisions of this Appendix in termination
situations.
a. The cost of items reasonably usable on the institution's other
work shall not be allowable unless the institution submits evidence that
it would not retain such items at cost without sustaining a loss. In
deciding whether such items are reasonably usable on other work of the
institution, the awarding agency should consider the institution's plans
and orders for current and scheduled activity. Contemporaneous purchases
of common items by the institution shall be regarded as evidence that
such items are reasonably usable on the institution's other work. Any
acceptance of common items as allocable to the terminated portion of the
sponsored agreement shall be limited to the extent that the quantities
of such items on hand, in transit, and on order are in excess of the
reasonable quantitative requirements of other work.
b. If in a particular case, despite all reasonable efforts by the
institution, certain costs cannot be discontinued immediately after the
effective date of termination, such costs are generally allowable within
the limitations set forth in this Appendix, except that any such costs
continuing after termination due to the negligent or willful failure of
the institution to discontinue such costs shall be unallowable.
c. Loss of useful value of special tooling, machinery, and equipment
is generally allowable if:
(1) Such special tooling, special machinery, or equipment is not
reasonably capable of use in the other work of the institution,
(2) The interest of the Federal Government is protected by transfer
of title or by other means deemed appropriate by the awarding agency,
and
(3) The loss of useful value for any one terminated sponsored
agreement is limited to that portion of the acquisition cost which bears
the same ratio to the total acquisition cost as the terminated portion
of the sponsored agreement bears to the entire terminated sponsored
agreement award and other sponsored agreements for which the special
tooling, machinery, or equipment was acquired.
d. Rental costs under unexpired leases are generally allowable where
clearly shown to have been reasonably necessary for the performance of
the terminated sponsored agreement less the residual value of such
leases, if:
(1) The amount of such rental claimed does not exceed the reasonable
use value of the property leased for the period of the sponsored
agreement and such further period as may be reasonable, and
(2) The institution makes all reasonable efforts to terminate,
assign, settle, or otherwise reduce the cost of such lease. There also
may be included the cost of alterations of such leased property,
provided such alterations were necessary for the performance of the
sponsored agreement, and of reasonable restoration required by the
provisions of the lease.
e. Settlement expenses including the following are generally
allowable:
(1) Accounting, legal, clerical, and similar costs reasonably
necessary for:
(a) The preparation and presentation to the awarding agency of
settlement claims and supporting data with respect to the terminated
portion of the sponsored agreement, unless the termination is for
default (see Sec. 215.61 of 2 CFR Part 215); and
(b) The termination and settlement of subawards.
(2) Reasonable costs for the storage, transportation, protection,
and disposition of property provided by the Federal Government or
acquired or produced for the sponsored agreement, except when
institutions are reimbursed for disposals at a predetermined amount in
accordance with Sec. 215.32 through Sec. 215.37 of 2 CFR Part 215.
(3) F&A costs related to salaries and wages incurred as settlement
expenses in subsections J.50.b.(1) and (2) of this Appendix. Normally,
such F&A costs shall be limited to fringe benefits, occupancy cost, and
immediate supervision.
f. Claims under subawards, including the allocable portion of claims
which are common to the sponsored agreement and to other work of the
institution, are generally allowable.
g. An appropriate share of the institution's F&A costs may be
allocated to the amount of settlements with subcontractors and/or
subgrantees, provided that the amount allocated is otherwise consistent
with the basic guidelines contained in section E, F&A costs.
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The F&A costs so allocated shall exclude the same and similar costs
claimed directly or indirectly as settlement expenses.
51. Training costs.
The cost of training provided for employee development is allowable.
52. Transportation costs.
Costs incurred for freight, express, cartage, postage, and other
transportation services relating either to goods purchased, in process,
or delivered, are allowable. When such costs can readily be identified
with the items involved, they may be charged directly as transportation
costs or added to the cost of such items. Where identification with the
materials received cannot readily be made, inbound transportation cost
may be charged to the appropriate F&A cost accounts if the institution
follows a consistent, equitable procedure in this respect. Outbound
freight, if reimbursable under the terms of the sponsored agreement,
should be treated as a direct cost.
53. Travel costs.
a. General.
Travel costs are the expenses for transportation, lodging,
subsistence, and related items incurred by employees who are in travel
status on official business of the institution. Such costs may be
charged on an actual cost basis, on a per diem or mileage basis in lieu
of actual costs incurred, or on a combination of the two, provided the
method used is applied to an entire trip and not to selected days of the
trip, and results in charges consistent with those normally allowed in
like circumstances in the institution's non-federally-sponsored
activities.
b. Lodging and subsistence.
Costs incurred by employees and officers for travel, including costs
of lodging, other subsistence, and incidental expenses, shall be
considered reasonable and allowable only to the extent such costs do not
exceed charges normally allowed by the institution in its regular
operations as the result of the institution's written travel policy. In
the absence of an acceptable, written institution policy regarding
travel costs, the rates and amounts established under subchapter I of
Chapter 57, Title 5, United States Code (``Travel and Subsistence
Expenses; Mileage Allowances''), or by the Administrator of General
Services, or by the President (or his or her designee) pursuant to any
provisions of such subchapter shall apply to travel under sponsored
agreements (48 CFR 31.205-46(a)).
c. Commercial air travel.
(1) Airfare costs in excess of the customary standard commercial
airfare (coach or equivalent), Federal Government contract airfare
(where authorized and available), or the lowest commercial discount
airfare are unallowable except when such accommodations would:
(a) Require circuitous routing;
(b) Require travel during unreasonable hours;
(c) Excessively prolong travel;
(d) Result in additional costs that would offset the transportation
savings; or
(e) Offer accommodations not reasonably adequate for the traveler's
medical needs. The institution must justify and document these
conditions on a case-by-case basis in order for the use of first-class
airfare to be allowable in such cases.
(2) Unless a pattern of avoidance is detected, the Federal
Government will generally not question an institution's determinations
that customary standard airfare or other discount airfare is unavailable
for specific trips if the institution can demonstrate either of the
following:
(a) That such airfare was not available in the specific case; or
(b) That it is the institution's overall practice to make routine
use of such airfare.
d. Air travel by other than commercial carrier.
Costs of travel by institution-owned, -leased, or -chartered
aircraft include the cost of lease, charter, operation (including
personnel costs), maintenance, depreciation, insurance, and other
related costs. The portion of such costs that exceeds the cost of
allowable commercial air travel, as provided for in subsection J.53.c.
of this Appendix, is unallowable.
54. Trustees.
Travel and subsistence costs of trustees (or directors) are
allowable. The costs are subject to restrictions regarding lodging,
subsistence and air travel costs provided in Section J.53 of this
Appendix.
K. Certification of Charges
1. To assure that expenditures for sponsored agreements are proper
and in accordance with the agreement documents and approved project
budgets, the annual and/or final fiscal reports or vouchers requesting
payment under the agreements will include a certification, signed by an
authorized official of the university, which reads essentially as
follows: ``I certify that all expenditures reported (or payment
requested) are for appropriate purposes and in accordance with the
provisions of the application and award documents.''
2. Certification of F&A costs.
a. Policy.
(1) No proposal to establish F&A cost rates shall be acceptable
unless such costs have been certified by the educational institution
using the Certificate of F&A Costs set forth in subsection K.2.b of this
Appendix. The certificate must be signed on behalf of the institution by
an individual at a level no lower than vice president or chief financial
officer of the institution that submits the proposal.
(2) No F&A cost rate shall be binding upon the Federal Government if
the most recent
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required proposal from the institution has not been certified. Where it
is necessary to establish F&A cost rates, and the institution has not
submitted a certified proposal for establishing such rates in accordance
with the requirements of this section, the Federal Government shall
unilaterally establish such rates. Such rates may be based upon audited
historical data or such other data that have been furnished to the
cognizant Federal agency and for which it can be demonstrated that all
unallowable costs have been excluded. When F&A cost rates are
unilaterally established by the Federal Government because of failure of
the institution to submit a certified proposal for establishing such
rates in accordance with this section, the rates established will be set
at a level low enough to ensure that potentially unallowable costs will
not be reimbursed.
b. Certificate. The certificate required by this section shall be in
the following form:
Certificate of F&A Costs
This is to certify that to the best of my knowledge and belief:
(1) I have reviewed the F&A cost proposal submitted herewith;
(2) All costs included in this proposal [identify date] to establish
billing or final F&A costs rate for [identify period covered by rate]
are allowable in accordance with the requirements of the Federal
agreement(s) to which they apply and with the cost principles applicable
to those agreements.
(3) This proposal does not include any costs which are unallowable
under applicable cost principles such as (without limitation):
advertising and public relations costs, contributions and donations,
entertainment costs, fines and penalties, lobbying costs, and defense of
fraud proceedings; and
(4) All costs included in this proposal are properly allocable to
Federal agreements on the basis of a beneficial or causal relationship
between the expenses incurred and the agreements to which they are
allocated in accordance with applicable requirements.
For educational institutions that are required to file a DS-2 in
accordance with Section C.14 of this Appendix, the following statement
shall be added to the ``Certificate of F&A Costs'':
(5) The rate proposal is prepared using the same cost accounting
practices that are disclosed in the DS-2, including its amendments and
revisions, filed with and approved by the cognizant agency.
I declare under penalty of perjury that the foregoing is true and
correct.
Institution:____________________________________________________________
Signature:______________________________________________________________
Name of Official:_______________________________________________________
Title:__________________________________________________________________
Date of Execution:______________________________________________________
Exhibit A--List of Colleges and Universities Subject to Section J.12.h
of This Appendix
1. Johns Hopkins University
2. Stanford University
3. Massachusetts Institute of Technology
4. University of Washington
5. University of California--Los Angeles
6. University of Michigan
7. University of California--San Diego
8. University of California--San Francisco
9. University of Wisconsin--Madison
10. Columbia University
11. Yale University
12. Harvard University
13. Cornell University
14. University of Pennsylvania
15. University of California--Berkeley
16. University of Minnesota
17. Pennsylvania State University
18. University of Southern California
19. Duke University
20. Washington University
21. University of Colorado
22. University of Illinois--Urbana
23. University of Rochester
24. University of North Carolina--Chapel Hill
25. University of Pittsburgh
26. University of Chicago
27. University of Texas--Austin
28. University of Arizona
29. New York University
30. University of Iowa
31. Ohio State University
32. University of Alabama--Birmingham
33. Case Western Reserve
34. Baylor College of Medicine
35. California Institute of Technology
36. Yeshiva University
37. University of Massachusetts
38. Vanderbilt University
39. Purdue University
40. University of Utah
41. Georgia Institute of Technology
42. University of Maryland--College Park
43. University of Miami
44. University of California--Davis
45. Boston University
46. University of Florida
47. Carnegie-Mellon University
48. Northwestern University
49. Indiana University
50. Michigan State University
51. University of Virginia
52. University of Texas--SW Medical Center
53. University of California--Irvine
54. Princeton University
55. Tulane University of Louisiana
56. Emory University
57. University of Georgia
58. Texas A&M University--all campuses
59. New Mexico State University
60. North Carolina State University--Raleigh
61. University of Illinois--Chicago
62. Utah State University
63. Virginia Commonwealth University
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64. Oregon State University
65. SUNY-Stony Brook
66. University of Cincinnati
67. CUNY-Mount Sinai School of Medicine
68. University of Connecticut
69. Louisiana State University
70. Tufts University
71. University of California--Santa Barbara
72. University of Hawaii--Manoa
73. Rutgers State University of New Jersey
74. Colorado State University
75. Rockefeller University
76. University of Maryland--Baltimore
77. Virginia Polytechnic Institute & State University
78. SUNY--Buffalo
79. Brown University
80. University of Medicine & Dentistry of New Jersey
81. University of Texas--Health Science Center San Antonio
82. University of Vermont
83. University of Texas--Health Science Center Houston
84. Florida State University
85. University of Texas--MD Anderson Cancer Center
86. University of Kentucky
87. Wake Forest University
88. Wayne State University
89. Iowa State University of Science & Technology
90. University of New Mexico
91. Georgetown University
92. Dartmouth College
93. University of Kansas
94. Oregon Health Sciences University
95. University of Texas--Medical Branch-Galveston
96. University of Missouri--Columbia
97. Temple University
98. George Washington University
99. University of Dayton
Exhibit B--Listing of Institutions That Are Eligible for the Utility
Cost Adjustment
1. Baylor University
2. Boston College
3. Boston University
4. California Institute of Technology
5. Carnegie-Mellon University
6. Case Western University
7. Columbia University
8. Cornell University (Endowed)
9. Cornell University (Statutory)
10. Cornell University (Medical)
11. Dayton University
12. Emory University
13. George Washington University (Medical)
14. Georgetown University
15. Harvard Medical School
16. Harvard University (Main Campus)
17. Harvard University (School of Public Health)
18. Johns Hopkins University
19. Massachusetts Institute of Technology
20. Medical University of South Carolina
21. Mount Sinai School of Medicine
22. New York University (except New York University Medical Center)
23. New York University Medical Center
24. North Carolina State University
25. Northeastern University
26. Northwestern University
27. Oregon Health Sciences University
28. Oregon State University
29. Rice University
30. Rockefeller University
31. Stanford University
32. Tufts University
33. Tulane University
34. Vanderbilt University
35. Virginia Commonwealth University
36. Virginia Polytechnic Institute and State University
37. University of Arizona
38. University of CA, Berkeley
39. University of CA, Irvine
40. University of CA, Los Angeles
41. University of CA, San Diego
42. University of CA, San Francisco
43. University of Chicago
44. University of Cincinnati
45. University of Colorado, Health Sciences Center
46. University of Connecticut, Health Sciences Center
47. University of Health Science and The Chicago Medical School
48. University of Illinois, Urbana
49. University of Massachusetts, Medical Center
50. University of Medicine & Dentistry of New Jersey
51. University of Michigan
52. University of Pennsylvania
53. University of Pittsburgh
54. University of Rochester
55. University of Southern California
56. University of Tennessee, Knoxville
57. University of Texas, Galveston
58. University of Texas, Austin
60. University of Texas Southwestern Medical Center
61. University of Virginia
62. University of Vermont & State Agriculture College
63. University of Washington
64. Washington University
65. Yale University
66. Yeshiva University
Exhibit C--Examples of ``Major Project'' Where Direct Charging of
Administrative or Clerical Staff Salaries May Be Appropriate
1. As used in paragraph F.6.b.(2) of this Appendix, below are
examples of ``major projects'':
a. Large, complex programs such as General Clinical Research
Centers, Primate Centers, Program Projects, environmental research
centers, engineering research centers,
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and other grants and contracts that entail assembling and managing teams
of investigators from a number of institutions.
b. Projects which involve extensive data accumulation, analysis and
entry, surveying, tabulation, cataloging, searching literature, and
reporting (such as epidemiological studies, clinical trials, and
retrospective clinical records studies).
c. Projects that require making travel and meeting arrangements for
large numbers of participants, such as conferences and seminars.
d. Projects whose principal focus is the preparation and production
of manuals and large reports, books and monographs (excluding routine
progress and technical reports).
e. Projects that are geographically inaccessible to normal
departmental administrative services, such as research vessels, radio
astronomy projects, and other research fields sites that are remote from
campus.
f. Individual projects requiring project-specific database
management; individualized graphics or manuscript preparation; human or
animal protocols; and multiple project-related investigator coordination
and communications.
2. These examples are not exhaustive nor are they intended to imply
that direct charging of administrative or clerical salaries would always
be appropriate for the situations illustrated in the examples. For
instance, the examples would be appropriate when the costs of such
activities are incurred in unlike circumstances, i.e., the actual
activities charged direct are not the same as the actual activities
normally included in the institution's facilities and administrative
(F&A) cost pools or, if the same, the indirect activity costs are
immaterial in amount. It would be inappropriate to charge the cost of
such activities directly to specific sponsored agreements if, in similar
circumstances, the costs of performing the same type of activity for
other sponsored agreements were included as allocable costs in the
institution's F&A cost pools. Application of negotiated predetermined
F&A cost rates may also be inappropriate if such activity costs charged
directly were not provided for in the allocation base that was used to
determine the predetermined F&A cost rates.
Attachment A to Appendix A--CASB's Cost Accounting Standards (CAS)
A. CAS 9905.501--Consistency in estimating, accumulating and
reporting costs by educational institutions.
1. Purpose
The purpose of this standard is to ensure that each educational
institution's practices used in estimating costs for a proposal are
consistent with cost accounting practices used by the educational
institution in accumulating and reporting costs. Consistency in the
application of cost accounting practices is necessary to enhance the
likelihood that comparable transactions are treated alike. With respect
to individual sponsored agreements, the consistent application of cost
accounting practices will facilitate the preparation of reliable cost
estimates used in pricing a proposal and their comparison with the costs
of performance of the resulting sponsored agreement. Such comparisons
provide one important basis for financial control over costs during
sponsored agreement performance and aid in establishing accountability
for costs in the manner agreed to by both parties at the time of
agreement. The comparisons also provide an improved basis for evaluating
estimating capabilities.
2. Definitions
(a) The following are definitions of terms which are prominent in
this standard.
(1) Accumulating costs means the collecting of cost data in an
organized manner, such as through a system of accounts.
(2) Actual cost means an amount determined on the basis of cost
incurred (as distinguished from forecasted cost), including standard
cost properly adjusted for applicable variance.
(3) Estimating costs means the process of forecasting a future
result in terms of cost, based upon information available at the time.
(4) Indirect cost pool means a grouping of incurred costs identified
with two or more objectives but not identified specifically with any
final cost objective.
(5) Pricing means the process of establishing the amount or amounts
to be paid in return for goods or services.
(6) Proposal means any offer or other submission used as a basis for
pricing a sponsored agreement, sponsored agreement modification or
termination settlement or for securing payments thereunder.
(7) Reporting costs means the providing of cost information to
others.
3. Fundamental Requirement
(a) An educational institution's practices used in estimating costs
in pricing a proposal shall be consistent with the educational
institution's cost accounting practices used in accumulating and
reporting costs.
(b) An educational institution's cost accounting practices used in
accumulating and reporting actual costs for a sponsored agreement shall
be consistent with the educational institution's practices used in
estimating costs in the related proposal or application.
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(c) The grouping of homogeneous costs in estimates prepared for
proposal purposes shall not per se be deemed an inconsistent application
of cost accounting practices of this paragraph when such costs are
accumulated and reported in greater detail on an actual costs basis
during performance of the sponsored agreement.
4. Techniques for application
(a) The standard allows grouping of homogeneous costs in order to
cover those cases where it is not practicable to estimate sponsored
agreement costs by individual cost element. However, costs estimated for
proposal purposes shall be presented in such a manner and in such detail
that any significant cost can be compared with the actual cost
accumulated and reported therefor. In any event, the cost accounting
practices used in estimating costs in pricing a proposal and in
accumulating and reporting costs on the resulting sponsored agreement
shall be consistent with respect to:
(1) The classification of elements of cost as direct or indirect;
(2) The indirect cost pools to which each element of cost is charged
or proposed to be charged; and
(3) The methods of allocating indirect costs to the sponsored
agreement.
(b) Adherence to the requirement of this standard shall be
determined as of the date of award of the sponsored agreement, unless
the sponsored agreement has submitted cost or pricing data pursuant to
10 U.S.C. 2306(a) or 41 U.S.C. 254(d) (Pub. L. 87-653), in which case
adherence to the requirement of this standard shall be determined as of
the date of final agreement on price, as shown on the signed certificate
of current cost or pricing data. Notwithstanding 9905.501-40(b), changes
in established cost accounting practices during sponsored agreement
performance may be made in accordance with Part 9903 (48 CFR part 9903).
(c) The standard does not prescribe the amount of detail required in
accumulating and reporting costs. The basic requirement which must be
met, however, is that for any significant amount of estimated cost, the
sponsored agreement must be able to accumulate and report actual cost at
a level which permits sufficient and meaningful comparison with its
estimates. The amount of detail required may vary considerably depending
on how the proposed costs were estimated, the data presented in
justification or lack thereof, and the significance of each situation.
Accordingly, it is neither appropriate nor practical to prescribe a
single set of accounting practices which would be consistent in all
situations with the practices of estimating costs. Therefore, the amount
of accounting and statistical detail to be required and maintained in
accounting for estimated costs has been and continues to be a matter to
be decided by Government procurement authorities on the basis of the
individual facts and circumstances.
B. CAS 9905.502--Consistency in Allocating Costs Incurred for the Same
Purpose by Educational Institutions
1. Purpose
The purpose of this standard is to require that each type of cost is
allocated only once and on only one basis to any sponsored agreement or
other cost objective. The criteria for determining the allocation of
costs to a sponsored agreement or other cost objective should be the
same for all similar objectives. Adherence to these cost accounting
concepts is necessary to guard against the overcharging of some cost
objectives and to prevent double counting. Double counting occurs most
commonly when cost items are allocated directly to a cost objective
without eliminating like cost items from indirect cost pools which are
allocated to that cost objective.
2. Definitions
(a) The following are definitions of terms which are prominent in
this standard.
(1) Allocate means to assign an item of cost, or a group of items of
cost, to one or more cost objectives. This term includes both direct
assignment of cost and the reassignment of a share from an indirect cost
pool.
(2) Cost objective means a function, organizational subdivision,
sponsored agreement, or other work unit for which cost data are desired
and for which provision is made to accumulate and measure the cost of
processes, products, jobs, capitalized projects, etc.
(3) Direct cost means any cost which is identified specifically with
a particular final cost objective. Direct costs are not limited to items
which are incorporated in the end product as material or labor. Costs
identified specifically with a sponsored agreement are direct costs of
that sponsored agreement. All costs identified specifically with other
final cost objectives of the educational institution are direct costs of
those cost objectives.
(4) Final cost objective means a cost objective which has allocated
to it both direct and indirect costs, and in the educational
institution's accumulation system, is one of the final accumulation
points.
(5) Indirect cost means any cost not directly identified with a
single final cost objective, but identified with two or more final cost
objectives or with at least one intermediate cost objective.
(6) Indirect cost pool means a grouping of incurred costs identified
with two or more cost objectives but not identified with any final cost
objective.
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(7) Intermediate cost objective means a cost objective that is used
to accumulate indirect costs or service center costs that are
subsequently allocated to one or more indirect cost pools and/or final
cost objectives.
3. Fundamental Requirement
All costs incurred for the same purpose, in like circumstances, are
either direct costs only or indirect costs only with respect to final
cost objectives. No final cost objective shall have allocated to it as
an indirect cost any cost, if other costs incurred for the same purpose,
in like circumstances, have been included as a direct cost of that or
any other final cost objective. Further, no final cost objective shall
have allocated to it as a direct cost any cost, if other costs incurred
for the same purpose, in like circumstances, have been included in any
indirect cost pool to be allocated to that or any other final cost
objective.
4. Techniques for Application
(a) The Fundamental Requirement is stated in terms of cost incurred
and is equally applicable to estimates of costs to be incurred as used
in sponsored agreement proposals.
(b) The Disclosure Statement to be submitted by the educational
institution will require that the educational institution set forth its
cost accounting practices with regard to the distinction between direct
and indirect costs. In addition, for those types of cost which are
sometimes accounted for as direct and sometimes accounted for as
indirect, the educational institution will set forth in its Disclosure
Statement the specific criteria and circumstances for making such
distinctions. In essence, the Disclosure Statement submitted by the
educational institution, by distinguishing between direct and indirect
costs, and by describing the criteria and circumstances for allocating
those items which are sometimes direct and sometimes indirect, will be
determinative as to whether or not costs are incurred for the same
purpose. Disclosure Statement as used herein refers to the statement
required to be submitted by educational institutions in Appendix A to
Part 220, Section C.14.
(c) In the event that an educational institution has not submitted a
Disclosure Statement, the determination of whether specific costs are
directly allocable to sponsored agreements shall be based upon the
educational institution's cost accounting practices used at the time of
sponsored agreement proposal.
(d) Whenever costs which serve the same purpose cannot equitably be
indirectly allocated to one or more final cost objectives in accordance
with the educational institution's disclosed accounting practices, the
educational institution may either (1) use a method for reassigning all
such costs which would provide an equitable distribution to all final
cost objectives, or (2) directly assign all such costs to final cost
objectives with which they are specifically identified. In the event the
educational institution decides to make a change for either purpose, the
Disclosure Statement shall be amended to reflect the revised accounting
practices involved.
(e) Any direct cost of minor dollar amount may be treated as an
indirect cost for reasons of practicality where the accounting treatment
for such cost is consistently applied to all final cost objectives,
provided that such treatment produces results which are substantially
the same as the results which would have been obtained if such cost had
been treated as a direct cost.
5. Illustrations
(a) Illustrations of costs which are incurred for the same purpose:
(1) An educational institution normally allocates all travel as an
indirect cost and previously disclosed this accounting practice to the
Government. For purposes of a new proposal, the educational institution
intends to allocate the travel costs of personnel whose time is
accounted for as direct labor directly to the sponsored agreement. Since
travel costs of personnel whose time is accounted for as direct labor
working on other sponsored agreements are costs which are incurred for
the same purpose, these costs may no longer be included within indirect
cost pools for purposes of allocation to any covered Government
sponsored agreement. The educational institution's Disclosure Statement
must be amended for the proposed changes in accounting practices.
(2) An educational institution normally allocates purchasing
activity costs indirectly and allocates this cost to instruction and
research on the basis of modified total costs. A proposal for a new
sponsored agreement requires a disproportionate amount of subcontract
administration to be performed by the purchasing activity. The
educational institution prefers to continue to allocate purchasing
activity costs indirectly. In order to equitably allocate the total
purchasing activity costs, the educational institution may use a method
for allocating all such costs which would provide an equitable
distribution to all applicable indirect cost pools. For example, the
educational institution may use the number of transactions processed
rather than its former allocation base of modified total costs. The
educational institution's Disclosure Statement must be amended for the
proposed changes in accounting practices.
(b) Illustrations of costs which are not incurred for the same
purpose:
(1) An educational institution normally allocates special test
equipment costs directly
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to sponsored agreements. The costs of general purpose test equipment are
normally included in the indirect cost pool which is allocated to
sponsored agreements. Both of these accounting practices were previously
disclosed to the Government. Since both types of costs involved were not
incurred for the same purpose in accordance with the criteria set forth
in the educational institution's Disclosure Statement, the allocation of
general purpose test equipment costs from the indirect cost pool to the
sponsored agreement, in addition to the directly allocated special test
equipment costs, is not considered a violation of the standard.
(2) An educational institution proposes to perform a sponsored
agreement which will require three firemen on 24-hour duty at a fixed-
post to provide protection against damage to highly inflammable
materials used on the sponsored agreement. The educational institution
presently has a firefighting force of 10 employees for general
protection of its facilities. The educational institution's costs for
these latter firemen are treated as indirect costs and allocated to all
sponsored agreements; however, it wants to allocate the three fixed-post
firemen directly to the particular sponsored agreement requiring them
and also allocate a portion of the cost of the general firefighting
force to the same sponsored agreement. The educational institution may
do so but only on condition that its disclosed practices indicate that
the costs of the separate classes of firemen serve different purposes
and that it is the educational institution's practice to allocate the
general firefighting force indirectly and to allocate fixed-post firemen
directly.
6. Interpretation
(a) Consistency in Allocating Costs Incurred for the Same Purpose by
Educational Institutions, provides, in this standard, that ``* * * no
final cost objective shall have allocated to it as a direct cost any
cost, if other costs incurred for the same purpose, in like
circumstances, have been included in any indirect cost pool to be
allocated to that or any other final cost objective.''
(b) This interpretation deals with the way this standard applies to
the treatment of costs incurred in preparing, submitting, and supporting
proposals. In essence, it is addressed to whether or not, under the
standard, all such costs are incurred for the same purpose, in like
circumstances.
(c) Under this standard, costs incurred in preparing, submitting,
and supporting proposals pursuant to a specific requirement of an
existing sponsored agreement are considered to have been incurred in
different circumstances from the circumstances under which costs are
incurred in preparing proposals which do not result from such specific
requirement. The circumstances are different because the costs of
preparing proposals specifically required by the provisions of an
existing sponsored agreement relate only to that sponsored agreement
while other proposal costs relate to all work of the educational
institution.
(d) This interpretation does not preclude the allocation, as
indirect costs, of costs incurred in preparing all proposals. The cost
accounting practices used by the educational institution, however, must
be followed consistently and the method used to reallocate such costs,
of course, must provide an equitable distribution to all final cost
objectives.
C. CAS 9905.505--Accounting for Unallowable Costs--Educational
Institutions
1. Purpose
(a) The purpose of this standard is to facilitate the negotiation,
audit, administration and settlement of sponsored agreements by
establishing guidelines covering (1) identification of costs
specifically described as unallowable, at the time such costs first
become defined or authoritatively designated as unallowable, and (2) the
cost accounting treatment to be accorded such identified unallowable
costs in order to promote the consistent application of sound cost
accounting principles covering all incurred costs. The standard is
predicated on the proposition that costs incurred in carrying on the
activities of an educational institution--regardless of the allowability
of such costs under Government sponsored agreements--are allocable to
the cost objectives with which they are identified on the basis of their
beneficial or causal relationships.
(b) This standard does not govern the allowability of costs. This is
a function of the appropriate procurement or reviewing authority.
2. Definitions
(a) The following are definitions of terms which are prominent in
this standard.
(1) Directly associated cost means any cost which is generated
solely as a result of the incurrence of another cost, and which would
not have been incurred had the other cost not been incurred.
(2) Expressly unallowable cost means a particular item or type of
cost which, under the express provisions of an applicable law,
regulation, or sponsored agreement, is specifically named and stated to
be unallowable.
(3) Indirect cost means any cost not directly identified with a
single final cost objective, but identified with two or more final cost
objectives or with at least one intermediate cost objective.
(4) Unallowable cost means any cost which, under the provisions of
any pertinent law, regulation, or sponsored agreement, cannot be
included in prices, cost reimbursements,
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or settlements under a Government sponsored agreement to which it is
allocable.
3. Fundamental Requirement
(a) Costs expressly unallowable or mutually agreed to be
unallowable, including costs mutually agreed to be unallowable directly
associated costs, shall be identified and excluded from any billing,
claim, application, or proposal applicable to a Government sponsored
agreement.
(b) Costs which specifically become designated as unallowable as a
result of a written decision furnished by a Federal official pursuant to
sponsored agreement disputes procedures shall be identified if included
in or used in the computation of any billing, claim, or proposal
applicable to a sponsored agreement. This identification requirement
applies also to any costs incurred for the same purpose under like
circumstances as the costs specifically identified as unallowable under
either this paragraph or paragraph (a) of this subsection.
(c) Costs which, in a Federal official's written decision furnished
pursuant to disputes procedures, are designated as unallowable directly
associated costs of unallowable costs covered by either paragraph (a) or
(b) of this subsection shall be accorded the identification required by
paragraph b. of this subsection.
(d) The costs of any work project not contractually authorized,
whether or not related to performance of a proposed or existing
contract, shall be accounted for, to the extent appropriate, in a manner
which permits ready separation from the costs of authorized work
projects.
(e) All unallowable costs covered by paragraphs (a) through (d) of
this subsection shall be subject to the same cost accounting principles
governing cost allocability as allowable costs. In circumstances where
these unallowable costs normally would be part of a regular indirect-
cost allocation base or bases, they shall remain in such base or bases.
Where a directly associated cost is part of a category of costs normally
included in an indirect-cost pool that will be allocated over a base
containing the unallowable cost with which it is associated, such a
directly associated cost shall be retained in the indirect-cost pool and
be allocated through the regular allocation process.
(f) Where the total of the allocable and otherwise allowable costs
exceeds a limitation-of-cost or ceiling-price provision in a sponsored
agreement, full direct and indirect cost allocation shall be made to the
cost objective, in accordance with established cost accounting practices
and Standards which regularly govern a given entity's allocations to
Government sponsored agreement cost objectives. In any determination of
unallowable cost overrun, the amount thereof shall be identified in
terms of the excess of allowable costs over the ceiling amount, rather
than through specific identification of particular cost items or cost
elements.
4. Techniques for Application
(a) The detail and depth of records required as backup support for
proposals, billings, or claims shall be that which is adequate to
establish and maintain visibility of identified unallowable costs
(including directly associated costs), their accounting status in terms
of their allocability to sponsored agreement cost objectives, and the
cost accounting treatment which has been accorded such costs. Adherence
to this cost accounting principle does not require that allocation of
unallowable costs to final cost objectives be made in the detailed cost
accounting records. It does require that unallowable costs be given
appropriate consideration in any cost accounting determinations
governing the content of allocation bases used for distributing indirect
costs to cost objectives. Unallowable costs involved in the
determination of rates used for standard costs, or for indirect-cost
bidding or billing, need be identified only at the time rates are
proposed, established, revised or adjusted.
(b) The visibility requirement of paragraph (a) of this subsection,
may be satisfied by any form of cost identification which is adequate
for purposes of sponsored agreement cost determination and verification.
The standard does not require such cost identification for purposes
which are not relevant to the determination of Government sponsored
agreement cost. Thus, to provide visibility for incurred costs,
acceptable alternative practices would include the segregation of
unallowable costs in separate accounts maintained for this purpose in
the regular books of account, the development and maintenance of
separate accounting records or workpapers, or the use of any less formal
cost accounting techniques which establishes and maintains adequate cost
identification to permit audit verification of the accounting
recognition given unallowable costs. Educational institutions may
satisfy the visibility requirements for estimated costs either by
designation and description (in backup data, workpapers, etc.) of the
amounts and types of any unallowable costs which have specifically been
identified and recognized in making the estimates, or by description of
any other estimating technique employed to provide appropriate
recognition of any unallowable costs pertinent to the estimates.
(c) Specific identification of unallowable costs is not required in
circumstances where, based upon considerations of materiality, the
Government and the educational institution reach agreement on an
alternate method that satisfies the purpose of the standard.
[[Page 113]]
5. Illustrations
(a) An auditor recommends disallowance of certain direct labor and
direct material costs, for which a billing has been submitted under a
sponsored agreement, on the basis that these particular costs were not
required for performance and were not authorized by the sponsored
agreement. The Federal officer issues a written decision which supports
the auditor's position that the questioned costs are unallowable.
Following receipt of the Federal officer's decision, the educational
institution must clearly identify the disallowed direct labor and direct
material costs in the educational institution's accounting records and
reports covering any subsequent submission which includes such costs.
Also, if the educational institution's base for allocation of any
indirect cost pool relevant to the subject sponsored agreement consists
of direct labor, direct material, total prime cost, total cost input,
etc., the educational institution must include the disallowed direct
labor and material costs in its allocation base for such pool. Had the
Federal officer's decision been against the auditor, the educational
institution would not, of course, have been required to account
separately for the costs questioned by the auditor.
(b) An educational institution incurs, and separately identifies, as
a part of a service center or expense pool, certain costs which are
expressly unallowable under the existing and currently effective
regulations. If the costs of the service center or indirect expense pool
are regularly a part of the educational institution's base for
allocation of general administration and general expenses (GA&GE) or
other indirect expenses, the educational institution must allocate the
GA&GE or other indirect expenses to sponsored agreements and other final
cost objectives by means of a base which includes the identified
unallowable indirect costs.
(c) An auditor recommends disallowance of certain indirect costs.
The educational institution claims that the costs in question are
allowable under the provisions of Appendix A to Part 220, Cost
Principles For Educational Institutions; the auditor disagrees. The
issue is referred to the Federal officer for resolution pursuant to the
sponsored agreement disputes clause. The Federal officer issues a
written decision supporting the auditor's position that the total costs
questioned are unallowable under Appendix A. Following receipt of the
Federal officer's decision, the educational institution must identify
the disallowed costs and specific other costs incurred for the same
purpose in like circumstances in any subsequent estimating, cost
accumulation or reporting for Government sponsored agreements, in which
such costs are included. If the Federal officer's decision had supported
the educational institution's contention, the costs questioned by the
auditor would have been allowable and the educational institution would
not have been required to provide special identification.
(d) An educational institution incurred certain unallowable costs
that were charged indirectly as general administration and general
expenses (GA&GE). In the educational institution's proposals for final
indirect cost rates to be applied in determining allowable sponsored
agreement costs, the educational institution identified and excluded the
expressly unallowable costs. In addition, during the course of
negotiation of indirect cost rates to be used for bidding and billing
purposes, the educational institution agreed to classify as unallowable
cost, various directly associated costs of the identifiable unallowable
costs. On the basis of negotiations and agreements between the
educational institution and the Federal officer's authorized
representatives, indirect cost rates were established, based on the net
balance of allowable GA&GE. Application of the rates negotiated to
proposals, and to billings, for covered sponsored agreements constitutes
compliance with the standard.
(e) An employee, whose salary, travel, and subsistence expenses are
charged regularly to the general administration and general expenses
(GA&GE) pool, takes several business associates on what is clearly a
business entertainment trip. The entertainment costs of such trips is
expressly unallowable because it constitutes entertainment expense
prohibited by Appendix A to Part 220, and is separately identified by
the educational institution. The educational institution does not
regularly include its GA&GE in any indirect-expense allocation base. In
these circumstances, the employee's travel and subsistence expenses
would be directly associated costs for identification with the
unallowable entertainment expense. However, unless this type of activity
constituted a significant part of the employee's regular duties and
responsibilities on which his salary was based, no part of the
employee's salary would be required to be identified as a directly
associated cost of the unallowable entertainment expense.
D. CAS 9905.506--Cost Accounting Period--Educational Institutions
1. Purpose
The purpose of this standard is to provide criteria for the
selection of the time periods to be used as cost accounting periods for
sponsored agreement cost estimating, accumulating, and reporting. This
standard will reduce the effects of variations in the flow of costs
within each cost accounting period. It will also enhance objectivity,
consistency, and verifiability, and promote uniformity
[[Page 114]]
and comparability in sponsored agreement cost measurements.
2. Definitions
(a) The following are definitions of terms which are prominent in
this standard.
(1) Allocate means to assign an item of cost, or a group of items of
cost, to one or more cost objectives. This term includes both direct
assignment of cost and the reassignment of a share from an indirect cost
pool.
(2) Cost Objective means a function, organizational subdivision,
sponsored agreement, or other work unit for which cost data are desired
and for which provision is made to accumulate and measure the cost of
processes, products, jobs, capitalized projects, etc.
(3) Fiscal year means the accounting period for which annual
financial statements are regularly prepared, generally a period of 12
months, 52 weeks, or 53 weeks.
(4) Indirect cost pool means a grouping of incurred costs identified
with two or more cost objectives but not identified specifically with
any final cost objective.
3. Fundamental Requirement
(a) Educational institutions shall use their fiscal year as their
cost accounting period, except that:
(b) Costs of an indirect function which exists for only a part of a
cost accounting period may be allocated to cost objectives of that same
part of the period.
(c) An annual period other than the fiscal year may be used as the
cost accounting period if its use is an established practice of the
educational institution.
(d) A transitional cost accounting period other than a year shall be
used whenever a change of fiscal year occurs.
(e) An educational institution shall follow consistent practices in
the selection of the cost accounting period or periods in which any
types of expense and any types of adjustment to expense (including
prior-period adjustments) are accumulated and allocated.
(f) The same cost accounting period shall be used for accumulating
costs in an indirect cost pool as for establishing its allocation base,
except that the contracting parties may agree to use a different period
for establishing an allocation base.
4. Techniques for Application
(a) The cost of an indirect function which exists for only a part of
a cost accounting period may be allocated on the basis of data for that
part of the cost accounting period if the cost is material in amount,
accumulated in a separate indirect cost pool or expense pool, and
allocated on the basis of an appropriate direct measure of the activity
or output of the function during that part of the period.
(b) The practices required by this standard shall include
appropriate practices for deferrals, accruals, and other adjustments to
be used in identifying the cost accounting periods among which any types
of expense and any types of adjustment to expense are distributed. If an
expense, such as insurance or employee leave, is identified with a
fixed, recurring, annual period which is different from the educational
institution's cost accounting period, the standard permits continued use
of that different period. Such expenses shall be distributed to cost
accounting periods in accordance with the educational institution's
established practices for accruals, deferrals, and other adjustments.
(c) Indirect cost allocation rates, based on estimates, which are
used for the purpose of expediting the closing of sponsored agreements
which are terminated or completed prior to the end of a cost accounting
period need not be those finally determined or negotiated for that cost
accounting period. They shall, however, be developed to represent a full
cost accounting period, except as provided in paragraph (a) of this
subsection.
(d) An educational institution may, upon mutual agreement with the
Government, use as its cost accounting period a fixed annual period
other than its fiscal year, if the use of such a period is an
established practice of the educational institution and is consistently
used for managing and controlling revenues and disbursements, and
appropriate accruals, deferrals or other adjustments are made with
respect to such annual periods.
(e) The parties may agree to use an annual period which does not
coincide precisely with the cost accounting period for developing the
data used in establishing an allocation base: Provided,
(1) The practice is necessary to obtain significant administrative
convenience,
(2) The practice is consistently followed by the educational
institution,
(3) The annual period used is representative of the activity of the
cost accounting period for which the indirect costs to be allocated are
accumulated, and
(4) The practice can reasonably be estimated to provide a
distribution to cost objectives of the cost accounting period not
materially different from that which otherwise would be obtained.
(f) When a transitional cost accounting period is required,
educational institution may select any one of the following: the period,
less than a year in length, extending from the end of its previous cost
accounting period to the beginning of its next regular cost accounting
period, a period in excess of a year, but not longer than 15 months,
obtained by combining the period described in subparagraph (f)(1) of
this subsection with the previous cost accounting period, or a period in
excess of a year, but not longer than
[[Page 115]]
15 months, obtained by combining the period described in subparagraph
(f)(1) of this subsection with the next regular cost accounting period.
A change in the educational institution's cost accounting period is a
change in accounting practices for which an adjustment in the sponsored
agreement price may be required.
5. Illustrations
(a) An educational institution allocates indirect expenses for
Organized Research on the basis of a modified total direct cost base. In
a proposal for a sponsored agreement, it estimates the allocable
expenses based solely on the estimated amount of indirect costs
allocated to Organized Research and the amount of the modified total
direct cost base estimated to be incurred during the 8 months in which
performance is scheduled to be commenced and completed. Such a proposal
would be in violation of the requirements of this standard that the
calculation of the amounts of both the indirect cost pools and the
allocation bases be based on the educational institution's cost
accounting period.
(b) An educational institution whose cost accounting period is the
calendar year, installs a computer service center to begin operations on
May 1. The operating expense related to the new service center is
expected to be material in amount, will be accumulated in an
intermediate cost objective, and will be allocated to the benefitting
cost objectives on the basis of measured usage. The total operating
expenses of the computer service center for the 8-month part of the cost
accounting period may be allocated to the benefitting cost objectives of
that same 8-month period.
(c) An educational institution changes its fiscal year from a
calendar year to the 12-month period ending May 31. For financial
reporting purposes, it has a 5-month transitional ``fiscal year.'' The
same 5-month period must be used as the transitional cost accounting
period; it may not be combined, because the transitional period would be
longer than 15 months. The new fiscal year must be adopted thereafter as
its regular cost accounting period. The change in its cost accounting
period is a change in accounting practices; adjustments of the sponsored
agreement prices may thereafter be required.
(d) Financial reports are prepared on a calendar year basis on a
university-wide basis. However, the contracting segment does all
internal financial planning, budgeting, and internal reporting on the
basis of a twelve month period ended June 30. The contracting parties
agree to use the period ended June 30 and they agree to overhead rates
on the June 30 basis. They also agree on a technique for prorating
fiscal year assignment of the university's central system office
expenses between such June 30 periods. This practice is permitted by the
standard.
(e) Most financial accounts and sponsored agreement cost records are
maintained on the basis of a fiscal year which ends November 30 each
year. However, employee vacation allowances are regularly managed on the
basis of a ``vacation year'' which ends September 30 each year. Vacation
expenses are estimated uniformly during each ``vacation year.''
Adjustments are made each October to adjust the accrued liability to
actual, and the estimating rates are modified to the extent deemed
appropriate. This use of a separate annual period for determining the
amounts of vacation expense is permitted.
Attachment B to Appendix A--CASB's Disclosure Statement (DS-2) is
available on the OMB Web site at http://www.whitehouse.gov/omb/grants/
a21-appx--b.pdf
Attachment C to Appendix A--Documentation Requirements for
Facilities and Administrative (F&A) Rate Proposals is available on the
OMB Web site at http://www.whitehouse.gov/omb/grants/a21-appx--c.pdf
PARTS 221-224 [RESERVED]
PART 225_COST PRINCIPLES FOR STATE, LOCAL, AND INDIAN TRIBAL GOVERNMENTS (OMB
CIRCULAR A-87)--Table of Contents
Sec.
225.5 Purpose.
225.10 Authority
225.15 Background
225.20 Policy.
225.25 Definitions.
225.30 OMB responsibilities.
225.35 Federal agency responsibilities.
225.40 Effective date of changes.
225.45 Relationship to previous issuance.
225.50 Policy review date.
225.55 Information Contact.
Appendix A to Part 225--General Principles for Determining Allowable
Costs
Appendix B to Part 225--Selected Items of Cost
Appendix C to Part 225--State/Local-Wide Central Service Cost Allocation
Plans
Appendix D to Part 225--Public Assistance Cost Allocation Plans
Appendix E to Part 225--State and Local Indirect Cost Rate Proposals
Authority: 31 U.S.C. 503; 31 U.S.C. 1111; 41 U.S.C. 405;
Reorganization Plan No. 2 of 1970; E.O. 11541, 35 FR 10737, 3 CFR, 1966-
1970, p. 939.
Source: 70 FR 51910, Aug. 31, 2005, unless otherwise noted.
[[Page 116]]
Sec. 225.5 Purpose.
This part establishes principles and standards for determining costs
for Federal awards carried out through grants, cost reimbursement
contracts, and other agreements with State and local governments and
federally-recognized Indian tribal governments (governmental units).
Sec. 225.10 Authority.
This part is issued under the authority of the Budget and Accounting
Act of 1921, as amended; the Budget and Accounting Procedures Act of
1950, as amended; the Chief Financial Officers Act of 1990;
Reorganization Plan No. 2 of 1970; and Executive Order No. 11541
(``Prescribing the Duties of the Office of Management and Budget and the
Domestic Policy Council in the Executive Office of the President'').
Sec. 225.15 Background.
As part of the government-wide grant streamlining effort under
Public Law 106-107, Federal Financial Award Management Improvement Act
of 1999, OMB led an interagency workgroup to simplify and make
consistent, to the extent feasible, the various rules used to award
Federal grants. An interagency task force was established in 2001 to
review existing cost principles for Federal awards to State, local, and
Indian tribal governments; colleges and universities; and non-profit
organizations. The task force studied ``Selected Items of Cost'' in each
of the three cost principles to determine which items of costs could be
stated consistently and/or more clearly.
Sec. 225.20 Policy.
This part establishes principles and standards to provide a uniform
approach for determining costs and to promote effective program
delivery, efficiency, and better relationships between governmental
units and the Federal Government. The principles are for determining
allowable costs only. They are not intended to identify the
circumstances or to dictate the extent of Federal and governmental unit
participation in the financing of a particular Federal award. Provision
for profit or other increment above cost is outside the scope of this
part.
Sec. 225.25 Definitions.
Definitions of key terms used in this part are contained in Appendix
A to this part, Section B.
Sec. 225.30 OMB responsibilities.
The Office of Management and Budget (OMB) will review agency
regulations and implementation of this part, and will provide policy
interpretations and assistance to insure effective and efficient
implementation. Any exceptions will be subject to approval by OMB.
Exceptions will only be made in particular cases where adequate
justification is presented.
Sec. 225.35 Federal agency responsibilities.
Agencies responsible for administering programs that involve cost
reimbursement contracts, grants, and other agreements with governmental
units shall issue regulations to implement the provisions of this part
and its appendices.
Sec. 225.40 Effective date of changes.
This part is effective August 31, 2005.
Sec. 225.45 Relationship to previous issuance.
(a) The guidance in this part previously was issued as OMB Circular
A-87. Appendix A to this part contains the guidance that was in
Attachment A (general principles) to the OMB circular; Appendix B
contains the guidance that was in Attachment B (selected items of cost);
Appendix C contains the information that was in Attachment C (state/
local-wide central service cost allocation plans); Appendix D contains
the guidance that was in Attachment D (public assistance cost allocation
plans); and Appendix E contains the guidance that was in Attachment E
(state and local indirect cost rate proposals).
(b) This part supersedes OMB Circular A-87, as amended May 10, 2004,
which superseded Circular A-87, as amended and issued May 4, 1995.
[[Page 117]]
Sec. 225.50 Policy review date.
This part will have a policy review three years from the date of
issuance.
Sec. 225.55 Information contact.
Further information concerning this part may be obtained by
contacting the Office of Federal Financial Management, Financial
Standards and Reporting Branch, Office of Management and Budget,
Washington, DC 20503, telephone 202-395-3993.
Appendix A to Part 225--General Principles for Determining Allowable
Costs
Table of Contents
A. Purpose and Scope
1. Objectives
2. Policy guides
3. Application
B. Definitions
1. Approval or authorization of the awarding or cognizant Federal agency
2. Award
3. Awarding agency
4. Central service cost allocation plan
5. Claim
6. Cognizant agency
7. Common rule
8. Contract
9. Cost
10. Cost allocation plan
11. Cost objective
12. Federally-recognized Indian tribal government
13. Governmental unit
14. Grantee department or agency
15. Indirect cost rate proposal
16. Local government
17. Public assistance cost allocation plan
18. State
C. Basic Guidelines
1. Factors affecting allowability of costs
2. Reasonable costs
3. Allocable costs
4. Applicable credits
D. Composition of Cost
1. Total cost
2. Classification of costs
E. Direct Costs
1. General
2. Application
3. Minor items
F. Indirect Costs
1. General
2. Cost allocation plans and indirect cost proposals
3. Limitation on indirect or administrative costs
G. Interagency Services
H. Required Certifications
General Principles for Determining Allowable Costs
A. Purpose and Scope
1. Objectives. This Appendix establishes principles for determining
the allowable costs incurred by State, local, and federally-recognized
Indian tribal governments (governmental units) under grants, cost
reimbursement contracts, and other agreements with the Federal
Government (collectively referred to in this appendix and other
appendices to 2 CFR part 225 as ``Federal awards''). The principles are
for the purpose of cost determination and are not intended to identify
the circumstances or dictate the extent of Federal or governmental unit
participation in the financing of a particular program or project. The
principles are designed to provide that Federal awards bear their fair
share of cost recognized under these principles except where restricted
or prohibited by law. Provision for profit or other increment above cost
is outside the scope of 2 CFR part 225.
2. Policy guides.
a. The application of these principles is based on the fundamental
premises that:
(1) Governmental units are responsible for the efficient and
effective administration of Federal awards through the application of
sound management practices.
(2) Governmental units assume responsibility for administering
Federal funds in a manner consistent with underlying agreements, program
objectives, and the terms and conditions of the Federal award.
(3) Each governmental unit, in recognition of its own unique
combination of staff, facilities, and experience, will have the primary
responsibility for employing whatever form of organization and
management techniques may be necessary to assure proper and efficient
administration of Federal awards.
b. Federal agencies should work with States or localities which wish
to test alternative mechanisms for paying costs for administering
Federal programs. The Office of Management and Budget (OMB) encourages
Federal agencies to test fee-for-service alternatives as a replacement
for current cost-reimbursement payment methods in response to the
National Performance Review's (NPR) recommendation. The NPR recommended
the fee-for-service approach to reduce the burden associated with
maintaining systems for charging administrative costs to Federal
programs and preparing and approving cost allocation plans. This
approach should also increase incentives for administrative efficiencies
and improve outcomes.
3. Application.
a. These principles will be applied by all Federal agencies in
determining costs incurred by governmental units under Federal awards
(including subawards) except those with (1) publicly-financed
educational institutions subject to, 2 CFR part 220, Cost Principles for
Educational Institutions (OMB Circular A-21), and (2) programs
administered
[[Page 118]]
by publicly-owned hospitals and other providers of medical care that are
subject to requirements promulgated by the sponsoring Federal agencies.
However, 2 CFR part 225 does apply to all central service and
department/agency costs that are allocated or billed to those
educational institutions, hospitals, and other providers of medical care
or services by other State and local government departments and
agencies.
b. All subawards are subject to those Federal cost principles
applicable to the particular organization concerned. Thus, if a subaward
is to a governmental unit (other than a college, university or
hospital), 2 CFR part 225 shall apply; if a subaward is to a commercial
organization, the cost principles applicable to commercial organizations
shall apply; if a subaward is to a college or university, 2 CFR part 220
(Circular A-21) shall apply; if a subaward is to a hospital, the cost
principles used by the Federal awarding agency for awards to hospitals
shall apply, subject to the provisions of subsection A.3.a. of this
Appendix; if a subaward is to some other non-profit organization, 2 CFR
part 230, Cost Principles for Non-Profit Organizations (Circular A-122),
shall apply.
c. These principles shall be used as a guide in the pricing of fixed
price arrangements where costs are used in determining the appropriate
price.
d. Where a Federal contract awarded to a governmental unit
incorporates a Cost Accounting Standards (CAS) clause, the requirements
of that clause shall apply. In such cases, the governmental unit and the
cognizant Federal agency shall establish an appropriate advance
agreement on how the governmental unit will comply with applicable CAS
requirements when estimating, accumulating and reporting costs under
CAS-covered contracts. The agreement shall indicate that 2 CFR part 225
(OMB Circular A-87) requirements will be applied to other Federal
awards. In all cases, only one set of records needs to be maintained by
the governmental unit.
e. Conditional exemptions.
(1) OMB authorizes conditional exemption from OMB administrative
requirements and cost principles for certain Federal programs with
statutorily-authorized consolidated planning and consolidated
administrative funding, that are identified by a Federal agency and
approved by the head of the Executive department or establishment. A
Federal agency shall consult with OMB during its consideration of
whether to grant such an exemption.
(2) To promote efficiency in State and local program administration,
when Federal non-entitlement programs with common purposes have specific
statutorily-authorized consolidated planning and consolidated
administrative funding and where most of the State agency's resources
come from non-Federal sources, Federal agencies may exempt these covered
State-administered, non-entitlement grant programs from certain OMB
grants management requirements. The exemptions would be from all but the
allocability of costs provisions of Appendix A subsection C.3 of 2 CFR
part 225, Cost Principles for State, Local, and Indian Tribal
Governments (OMB Circular A-87); Appendix A, Section C.4 of 2 CFR 220,
Cost Principles for Educational Institutions (Circular A-21); Appendix
A, subsection A.4 of 2 CFR 230 Cost Principles for Non-Profit
Organizations (Circular A-122); and from all of the administrative
requirements provisions of 2 CFR part 215, Uniform Administrative
Requirements for Grants and Agreements with Institutions of Higher
Education, Hospitals, and Other Non-Profit Organizations (Circular A-
110), and the agencies' grants management common rule.
(3) When a Federal agency provides this flexibility, as a
prerequisite to a State's exercising this option, a State must adopt its
own written fiscal and administrative requirements for expending and
accounting for all funds, which are consistent with the provisions of 2
CFR part 225 (OMB Circular A-87), and extend such policies to all
subrecipients. These fiscal and administrative requirements must be
sufficiently specific to ensure that: Funds are used in compliance with
all applicable Federal statutory and regulatory provisions, costs are
reasonable and necessary for operating these programs, and funds are not
used for general expenses required to carry out other responsibilities
of a State or its subrecipients.
B. Definitions
1. ``Approval or authorization of the awarding or cognizant Federal
agency'' means documentation evidencing consent prior to incurring a
specific cost. If such costs are specifically identified in a Federal
award document, approval of the document constitutes approval of the
costs. If the costs are covered by a State/local-wide cost allocation
plan or an indirect cost proposal, approval of the plan constitutes the
approval.
2. ``Award'' means grants, cost reimbursement contracts and other
agreements between a State, local and Indian tribal government and the
Federal Government.
3. ``Awarding agency'' means (a) with respect to a grant,
cooperative agreement, or cost reimbursement contract, the Federal
agency, and (b) with respect to a subaward, the party that awarded the
subaward.
4. ``Central service cost allocation plan'' means the documentation
identifying, accumulating, and allocating or developing billing rates
based on the allowable costs of services provided by a governmental unit
on a centralized basis to its departments and agencies. The costs of
these services may be allocated or billed to users.
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5. ``Claim'' means a written demand or written assertion by the
governmental unit or grantor seeking, as a matter of right, the payment
of money in a sum certain, the adjustment or interpretation of award
terms, or other relief arising under or relating to the award. A
voucher, invoice or other routine request for payment that is not a
dispute when submitted is not a claim. Appeals, such as those filed by a
governmental unit in response to questioned audit costs, are not
considered claims until a final management decision is made by the
Federal awarding agency.
6. ``Cognizant agency'' means the Federal agency responsible for
reviewing, negotiating, and approving cost allocation plans or indirect
cost proposals developed under 2 CFR part 225 on behalf of all Federal
agencies. OMB publishes a listing of cognizant agencies.
7. ``Common Rule'' means the ``Uniform Administrative Requirements
for Grants and Cooperative Agreements to State and Local Governments;
Final Rule'' originally issued at 53 FR 8034-8103 (March 11, 1988).
Other common rules will be referred to by their specific titles.
8. ``Contract'' means a mutually binding legal relationship
obligating the seller to furnish the supplies or services (including
construction) and the buyer to pay for them. It includes all types of
commitments that obligate the government to an expenditure of
appropriated funds and that, except as otherwise authorized, are in
writing. In addition to bilateral instruments, contracts include (but
are not limited to): Awards and notices of awards; job orders or task
orders issued under basic ordering agreements; letter contracts; orders,
such as purchase orders, under which the contract becomes effective by
written acceptance or performance; and, bilateral contract
modifications. Contracts do not include grants and cooperative
agreements covered by 31 U.S.C. 6301 et seq.
9. ``Cost'' means an amount as determined on a cash, accrual, or
other basis acceptable to the Federal awarding or cognizant agency. It
does not include transfers to a general or similar fund.
10. ``Cost allocation plan'' means central service cost allocation
plan, public assistance cost allocation plan, and indirect cost rate
proposal. Each of these terms is further defined in this section.
11. ``Cost objective'' means a function, organizational subdivision,
contract, grant, or other activity for which cost data are needed and
for which costs are incurred.
12. ``Federally-recognized Indian tribal government'' means the
governing body or a governmental agency of any Indian tribe, band,
nation, or other organized group or community (including any native
village as defined in Section 3 of the Alaska Native Claims Settlement
Act, 85 Stat. 688) certified by the Secretary of the Interior as
eligible for the special programs and services provided through the
Bureau of Indian Affairs.
13. ``Governmental unit'' means the entire State, local, or
federally-recognized Indian tribal government, including any component
thereof. Components of governmental units may function independently of
the governmental unit in accordance with the term of the award.
14. ``Grantee department or agency'' means the component of a State,
local, or federally-recognized Indian tribal government which is
responsible for the performance or administration of all or some part of
a Federal award.
15. ``Indirect cost rate proposal'' means the documentation prepared
by a governmental unit or component thereof to substantiate its request
for the establishment of an indirect cost rate as described in Appendix
E of 2 CFR part 225.
16. ``Local government'' means a county, municipality, city, town,
township, local public authority, school district, special district,
intrastate district, council of governments (whether or not incorporated
as a non-profit corporation under State law), any other regional or
interstate government entity, or any agency or instrumentality of a
local government.
17. ``Public assistance cost allocation plan'' means a narrative
description of the procedures that will be used in identifying,
measuring and allocating all administrative costs to all of the programs
administered or supervised by State public assistance agencies as
described in Appendix D of 2 CFR part 225.
18. ``State'' means any of the several States of the United States,
the District of Columbia, the Commonwealth of Puerto Rico, any territory
or possession of the United States, or any agency or instrumentality of
a State exclusive of local governments.
C. Basic Guidelines
1. Factors affecting allowability of costs. To be allowable under
Federal awards, costs must meet the following general criteria:
a. Be necessary and reasonable for proper and efficient performance
and administration of Federal awards.
b. Be allocable to Federal awards under the provisions of 2 CFR part
225.
c. Be authorized or not prohibited under State or local laws or
regulations.
d. Conform to any limitations or exclusions set forth in these
principles, Federal laws, terms and conditions of the Federal award, or
other governing regulations as to types or amounts of cost items.
e. Be consistent with policies, regulations, and procedures that
apply uniformly to both Federal awards and other activities of the
governmental unit.
f. Be accorded consistent treatment. A cost may not be assigned to a
Federal award as a
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direct cost if any other cost incurred for the same purpose in like
circumstances has been allocated to the Federal award as an indirect
cost.
g. Except as otherwise provided for in 2 CFR part 225, be determined
in accordance with generally accepted accounting principles.
h. Not be included as a cost or used to meet cost sharing or
matching requirements of any other Federal award in either the current
or a prior period, except as specifically provided by Federal law or
regulation.
i. Be the net of all applicable credits.
j. Be adequately documented.
2. Reasonable costs. A cost is reasonable if, in its nature and
amount, it does not exceed that which would be incurred by a prudent
person under the circumstances prevailing at the time the decision was
made to incur the cost. The question of reasonableness is particularly
important when governmental units or components are predominately
federally-funded. In determining reasonableness of a given cost,
consideration shall be given to:
a. Whether the cost is of a type generally recognized as ordinary
and necessary for the operation of the governmental unit or the
performance of the Federal award.
b. The restraints or requirements imposed by such factors as: Sound
business practices; arm's-length bargaining; Federal, State and other
laws and regulations; and, terms and conditions of the Federal award.
c. Market prices for comparable goods or services.
d. Whether the individuals concerned acted with prudence in the
circumstances considering their responsibilities to the governmental
unit, its employees, the public at large, and the Federal Government.
e. Significant deviations from the established practices of the
governmental unit which may unjustifiably increase the Federal award's
cost.
3. Allocable costs.
a. A cost is allocable to a particular cost objective if the goods
or services involved are chargeable or assignable to such cost objective
in accordance with relative benefits received.
b. All activities which benefit from the governmental unit's
indirect cost, including unallowable activities and services donated to
the governmental unit by third parties, will receive an appropriate
allocation of indirect costs.
c. Any cost allocable to a particular Federal award or cost
objective under the principles provided for in 2 CFR part 225 may not be
charged to other Federal awards to overcome fund deficiencies, to avoid
restrictions imposed by law or terms of the Federal awards, or for other
reasons.
d. Where an accumulation of indirect costs will ultimately result in
charges to a Federal award, a cost allocation plan will be required as
described in Appendices C, D, and E to this part.
4. Applicable credits.
a. Applicable credits refer to those receipts or reduction of
expenditure-type transactions that offset or reduce expense items
allocable to Federal awards as direct or indirect costs. Examples of
such transactions are: Purchase discounts, rebates or allowances,
recoveries or indemnities on losses, insurance refunds or rebates, and
adjustments of overpayments or erroneous charges. To the extent that
such credits accruing to or received by the governmental unit relate to
allowable costs, they shall be credited to the Federal award either as a
cost reduction or cash refund, as appropriate.
b. In some instances, the amounts received from the Federal
Government to finance activities or service operations of the
governmental unit should be treated as applicable credits. Specifically,
the concept of netting such credit items (including any amounts used to
meet cost sharing or matching requirements) should be recognized in
determining the rates or amounts to be charged to Federal awards. (See
Appendix B to this part, item 11, ``Depreciation and use allowances,''
for areas of potential application in the matter of Federal financing of
activities.)
D. Composition of Cost
1. Total cost. The total cost of Federal awards is comprised of the
allowable direct cost of the program, plus its allocable portion of
allowable indirect costs, less applicable credits.
2. Classification of costs. There is no universal rule for
classifying certain costs as either direct or indirect under every
accounting system. A cost may be direct with respect to some specific
service or function, but indirect with respect to the Federal award or
other final cost objective. Therefore, it is essential that each item of
cost be treated consistently in like circumstances either as a direct or
an indirect cost. Guidelines for determining direct and indirect costs
charged to Federal awards are provided in the sections that follow.
E. Direct Costs
1. General. Direct costs are those that can be identified
specifically with a particular final cost objective.
2. Application. Typical direct costs chargeable to Federal awards
are:
a. Compensation of employees for the time devoted and identified
specifically to the performance of those awards.
b. Cost of materials acquired, consumed, or expended specifically
for the purpose of those awards.
c. Equipment and other approved capital expenditures.
d. Travel expenses incurred specifically to carry out the award.
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3. Minor items. Any direct cost of a minor amount may be treated as
an indirect cost for reasons of practicality where such accounting
treatment for that item of cost is consistently applied to all cost
objectives.
F. Indirect Costs
1. General. Indirect costs are those: Incurred for a common or joint
purpose benefiting more than one cost objective, and not readily
assignable to the cost objectives specifically benefitted, without
effort disproportionate to the results achieved. The term ``indirect
costs,'' as used herein, applies to costs of this type originating in
the grantee department, as well as those incurred by other departments
in supplying goods, services, and facilities. To facilitate equitable
distribution of indirect expenses to the cost objectives served, it may
be necessary to establish a number of pools of indirect costs within a
governmental unit department or in other agencies providing services to
a governmental unit department. Indirect cost pools should be
distributed to benefitted cost objectives on bases that will produce an
equitable result in consideration of relative benefits derived.
2. Cost allocation plans and indirect cost proposals. Requirements
for development and submission of cost allocation plans and indirect
cost rate proposals are contained in Appendices C, D, and E to this
part.
3. Limitation on indirect or administrative costs.
a. In addition to restrictions contained in 2 CFR part 225, there
may be laws that further limit the amount of administrative or indirect
cost allowed.
b. Amounts not recoverable as indirect costs or administrative costs
under one Federal award may not be shifted to another Federal award,
unless specifically authorized by Federal legislation or regulation.
G. Interagency Services. The cost of services provided by one agency
to another within the governmental unit may include allowable direct
costs of the service plus a pro rate share of indirect costs. A standard
indirect cost allowance equal to ten percent of the direct salary and
wage cost of providing the service (excluding overtime, shift premiums,
and fringe benefits) may be used in lieu of determining the actual
indirect costs of the service. These services do not include centralized
services included in central service cost allocation plans as described
in Appendix C to this part.
H. Required Certifications. Each cost allocation plan or indirect
cost rate proposal required by Appendices C and E to this part must
comply with the following:
1. No proposal to establish a cost allocation plan or an indirect
cost rate, whether submitted to a Federal cognizant agency or maintained
on file by the governmental unit, shall be acceptable unless such costs
have been certified by the governmental unit using the Certificate of
Cost Allocation Plan or Certificate of Indirect Costs as set forth in
Appendices C and E to this part. The certificate must be signed on
behalf of the governmental unit by an individual at a level no lower
than chief financial officer of the governmental unit that submits the
proposal or component covered by the proposal.
2. No cost allocation plan or indirect cost rate shall be approved
by the Federal Government unless the plan or rate proposal has been
certified. Where it is necessary to establish a cost allocation plan or
an indirect cost rate and the governmental unit has not submitted a
certified proposal for establishing such a plan or rate in accordance
with the requirements, the Federal Government may either disallow all
indirect costs or unilaterally establish such a plan or rate. Such a
plan or rate may be based upon audited historical data or such other
data that have been furnished to the cognizant Federal agency and for
which it can be demonstrated that all unallowable costs have been
excluded. When a cost allocation plan or indirect cost rate is
unilaterally established by the Federal Government because of failure of
the governmental unit to submit a certified proposal, the plan or rate
established will be set to ensure that potentially unallowable costs
will not be reimbursed.
Appendix B to Part 225--Selected Items of Cost
Table of Contents
1. Advertising and public relations costs
2. Advisory councils
3. Alcoholic beverages
4. Audit costs and related services
5. Bad debts
6. Bonding costs
7. Communication costs
8. Compensation for personal services
9. Contingency provisions
10. Defense and prosecution of criminal and civil proceedings, and
claims
11. Depreciation and use allowances
12. Donations and contributions
13. Employee morale, health, and welfare costs
14. Entertainment costs
15. Equipment and other capital expenditures
16. Fines and penalties
17. Fund raising and investment management costs
18. Gains and losses on disposition of depreciable property and other
capital assets and substantial relocation of Federal programs
19. General government expenses
20. Goods or services for personal use
21. Idle facilities and idle capacity
22. Insurance and indemnification
23. Interest
24. Lobbying
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25. Maintenance, operations, and repairs
26. Materials and supplies costs
27. Meetings and conferences
28. Memberships, subscriptions, and professional activity costs
29. Patent costs
30. Plant and homeland security costs
31. Pre-award costs
32. Professional service costs
33. Proposal costs
34. Publication and printing costs
35. Rearrangement and alteration costs
36. Reconversion costs
37. Rental costs of building and equipment
38. Royalties and other costs for the use of patents
39. Selling and marketing
40. Taxes
41. Termination costs applicable to sponsored agreements
42. Training costs
43. Travel costs
Sections 1 through 43 provide principles to be applied in
establishing the allowability or unallowability of certain items of
cost. These principles apply whether a cost is treated as direct or
indirect. A cost is allowable for Federal reimbursement only to the
extent of benefits received by Federal awards and its conformance with
the general policies and principles stated in Appendix A to this part.
Failure to mention a particular item of cost in these sections is not
intended to imply that it is either allowable or unallowable; rather,
determination of allowability in each case should be based on the
treatment or standards provided for similar or related items of cost.
1. Advertising and public relations costs.
a. The term advertising costs means the costs of advertising media
and corollary administrative costs. Advertising media include magazines,
newspapers, radio and television, direct mail, exhibits, electronic or
computer transmittals, and the like.
b. The term public relations includes community relations and means
those activities dedicated to maintaining the image of the governmental
unit or maintaining or promoting understanding and favorable relations
with the community or public at large or any segment of the public.
c. The only allowable advertising costs are those which are solely
for:
(1) The recruitment of personnel required for the performance by the
governmental unit of obligations arising under a Federal award;
(2) The procurement of goods and services for the performance of a
Federal award;
(3) The disposal of scrap or surplus materials acquired in the
performance of a Federal award except when governmental units are
reimbursed for disposal costs at a predetermined amount; or
(4) Other specific purposes necessary to meet the requirements of
the Federal award.
d. The only allowable public relations costs are:
(1) Costs specifically required by the Federal award;
(2) Costs of communicating with the public and press pertaining to
specific activities or accomplishments which result from performance of
Federal awards (these costs are considered necessary as part of the
outreach effort for the Federal award); or
(3) Costs of conducting general liaison with news media and
government public relations officers, to the extent that such activities
are limited to communication and liaison necessary keep the public
informed on matters of public concern, such as notices of Federal
contract/grant awards, financial matters, etc.
e. Costs identified in subsections c and d if incurred for more than
one Federal award or for both sponsored work and other work of the
governmental unit, are allowable to the extent that the principles in
Appendix A to this part, sections E. (``Direct Costs'') and F.
(``Indirect Costs'') are observed.
f. Unallowable advertising and public relations costs include the
following:
(1) All advertising and public relations costs other than as
specified in subsections 1.c, d, and e of this appendix;
(2) Costs of meetings, conventions, convocations, or other events
related to other activities of the governmental unit, including:
(a) Costs of displays, demonstrations, and exhibits;
(b) Costs of meeting rooms, hospitality suites, and other special
facilities used in conjunction with shows and other special events; and
(c) Salaries and wages of employees engaged in setting up and
displaying exhibits, making demonstrations, and providing briefings;
(3) Costs of promotional items and memorabilia, including models,
gifts, and souvenirs;
(4) Costs of advertising and public relations designed solely to
promote the governmental unit.
2. Advisory councils. Costs incurred by advisory councils or
committees are allowable as a direct cost where authorized by the
Federal awarding agency or as an indirect cost where allocable to
Federal awards.
3. Alcoholic beverages. Costs of alcoholic beverages are
unallowable.
4. Audit costs and related services.
a. The costs of audits required by , and performed in accordance
with, the Single Audit Act, as implemented by Circular A-133, ``Audits
of States, Local Governments, and Non-Profit Organizations'' are
allowable. Also see 31 U.S.C. 7505(b) and section 230 (``Audit Costs'')
of Circular A-133.
b. Other audit costs are allowable if included in a cost allocation
plan or indirect
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cost proposal, or if specifically approved by the awarding agency as a
direct cost to an award.
c. The cost of agreed-upon procedures engagements to monitor
subrecipients who are exempted from A-133 under section 200(d) are
allowable, subject to the conditions listed in A-133, section 230
(b)(2).
5. Bad debts. Bad debts, including losses (whether actual or
estimated) arising from uncollectable accounts and other claims, related
collection costs, and related legal costs, are unallowable.
6. Bonding costs.
a. Bonding costs arise when the Federal Government requires
assurance against financial loss to itself or others by reason of the
act or default of the governmental unit. They arise also in instances
where the governmental unit requires similar assurance. Included are
such bonds as bid, performance, payment, advance payment, infringement,
and fidelity bonds.
b. Costs of bonding required pursuant to the terms of the award are
allowable.
c. Costs of bonding required by the governmental unit in the general
conduct of its operations are allowable to the extent that such bonding
is in accordance with sound business practice and the rates and premiums
are reasonable under the circumstances.
7. Communication costs. Costs incurred for telephone services, local
and long distance telephone calls, telegrams, postage, messenger,
electronic or computer transmittal services and the like are allowable.
8. Compensation for personal services.
a. General. Compensation for personnel services includes all
remuneration, paid currently or accrued, for services rendered during
the period of performance under Federal awards, including but not
necessarily limited to wages, salaries, and fringe benefits. The costs
of such compensation are allowable to the extent that they satisfy the
specific requirements of this and other appendices under 2 CFR Part 225,
and that the total compensation for individual employees:
(1) Is reasonable for the services rendered and conforms to the
established policy of the governmental unit consistently applied to both
Federal and non-Federal activities;
(2) Follows an appointment made in accordance with a governmental
unit's laws and rules and meets merit system or other requirements
required by Federal law, where applicable; and
(3) Is determined and supported as provided in subsection h.
b. Reasonableness. Compensation for employees engaged in work on
Federal awards will be considered reasonable to the extent that it is
consistent with that paid for similar work in other activities of the
governmental unit. In cases where the kinds of employees required for
Federal awards are not found in the other activities of the governmental
unit, compensation will be considered reasonable to the extent that it
is comparable to that paid for similar work in the labor market in which
the employing government competes for the kind of employees involved.
Compensation surveys providing data representative of the labor market
involved will be an acceptable basis for evaluating reasonableness.
c. Unallowable costs. Costs which are unallowable under other
sections of these principles shall not be allowable under this section
solely on the basis that they constitute personnel compensation.
d. Fringe benefits.
(1) Fringe benefits are allowances and services provided by
employers to their employees as compensation in addition to regular
salaries and wages. Fringe benefits include, but are not limited to, the
costs of leave, employee insurance, pensions, and unemployment benefit
plans. Except as provided elsewhere in these principles, the costs of
fringe benefits are allowable to the extent that the benefits are
reasonable and are required by law, governmental unit-employee
agreement, or an established policy of the governmental unit.
(2) The cost of fringe benefits in the form of regular compensation
paid to employees during periods of authorized absences from the job,
such as for annual leave, sick leave, holidays, court leave, military
leave, and other similar benefits, are allowable if: They are provided
under established written leave policies; the costs are equitably
allocated to all related activities, including Federal awards; and, the
accounting basis (cash or accrual) selected for costing each type of
leave is consistently followed by the governmental unit.
(3) When a governmental unit uses the cash basis of accounting, the
cost of leave is recognized in the period that the leave is taken and
paid for. Payments for unused leave when an employee retires or
terminates employment are allowable in the year of payment provided they
are allocated as a general administrative expense to all activities of
the governmental unit or component.
(4) The accrual basis may be only used for those types of leave for
which a liability as defined by Generally Accepted Accounting Principles
(GAAP) exists when the leave is earned. When a governmental unit uses
the accrual basis of accounting, in accordance with GAAP, allowable
leave costs are the lesser of the amount accrued or funded.
(5) The cost of fringe benefits in the form of employer
contributions or expenses for social security; employee life, health,
unemployment, and worker's compensation insurance (except as indicated
in section 22, Insurance and indemnification); pension plan costs (see
subsection e.); and other similar
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benefits are allowable, provided such benefits are granted under
established written policies. Such benefits, whether treated as indirect
costs or as direct costs, shall be allocated to Federal awards and all
other activities in a manner consistent with the pattern of benefits
attributable to the individuals or group(s) of employees whose salaries
and wages are chargeable to such Federal awards and other activities.
e. Pension plan costs. Pension plan costs may be computed using a
pay-as-you-go method or an acceptable actuarial cost method in
accordance with established written policies of the governmental unit.
(1) For pension plans financed on a pay-as-you-go method, allowable
costs will be limited to those representing actual payments to retirees
or their beneficiaries.
(2) Pension costs calculated using an actuarial cost-based method
recognized by GAAP are allowable for a given fiscal year if they are
funded for that year within six months after the end of that year. Costs
funded after the six month period (or a later period agreed to by the
cognizant agency) are allowable in the year funded. The cognizant agency
may agree to an extension of the six month period if an appropriate
adjustment is made to compensate for the timing of the charges to the
Federal Government and related Federal reimbursement and the
governmental unit's contribution to the pension fund. Adjustments may be
made by cash refund or other equitable procedures to compensate the
Federal Government for the time value of Federal reimbursements in
excess of contributions to the pension fund.
(3) Amounts funded by the governmental unit in excess of the
actuarially determined amount for a fiscal year may be used as the
governmental unit's contribution in future periods.
(4) When a governmental unit converts to an acceptable actuarial
cost method, as defined by GAAP, and funds pension costs in accordance
with this method, the unfunded liability at the time of conversion shall
be allowable if amortized over a period of years in accordance with
GAAP.
(5) The Federal Government shall receive an equitable share of any
previously allowed pension costs (including earnings thereon) which
revert or inure to the governmental unit in the form of a refund,
withdrawal, or other credit.
f. Post-retirement health benefits. Post-retirement health benefits
(PRHB) refers to costs of health insurance or health services not
included in a pension plan covered by subsection 8.e. of this appendix
for retirees and their spouses, dependents, and survivors. PRHB costs
may be computed using a pay-as-you-go method or an acceptable actuarial
cost method in accordance with established written polices of the
governmental unit.
(1) For PRHB financed on a pay as-you-go method, allowable costs
will be limited to those representing actual payments to retirees or
their beneficiaries.
(2) PRHB costs calculated using an actuarial cost method recognized
by GAAP are allowable if they are funded for that year within six months
after the end of that year. Costs funded after the six month period (or
a later period agreed to by the cognizant agency) are allowable in the
year funded. The cognizant agency may agree to an extension of the six
month period if an appropriate adjustment is made to compensate for the
timing of the charges to the Federal Government and related Federal
reimbursements and the governmental unit's contributions to the PRHB
fund. Adjustments may be made by cash refund, reduction in current
year's PRHB costs, or other equitable procedures to compensate the
Federal Government for the time value of Federal reimbursements in
excess of contributions to the PRHB fund.
(3) Amounts funded in excess of the actuarially determined amount
for a fiscal year may be used as the government's contribution in a
future period.
(4) When a governmental unit converts to an acceptable actuarial
cost method and funds PRHB costs in accordance with this method, the
initial unfunded liability attributable to prior years shall be
allowable if amortized over a period of years in accordance with GAAP,
or, if no such GAAP period exists, over a period negotiated with the
cognizant agency.
(5) To be allowable in the current year, the PRHB costs must be paid
either to:
(a) An insurer or other benefit provider as current year costs or
premiums, or
(b) An insurer or trustee to maintain a trust fund or reserve for
the sole purpose of providing post-retirement benefits to retirees and
other beneficiaries.
(6) The Federal Government shall receive an equitable share of any
amounts of previously allowed post-retirement benefit costs (including
earnings thereon) which revert or inure to the governmental unit in the
form of a refund, withdrawal, or other credit.
g. Severance pay.
(1) Payments in addition to regular salaries and wages made to
workers whose employment is being terminated are allowable to the extent
that, in each case, they are required by law, employer-employee
agreement, or established written policy.
(2) Severance payments (but not accruals) associated with normal
turnover are allowable. Such payments shall be allocated to all
activities of the governmental unit as an indirect cost.
(3) Abnormal or mass severance pay will be considered on a case-by-
case basis and is allowable only if approved by the cognizant Federal
agency.
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h. Support of salaries and wages. These standards regarding time
distribution are in addition to the standards for payroll documentation.
(1) Charges to Federal awards for salaries and wages, whether
treated as direct or indirect costs, will be based on payrolls
documented in accordance with generally accepted practice of the
governmental unit and approved by a responsible official(s) of the
governmental unit.
(2) No further documentation is required for the salaries and wages
of employees who work in a single indirect cost activity.
(3) Where employees are expected to work solely on a single Federal
award or cost objective, charges for their salaries and wages will be
supported by periodic certifications that the employees worked solely on
that program for the period covered by the certification. These
certifications will be prepared at least semi-annually and will be
signed by the employee or supervisory official having first hand
knowledge of the work performed by the employee.
(4) Where employees work on multiple activities or cost objectives,
a distribution of their salaries or wages will be supported by personnel
activity reports or equivalent documentation which meets the standards
in subsection 8.h.(5) of this appendix unless a statistical sampling
system (see subsection 8.h.(6) of this appendix) or other substitute
system has been approved by the cognizant Federal agency. Such
documentary support will be required where employees work on:
(a) More than one Federal award,
(b) A Federal award and a non-Federal award,
(c) An indirect cost activity and a direct cost activity,
(d) Two or more indirect activities which are allocated using
different allocation bases, or
(e) An unallowable activity and a direct or indirect cost activity.
(5) Personnel activity reports or equivalent documentation must meet
the following standards:
(a) They must reflect an after-the-fact distribution of the actual
activity of each employee,
(b) They must account for the total activity for which each employee
is compensated,
(c) They must be prepared at least monthly and must coincide with
one or more pay periods, and
(d) They must be signed by the employee.
(e) Budget estimates or other distribution percentages determined
before the services are performed do not qualify as support for charges
to Federal awards but may be used for interim accounting purposes,
provided that:
(i) The governmental unit's system for establishing the estimates
produces reasonable approximations of the activity actually performed;
(ii) At least quarterly, comparisons of actual costs to budgeted
distributions based on the monthly activity reports are made. Costs
charged to Federal awards to reflect adjustments made as a result of the
activity actually performed may be recorded annually if the quarterly
comparisons show the differences between budgeted and actual costs are
less than ten percent; and
(iii) The budget estimates or other distribution percentages are
revised at least quarterly, if necessary, to reflect changed
circumstances.
(6) Substitute systems for allocating salaries and wages to Federal
awards may be used in place of activity reports. These systems are
subject to approval if required by the cognizant agency. Such systems
may include, but are not limited to, random moment sampling, case
counts, or other quantifiable measures of employee effort.
(a) Substitute systems which use sampling methods (primarily for
Temporary Assistance to Needy Families (TANF), Medicaid, and other
public assistance programs) must meet acceptable statistical sampling
standards including:
(i) The sampling universe must include all of the employees whose
salaries and wages are to be allocated based on sample results except as
provided in subsection 8.h.(6)(c) of this appendix;
(ii) The entire time period involved must be covered by the sample;
and
(iii) The results must be statistically valid and applied to the
period being sampled.
(b) Allocating charges for the sampled employees' supervisors,
clerical and support staffs, based on the results of the sampled
employees, will be acceptable.
(c) Less than full compliance with the statistical sampling
standards noted in subsection 8.h.(6)(a) of this appendix may be
accepted by the cognizant agency if it concludes that the amounts to be
allocated to Federal awards will be minimal, or if it concludes that the
system proposed by the governmental unit will result in lower costs to
Federal awards than a system which complies with the standards.
(7) Salaries and wages of employees used in meeting cost sharing or
matching requirements of Federal awards must be supported in the same
manner as those claimed as allowable costs under Federal awards.
i. Donated services.
(1) Donated or volunteer services may be furnished to a governmental
unit by professional and technical personnel, consultants, and other
skilled and unskilled labor. The value of these services is not
reimbursable either as a direct or indirect cost. However, the value of
donated services may be used to meet cost sharing or matching
requirements
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in accordance with the provisions of the Common Rule.
(2) The value of donated services utilized in the performance of a
direct cost activity shall, when material in amount, be considered in
the determination of the governmental unit's indirect costs or rate(s)
and, accordingly, shall be allocated a proportionate share of applicable
indirect costs.
(3) To the extent feasible, donated services will be supported by
the same methods used by the governmental unit to support the
allocability of regular personnel services.
9. Contingency provisions. Contributions to a contingency reserve or
any similar provision made for events the occurrence of which cannot be
foretold with certainty as to time, intensity, or with an assurance of
their happening, are unallowable. The term ``contingency reserve''
excludes self-insurance reserves (see section 22.c. of this appendix),
pension plan reserves (see section 8.e.), and post-retirement health and
other benefit reserves (section 8.f.) computed using acceptable
actuarial cost methods.
10. Defense and prosecution of criminal and civil proceedings, and
claims.
a. The following costs are unallowable for contracts covered by 10
U.S.C. 2324(k), ``Allowable costs under defense contracts.''
(1) Costs incurred in defense of any civil or criminal fraud
proceeding or similar proceeding (including filing of false
certification brought by the United States where the contractor is found
liable or has pleaded nolo contendere to a charge of fraud or similar
proceeding (including filing of a false certification).
(2) Costs incurred by a contractor in connection with any criminal,
civil or administrative proceedings commenced by the United States or a
State to the extent provided in 10 U.S.C. 2324(k).
b. Legal expenses required in the administration of Federal programs
are allowable. Legal expenses for prosecution of claims against the
Federal Government are unallowable.
11. Depreciation and use allowances.
a. Depreciation and use allowances are means of allocating the cost
of fixed assets to periods benefiting from asset use. Compensation for
the use of fixed assets on hand may be made through depreciation or use
allowances. A combination of the two methods may not be used in
connection with a single class of fixed assets (e.g., buildings, office
equipment, computer equipment, etc.) except as provided for in
subsection g. Except for enterprise funds and internal service funds
that are included as part of a State/local cost allocation plan, classes
of assets shall be determined on the same basis used for the government-
wide financial statements.
b. The computation of depreciation or use allowances shall be based
on the acquisition cost of the assets involved. Where actual cost
records have not been maintained, a reasonable estimate of the original
acquisition cost may be used. The value of an asset donated to the
governmental unit by an unrelated third party shall be its fair market
value at the time of donation. Governmental or quasi-governmental
organizations located within the same State shall not be considered
unrelated third parties for this purpose.
c. The computation of depreciation or use allowances will exclude:
(1) The cost of land;
(2) Any portion of the cost of buildings and equipment borne by or
donated by the Federal Government irrespective of where title was
originally vested or where it presently resides; and
(3) Any portion of the cost of buildings and equipment contributed
by or for the governmental unit, or a related donor organization, in
satisfaction of a matching requirement.
d. Where the depreciation method is followed, the following general
criteria apply:
(1) The period of useful service (useful life) established in each
case for usable capital assets must take into consideration such factors
as type of construction, nature of the equipment used, historical usage
patterns, technological developments, and the renewal and replacement
policies of the governmental unit followed for the individual items or
classes of assets involved. In the absence of clear evidence indicating
that the expected consumption of the asset will be significantly greater
in the early portions than in the later portions of its useful life, the
straight line method of depreciation shall be used.
(2) Depreciation methods once used shall not be changed unless
approved by the Federal cognizant or awarding agency. When the
depreciation method is introduced for application to an asset previously
subject to a use allowance, the annual depreciation charge thereon may
not exceed the amount that would have resulted had the depreciation
method been in effect from the date of acquisition of the asset. The
combination of use allowances and depreciation applicable to the asset
shall not exceed the total acquisition cost of the asset or fair market
value at time of donation.
e. When the depreciation method is used for buildings, a building's
shell may be segregated from the major component of the building (e.g.,
plumbing system, heating, and air conditioning system, etc.) and each
major component depreciated over its estimated useful life, or the
entire building (i.e., the shell and all components) may be treated as a
single asset and depreciated over a single useful life.
f. Where the use allowance method is followed, the following general
criteria apply:
(1) The use allowance for buildings and improvements (including land
improvements, such as paved parking areas, fences, and
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sidewalks) will be computed at an annual rate not exceeding two percent
of acquisition costs.
(2) The use allowance for equipment will be computed at an annual
rate not exceeding 6\2/3\ percent of acquisition cost.
(3) When the use allowance method is used for buildings, the entire
building must be treated as a single asset; the building's components
(e.g., plumbing system, heating and air condition, etc.) cannot be
segregated from the building's shell. The two percent limitation,
however, need not be applied to equipment which is merely attached or
fastened to the building but not permanently fixed to it and which is
used as furnishings or decorations or for specialized purposes (e.g.,
dentist chairs and dental treatment units, counters, laboratory benches
bolted to the floor, dishwashers, modular furniture, carpeting, etc.).
Such equipment will be considered as not being permanently fixed to the
building if it can be removed without the destruction of, or need for
costly or extensive alterations or repairs, to the building or the
equipment. Equipment that meets these criteria will be subject to the
6\2/3\ percent equipment use allowance limitation.
g. A reasonable use allowance may be negotiated for any assets that
are considered to be fully depreciated, after taking into consideration
the amount of depreciation previously charged to the government, the
estimated useful life remaining at the time of negotiation, the effect
of any increased maintenance charges, decreased efficiency due to age,
and any other factors pertinent to the utilization of the asset for the
purpose contemplated.
h. Charges for use allowances or depreciation must be supported by
adequate property records. Physical inventories must be taken at least
once every two years (a statistical sampling approach is acceptable) to
ensure that assets exist, and are in use. Governmental units will manage
equipment in accordance with State laws and procedures. When the
depreciation method is followed, depreciation records indicating the
amount of depreciation taken each period must also be maintained.
12. Donations and contributions.
a. Contributions or donations rendered. Contributions or donations,
including cash, property, and services, made by the governmental unit,
regardless of the recipient, are unallowable.
b. Donated services received:
(1) Donated or volunteer services may be furnished to a governmental
unit by professional and technical personnel, consultants, and other
skilled and unskilled labor. The value of these services is not
reimbursable either as a direct or indirect cost. However, the value of
donated services may be used to meet cost sharing or matching
requirements in accordance with the Federal Grants Management Common
Rule.
(2) The value of donated services utilized in the performance of a
direct cost activity shall, when material in amount, be considered in
the determination of the governmental unit's indirect costs or rate(s)
and, accordingly, shall be allocated a proportionate share of applicable
indirect costs.
(3) To the extent feasible, donated services will be supported by
the same methods used by the governmental unit to support the
allocability of regular personnel services.
13. Employee morale, health, and welfare costs.
a. The costs of employee information publications, health or first-
aid clinics and/or infirmaries, recreational activities, employee
counseling services, and any other expenses incurred in accordance with
the governmental unit's established practice or custom for the
improvement of working conditions, employer-employee relations, employee
morale, and employee performance are allowable.
b. Such costs will be equitably apportioned to all activities of the
governmental unit. Income generated from any of these activities will be
offset against expenses.
14. Entertainment. Costs of entertainment, including amusement,
diversion, and social activities and any costs directly associated with
such costs (such as tickets to shows or sports events, meals, lodging,
rentals, transportation, and gratuities) are unallowable.
15. Equipment and other capital expenditures.
a. For purposes of this subsection 15, the following definitions
apply:
(1) ``Capital Expenditures'' means expenditures for the acquisition
cost of capital assets (equipment, buildings, land), or expenditures to
make improvements to capital assets that materially increase their value
or useful life. Acquisition cost means the cost of the asset including
the cost to put it in place. Acquisition cost for equipment, for
example, means the net invoice price of the equipment, including the
cost of any modifications, attachments, accessories, or auxiliary
apparatus necessary to make it usable for the purpose for which it is
acquired. Ancillary charges, such as taxes, duty, protective in transit
insurance, freight, and installation may be included in, or excluded
from the acquisition cost in accordance with the governmental unit's
regular accounting practices.
(2) ``Equipment'' means an article of nonexpendable, tangible
personal property having a useful life of more than one year and an
acquisition cost which equals or exceeds the lesser of the
capitalization level established by the governmental unit for financial
statement purposes, or $5000.
(3) ``Special purpose equipment'' means equipment which is used only
for research,
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medical, scientific, or other technical activities. Examples of special
purpose equipment include microscopes, x-ray machines, surgical
instruments, and spectrometers.
(4) ``General purpose equipment'' means equipment, which is not
limited to research, medical, scientific or other technical activities.
Examples include office equipment and furnishings, modular offices,
telephone networks, information technology equipment and systems, air
conditioning equipment, reproduction and printing equipment, and motor
vehicles.
b. The following rules of allowability shall apply to equipment and
other capital expenditures:
(1) Capital expenditures for general purpose equipment, buildings,
and land are unallowable as direct charges, except where approved in
advance by the awarding agency.
(2) Capital expenditures for special purpose equipment are allowable
as direct costs, provided that items with a unit cost of $5000 or more
have the prior approval of the awarding agency.
(3) Capital expenditures for improvements to land, buildings, or
equipment which materially increase their value or useful life are
unallowable as a direct cost except with the prior approval of the
awarding agency.
(4) When approved as a direct charge pursuant to section 15.b(1),
(2), and (3)of this appendix, capital expenditures will be charged in
the period in which the expenditure is incurred, or as otherwise
determined appropriate and negotiated with the awarding agency. In
addition, Federal awarding agencies are authorized at their option to
waive or delegate the prior approval requirement.
(5) Equipment and other capital expenditures are unallowable as
indirect costs. However, see section 11 of this appendix, Depreciation
and use allowance, for rules on the allowability of use allowances or
depreciation on buildings, capital improvements, and equipment. Also,
see section 37 of this appendix, Rental costs, concerning the
allowability of rental costs for land, buildings, and equipment.
(6) The unamortized portion of any equipment written off as a result
of a change in capitalization levels may be recovered by continuing to
claim the otherwise allowable use allowances or depreciation on the
equipment, or by amortizing the amount to be written off over a period
of years negotiated with the cognizant agency.
(7) When replacing equipment purchased in whole or in part with
Federal funds, the governmental unit may use the equipment to be
replaced as a trade-in or sell the property and use the proceeds to
offset the cost of the replacement property.
16. Fines and penalties. Fines, penalties, damages, and other
settlements resulting from violations (or alleged violations) of, or
failure of the governmental unit to comply with, Federal, State, local,
or Indian tribal laws and regulations are unallowable except when
incurred as a result of compliance with specific provisions of the
Federal award or written instructions by the awarding agency authorizing
in advance such payments.
17. Fund raising and investment management costs.
a. Costs of organized fund raising, including financial campaigns,
solicitation of gifts and bequests, and similar expenses incurred to
raise capital or obtain contributions are unallowable, regardless of the
purpose for which the funds will be used.
b. Costs of investment counsel and staff and similar expenses
incurred to enhance income from investments are unallowable. However,
such costs associated with investments covering pension, self-insurance,
or other funds which include Federal participation allowed by this and
other appendices of 2 CFR part 225 are allowable.
c. Fund raising and investment activities shall be allocated an
appropriate share of indirect costs under the conditions described in
subsection C.3.b. of Appendix A to this part.
18. Gains and losses on disposition of depreciable property and
other capital assets and substantial relocation of Federal programs.
a. (1) Gains and losses on the sale, retirement, or other
disposition of depreciable property shall be included in the year in
which they occur as credits or charges to the asset cost grouping(s) in
which the property was included. The amount of the gain or loss to be
included as a credit or charge to the appropriate asset cost grouping(s)
shall be the difference between the amount realized on the property and
the undepreciated basis of the property.
(2) Gains and losses on the disposition of depreciable property
shall not be recognized as a separate credit or charge under the
following conditions:
(a) The gain or loss is processed through a depreciation account and
is reflected in the depreciation allowable under sections 11 and 15 of
this appendix.
(b) The property is given in exchange as part of the purchase price
of a similar item and the gain or loss is taken into account in
determining the depreciation cost basis of the new item.
(c) A loss results from the failure to maintain permissible
insurance, except as otherwise provided in subsection 22.d of this
appendix.
(d) Compensation for the use of the property was provided through
use allowances in lieu of depreciation.
b. Substantial relocation of Federal awards from a facility where
the Federal Government participated in the financing to another facility
prior to the expiration of the useful life of the financed facility
requires Federal agency approval. The extent of the
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relocation, the amount of the Federal participation in the financing,
and the depreciation charged to date may require negotiation of space
charges for Federal awards.
c. Gains or losses of any nature arising from the sale or exchange
of property other than the property covered in subsection 18.a. of this
appendix, e.g., land or included in the fair market value used in any
adjustment resulting from a relocation of Federal awards covered in
subsection b. shall be excluded in computing Federal award costs.
19. General government expenses.
a. The general costs of government are unallowable (except as
provided in section 43 of this appendix, Travel costs). These include:
(1) Salaries and expenses of the Office of the Governor of a State
or the chief executive of a political subdivision or the chief executive
of federally-recognized Indian tribal government;
(2) Salaries and other expenses of a State legislature, tribal
council, or similar local governmental body, such as a county
supervisor, city council, school board, etc., whether incurred for
purposes of legislation or executive direction;
(3) Costs of the judiciary branch of a government;
(4) Costs of prosecutorial activities unless treated as a direct
cost to a specific program if authorized by program statute or
regulation (however, this does not preclude the allowability of other
legal activities of the Attorney General); and
(5) Costs of other general types of government services normally
provided to the general public, such as fire and police, unless provided
for as a direct cost under a program statute or regulation.
b. For federally-recognized Indian tribal governments and Councils
Of Governments (COGs), the portion of salaries and expenses directly
attributable to managing and operating Federal programs by the chief
executive and his staff is allowable.
20. Goods or services for personal use. Costs of goods or services
for personal use of the governmental unit's employees are unallowable
regardless of whether the cost is reported as taxable income to the
employees.
21. Idle facilities and idle capacity.
As used in this section the following terms have the meanings set
forth below:
(1) ``Facilities'' means land and buildings or any portion thereof,
equipment individually or collectively, or any other tangible capital
asset, wherever located, and whether owned or leased by the governmental
unit.
(2) ``Idle facilities'' means completely unused facilities that are
excess to the governmental unit's current needs.
(3) ``Idle capacity'' means the unused capacity of partially used
facilities. It is the difference between: that which a facility could
achieve under 100 percent operating time on a one-shift basis less
operating interruptions resulting from time lost for repairs, setups,
unsatisfactory materials, and other normal delays; and the extent to
which the facility was actually used to meet demands during the
accounting period. A multi-shift basis should be used if it can be shown
that this amount of usage would normally be expected for the type of
facility involved.
(4) ``Cost of idle facilities or idle capacity'' means costs such as
maintenance, repair, housing, rent, and other related costs, e.g.,
insurance, interest, property taxes and depreciation or use allowances.
b. The costs of idle facilities are unallowable except to the extent
that:
(1) They are necessary to meet fluctuations in workload; or
(2) Although not necessary to meet fluctuations in workload, they
were necessary when acquired and are now idle because of changes in
program requirements, efforts to achieve more economical operations,
reorganization, termination, or other causes which could not have been
reasonably foreseen. Under the exception stated in this subsection,
costs of idle facilities are allowable for a reasonable period of time,
ordinarily not to exceed one year, depending on the initiative taken to
use, lease, or dispose of such facilities.
c. The costs of idle capacity are normal costs of doing business and
are a factor in the normal fluctuations of usage or indirect cost rates
from period to period. Such costs are allowable, provided that the
capacity is reasonably anticipated to be necessary or was originally
reasonable and is not subject to reduction or elimination by use on
other Federal awards, subletting, renting, or sale, in accordance with
sound business, economic, or security practices. Widespread idle
capacity throughout an entire facility or among a group of assets having
substantially the same function may be considered idle facilities.
22. Insurance and indemnification.
a. Costs of insurance required or approved and maintained, pursuant
to the Federal award, are allowable.
b. Costs of other insurance in connection with the general conduct
of activities are allowable subject to the following limitations:
(1) Types and extent and cost of coverage are in accordance with the
governmental unit's policy and sound business practice.
(2) Costs of insurance or of contributions to any reserve covering
the risk of loss of, or damage to, Federal Government property are
unallowable except to the extent that the awarding agency has
specifically required or approved such costs.
c. Actual losses which could have been covered by permissible
insurance (through a self-insurance program or otherwise) are
unallowable, unless expressly provided for in the Federal award or as
described below.
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However, the Federal Government will participate in actual losses of a
self insurance fund that are in excess of reserves. Costs incurred
because of losses not covered under nominal deductible insurance
coverage provided in keeping with sound management practice, and minor
losses not covered by insurance, such as spoilage, breakage, and
disappearance of small hand tools, which occur in the ordinary course of
operations, are allowable.
d. Contributions to a reserve for certain self-insurance programs
including workers compensation, unemployment compensation, and severance
pay are allowable subject to the following provisions:
(1) The type of coverage and the extent of coverage and the rates
and premiums would have been allowed had insurance (including
reinsurance) been purchased to cover the risks. However, provision for
known or reasonably estimated self-insured liabilities, which do not
become payable for more than one year after the provision is made, shall
not exceed the discounted present value of the liability. The rate used
for discounting the liability must be determined by giving consideration
to such factors as the governmental unit's settlement rate for those
liabilities and its investment rate of return.
(2) Earnings or investment income on reserves must be credited to
those reserves.
(3) Contributions to reserves must be based on sound actuarial
principles using historical experience and reasonable assumptions.
Reserve levels must be analyzed and updated at least biennially for each
major risk being insured and take into account any reinsurance,
coinsurance, etc. Reserve levels related to employee-related coverages
will normally be limited to the value of claims submitted and
adjudicated but not paid, submitted but not adjudicated, and incurred
but not submitted. Reserve levels in excess of the amounts based on the
above must be identified and justified in the cost allocation plan or
indirect cost rate proposal.
(4) Accounting records, actuarial studies, and cost allocations (or
billings) must recognize any significant differences due to types of
insured risk and losses generated by the various insured activities or
agencies of the governmental unit. If individual departments or agencies
of the governmental unit experience significantly different levels of
claims for a particular risk, those differences are to be recognized by
the use of separate allocations or other techniques resulting in an
equitable allocation.
(5) Whenever funds are transferred from a self-insurance reserve to
other accounts (e.g., general fund), refunds shall be made to the
Federal Government for its share of funds transferred, including earned
or imputed interest from the date of transfer.
e. Actual claims paid to or on behalf of employees or former
employees for workers' compensation, unemployment compensation,
severance pay, and similar employee benefits (e.g., subsection 8.f. for
post retirement health benefits), are allowable in the year of payment
provided the governmental unit follows a consistent costing policy and
they are allocated as a general administrative expense to all activities
of the governmental unit.
f. Insurance refunds shall be credited against insurance costs in
the year the refund is received.
g. Indemnification includes securing the governmental unit against
liabilities to third persons and other losses not compensated by
insurance or otherwise. The Federal Government is obligated to indemnify
the governmental unit only to the extent expressly provided for in the
Federal award, except as provided in subsection 22.d of this appendix.
h. Costs of commercial insurance that protects against the costs of
the contractor for correction of the contractor's own defects in
materials or workmanship are unallowable.
23. Interest.
a. Costs incurred for interest on borrowed capital or the use of a
governmental unit's own funds, however represented, are unallowable
except as specifically provided in subsection b. or authorized by
Federal legislation.
b. Financing costs (including interest) paid or incurred which are
associated with the otherwise allowable costs of building acquisition,
construction, or fabrication, reconstruction or remodeling completed on
or after October 1, 1980 is allowable subject to the conditions in
section 23.b.(1) through (4) of this appendix. Financing costs
(including interest) paid or incurred on or after September 1, 1995 for
land or associated with otherwise allowable costs of equipment is
allowable, subject to the conditions in section 23.b. (1) through (4) of
this appendix.
(1) The financing is provided (from other than tax or user fee
sources) by a bona fide third party external to the governmental unit;
(2) The assets are used in support of Federal awards;
(3) Earnings on debt service reserve funds or interest earned on
borrowed funds pending payment of the construction or acquisition costs
are used to offset the current period's cost or the capitalized
interest, as appropriate. Earnings subject to being reported to the
Federal Internal Revenue Service under arbitrage requirements are
excludable.
(4) For debt arrangements over $1 million, unless the governmental
unit makes an initial equity contribution to the asset purchase of 25
percent or more, the governmental unit shall reduce claims for interest
cost by an amount equal to imputed interest earnings on excess cash
flow, which is to be calculated as follows. Annually, non-Federal
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entities shall prepare a cumulative (from the inception of the project)
report of monthly cash flows that includes inflows and outflows,
regardless of the funding source. Inflows consist of depreciation
expense, amortization of capitalized construction interest, and annual
interest cost. For cash flow calculations, the annual inflow figures
shall be divided by the number of months in the year (i.e., usually 12)
that the building is in service for monthly amounts. Outflows consist of
initial equity contributions, debt principal payments (less the pro rata
share attributable to the unallowable costs of land) and interest
payments. Where cumulative inflows exceed cumulative outflows, interest
shall be calculated on the excess inflows for that period and be treated
as a reduction to allowable interest cost. The rate of interest to be
used to compute earnings on excess cash flows shall be the three-month
Treasury bill closing rate as of the last business day of that month.
(5) Interest attributable to fully depreciated assets is
unallowable.
24. Lobbying.
a. General. The cost of certain influencing activities associated
with obtaining grants, contracts, cooperative agreements, or loans is an
unallowable cost. Lobbying with respect to certain grants, contracts,
cooperative agreements, and loans shall be governed by the common rule,
``New Restrictions on Lobbying'' (see Section J.24 of Appendix A to 2
CFR part 220), including definitions, and the Office of Management and
Budget ``Government-wide Guidance for New Restrictions on Lobbying'' and
notices published at 54 FR 52306 (December 20, 1989), 55 FR 24540 (June
15, 1990), and 57 FR 1772 (January 15, 1992), respectively.
b. Executive lobbying costs. Costs incurred in attempting to
improperly influence either directly or indirectly, an employee or
officer of the Executive Branch of the Federal Government to give
consideration or to act regarding a sponsored agreement or a regulatory
matter are unallowable. Improper influence means any influence that
induces or tends to induce a Federal employee or officer to give
consideration or to act regarding a federally-sponsored agreement or
regulatory matter on any basis other than the merits of the matter.
25. Maintenance, operations, and repairs. Unless prohibited by law,
the cost of utilities, insurance, security, janitorial services,
elevator service, upkeep of grounds, necessary maintenance, normal
repairs and alterations, and the like are allowable to the extent that
they: keep property (including Federal property, unless otherwise
provided for) in an efficient operating condition, do not add to the
permanent value of property or appreciably prolong its intended life,
and are not otherwise included in rental or other charges for space.
Costs which add to the permanent value of property or appreciably
prolong its intended life shall be treated as capital expenditures (see
sections 11 and 15 of this appendix).
26. Materials and supplies costs.
a. Costs incurred for materials, supplies, and fabricated parts
necessary to carry out a Federal award are allowable.
b. Purchased materials and supplies shall be charged at their actual
prices, net of applicable credits. Withdrawals from general stores or
stockrooms should be charged at their actual net cost under any
recognized method of pricing inventory withdrawals, consistently
applied. Incoming transportation charges are a proper part of materials
and supplies costs.
c. Only materials and supplies actually used for the performance of
a Federal award may be charged as direct costs.
d. Where federally-donated or furnished materials are used in
performing the Federal award, such materials will be used without
charge.
27. Meetings and conferences. Costs of meetings and conferences, the
primary purpose of which is the dissemination of technical information,
are allowable. This includes costs of meals, transportation, rental of
facilities, speakers' fees, and other items incidental to such meetings
or conferences. But see section 14, Entertainment costs, of this
appendix.
28. Memberships, subscriptions, and professional activity costs.
a. Costs of the governmental unit's memberships in business,
technical, and professional organizations are allowable.
b. Costs of the governmental unit's subscriptions to business,
professional, and technical periodicals are allowable.
c. Costs of membership in civic and community, social organizations
are allowable as a direct cost with the approval of the Federal awarding
agency.
d. Costs of membership in organizations substantially engaged in
lobbying are unallowable.
29. Patent costs.
a. The following costs relating to patent and copyright matters are
allowable: cost of preparing disclosures, reports, and other documents
required by the Federal award and of searching the art to the extent
necessary to make such disclosures; cost of preparing documents and any
other patent costs in connection with the filing and prosecution of a
United States patent application where title or royalty-free license is
required by the Federal Government to be conveyed to the Federal
Government; and general counseling services relating to patent and
copyright matters, such as advice on patent and copyright laws,
regulations, clauses, and employee agreements (but see sections 32,
Professional service costs, and 38, Royalties and
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other costs for use of patents and copyrights, of this appendix).
b. The following costs related to patent and copyright matter are
unallowable: Cost of preparing disclosures, reports, and other documents
and of searching the art to the extent necessary to make disclosures not
required by the award; costs in connection with filing and prosecuting
any foreign patent application; or any United States patent application,
where the Federal award does not require conveying title or a royalty-
free license to the Federal Government (but see section 38, Royalties
and other costs for use of patents and copyrights, of this appendix).
30. Plant and homeland security costs. Necessary and reasonable
expenses incurred for routine and homeland security to protect
facilities, personnel, and work products are allowable. Such costs
include, but are not limited to, wages and uniforms of personnel engaged
in security activities; equipment; barriers; contractual security
services; consultants; etc. Capital expenditures for homeland and plant
security purposes are subject to section 15, Equipment and other capital
expenditures, of this appendix.
31. Pre-award costs. Pre-award costs are those incurred prior to the
effective date of the award directly pursuant to the negotiation and in
anticipation of the award where such costs are necessary to comply with
the proposed delivery schedule or period of performance. Such costs are
allowable only to the extent that they would have been allowable if
incurred after the date of the award and only with the written approval
of the awarding agency.
32. Professional service costs.
a. Costs of professional and consultant services rendered by persons
who are members of a particular profession or possess a special skill,
and who are not officers or employees of the governmental unit, are
allowable, subject to subparagraphs b and c when reasonable in relation
to the services rendered and when not contingent upon recovery of the
costs from the Federal Government. In addition, legal and related
services are limited under section 10 of this appendix.
b. In determining the allowability of costs in a particular case, no
single factor or any special combination of factors is necessarily
determinative. However, the following factors are relevant:
(1) The nature and scope of the service rendered in relation to the
service required.
(2) The necessity of contracting for the service, considering the
governmental unit's capability in the particular area.
(3) The past pattern of such costs, particularly in the years prior
to Federal awards.
(4) The impact of Federal awards on the governmental unit's business
(i.e., what new problems have arisen).
(5) Whether the proportion of Federal work to the governmental
unit's total business is such as to influence the governmental unit in
favor of incurring the cost, particularly where the services rendered
are not of a continuing nature and have little relationship to work
under Federal grants and contracts.
(6) Whether the service can be performed more economically by direct
employment rather than contracting.
(7) The qualifications of the individual or concern rendering the
service and the customary fees charged, especially on non-Federal
awards.
(8) Adequacy of the contractual agreement for the service (e.g.,
description of the service, estimate of time required, rate of
compensation, and termination provisions).
c. In addition to the factors in subparagraph b, retainer fees to be
allowable must be supported by available or rendered evidence of bona
fide services available or rendered.
33. Proposal costs. Costs of preparing proposals for potential
Federal awards are allowable. Proposal costs should normally be treated
as indirect costs and should be allocated to all activities of the
governmental unit utilizing the cost allocation plan and indirect cost
rate proposal. However, proposal costs may be charged directly to
Federal awards with the prior approval of the Federal awarding agency.
34. Publication and printing costs.
a. Publication costs include the costs of printing (including the
processes of composition, plate-making, press work, binding, and the end
products produced by such processes), distribution, promotion, mailing,
and general handling. Publication costs also include page charges in
professional publications.
b. If these costs are not identifiable with a particular cost
objective, they should be allocated as indirect costs to all benefiting
activities of the governmental unit.
c. Page charges for professional journal publications are allowable
as a necessary part of research costs where:
(1) The research papers report work supported by the Federal
Government; and
(2) The charges are levied impartially on all research papers
published by the journal, whether or not by federally-sponsored authors.
35. Rearrangement and alteration costs. Costs incurred for ordinary
and normal rearrangement and alteration of facilities are allowable.
Special arrangements and alterations costs incurred specifically for a
Federal award are allowable with the prior approval of the Federal
awarding agency.
36. Reconversion costs. Costs incurred in the restoration or
rehabilitation of the governmental unit's facilities to approximately
the same condition existing immediately prior to commencement of Federal
awards, less costs related to normal wear and tear, are allowable.
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37. Rental costs of buildings and equipment.
a. Subject to the limitations described in subsections b. through d.
of this section, rental costs are allowable to the extent that the rates
are reasonable in light of such factors as: rental costs of comparable
property, if any; market conditions in the area; alternatives available;
and the type, life expectancy, condition, and value of the property
leased. Rental arrangements should be reviewed periodically to determine
if circumstances have changed and other options are available.
b. Rental costs under ``sale and lease back'' arrangements are
allowable only up to the amount that would be allowed had the
governmental unit continued to own the property. This amount would
include expenses such as depreciation or use allowance, maintenance,
taxes, and insurance.
c. Rental costs under ``less-than-arm's-length'' leases are
allowable only up to the amount (as explained in section 37.b of this
appendix) that would be allowed had title to the property vested in the
governmental unit. For this purpose, a less-than-arm's-length lease is
one under which one party to the lease agreement is able to control or
substantially influence the actions of the other. Such leases include,
but are not limited to those between divisions of a governmental unit;
governmental units under common control through common officers,
directors, or members; and a governmental unit and a director, trustee,
officer, or key employee of the governmental unit or his immediate
family, either directly or through corporations, trusts, or similar
arrangements in which they hold a controlling interest. For example, a
governmental unit may establish a separate corporation for the sole
purpose of owning property and leasing it back to the governmental unit.
d. Rental costs under leases which are required to be treated as
capital leases under GAAP are allowable only up to the amount (as
explained in subsection 37.b of this appendix) that would be allowed had
the governmental unit purchased the property on the date the lease
agreement was executed. The provisions of Financial Accounting Standards
Board Statement 13, Accounting for Leases, shall be used to determine
whether a lease is a capital lease. Interest costs related to capital
leases are allowable to the extent they meet the criteria in section 23
of this appendix. Unallowable costs include amounts paid for profit,
management fees, and taxes that would not have been incurred had the
governmental unit purchased the facility.
38. Royalties and other costs for the use of patents.
a. Royalties on a patent or copyright or amortization of the cost of
acquiring by purchase a copyright, patent, or rights thereto, necessary
for the proper performance of the award are allowable unless:
(1) The Federal Government has a license or the right to free use of
the patent or copyright.
(2) The patent or copyright has been adjudicated to be invalid, or
has been administratively determined to be invalid.
(3) The patent or copyright is considered to be unenforceable.
(4) The patent or copyright is expired.
b. Special care should be exercised in determining reasonableness
where the royalties may have been arrived at as a result of less-than-
arm's-length bargaining, e.g.:
(1) Royalties paid to persons, including corporations, affiliated
with the governmental unit.
(2) Royalties paid to unaffiliated parties, including corporations,
under an agreement entered into in contemplation that a Federal award
would be made.
(3) Royalties paid under an agreement entered into after an award is
made to a governmental unit.
c. In any case involving a patent or copyright formerly owned by the
governmental unit, the amount of royalty allowed should not exceed the
cost which would have been allowed had the governmental unit retained
title thereto.
39. Selling and marketing. Costs of selling and marketing any
products or services of the governmental unit are unallowable (unless
allowed under section 1. of this appendix as allowable public relations
costs or under section 33. of this appendix as allowable proposal costs.
40. Taxes.
a. Taxes that a governmental unit is legally required to pay are
allowable, except for self-assessed taxes that disproportionately affect
Federal programs or changes in tax policies that disproportionately
affect Federal programs. This provision is applicable to taxes paid
during the governmental unit's first fiscal year that begins on or after
January 1, 1998, and applies thereafter.
b. Gasoline taxes, motor vehicle fees, and other taxes that are in
effect user fees for benefits provided to the Federal Government are
allowable.
c. This provision does not restrict the authority of Federal
agencies to identify taxes where Federal participation is inappropriate.
Where the identification of the amount of unallowable taxes would
require an inordinate amount of effort, the cognizant agency may accept
a reasonable approximation thereof.
41. Termination costs applicable to sponsored agreements.
Termination of awards generally gives rise to the incurrence of costs,
or the need for special treatment of costs, which would not have arisen
had the Federal award not been terminated. Cost principles covering
these items are set forth below. They
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are to be used in conjunction with the other provisions of this appendix
in termination situations.
a. The cost of items reasonably usable on the governmental unit's
other work shall not be allowable unless the governmental unit submits
evidence that it would not retain such items at cost without sustaining
a loss. In deciding whether such items are reasonably usable on other
work of the governmental unit, the awarding agency should consider the
governmental unit's plans and orders for current and scheduled activity.
Contemporaneous purchases of common items by the governmental unit shall
be regarded as evidence that such items are reasonably usable on the
governmental unit's other work. Any acceptance of common items as
allocable to the terminated portion of the Federal award shall be
limited to the extent that the quantities of such items on hand, in
transit, and on order are in excess of the reasonable quantitative
requirements of other work.
b. If in a particular case, despite all reasonable efforts by the
governmental unit, certain costs cannot be discontinued immediately
after the effective date of termination, such costs are generally
allowable within the limitations set forth in this and other appendices
of 2 CFR part 225, except that any such costs continuing after
termination due to the negligent or willful failure of the governmental
unit to discontinue such costs shall be unallowable.
c. Loss of useful value of special tooling, machinery, and equipment
is generally allowable if:
(1) Such special tooling, special machinery, or equipment is not
reasonably capable of use in the other work of the governmental unit,
(2) The interest of the Federal Government is protected by transfer
of title or by other means deemed appropriate by the awarding agency,
and
(3) The loss of useful value for any one terminated Federal award is
limited to that portion of the acquisition cost which bears the same
ratio to the total acquisition cost as the terminated portion of the
Federal award bears to the entire terminated Federal award and other
Federal awards for which the special tooling, machinery, or equipment
was acquired.
d. Rental costs under unexpired leases are generally allowable where
clearly shown to have been reasonably necessary for the performance of
the terminated Federal award less the residual value of such leases, if:
(1) The amount of such rental claimed does not exceed the reasonable
use value of the property leased for the period of the Federal award and
such further period as may be reasonable, and
(2) The governmental unit makes all reasonable efforts to terminate,
assign, settle, or otherwise reduce the cost of such lease. There also
may be included the cost of alterations of such leased property,
provided such alterations were necessary for the performance of the
Federal award, and of reasonable restoration required by the provisions
of the lease.
e. Settlement expenses including the following are generally
allowable:
(1) Accounting, legal, clerical, and similar costs reasonably
necessary for:
(a) The preparation and presentation to the awarding agency of
settlement claims and supporting data with respect to the terminated
portion of the Federal award, unless the termination is for default (see
Subpart --.44 of the Grants Management Common Rule (see Sec. 215.5)
implementing OMB Circular A-102); and
(b) The termination and settlement of subawards.
(2) Reasonable costs for the storage, transportation, protection,
and disposition of property provided by the Federal Government or
acquired or produced for the Federal award, except when grantees or
contractors are reimbursed for disposals at a predetermined amount in
accordance with Subparts --.31 and --.32 of the Grants Management Common
Rule (see Sec. 215.5) implementing OMB Circular A-102.
f. Claims under subawards, including the allocable portion of claims
which are common to the Federal award, and to other work of the
governmental unit are generally allowable. An appropriate share of the
governmental unit's indirect expense may be allocated to the amount of
settlements with subcontractors and/or subgrantees, provided that the
amount allocated is otherwise consistent with the basic guidelines
contained in Appendix A to this part. The indirect expense so allocated
shall exclude the same and similar costs claimed directly or indirectly
as settlement expenses.
42. Training costs. The cost of training provided for employee
development is allowable.
43. Travel costs.
a. General. Travel costs are the expenses for transportation,
lodging, subsistence, and related items incurred by employees who are in
travel status on official business of the governmental unit. Such costs
may be charged on an actual cost basis, on a per diem or mileage basis
in lieu of actual costs incurred, or on a combination of the two,
provided the method used is applied to an entire trip and not to
selected days of the trip, and results in charges consistent with those
normally allowed in like circumstances in the governmental unit's non-
federally-sponsored activities. Notwithstanding the provisions of
section 19 of this appendix, General government expenses, travel costs
of officials covered by that section are allowable
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with the prior approval of an awarding agency when they are specifically
related to Federal awards.
b. Lodging and subsistence. Costs incurred by employees and officers
for travel, including costs of lodging, other subsistence, and
incidental expenses, shall be considered reasonable and allowable only
to the extent such costs do not exceed charges normally allowed by the
governmental unit in its regular operations as the result of the
governmental unit's written travel policy. In the absence of an
acceptable, written governmental unit policy regarding travel costs, the
rates and amounts established under subchapter I of Chapter 57, Title 5,
United States Code (``Travel and Subsistence Expenses; Mileage
Allowances''), or by the Administrator of General Services, or by the
President (or his or her designee) pursuant to any provisions of such
subchapter shall apply to travel under Federal awards (48 CFR 31.205-
46(a)).
c. Commercial air travel.
(1) Airfare costs in excess of the customary standard commercial
airfare (coach or equivalent), Federal Government contract airfare
(where authorized and available), or the lowest commercial discount
airfare are unallowable except when such accommodations would:
(a) Require circuitous routing;
(b) Require travel during unreasonable hours;
(c) Excessively prolong travel;
(d) Result in additional costs that would offset the transportation
savings; or
(e) Offer accommodations not reasonably adequate for the traveler's
medical needs. The governmental unit must justify and document these
conditions on a case-by-case basis in order for the use of first-class
airfare to be allowable in such cases.
(2) Unless a pattern of avoidance is detected, the Federal
Government will generally not question a governmental unit's
determinations that customary standard airfare or other discount airfare
is unavailable for specific trips if the governmental unit can
demonstrate either of the following:
(aa) That such airfare was not available in the specific case; or
(b) That it is the governmental unit's overall practice to make
routine use of such airfare.
d. Air travel by other than commercial carrier. Costs of travel by
governmental unit-owned, -leased, or -chartered aircraft include the
cost of lease, charter, operation (including personnel costs),
maintenance, depreciation, insurance, and other related costs. The
portion of such costs that exceeds the cost of allowable commercial air
travel, as provided for in subsection 43.c. of this appendix, is
unallowable.
e. Foreign travel. Direct charges for foreign travel costs are
allowable only when the travel has received prior approval of the
awarding agency. Each separate foreign trip must receive such approval.
For purposes of this provision, ``foreign travel'' includes any travel
outside Canada, Mexico, the United States, and any United States
territories and possessions. However, the term ``foreign travel'' for a
governmental unit located in a foreign country means travel outside that
country.
Appendix C to Part 225--State/Local-Wide Central Service Cost Allocation
Plans
Table of Contents
A. General
B. Definitions
1. Billed central services
2. Allocated central services
3. Agency or operating agency
C. Scope of the Central Service Cost Allocation Plans
D. Submission Requirements
E. Documentation Requirements for Submitted Plans
1. General
2. Allocated central services
3. Billed services
a. General
b. Internal service funds
c. Self-insurance funds
d. Fringe benefits
4. Required certification
F. Negotiation and Approval of Central Service Plans
G. Other Policies
1. Billed central service activities
2. Working capital reserves
3. Carry-forward adjustments of allocated central service costs
4. Adjustments of billed central services
5. Records retention
6. Appeals
7. OMB assistance State/Local-Wide Central Service Cost Allocation Plans
A. General.
1. Most governmental units provide certain services, such as motor
pools, computer centers, purchasing, accounting, etc., to operating
agencies on a centralized basis. Since federally-supported awards are
performed within the individual operating agencies, there needs to be a
process whereby these central service costs can be identified and
assigned to benefitted activities on a reasonable and consistent basis.
The central service cost allocation plan provides that process. All
costs and other data used to distribute the costs included in the plan
should be supported by formal accounting and other records that will
support the propriety of the costs assigned to Federal awards.
2. Guidelines and illustrations of central service cost allocation
plans are provided in a brochure published by the Department of
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Health and Human Services entitled ``A Guide for State and Local
Government Agencies: Cost Principles and Procedures for Establishing
Cost Allocation Plans and Indirect Cost Rates for Grants and Contracts
with the Federal Government.'' A copy of this brochure may be obtained
from the Superintendent of Documents, U.S. Government Printing Office,
Washington, DC 20401.
B. Definitions.
1. ``Billed central services'' means central services that are
billed to benefitted agencies and/or programs on an individual fee-for-
service or similar basis. Typical examples of billed central services
include computer services, transportation services, insurance, and
fringe benefits.
2. ``Allocated central services'' means central services that
benefit operating agencies but are not billed to the agencies on a fee-
for-service or similar basis. These costs are allocated to benefitted
agencies on some reasonable basis. Examples of such services might
include general accounting, personnel administration, purchasing, etc.
3. ``Agency or operating agency'' means an organizational unit or
sub-division within a governmental unit that is responsible for the
performance or administration of awards or activities of the
governmental unit.
C. Scope of the Central Service Cost Allocation Plans. The central
service cost allocation plan will include all central service costs that
will be claimed (either as a billed or an allocated cost) under Federal
awards and will be documented as described in section E. Costs of
central services omitted from the plan will not be reimbursed.
D. Submission Requirements.
1. Each State will submit a plan to the Department of Health and
Human Services for each year in which it claims central service costs
under Federal awards. The plan should include a projection of the next
year's allocated central service cost (based either on actual costs for
the most recently completed year or the budget projection for the coming
year), and a reconciliation of actual allocated central service costs to
the estimated costs used for either the most recently completed year or
the year immediately preceding the most recently completed year.
2. Each local government that has been designated as a ``major local
government'' by the Office of Management and Budget (OMB) is also
required to submit a plan to its cognizant agency annually. OMB
periodically lists major local governments in the Federal Register.
3. All other local governments claiming central service costs must
develop a plan in accordance with the requirements described in this
appendix and maintain the plan and related supporting documentation for
audit. These local governments are not required to submit their plans
for Federal approval unless they are specifically requested to do so by
the cognizant agency. Where a local government only receives funds as a
sub-recipient, the primary recipient will be responsible for negotiating
indirect cost rates and/or monitoring the sub-recipient's plan.
4. All central service cost allocation plans will be prepared and,
when required, submitted within six months prior to the beginning of
each of the governmental unit's fiscal years in which it proposes to
claim central service costs. Extensions may be granted by the cognizant
agency on a case-by-case basis.
E. Documentation Requirements for Submitted Plans. The documentation
requirements described in this section may be modified, expanded, or
reduced by the cognizant agency on a case-by-case basis. For example,
the requirements may be reduced for those central services which have
little or no impact on Federal awards. Conversely, if a review of a plan
indicates that certain additional information is needed, and will likely
be needed in future years, it may be routinely requested in future plan
submissions. Items marked with an asterisk (*) should be submitted only
once; subsequent plans should merely indicate any changes since the last
plan.
1. General. All proposed plans must be accompanied by the following:
An organization chart sufficiently detailed to show operations including
the central service activities of the State/local government whether or
not they are shown as benefiting from central service functions; a copy
of the Comprehensive Annual Financial Report (or a copy of the Executive
Budget if budgeted costs are being proposed) to support the allowable
costs of each central service activity included in the plan; and, a
certification (see subsection 4.) that the plan was prepared in
accordance with this and other appendices to this part, contains only
allowable costs, and was prepared in a manner that treated similar costs
consistently among the various Federal awards and between Federal and
non-Federal awards/activities.
2. Allocated central services. For each allocated central service,
the plan must also include the following: A brief description of the
service*, an identification of the unit rendering the service and the
operating agencies receiving the service, the items of expense included
in the cost of the service, the method used to distribute the cost of
the service to benefitted agencies, and a summary schedule showing the
allocation of each service to the specific benefitted agencies. If any
self-insurance funds or fringe benefits costs are treated as allocated
(rather than billed) central services, documentation discussed in
subsections 3.b. and c. shall also be included.
3. Billed services.
a. General. The information described below shall be provided for
all billed central
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services, including internal service funds, self-insurance funds, and
fringe benefit funds.
b. Internal service funds.
(1) For each internal service fund or similar activity with an
operating budget of $5 million or more, the plan shall include: A brief
description of each service; a balance sheet for each fund based on
individual accounts contained in the governmental unit's accounting
system; a revenue/expenses statement, with revenues broken out by
source, e.g., regular billings, interest earned, etc.; a listing of all
non-operating transfers (as defined by Generally Accepted Accounting
Principles (GAAP)) into and out of the fund; a description of the
procedures (methodology) used to charge the costs of each service to
users, including how billing rates are determined; a schedule of current
rates; and, a schedule comparing total revenues (including imputed
revenues) generated by the service to the allowable costs of the
service, as determined under this and other appendices of this part,
with an explanation of how variances will be handled.
(2) Revenues shall consist of all revenues generated by the service,
including unbilled and uncollected revenues. If some users were not
billed for the services (or were not billed at the full rate for that
class of users), a schedule showing the full imputed revenues associated
with these users shall be provided. Expenses shall be broken out by
object cost categories (e.g., salaries, supplies, etc.).
c. Self-insurance funds. For each self-insurance fund, the plan
shall include: The fund balance sheet; a statement of revenue and
expenses including a summary of billings and claims paid by agency; a
listing of all non-operating transfers into and out of the fund; the
type(s) of risk(s) covered by the fund (e.g., automobile liability,
workers' compensation, etc.); an explanation of how the level of fund
contributions are determined, including a copy of the current actuarial
report (with the actuarial assumptions used) if the contributions are
determined on an actuarial basis; and, a description of the procedures
used to charge or allocate fund contributions to benefitted activities.
Reserve levels in excess of claims submitted and adjudicated but not
paid, submitted but not adjudicated, and incurred but not submitted must
be identified and explained.
d. Fringe benefits. For fringe benefit costs, the plan shall
include: A listing of fringe benefits provided to covered employees, and
the overall annual cost of each type of benefit; current fringe benefit
policies*; and procedures used to charge or allocate the costs of the
benefits to benefitted activities. In addition, for pension and post-
retirement health insurance plans, the following information shall be
provided: the governmental unit's funding policies, e.g., legislative
bills, trust agreements, or State-mandated contribution rules, if
different from actuarially determined rates; the pension plan's costs
accrued for the year; the amount funded, and date(s) of funding; a copy
of the current actuarial report (including the actuarial assumptions);
the plan trustee's report; and, a schedule from the activity showing the
value of the interest cost associated with late funding.
4. Required certification. Each central service cost allocation plan
will be accompanied by a certification in the following form:
Certificate of Cost Allocation Plan
This is to certify that I have reviewed the cost allocation plan
submitted herewith and to the best of my knowledge and belief:
(1) All costs included in this proposal [identify date] to establish
cost allocations or billings for [identify period covered by plan] are
allowable in accordance with the requirements of 2 CFR Part 225, Cost
Principles for State, Local, and Indian Tribal Governments (OMB Circular
A-87), and the Federal award(s) to which they apply. Unallowable costs
have been adjusted for in allocating costs as indicated in the cost
allocation plan.
(2) All costs included in this proposal are properly allocable to
Federal awards on the basis of a beneficial or causal relationship
between the expenses incurred and the awards to which they are allocated
in accordance with applicable requirements. Further, the same costs that
have been treated as indirect costs have not been claimed as direct
costs. Similar types of costs have been accounted for consistently.
I declare that the foregoing is true and correct.
[fxsp0]Governmental Unit:_______________________________________________
[fxsp0]Signature:_______________________________________________________
[fxsp0]Name of Official:________________________________________________
[fxsp0]Title:___________________________________________________________
[fxsp0]Date of Execution:_______________________________________________
F. Negotiation and Approval of Central Service Plans.
1. All proposed central service cost allocation plans that are
required to be submitted will be reviewed, negotiated, and approved by
the Federal cognizant agency on a timely basis. The cognizant agency
will review the proposal within six months of receipt of the proposal
and either negotiate/approve the proposal or advise the governmental
unit of the additional documentation needed to support/evaluate the
proposed plan or the changes required to make the proposal acceptable.
Once an agreement with the governmental unit has been reached, the
agreement will be accepted and used by all Federal agencies, unless
prohibited or limited by statute. Where a Federal funding agency has
reason to believe that special operating factors affecting its awards
necessitate special
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consideration, the funding agency will, prior to the time the plans are
negotiated, notify the cognizant agency.
2. The results of each negotiation shall be formalized in a written
agreement between the cognizant agency and the governmental unit. This
agreement will be subject to re-opening if the agreement is subsequently
found to violate a statute or the information upon which the plan was
negotiated is later found to be materially incomplete or inaccurate. The
results of the negotiation shall be made available to all Federal
agencies for their use.
3. Negotiated cost allocation plans based on a proposal later found
to have included costs that: Are unallowable as specified by law or
regulation, as identified in Appendix B of this part, or by the terms
and conditions of Federal awards, or are unallowable because they are
clearly not allocable to Federal awards, shall be adjusted, or a refund
shall be made at the option of the Federal cognizant agency. These
adjustments or refunds are designed to correct the plans and do not
constitute a reopening of the negotiation.
G. Other Policies.
1. Billed central service activities. Each billed central service
activity must separately account for all revenues (including imputed
revenues) generated by the service, expenses incurred to furnish the
service, and profit/loss.
2. Working capital reserves. Internal service funds are dependent
upon a reasonable level of working capital reserve to operate from one
billing cycle to the next. Charges by an internal service activity to
provide for the establishment and maintenance of a reasonable level of
working capital reserve, in addition to the full recovery of costs, are
allowable. A working capital reserve as part of retained earnings of up
to 60 days cash expenses for normal operating purposes is considered
reasonable. A working capital reserve exceeding 60 days may be approved
by the cognizant Federal agency in exceptional cases.
3. Carry-forward adjustments of allocated central service costs.
Allocated central service costs are usually negotiated and approved for
a future fiscal year on a ``fixed with carry-forward'' basis. Under this
procedure, the fixed amounts for the future year covered by agreement
are not subject to adjustment for that year. However, when the actual
costs of the year involved become known, the differences between the
fixed amounts previously approved and the actual costs will be carried
forward and used as an adjustment to the fixed amounts established for a
later year. This ``carry-forward'' procedure applies to all central
services whose costs were fixed in the approved plan. However, a carry-
forward adjustment is not permitted, for a central service activity that
was not included in the approved plan, or for unallowable costs that
must be reimbursed immediately.
4. Adjustments of billed central services. Billing rates used to
charge Federal awards shall be based on the estimated costs of providing
the services, including an estimate of the allocable central service
costs. A comparison of the revenue generated by each billed service
(including total revenues whether or not billed or collected) to the
actual allowable costs of the service will be made at least annually,
and an adjustment will be made for the difference between the revenue
and the allowable costs. These adjustments will be made through one of
the following adjustment methods: A cash refund to the Federal
Government for the Federal share of the adjustment, credits to the
amounts charged to the individual programs, adjustments to future
billing rates, or adjustments to allocated central service costs.
Adjustments to allocated central services will not be permitted where
the total amount of the adjustment for a particular service (Federal
share and non-Federal) share exceeds $500,000.
5. Records retention. All central service cost allocation plans and
related documentation used as a basis for claiming costs under Federal
awards must be retained for audit in accordance with the records
retention requirements contained in the Common Rule.
6. Appeals. If a dispute arises in the negotiation of a plan between
the cognizant agency and the governmental unit, the dispute shall be
resolved in accordance with the appeals procedures of the cognizant
agency.
7. OMB assistance. To the extent that problems are encountered among
the Federal agencies and/or governmental units in connection with the
negotiation and approval process, OMB will lend assistance, as required,
to resolve such problems in a timely manner.
Appendix D to Part 225--Public Assistance Cost Allocation Plans
Table of Contents
A. General
B. Definitions
1. State public assistance agency
2. State public assistance agency costs
C. Policy
D. Submission, Documentation, and Approval of Public Assistance Cost
Allocation Plans
E. Review of Implementation of Approved Plans
F. Unallowable Costs
A. General. Federally-financed programs administered by State public
assistance agencies are funded predominately by the Department of Health
and Human Services
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(HHS). In support of its stewardship requirements, HHS has published
requirements for the development, documentation, submission,
negotiation, and approval of public assistance cost allocation plans in
Subpart E of 45 CFR part 95. All administrative costs (direct and
indirect) are normally charged to Federal awards by implementing the
public assistance cost allocation plan. This appendix extends these
requirements to all Federal agencies whose programs are administered by
a State public assistance agency. Major federally-financed programs
typically administered by State public assistance agencies include:
Temporary Assistance to Needy Families (TANF), Medicaid, Food Stamps,
Child Support Enforcement, Adoption Assistance and Foster Care, and
Social Services Block Grant.
B. Definitions.
1. ``State public assistance agency'' means a State agency
administering or supervising the administration of one or more public
assistance programs operated by the State as identified in Subpart E of
45 CFR part 95. For the purpose of this appendix, these programs include
all programs administered by the State public assistance agency.
2. ``State public assistance agency costs'' means all costs incurred
by, or allocable to, the State public assistance agency, except
expenditures for financial assistance, medical vendor payments, food
stamps, and payments for services and goods provided directly to program
recipients.
C. Policy. State public assistance agencies will develop, document
and implement, and the Federal Government will review, negotiate, and
approve, public assistance cost allocation plans in accordance with
Subpart E of 45 CFR part 95. The plan will include all programs
administered by the State public assistance agency. Where a letter of
approval or disapproval is transmitted to a State public assistance
agency in accordance with Subpart E, the letter will apply to all
Federal agencies and programs. The remaining sections of this appendix
(except for the requirement for certification) summarize the provisions
of Subpart E of 45 CFR part 95.
D. Submission, Documentation, and Approval of Public Assistance Cost
Allocation Plans.
1. State public assistance agencies are required to promptly submit
amendments to the cost allocation plan to HHS for review and approval.
2. Under the coordination process outlined in subsection E, affected
Federal agencies will review all new plans and plan amendments and
provide comments, as appropriate, to HHS. The effective date of the plan
or plan amendment will be the first day of the quarter following the
submission of the plan or amendment, unless another date is specifically
approved by HHS. HHS, as the cognizant agency acting on behalf of all
affected Federal agencies, will, as necessary, conduct negotiations with
the State public assistance agency and will inform the State agency of
the action taken on the plan or plan amendment.
E. Review of Implementation of Approved Plans.
1. Since public assistance cost allocation plans are of a narrative
nature, the review during the plan approval process consists of
evaluating the appropriateness of the proposed groupings of costs (cost
centers) and the related allocation bases. As such, the Federal
Government needs some assurance that the cost allocation plan has been
implemented as approved. This is accomplished by reviews by the funding
agencies, single audits, or audits conducted by the cognizant audit
agency.
2. Where inappropriate charges affecting more than one funding
agency are identified, the cognizant HHS cost negotiation office will be
advised and will take the lead in resolving the issue(s) as provided for
in Subpart E of 45 CFR part 95.
3. If a dispute arises in the negotiation of a plan or from a
disallowance involving two or more funding agencies, the dispute shall
be resolved in accordance with the appeals procedures set out in 45 CFR
part 75. Disputes involving only one funding agency will be resolved in
accordance with the funding agency's appeal process.
4. To the extent that problems are encountered among the Federal
agencies and/or governmental units in connection with the negotiation
and approval process, the Office of Management and Budget will lend
assistance, as required, to resolve such problems in a timely manner.
F. Unallowable Costs. Claims developed under approved cost
allocation plans will be based on allowable costs as identified in 2 CFR
part 225. Where unallowable costs have been claimed and reimbursed, they
will be refunded to the program that reimbursed the unallowable cost
using one of the following methods: a cash refund, offset to a
subsequent claim, or credits to the amounts charged to individual
awards.
Appendix E to Part 225--State and Local Indirect Cost Rate Proposals
Table of Contents
A. General
B. Definitions
1. Indirect cost rate proposal
2. Indirect cost rate
3. Indirect cost pool
4. Base
5. Predetermined rate
6. Fixed rate
7. Provisional rate
8. Final rate
9. Base period
C. Allocation of Indirect Costs and Determination of Indirect Cost Rates
[[Page 140]]
1. General
2. Simplified method
3. Multiple allocation base method
4. Special indirect cost rates
D. Submission and Documentation of Proposals
1. Submission of indirect cost rate proposals
2. Documentation of proposals
3. Required certification
E. Negotiation and Approval of Rates
F. Other Policies
1. Fringe benefit rates
2. Billed services provided by the grantee agency
3. Indirect cost allocations not using rates
4. Appeals
5. Collections of unallowable costs and erroneous payments
6. OMB assistance
A. General.
1. Indirect costs are those that have been incurred for common or
joint purposes. These costs benefit more than one cost objective and
cannot be readily identified with a particular final cost objective
without effort disproportionate to the results achieved. After direct
costs have been determined and assigned directly to Federal awards and
other activities as appropriate, indirect costs are those remaining to
be allocated to benefitted cost objectives. A cost may not be allocated
to a Federal award as an indirect cost if any other cost incurred for
the same purpose, in like circumstances, has been assigned to a Federal
award as a direct cost.
2. Indirect costs include the indirect costs originating in each
department or agency of the governmental unit carrying out Federal
awards and the costs of central governmental services distributed
through the central service cost allocation plan (as described in
Appendix C to this part) and not otherwise treated as direct costs.
3. Indirect costs are normally charged to Federal awards by the use
of an indirect cost rate. A separate indirect cost rate(s) is usually
necessary for each department or agency of the governmental unit
claiming indirect costs under Federal awards. Guidelines and
illustrations of indirect cost proposals are provided in a brochure
published by the Department of Health and Human Services entitled ``A
Guide for State and Local Government Agencies: Cost Principles and
Procedures for Establishing Cost Allocation Plans and Indirect Cost
Rates for Grants and Contracts with the Federal Government.'' A copy of
this brochure may be obtained from the Superintendent of Documents, U.S.
Government Printing Office, Washington, DC 20401.
4. Because of the diverse characteristics and accounting practices
of governmental units, the types of costs which may be classified as
indirect costs cannot be specified in all situations. However, typical
examples of indirect costs may include certain State/local-wide central
service costs, general administration of the grantee department or
agency, accounting and personnel services performed within the grantee
department or agency, depreciation or use allowances on buildings and
equipment, the costs of operating and maintaining facilities, etc.
5. This appendix does not apply to State public assistance agencies.
These agencies should refer instead to Appendix D to this part.
B. Definitions.
1. ``Indirect cost rate proposal'' means the documentation prepared
by a governmental unit or subdivision thereof to substantiate its
request for the establishment of an indirect cost rate.
2. ``Indirect cost rate'' is a device for determining in a
reasonable manner the proportion of indirect costs each program should
bear. It is the ratio (expressed as a percentage) of the indirect costs
to a direct cost base.
3. ``Indirect cost pool'' is the accumulated costs that jointly
benefit two or more programs or other cost objectives.
4. ``Base'' means the accumulated direct costs (normally either
total direct salaries and wages or total direct costs exclusive of any
extraordinary or distorting expenditures) used to distribute indirect
costs to individual Federal awards. The direct cost base selected should
result in each award bearing a fair share of the indirect costs in
reasonable relation to the benefits received from the costs.
5. ``Predetermined rate'' means an indirect cost rate, applicable to
a specified current or future period, usually the governmental unit's
fiscal year. This rate is based on an estimate of the costs to be
incurred during the period. Except under very unusual circumstances, a
predetermined rate is not subject to adjustment. (Because of legal
constraints, predetermined rates are not permitted for Federal
contracts; they may, however, be used for grants or cooperative
agreements.) Predetermined rates may not be used by governmental units
that have not submitted and negotiated the rate with the cognizant
agency. In view of the potential advantages offered by this procedure,
negotiation of predetermined rates for indirect costs for a period of
two to four years should be the norm in those situations where the cost
experience and other pertinent facts available are deemed sufficient to
enable the parties involved to reach an informed judgment as to the
probable level of indirect costs during the ensuing accounting periods.
6. ``Fixed rate'' means an indirect cost rate which has the same
characteristics as a predetermined rate, except that the difference
between the estimated costs and the actual, allowable costs of the
period covered by the
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rate is carried forward as an adjustment to the rate computation of a
subsequent period.
7. ``Provisional rate'' means a temporary indirect cost rate
applicable to a specified period which is used for funding, interim
reimbursement, and reporting indirect costs on Federal awards pending
the establishment of a ``final'' rate for that period.
8. ``Final rate'' means an indirect cost rate applicable to a
specified past period which is based on the actual allowable costs of
the period. A final audited rate is not subject to adjustment.
9. ``Base period'' for the allocation of indirect costs is the
period in which such costs are incurred and accumulated for allocation
to activities performed in that period. The base period normally should
coincide with the governmental unit's fiscal year, but in any event,
shall be so selected as to avoid inequities in the allocation of costs.
C. Allocation of Indirect Costs and Determination of Indirect Cost
Rates.
1. General.
a. Where a governmental unit's department or agency has only one
major function, or where all its major functions benefit from the
indirect costs to approximately the same degree, the allocation of
indirect costs and the computation of an indirect cost rate may be
accomplished through simplified allocation procedures as described in
subsection 2 of this appendix.
b. Where a governmental unit's department or agency has several
major functions which benefit from its indirect costs in varying
degrees, the allocation of indirect costs may require the accumulation
of such costs into separate cost groupings which then are allocated
individually to benefitted functions by means of a base which best
measures the relative degree of benefit. The indirect costs allocated to
each function are then distributed to individual awards and other
activities included in that function by means of an indirect cost
rate(s).
c. Specific methods for allocating indirect costs and computing
indirect cost rates along with the conditions under which each method
should be used are described in subsections 2, 3 and 4 of this appendix.
2. Simplified method.
a. Where a grantee agency's major functions benefit from its
indirect costs to approximately the same degree, the allocation of
indirect costs may be accomplished by classifying the grantee agency's
total costs for the base period as either direct or indirect, and
dividing the total allowable indirect costs (net of applicable credits)
by an equitable distribution base. The result of this process is an
indirect cost rate which is used to distribute indirect costs to
individual Federal awards. The rate should be expressed as the
percentage which the total amount of allowable indirect costs bears to
the base selected. This method should also be used where a governmental
unit's department or agency has only one major function encompassing a
number of individual projects or activities, and may be used where the
level of Federal awards to that department or agency is relatively
small.
b. Both the direct costs and the indirect costs shall exclude
capital expenditures and unallowable costs. However, unallowable costs
must be included in the direct costs if they represent activities to
which indirect costs are properly allocable.
c. The distribution base may be total direct costs (excluding
capital expenditures and other distorting items, such as pass-through
funds, major subcontracts, etc.), direct salaries and wages, or another
base which results in an equitable distribution.
3. Multiple allocation base method.
a. Where a grantee agency's indirect costs benefit its major
functions in varying degrees, such costs shall be accumulated into
separate cost groupings. Each grouping shall then be allocated
individually to benefitted functions by means of a base which best
measures the relative benefits.
b. The cost groupings should be established so as to permit the
allocation of each grouping on the basis of benefits provided to the
major functions. Each grouping should constitute a pool of expenses that
are of like character in terms of the functions they benefit and in
terms of the allocation base which best measures the relative benefits
provided to each function. The number of separate groupings should be
held within practical limits, taking into consideration the materiality
of the amounts involved and the degree of precision needed.
c. Actual conditions must be taken into account in selecting the
base to be used in allocating the expenses in each grouping to
benefitted functions. When an allocation can be made by assignment of a
cost grouping directly to the function benefitted, the allocation shall
be made in that manner. When the expenses in a grouping are more general
in nature, the allocation should be made through the use of a selected
base which produces results that are equitable to both the Federal
Government and the governmental unit. In general, any cost element or
related factor associated with the governmental unit's activities is
potentially adaptable for use as an allocation base provided that: it
can readily be expressed in terms of dollars or other quantitative
measures (total direct costs, direct salaries and wages, staff hours
applied, square feet used, hours of usage, number of documents
processed, population served, and the like), and it is common to the
benefitted functions during the base period.
d. Except where a special indirect cost rate(s) is required in
accordance with subsection 4, the separate groupings of indirect costs
allocated to each major function shall
[[Page 142]]
be aggregated and treated as a common pool for that function. The costs
in the common pool shall then be distributed to individual Federal
awards included in that function by use of a single indirect cost rate.
e. The distribution base used in computing the indirect cost rate
for each function may be total direct costs (excluding capital
expenditures and other distorting items such as pass-through funds,
major subcontracts, etc.), direct salaries and wages, or another base
which results in an equitable distribution. An indirect cost rate should
be developed for each separate indirect cost pool developed. The rate in
each case should be stated as the percentage relationship between the
particular indirect cost pool and the distribution base identified with
that pool.
4. Special indirect cost rates.
a. In some instances, a single indirect cost rate for all activities
of a grantee department or agency or for each major function of the
agency may not be appropriate. It may not take into account those
different factors which may substantially affect the indirect costs
applicable to a particular program or group of programs. The factors may
include the physical location of the work, the level of administrative
support required, the nature of the facilities or other resources
employed, the organizational arrangements used, or any combination
thereof. When a particular award is carried out in an environment which
appears to generate a significantly different level of indirect costs,
provisions should be made for a separate indirect cost pool applicable
to that award. The separate indirect cost pool should be developed
during the course of the regular allocation process, and the separate
indirect cost rate resulting therefrom should be used, provided that:
the rate differs significantly from the rate which would have been
developed under subsections 2. and 3. of this appendix, and the award to
which the rate would apply is material in amount.
b. Although 2 CFR part 225 adopts the concept of the full allocation
of indirect costs, there are some Federal statutes which restrict the
reimbursement of certain indirect costs. Where such restrictions exist,
it may be necessary to develop a special rate for the affected award.
Where a ``restricted rate'' is required, the procedure for developing a
non-restricted rate will be used except for the additional step of the
elimination from the indirect cost pool those costs for which the law
prohibits reimbursement.
D. Submission and Documentation of Proposals.
1. Submission of indirect cost rate proposals.
a. All departments or agencies of the governmental unit desiring to
claim indirect costs under Federal awards must prepare an indirect cost
rate proposal and related documentation to support those costs. The
proposal and related documentation must be retained for audit in
accordance with the records retention requirements contained in the
Common Rule.
b. A governmental unit for which a cognizant agency assignment has
been specifically designated must submit its indirect cost rate proposal
to its cognizant agency. The Office of Management and Budget (OMB) will
periodically publish lists of governmental units identifying the
appropriate Federal cognizant agencies. The cognizant agency for all
governmental units or agencies not identified by OMB will be determined
based on the Federal agency providing the largest amount of Federal
funds. In these cases, a governmental unit must develop an indirect cost
proposal in accordance with the requirements of 2 CFR 225 and maintain
the proposal and related supporting documentation for audit. These
governmental units are not required to submit their proposals unless
they are specifically requested to do so by the cognizant agency. Where
a local government only receives funds as a sub-recipient, the primary
recipient will be responsible for negotiating and/or monitoring the sub-
recipient's plan.
c. Each Indian tribal government desiring reimbursement of indirect
costs must submit its indirect cost proposal to the Department of the
Interior (its cognizant Federal agency).
d. Indirect cost proposals must be developed (and, when required,
submitted) within six months after the close of the governmental unit's
fiscal year, unless an exception is approved by the cognizant Federal
agency. If the proposed central service cost allocation plan for the
same period has not been approved by that time, the indirect cost
proposal may be prepared including an amount for central services that
is based on the latest federally-approved central service cost
allocation plan. The difference between these central service amounts
and the amounts ultimately approved will be compensated for by an
adjustment in a subsequent period.
2. Documentation of proposals. The following shall be included with
each indirect cost proposal:
a. The rates proposed, including subsidiary work sheets and other
relevant data, cross referenced and reconciled to the financial data
noted in subsection b of this appendix. Allocated central service costs
will be supported by the summary table included in the approved central
service cost allocation plan. This summary table is not required to be
submitted with the indirect cost proposal if the central service cost
allocation plan for the same fiscal year has been approved by the
cognizant agency and is available to the funding agency.
b. A copy of the financial data (financial statements, comprehensive
annual financial
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report, executive budgets, accounting reports, etc.) upon which the rate
is based. Adjustments resulting from the use of unaudited data will be
recognized, where appropriate, by the Federal cognizant agency in a
subsequent proposal.
c. The approximate amount of direct base costs incurred under
Federal awards. These costs should be broken out between salaries and
wages and other direct costs.
d. A chart showing the organizational structure of the agency during
the period for which the proposal applies, along with a functional
statement(s) noting the duties and/or responsibilities of all units that
comprise the agency. (Once this is submitted, only revisions need be
submitted with subsequent proposals.)
3. Required certification. Each indirect cost rate proposal shall be
accompanied by a certification in the following form:
Certificate of Indirect Costs
This is to certify that I have reviewed the indirect cost rate
proposal submitted herewith and to the best of my knowledge and belief:
(1) All costs included in this proposal [identify date] to establish
billing or final indirect costs rates for [identify period covered by
rate] are allowable in accordance with the requirements of the Federal
award(s) to which they apply and 2 CFR part 225, Cost Principles for
State, Local, and Indian Tribal Governments (OMB Circular A-87).
Unallowable costs have been adjusted for in allocating costs as
indicated in the cost allocation plan.
(2) All costs included in this proposal are properly allocable to
Federal awards on the basis of a beneficial or causal relationship
between the expenses incurred and the agreements to which they are
allocated in accordance with applicable requirements. Further, the same
costs that have been treated as indirect costs have not been claimed as
direct costs. Similar types of costs have been accounted for
consistently and the Federal Government will be notified of any
accounting changes that would affect the predetermined rate.
I declare that the foregoing is true and correct.
[fxsp0]Governmental Unit:_______________________________________________
[fxsp0]Signature:_______________________________________________________
[fxsp0]Name of Official:________________________________________________
[fxsp0]Title:___________________________________________________________
[fxsp0]Date of Execution:_______________________________________________
E. Negotiation and Approval of Rates.
1. Indirect cost rates will be reviewed, negotiated, and approved by
the cognizant Federal agency on a timely basis. Once a rate has been
agreed upon, it will be accepted and used by all Federal agencies unless
prohibited or limited by statute. Where a Federal funding agency has
reason to believe that special operating factors affecting its awards
necessitate special indirect cost rates, the funding agency will, prior
to the time the rates are negotiated, notify the cognizant Federal
agency.
2. The use of predetermined rates, if allowed, is encouraged where
the cognizant agency has reasonable assurance based on past experience
and reliable projection of the grantee agency's costs, that the rate is
not likely to exceed a rate based on actual costs. Long-term agreements
utilizing predetermined rates extending over two or more years are
encouraged, where appropriate.
3. The results of each negotiation shall be formalized in a written
agreement between the cognizant agency and the governmental unit. This
agreement will be subject to re-opening if the agreement is subsequently
found to violate a statute, or the information upon which the plan was
negotiated is later found to be materially incomplete or inaccurate. The
agreed upon rates shall be made available to all Federal agencies for
their use.
4. Refunds shall be made if proposals are later found to have
included costs that are unallowable as specified by law or regulation,
as identified in Appendix B to this part, or by the terms and conditions
of Federal awards, or are unallowable because they are clearly not
allocable to Federal awards. These adjustments or refunds will be made
regardless of the type of rate negotiated (predetermined, final, fixed,
or provisional).
F. Other Policies.
1. Fringe benefit rates. If overall fringe benefit rates are not
approved for the governmental unit as part of the central service cost
allocation plan, these rates will be reviewed, negotiated and approved
for individual grantee agencies during the indirect cost negotiation
process. In these cases, a proposed fringe benefit rate computation
should accompany the indirect cost proposal. If fringe benefit rates are
not used at the grantee agency level (i.e., the agency specifically
identifies fringe benefit costs to individual employees), the
governmental unit should so advise the cognizant agency.
2. Billed services provided by the grantee agency. In some cases,
governmental units provide and bill for services similar to those
covered by central service cost allocation plans (e.g., computer
centers). Where this occurs, the governmental unit should be guided by
the requirements in Appendix C to this part relating to the development
of billing rates and documentation requirements, and should advise the
cognizant agency of any billed services. Reviews of these types of
services (including reviews of costing/billing methodology, profits or
losses, etc.) will be made on a case-by-case basis as warranted by the
circumstances involved.
[[Page 144]]
3. Indirect cost allocations not using rates. In certain situations,
a governmental unit, because of the nature of its awards, may be
required to develop a cost allocation plan that distributes indirect
(and, in some cases, direct) costs to the specific funding sources. In
these cases, a narrative cost allocation methodology should be
developed, documented, maintained for audit, or submitted, as
appropriate, to the cognizant agency for review, negotiation, and
approval.
4. Appeals. If a dispute arises in a negotiation of an indirect cost
rate (or other rate) between the cognizant agency and the governmental
unit, the dispute shall be resolved in accordance with the appeals
procedures of the cognizant agency.
5. Collection of unallowable costs and erroneous payments. Costs
specifically identified as unallowable and charged to Federal awards
either directly or indirectly will be refunded (including interest
chargeable in accordance with applicable Federal agency regulations).
6. OMB assistance. To the extent that problems are encountered among
the Federal agencies and/or governmental units in connection with the
negotiation and approval process, OMB will lend assistance, as required,
to resolve such problems in a timely manner.
PARTS 226-229 [RESERVED]
PART 230_COST PRINCIPLES FOR NON-PROFIT ORGANIZATIONS (OMB CIRCULAR
A-122)--Table of Contents
Sec.
230.5 Purpose.
230.10 Scope.
230.15 Policy.
230.20 Applicability.
230.25 Definitions
230.30 OMB responsibilities.
230.35 Federal agency responsibilities.
230.40 Effective date of changes.
230.45 Relationship to previous issuance.
230.50 Information Contact.
Appendix A to Part 230--General Principles
Appendix B to Part 230--Selected Items of Cost
Appendix C to Part 230--Non-Profit Organizations Not Subject to This
Part
Authority: 31 U.S.C. 503; 31 U.S.C. 1111; 41 U.S.C. 405;
Reorganization Plan No. 2 of 1970; E.O. 11541, 35 FR 10737, 3 CFR, 1966-
1970, p. 939
Source: 70 FR 51927, Aug. 31, 2005, unless otherwise noted.
Sec. 230.5 Purpose.
This part establishes principles for determining costs of grants,
contracts and other agreements with non-profit organizations.