Federal Awarding Agency Regulatory Implementation of Office of Management and Budget's Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, 75867-76106 [2014-28697]
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Vol. 79
Friday,
No. 244
December 19, 2014
Part II
EXECUTIVE OFFICE OF THE PRESIDENT
Office of Management and Budget
2 CFR Parts 1, 25, 170, et al.
DEPARTMENT OF HEALTH AND HUMAN
SERVICES
2 CFR Part 300
45 CFR Parts 74, 75, and 92
DEPARTMENT OF AGRICULTURE
2 CFR Parts 400, 415, 416, et al.
Office of the Chief Financial Officer
7 CFR Parts 3015, 3016, 3018, et al.
Farm Service Agency
tkelley on DSK3SPTVN1PROD with RULES2
7 CFR Parts 761 and 785
Commodity Credit Corporation
7 CFR Parts 1407 and 1485
National Institute of Food and Agriculture
7 CFR Parts 3400, 3401, 3402, et al.
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Rural Utilities Service
7 CFR Parts 1703, 1709, 1710, et al.
Rural
Rural
Rural
Farm
Business-Cooperative Service
Housing Service
Utilities Service
Service Agency
7 CFR Parts 1942, 1944, 1951, et al.
Rural Housing Service
7 CFR Parts 3570 and 3575
Rural Business-Cooperative Service
Rural Utilities Service
7 CFR Parts 4274, 4279, 4280, et al.
DEPARTMENT OF STATE
2 CFR Part 600
22 CFR Parts 135 and 145
AGENCY FOR INTERNATIONAL
DEVELOPMENT
2 CFR Part 700
22 CFR Part 226
DEPARTMENT OF VETERANS AFFAIRS
2 CFR Part 802
38 CFR Parts 41 and 43
DEPARTMENT OF ENERGY
2 CFR Part 910
10 CFR Parts 602, 605, and 733
DEPARTMENT OF TREASURY
2 CFR Part 1000
DEPARTMENT OF DEFENSE
2 CFR Part 1103
DEPARTMENT OF TRANSPORTATION
2 CFR Part 1201
49 CFR Parts 18 and 19
DEPARTMENT OF COMMERCE
2 CFR Part 1327
15 CFR Parts 14 and 24
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DEPARTMENT OF THE INTERIOR
2 CFR Part 1402
43 CFR Part 12
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ENVIRONMENTAL PROTECTION AGENCY
2 CFR Part 1500
40 CFR Parts 30, 31, 33, et al.
NATIONAL AERONAUTICS AND SPACE
ADMINISTRATION
2 CFR Part 1800
14 CFR Parts 1260 and 1273
CORPORATION FOR NATIONAL AND
COMMUNITY SERVICE
2 CFR Part 2205
45 CFR Parts 1235, 2510, 2520, et al.
SOCIAL SECURITY ADMINISTRATION
2 CFR Part 2300
20 CFR Parts 435 and 437
DEPARTMENT OF HOUSING AND URBAN
DEVELOPMENT
2 CFR Part 2400
24 CFR Parts 84 and 85
NATIONAL SCIENCE FOUNDATION
2 CFR Part 2500
45 CFR Part 602
NATIONAL ARCHIVES AND RECORDS
ADMINISTRATION
2 CFR Part 2600
36 CFR Parts 1206, 1207, and 1210
SMALL BUSINESS ADMINISTRATION
2 CFR Part 2701
13 CFR Part 143
DEPARTMENT OF JUSTICE
2 CFR Part 2800
28 CFR Parts 66 and 70
DEPARTMENT OF LABOR
2 CFR Part 2900
DEPARTMENT OF HOMELAND SECURITY
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2 CFR Part 3002
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Federal Emergency Management Agency
44 CFR Parts 13, 78, 79, et al.
INSTITUTE OF MUSEUM AND LIBRARY
SERVICES
2 CFR Part 3187
45 CFR Parts 1180 and 1183
NATIONAL ENDOWMENT FOR THE ARTS
2 CFR Part 3255
45 CFR Part 1157
NATIONAL ENDOWMENT FOR THE
HUMANITIES
2 CFR Part 3374
45 CFR Part 1174
DEPARTMENT OF EDUCATION
2 CFR Part 3474
34 CFR Parts 74, 75, 76, et al.
EXECUTIVE OFFICE OF THE PRESIDENT
Office of National Drug Control Policy
2 CFR Part 3603
21 CFR Parts 1403, 1404, and 1405
GULF COAST ECOSYSTEM RESTORATION
COUNCIL
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2 CFR Part 5900
Federal Awarding Agency Regulatory Implementation of Office of
Management and Budget’s Uniform Administrative Requirements, Cost
Principles, and Audit Requirements for Federal Awards; Final Rule
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Federal Register / Vol. 79, No. 244 / Friday, December 19, 2014 / Rules and Regulations
EXECUTIVE OFFICE OF THE
PRESIDENT
75871
DEPARTMENT OF STATE
DEPARTMENT OF THE INTERIOR
2 CFR Part 600
2 CFR Part 1402
22 CFR Parts 135 and 145
43 CFR Part 12
Office of Management and Budget
2 CFR Parts 1, 25, 170, 180, and 200
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
RIN 1090–AB08
RIN 1400–AD57
2 CFR Part 300
AGENCY FOR INTERNATIONAL
DEVELOPMENT
45 CFR Parts 74, 75, and 92
ENVIRONMENTAL PROTECTION
AGENCY
2 CFR Part 1500
RIN 0991–ZA46
2 CFR Part 700
DEPARTMENT OF AGRICULTURE
22 CFR Part 226
2 CFR Parts 400, 415, 416, 418, and 422
Office of the Chief Financial Officer
40 CFR Parts 30, 31, 33, 35, 40, 45, 46,
and 47
RIN 2030–AA99
RIN 0412–AA73
DEPARTMENT OF VETERANS
AFFAIRS
7 CFR Parts 3015, 3016, 3018, 3019,
3022, and 3052
NATIONAL AERONAUTICS AND
SPACE ADMINISTRATION
2 CFR Part 1800
2 CFR Part 802
14 CFR Parts 1260 and 1273
Farm Service Agency
38 CFR Parts 41 and 43
RIN 2700–AE94
7 CFR Parts 761 and 785
RIN 2900–AP03
CORPORATION FOR NATIONAL AND
COMMUNITY SERVICE
Commodity Credit Corporation
DEPARTMENT OF ENERGY
7 CFR Parts 1407 and 1485
2 CFR Part 2205
2 CFR Part 910
National Institute of Food and
Agriculture
10 CFR Parts 602, 605, and 733
7 CFR Parts 3400, 3401, 3402, 3403,
3405, 3406, 3407, 3415, 3430, and 3431
RIN 1991–AB94
Rural Utilities Service
DEPARTMENT OF TREASURY
7 CFR Parts 1703, 1709, 1710, 1717,
1724, 1726, 1737, 1738, 1739, 1740,
1773, 1774, 1775, 1776, 1778, 1779,
1780, 1782, and 1783
2 CFR Part 1000
45 CFR Parts 1235, 2510, 2520, 2541,
2543, 2551, 2552, and 2553
RIN 3045–AA61
SOCIAL SECURITY ADMINISTRATION
2 CFR Part 2300
20 CFR Parts 435 and 437
RIN 1505–AC48
RIN 0960–0960–AH73
DEPARTMENT OF DEFENSE
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
Rural Business-Cooperative Service
2 CFR Part 1103
Rural Housing Service
2 CFR Part 2400
RIN 0790–AJ25
Rural Utilities Service
DEPARTMENT OF TRANSPORTATION
Farm Service Agency
24 CFR Parts 84 and 85
RIN 2501–AD54
7 CFR Parts 1942, 1944, 1951, and 1980
2 CFR Part 1201
NATIONAL SCIENCE FOUNDATION
49 CFR Parts 18 and 19
Rural Housing Service
2 CFR Part 2500
RIN 2105–AE33
45 CFR Part 602
Rural Business-Cooperative Service
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7 CFR Parts 3570 and 3575
DEPARTMENT OF COMMERCE
RIN 3145–AA57
Rural Utilities Service
2 CFR Part 1327
7 CFR Parts 4274, 4279, 4280, 4284,
4285, and 4290
15 CFR Parts 14 and 24
RIN 0505–AA15
RIN 0605–AA34
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Federal Register / Vol. 79, No. 244 / Friday, December 19, 2014 / Rules and Regulations
NATIONAL ARCHIVES AND RECORDS
ADMINISTRATION
2 CFR Part 2600
DEPARTMENT OF EDUCATION
2 CFR Part 3474
36 CFR Parts 1206, 1207, and 1210
RIN 3095–AB83
SMALL BUSINESS ADMINISTRATION
2 CFR Part 2701
13 CFR Part 143
34 CFR Parts 74, 75, 76, 77, 80, 101,
206, 222, 225, 226, 270, 280, 299, 300,
303, 350, 361, 363, 364, 365, 367, 369,
370, 373, 377, 380, 381, 385, 396, 400,
426, 460, 464, 491, 535, 606, 607, 608,
609, 611, 614, 628, 636, 637, 642, 643,
644, 645, 646, 647, 648, 650, 654, 655,
661, 662, 663, 664, 682, 692, 694, and
1100
RIN 3245–AG62
RIN 1890–AA19
DEPARTMENT OF JUSTICE
EXECUTIVE OFFICE OF THE
PRESIDENT
2 CFR Part 2800
Office of National Drug Control Policy
28 CFR Parts 66 and 70
RIN 1121–AA81
2 CFR Part 3603
DEPARTMENT OF LABOR
21 CFR Parts 1403, 1404, and 1405
RIN 3201–AA00
2 CFR Part 2900
RIN 1205–AB71
GULF COAST ECOSYSTEM
RESTORATION COUNCIL
DEPARTMENT OF HOMELAND
SECURITY
2 CFR Part 5900
2 CFR Part 3002
RIN 3600–AA03
Federal Emergency Management
Agency
44 CFR Parts 13, 78, 79, 152, 201, 204,
206, 207, 208, 304, 360, and 361
RIN 1601–AA70
INSTITUTE OF MUSEUM AND
LIBRARY SERVICES
2 CFR Part 3187
45 CFR Parts 1180 and 1183
RIN 3137–AA24
NATIONAL ENDOWMENT FOR THE
ARTS
2 CFR Part 3255
45 CFR Part 1157
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RIN 3135–AA32
NATIONAL ENDOWMENT FOR THE
HUMANITIES
2 CFR Part 3374
45 CFR Part 1174
RIN 3136–AA35
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Federal Awarding Agency Regulatory
Implementation of Office of
Management and Budget’s Uniform
Administrative Requirements, Cost
Principles, and Audit Requirements for
Federal Awards
Office of Management and
Budget, Executive Office of the
President; Department of Health And
Human Services; Farm Service Agency,
Commodity Credit Corporation,
National Institute of Food and
Agriculture, Rural Utilities Service,
Rural Business-Cooperative Service,
Rural Housing Service, Rural Utilities
Service, Farm Service Agency,
Department of Agriculture; Department
of State; Agency for International
Development; Department of Veterans
Affairs; Department of Energy;
Department of Treasury; Department of
Defense; Department of Transportation;
Department of Commerce; Department
of the Interior; Environmental
Protection Agency; National
Aeronautics and Space Administration;
Corporation for National and
Community Service; Social Security
Administration; Department of Housing
And Urban Development; National
Science Foundation; National Archives
and Records Administration; Small
AGENCY:
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Business Administration; Department of
Justice; Department of Labor; Federal
Emergency Management Agency,
Department of Homeland Security;
Institute of Museum and Library
Services; National Endowment for the
Arts; National Endowment for the
Humanities; Department of Education;,
Office of National Drug Control Policy,
Executive Office of the President; Gulf
Coast Ecosystem Restoration Council.
ACTION: Interim final rule.
This joint interim final rule
implements for all Federal awardmaking agencies the final guidance
Uniform Administrative Requirements,
Cost Principles, and Audit
Requirements for Federal Awards
(Uniform Guidance) published by the
Office of Management and Budget
(OMB) on December 26, 2013. This rule
is necessary in order to incorporate into
regulation and thus bring into effect the
Uniform Guidance as required by OMB.
Implementation of this guidance will
reduce administrative burden and risk
of waste, fraud, and abuse for the
approximately $600 billion per year
awarded in Federal financial assistance.
The result will be more Federal dollars
reprogrammed to support the mission,
new entities able to compete and win
awards, and ultimately a stronger
framework to provide key services to
American citizens and support the basic
research that underpins the United
States economy.
DATES: Effective date: This interim final
rule is effective on December 26, 2014.
The incorporation by reference of
certain publications listed in the rule is
approved by the Director of the Federal
Register as of December 26, 2014.
Implementation dates: For grants
authorized under the Robert T. Stafford
Disaster Relief and Emergency
Assistance Act, this rule is applicable
for emergency or major disaster
declarations issued on or after December
26, 2014. For non-Federal entities that
are nonprofit organizations or
institutions of higher education (IHEs),
there is a one-year grace period for
implementation of the procurement
standards in 2 CFR 200.317 through
200.326. As will be detailed in the 2015
OMB Compliance Supplement, nonFederal entities choosing to delay
implementation for the procurement
standards will need to specify in their
documented policies and procedures
that they continue to comply with OMB
circular A–110 for one additional fiscal
year which begins after December 26,
2014.
Comment date: To be assured of
consideration, comments must be
received by OMB electronically through
SUMMARY:
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www.regulations.gov no later than
midnight Eastern Standard Time (E.S.T.)
on February 17, 2015.
ADDRESSES: Comments should be
submitted to www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: For
general information, please contact
Victoria Collin or Gil Tran at the OMB
Office of Federal Financial
Management, 175 17th St. NW.,
Washington, DC 20500, or via telephone
at (202) 395–3993. You may submit
comments via the Federal eRulemaking
Portal at www.regulations.gov, Docket
Number OMB–2014–0006. Follow the
instructions for submitting comments.
SUPPLEMENTARY INFORMATION:
Background
This joint interim final rule
implements for all Federal awardmaking agencies the final guidance
Uniform Administrative Requirements,
Cost Principles, and Audit
Requirements for Federal Awards
published by the Office of Management
and Budget (OMB) on December 26,
2013 in 2 CFR part 200 (Uniform
Guidance—available at 78 FR 78589).
The Uniform Guidance followed on a
Notice of Proposed Guidance issued
February 1, 2013 (available at 78 FR
7282), and an Advanced Notice of
Proposed Guidance issued February 28,
2012 (available at 77 FR 11778). The
final guidance incorporated feedback
received from the public in response to
those earlier issuances. Additional
supporting resources are available from
the Council on Financial Assistance
Reform at www.cfo.gov/COFAR.
The Uniform Guidance delivered on
two presidential directives; Executive
Order 13520 on Reducing Improper
Payments (74 FR 62201; November 15,
20019), and February 28, 2011
Presidential Memorandum on
Administrative Flexibility, Lower Costs,
and Better Results for State, Local, and
Tribal Governments, (Daily Comp. Pres.
Docs.; https://www.gpo.gov/fdsys/pkg/
DCPD-201100123/pdf/DCPD201100123.pdf). It reflected more than
two years of work by the Council on
Financial Assistance Reform to improve
the efficiency and effectiveness of
Federal financial assistance. For a
detailed discussion of the reform and its
impacts, please see the Federal Register
notice for the issuance of the final
guidance (78 FR 78589).
With this interim final rule, OMB is
amending the uniform guidance to make
technical corrections where needed, and
Federal awarding agencies are joining
together to implement the Uniform
Guidance in their respective chapters of
title 2 of the CFR. With respect to the
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technical corrections that OMB is
issuing, these corrections are included
only where it has come to the attention
of the COFAR that particular language
in the final guidance did not match with
the COFAR’s intent and would result in
an erroneous implementation of the
guidance. These technical corrections
will go into effect at the time of the
effective date of this interim final rule.
Among these technical corrections,
please note in particular, parts 25, 170,
and 180 are amended to reflect that the
Central Contractor Registration (CCR)
and Excluded Parties List System
(EPLS) no longer exist as stand-alone
systems; their functionalities are now
available in the System of Award
Management (SAM).
2 CFR parts 25, 180 and, 200 are
revised to remove references to the Dun
and Bradstreet (D&B) Data Universal
Numbering System (DUNS) and replace
them with the term ‘unique entity
identifier’. This change is consistent
with Administration priorities to
technically refine existing regulations.
The specific standard for this unique
entity identifier will be in accordance
with the requirements of SAM. This
revision does not indicate a change in
current policy.
References to the Federal Awardee
Performance and Integrity Information
System (FAPIIS) remain in 2 CFR part
200 reflecting that final guidance for
Federal grants and cooperative
agreements will be published following
the issuance of this interim final rule.
2 CFR 200.110 Effective/applicability
date is revised to allow a grace period
of one fiscal year for non-Federal
entities to implement changes to their
procurement policies and procedures in
accordance with sections 200.317
through 200.336 Procurement
Standards.
Finally, 2 CFR 200.320 Methods of
Procurement paragraph (c), the
requirement for sealed bids to be
advertised and opened ‘‘publicly’’ is
limited as was originally intended to
state, local and tribal entities. Other
requirements in the section remain as
originally published.
In addition, throughout the guidance,
the COFAR changed the word ‘‘should’’
to ‘‘must’’ to reflect longstanding
policies that have been requirements in
practice, but which may have been
misinterpreted as optional with the
usage of the word ‘‘should’’. Other
technical corrections are made to
eliminate conflicting or unclear
language and grammatical
inconsistencies or citation errors
throughout.
With respect to the implementing
regulations that Federal awarding
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agencies are issuing, any agencies that
have received OMB approval for an
exception to the Uniform Guidance have
included the resulting language in their
regulations. OMB has only approved
exceptions to the Uniform Guidance
where they are consistent with existing
policy. Further, agencies are providing
additional language beyond that
included in 2 CFR part 200, consistent
with their existing policy, to provide
more detail with respect to how they
intend to implement the policy, where
appropriate. Agencies are not making
new policy with this interim final rule;
all regulatory language included here
should be consistent with either the
policies in the Uniform Guidance or the
agencies’ existing policies and practices.
Three agencies have requested special
accommodation with respect to the
format of their implementing language.
The National Science Foundation, the
Department of Education, and the
Department of Health and Human
Services have included agency-specific
preamble language as follows:
National Science Foundation
The National Science Foundation
(NSF) has received approval from OMB
to implement 2 CFR part 200 via use of
a policy, rather than a regulation. In the
interest of establishing a single location
for each of the Departments’ and
Agencies’ implementation of the
Uniform Guidance, per OMB’s request,
NSF has provided a link to its policy
implementation of OMB’s Uniform
Guidance in 2 CFR part 2500 for
inclusion in this issuance.
Department of Education
The Secretary of the Department of
Education takes one exception from the
Uniform Guidance and makes one
clarification regarding another section of
the Uniform Guidance (discussed more
fully later in this section of the
preamble). The Secretary also describes
the technical amendments needed to
conform to the guidance in 2 CFR part
200. The Secretary publishes this
special section of the joint preamble to
provide the basis and purpose for the
exception and clarification.
The Secretary also seeks comments on
whether any of the requirements
imposed under our adoption of the
Uniform Guidance conflict with any of
the requirements in the Department’s
statutes and regulations.
Exception and Clarification
An exception to the Uniform
Guidance is required because the
Secretary lacks authority to delegate
functions to the Office of Management
and Budget (OMB), as contemplated by
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Federal Register / Vol. 79, No. 244 / Friday, December 19, 2014 / Rules and Regulations
the Uniform Guidance. In particular, 2
CFR 200.102(a) would effectively
delegate one of the Secretary’s
functions—granting exceptions to the
regulations as promulgated by the
Department—to employees of OMB.
Section 412 of the Department of
Education Organization Act (20 U.S.C.
3472) permits the Secretary to delegate
functions of the Department to officers
and employees of the Department, but
neither that section or any other statute
permits the Secretary to delegate to
OMB the authority to grant exceptions
to the Department’s regulations. The
Secretary is therefore modifying the
regulation in 2 CFR 200.102(a) to
authorize the Secretary to grant
exceptions to the regulations after
consultation with appropriate officials
at OMB. This exception is stated in 2
CFR 3474.5.
The Secretary also clarifies that the
Department’s authority under 2 CFR
200.207, Specific conditions, also
permits the Department to designate
grants and grantees as high risk. The
Department has long used the authority
under 34 CFR 74.14, Special award
conditions, and 80.12, Special grant or
subgrant conditions for ‘‘high-risk’’
grantees, to impose high-risk conditions
on both individual grants and
individual grantees. While these two
sections did not both use the term
‘‘high-risk,’’ they established identical
standards for imposing special
conditions on grantees. Under these
regulations, the Department has
imposed high-risk conditions on
specific grants and grantees in
appropriate circumstances regardless of
whether the grantee was subject to part
74 or part 80. The guidance in 2 CFR
200.205 and 200.207 replaces the
requirements in 34 CFR 74.14 and 80.12
and authorizes specific conditions
under virtually identical standards to
those formerly in parts 74 and 80.
Because the standards in 2 CFR 200.207
are virtually identical to those in former
34 CFR parts 74 and 80, the Secretary
clarifies that the Department will now
use the standards in 2 CFR 200.205 and
the procedures in 2 CFR 200.207 to
impose specific or high risk conditions
on grants and grantees, depending on
the circumstances in each case.
The current regulations in parts 74
and 80 contain provisions that authorize
the Department to impose conditions on
grants or grantees if an applicant or
grantee (1) Has a history of poor
performance; (2) Is not financially
stable; (3) Has a management system
that does not meet the standards
prescribed in this part; (4) Has not
conformed to the terms and conditions
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of a previous award; or (5) Is not
otherwise responsible.
The guidance in 2 CFR 200.205
requires agencies to conduct a risk
evaluation whenever making new
awards, authorizing agencies to use a
risk-based approach, and may consider
any items such as the following: (1)
Financial stability; (2) Quality of
management systems and ability to meet
the management standards prescribed in
Part 200; (3) History of performance.
The applicant’s record in managing
Federal awards, if it is a prior recipient
of Federal awards, including timeliness
of compliance with applicable reporting
requirements, conformance to the terms
and conditions of previous Federal
awards and, if applicable, the extent to
which any previously awarded amounts
will be expended prior to future awards;
(4) Reports and findings from audits
performed under Subpart F—Audit
Requirements of Part 200 or the reports
and findings of any other available
audits; and (5) The applicant’s ability to
effectively implement statutory,
regulatory, or other requirements
imposed on non-Federal entities.
The standards identified in 2 CFR
200.205 may be used both at the time of
the award or after an award is made if
the Department discovers new risks
posed under a particular grant or by a
particular grantee. While the standards
in 2 CFR 200.205 provide more detail
and are stated in neutral terms, the same
underlying reasons apply to the
standards used by the Department to
impose high-risk conditions under 34
CFR 74.14 and 80.12. Therefore, the
Secretary clarifies that the standards in
2 CFR 200.205, which do not mention
‘‘high-risk’’ conditions, can be used in
appropriate cases by Department
officials to impose high-risk conditions
on individual grants or on specific
grantees.
Technical Amendments and Removal of
Obsolete Parts
These interim final regulations also
make technical changes: (1) To the
Department’s regulations in the
Education Department General
Administrative Regulations (EDGAR),
34 CFR parts 75, 76, and 77, to conform
to the Uniform Guidance in part 2 CFR
part 200; and (2) to update program
regulations that currently reference 34
CFR parts 74 and 80 or specific sections
in those parts. In addition, the
Department is removing, rather than
updating, the following parts of title 34
of the CFR that reference parts 74 and
80 but that are no longer authorized by
statute:
Part 380, Special Projects and
Demonstrations for Providing Supported
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Employment Services to Individuals
with the Most Severe Disabilities and
Technical Assistance Projects:
previously authorized by section 311(c)
of the Rehabilitation Act of 1973 (former
29 U.S.C. 777a(c)); the authority for this
program was not retained when
Congress reauthorized the Act in 1998
(P.L. 105–220).
Part 426, Cooperative Demonstration
Program: previously authorized by
section 420A of the Carl D. Perkins
Vocational and Applied Technology Act
(former 20 U.S.C. 2420a); the authority
for this program was not retained when
Congress reauthorized the Perkins Act
in 1998 (Pub. L. 105–332).
Part 460, Adult Education—General
Provisions: previously authorized by the
Adult Education Act (former 20 U.S.C.
1201 et seq.), which was repealed by
section 251(a)(1) of Pub. L. 105–220
(1998).
Part 464, State Literacy Resource
Centers Program: previously authorized
by section 356 of the Adult Education
Act (former 20 U.S.C. 1208aa), which
was repealed by section 251(a)(1) of
Pub. L. 105–220 (1998).
Part 491, Adult Education for the
Homeless Program: previously
authorized by section 701 of the
McKinney-Vento Homeless Assistance
Act (former 42 U.S.C. 11421), which
was repealed by section 199(b)(1) of P.L.
105–220 (1998).
Part 535, Bilingual Education:
Graduate Fellowship Program:
previously authorized by section 7145
of the Elementary and Secondary
Education Act of 1965 (ESEA) (former
20 U.S.C. 7475), which was not retained
in the 2002 reauthorization of the ESEA
(P.L. 107–110).
Part 636, Urban Community Service
Program: previously authorized by title
XI, part A of the Higher Education Act
of 1965 (HEA) (former 20 U.S.C. 1136–
1136h), which was repealed by section
202 of P.L. 105–244 (1998).
Part 1100, National Institute for
Literacy: Literacy Leader Fellowship
Program: previously authorized by
section 384(e) of the Adult Education
Act (former 20 U.S.C. 1213c(e)), which
was repealed by section 251(a)(1) of
Pub. L. 105–220 (1998).
Definition of ‘‘Grant’’
Two of the technical amendments
relate to the definitions of ‘‘grant’’ and
‘‘award.’’ These terms are defined in 34
CFR parts 74 and 80, as equivalent
terms for financial assistance awarded
by the Department. The guidance in 2
CFR 200.24 and 200.51 defines
‘‘cooperative agreement’’ and ‘‘grant
agreement’’, respectively, and these
definitions follow the Federal Grant and
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Cooperative Agreement Act (31 U.S.C.
6303–6305) language closely for the
treatment of grants and cooperative
agreements. However, because
Department regulations use the terms
‘‘grant’’ and ‘‘award’’ to refer generally
to both grants and cooperative
agreements, the Department cannot rely
on the definition of ‘‘grant agreement’’
in part 200. Instead, we establish
definitions of ‘‘grant’’ and ‘‘award’’ in
34 CFR 77.1(c) to include within their
scope cooperative agreements as well as
grants. Because part 77 defines terms
applicable to all programs of the
Department, program regulations can
continue to use these terms to refer to
both types of awards.
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General Education Provisions Act
Requirements
Section 437(b) of the General
Education Provisions Act (GEPA), 20
U.S.C. 1232(b), provides that,
immediately following each substantive
provision of the Department’s
regulations, the Department must
provide the citations to the particular
section or sections of statutory law or
other legal authority on which that
provision is based. The substantive
provision in these interim final
regulations that adopts the guidance in
2 CFR part 200 is 2 CFR 3474.1. Because
the authority citations for all of the
sections adopted by the Department are
the same (unless noted otherwise), the
Department provides the authority
citation for all of the adopted guidance
in paragraph (b) of 3474.1. For other
sections in Part 3474, the authority
citations are provided at the end of each
of those sections.
Rulemaking Considerations
The Department is generally required,
under the General Education Provisions
Act (GEPA), section 437 (20 U.S.C.
1232) and the APA to take comment on
proposed rules before they become
effective. Also, under the Higher
Education Act of 1965 (HEA), section
492, (20 U.S.C. 1098a), all Department
regulations for programs authorized
under title IV of the HEA are subject to
negotiated rulemaking requirements
and, under section 482 of the HEA, any
title IV regulations that have not been
published in final form by November 1
prior to the start of an award year
cannot become effective until the
beginning of the second award year
following the November 1 date. The
joint preamble includes waivers of
proposed rulemaking and delayed
effective date with respect to the APA.
For the same reasons included in the
joint preamble, the Secretary has
determined that there is good cause to
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waive proposed rulemaking and delayed
effective date under both GEPA and the
HEA.
Assessment of Educational Impact
In accordance with section 411 of the
General Education Provisions Act, 20
U.S.C. 1221e–4, the Secretary
particularly requests comments on
whether these interim final regulations
would require transmission of
information that any other agency or
authority of the United States gathers or
makes available.
Department of Health and Human
Services
The Department of Health and Human
Services (HHS) is adapting OMB’s final
guidance with certain amendments,
based on existing HHS regulations, to
supplement the guidance as needed for
the Department. HHS’ amendments are
described below, and incorporated into
HHS’ implementing regulations at 45
CFR part 75. As with NSF, HHS has, in
the interest of establishing a single
location for each Department’s
implementation of the uniform
guidance, provided a link to its policy
implementation of OMB’s uniform
guidance in 2 CFR part 300. The
changes described below are categorized
as regulation-wide formatting changes,
additions, or revisions. The items
described as formatting changes have
been made throughout the text of the
HHS regulation to accommodate the
structure and content of the HHS
guidance. All other changes are listed in
order by section.
As indicated in the common
preamble, OMB has afforded ample
opportunity for notice and an
opportunity for comment on the
provisions contained therein. In
addition, HHS finds that there is good
cause under 5 U.S.C. 553(b)(B) and
(d)(3) to dispense with the opportunity
for advance notice and opportunity for
public comment and good cause to
publish this rule with an effective date
of December 26, 2014. All of the
additions and modifications listed
below already exist in codified
regulations (45 CFR part 74 or part 92),
and thus are currently applicable to
HHS grantees. As such, all HHS grantees
should already be in compliance with
these provisions. Consequently, no
changes on the part of grantees are
expected. In order to comport with
OMB’s timeframe for Federal agency
adoption of these regulations, it is
impracticable and contrary to the public
interest to delay this rule for the
purpose of soliciting advance public
comment or to have a delayed effective
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date for these minor changes that reflect
current HHS rules and practice.
HHS is making the rule effective on
December 26, 2014, in order to comport
with all other Federal agency adoption,
and to ensure consistency in all grantmaking procedures. Failure to do so
could have unpredictable negative
effects on grants implementation.
For the above reasons, the Secretary
issues this rule as an interim final rule.
However, HHS will consider and
address comments that are received
within 60 days of the date this interim
final rule is published in the Federal
Register.
In 45 CFR part 75, HHS incorporates
the guidance in 2 CFR part 200 with the
following adjustments:
1. Changes ‘‘Federal Awarding
Agency’’ to ‘‘HHS Awarding Agency’’
where applicable.
2. Removes titles of sections within
the regulatory text to improve
readability.
3. Revises the numbering schema to
facilitate the inclusion of additional
definitions and to facilitate the
inclusion of material specific to HHS
awards. All such numbering changes are
updated throughout the document,
including internal references.
4. Includes Appendix IX, ‘‘Principles
for Determining Costs Applicable to
Research and Development Under
Grants and Contracts with Hospitals,’’
with appropriate numbering schema.
5. Renumber sections, especially
Subpart D, to facilitate the inclusion of
material specific to HHS awards.
6. Changes citations to reflect location
in 45 CFR part 75.
7. Inserts reserved sections
throughout the regulation to
accommodate future changes.
(a) HHS adopts 2 CFR 200.0 in 45 CFR
75.1, with the following additional
acronyms, added to existing list in
appropriate alphabetical order:
(1) HHS U.S. Department of Health
and Human Services
(2) SF 424 Standard Form 424 series
and Form Families Application for
Federal Assistance
(b) HHS adopts the definitions found
in 2 CFR 200.2–200.99 in 45 CFR 75.2
with the following changes.
(1) Adds the following new
definitions:
(i) ‘‘Awardee.’’
(ii) ‘‘Commercial organization.’’
(iii) ‘‘Departmental Appeals Board.’’
(iv) ‘‘Excess property.’’
(v) ‘‘Expenditure report.’’
(vi) ‘‘Grantee.’’
(vii) ‘‘HHS awarding agency.’’
(viii) ‘‘Principal Investigator/Program
Director/(PI/PD).’’
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(ix) ‘‘Prior approval.’’
(x) ‘‘Project period.’’
(xi) ‘‘Surplus property.’’
(xii) ‘‘Suspension of award activities.’’
(xiii) ‘‘Total Costs.’’
(2) Revises the following specific
definitions as described below:
(i) Cost sharing or matching to add
‘‘This may include the value of
allowable third party in-kind
contributions, as well as expenditures
by the recipient.’’ after the first
sentence.
(ii) Indirect cost rate proposal to add
‘‘and Appendix IX’’ after ‘‘Appendix
VII’’.
(iii) Personal property to add ‘‘such as
copyrights, patents, or securities’’ at the
end of the definition.
(iv) Recipient to add ‘‘usually but not
limited to non-Federal entities,’’ in the
first sentence, after ‘‘entity,’’.
(v) Research and Development to
replace ‘‘non-Federal entities’’ with
‘‘HHS award recipients’’.
(3) All definitions, including the HHS
additions, are in alphabetical order.
(c) HHS adopts 2 CFR 200.104 in 45
CFR 75.104 by adding a new subsection
to note the supersession of 45 CFR parts
74 and 92 and renumbers accordingly.
(d) HHS adopts 2 CFR 200.106 in 45
CFR 75.106 and articulates HHS
implementation of 2 CFR part 200.
(e) HHS adopts 2 CFR 200.108 in 45
CFR 75.108 and articulates to whom
changes for HHS regulations should be
addressed.
(f) HHS adopts 2 CFR 200.109 in 45
CFR 75.109 to articulate HHS’ review
period for its regulations.
(h) HHS adopts 2 CFR 200.112 in 45
CFR 75.112 and articulates HHS’
establishment of conflict of interest
policies and disclosure criteria.
(i) HHS adopts 2 CFR 200.205 in 45
CFR 75.205 and adds text at the end of
subsection (a) to reference suspension
and debarment regulations.
(j) HHS adopts 2 CFR 200.206 in 45
CFR 75.206 and amends the section
heading and adds new subsections (c)
and (d) to specify the forms required.
(k) HHS adopts 2 CFR 200.208 in 45
CFR 75.208 and adds after the
introductory language new subsections
(a) and (b) to reference 45 CFR part 87
and § 75.206(d)(2).
(l) HHS adopts 2 CFR 200.212 in 45
CFR 75.212 and changes ‘‘2 CFR part
180’’ to read ‘‘2 CFR parts 180 and 376’’.
(m) HHS adds new 45 CFR 75.213 to
reference The Metric Conversion Act
and HHS’ use of Executive Order 12770.
(n) HHS adds new 45 CFR 75.214 to
reference lobbying restrictions in 45
CFR part 93.
(o) HHS adds new 45 CFR 75.215 to
reference provisions for awards to
Commercial Organizations.
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(p) HHS adds new 45 CFR 75.216 to
reference provisions for awards to
Federal Agencies.
(q) HHS adds new 45 CFR 75.217 to
reference standards for faith-based
organizations in 45 CFR part 87.
(r) HHS adopts 2 CFR 200.305 in 45
CFR 75.305 and adds at the end of
subsection (b)(5)(ii) ‘‘(See 45 CFR part
30).’’.
(s) HHS adopts 2 CFR 200.307 in 45
CFR 75.307 with the following changes:
(1) revise subsection (c) to include
details concerning the Patent and
Trademark Laws Amendments, 34
U.S.C. 200–212, and conditions
described under § 75.207 or § 75.215.’’.
(t) HHS adopts 2 CFR 200.308 in 45
CFR 75.308 with the following changes:
(1) Add subsections (c)(9) through
(11) to include research patient care
costs, subaward relations to Simplified
Acquisition Threshold, and the
disposition of property and equipment.
(2) add at the end, new subsection (j)
to detail the appropriate authorizing
personnel for revisions.
(u) HHS adopts 2 CFR 200.309 in 45
CFR 75.309 to articulate the use of funds
within the period of performance.
(v) HHS adds 45 CFR 75.316 to
articulate HHS’ policy on property
management standards and procedures.
(w) HHS adopts 2 CFR 200.310 in 45
CFR 75.317 with the insertion of
‘‘other’’ preceding ‘‘property owned’’ in
the first sentence.
(x) HHS adopts 2 CFR 200.311 in 45
CFR 75.318 by revising subsection (b):
(1) in subparagraph (b), by inserting
subparagraph (1) following ‘‘Use.’’;
(2) by adding subparagraph (b)(2) to
articulate the use of real property in
other federally-sponsored projects.
(3) in subparagraph (c), after ‘‘is no
longer needed’’, adding the phrase ‘‘as
provided in subsection (b).’’.
(y) HHS adopts 2 CFR 200.313 in 45
CFR 75.320, by adding, at the end of
subsection (c)(4), ‘‘subject to the
approval of the HHS awarding agency.’’.
(z) HHS adopts 2 CFR 200.315 in 45
CFR 75.322 with the following changes:
(1) The title is amended to read
‘‘Intangible property and copyrights.’’;
(2) Add new subsection (f) to exclude
commercial organizations from
paragraph (e)(1).
(aa) HHS adopts 2 CFR 200.318 in 45
CFR 75.327, with the following changes:
(1) Add, ‘‘In certain circumstances,
contracts with certain parties are
restricted by agencies’ implementation
of Executive Orders 12549 and 12689.
(See 2 CFR part 376.)’’ at the end of
subparagraph (h).
(2) Add, new subparagraph (l) to
articulate the appropriateness of the
procurement instrument.
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(bb) HHS adopts 2 CFR 200.320 in 45
CFR 75.329 and changes the title.
(cc) HHS adopts 2 CFR 200.325 in 45
CFR 75.334, and adds new
subparagraph (d) to reference
certificates of authority pursuant to 31
CFR part 223.
(dd) HHS adopts 2 CFR 200.338 in 45
CFR 75.371, with the following changes:
(1) in subparagraph (c), add
‘‘(suspension of award activities)’’ after
‘‘suspend’’.
(2) in subparagraph (d) add ‘‘at 2 CFR
part 376’’ after ‘‘regulations’’.
(ee) HHS adopts 2 CFR 200.341 in 45
CFR 75.374, with an additional
subparagraph (b) to reference additional
appeals procedures.
(ff) HHS adopts 2 CFR 200.343 in 45
CFR 75.381, and, in subparagraph (g),
changes ‘‘one year’’ to ‘‘180 calendar
days’’.
(gg) HHS adopts 2 CFR 200.345 in 45
CFR 75.391, and adds, at the end of
subparagraph (b), ‘‘(See also HHS
Claims Collection regulations at 45 CFR
part 30.)’’.
(hh) HHS adopts 2 CFR 200.407 in 45
CFR 75.407, with the additional
subparagraphs (b) and (c) to articulate
additional prior approval conditions.
(ii) HHS adopts 2 CFR200.439 in 45
CFR 75.439, and amend subsection (a)
to remove definition numbers.
(jj) HHS adds new 45 CFR 75.476 to
articulate independent research and
development costs.
(kk) HHS adopts 2 CFR 200.501 in 45
CFR 75.501, by adding new
subparagraphs (i) and (j) to articulate the
audit options and exemptions for
commercial organizations.
Additional Outreach and Training
Since the issuance of the Uniform
Guidance on December 26, 2013, the
COFAR has developed and provided
numerous additional resources to assist
stakeholders in learning about the
guidance. For a complete list and access
to these resources, please visit the
COFAR Web site at cfo.gov/COFAR.
Resources available include a
Frequently Asked Questions document,
as well as several training webcasts.
Please note that the Frequently Asked
Questions document will be referenced
as additional guidance in the 2015
issuance of Appendix XI to Part 200—
Compliance Supplement.
Regulatory Analysis
Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. Ch.
3506; 5 CFR 1320 Appendix A.1) (PRA),
each agency reviewed its final rule and
determined that there are no new
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Federal Register / Vol. 79, No. 244 / Friday, December 19, 2014 / Rules and Regulations
collections of information contained
therein. However, the OMB uniform
guidance in 2 CFR 200 may have a
negligible effect on burden estimates for
existing information collections,
including recordkeeping requirements
for non-Federal entities that receive
Federal awards.
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA)
requires an agency that is issuing a final
rule to provide a final regulatory
flexibility analysis or to certify that the
rule will not have a significant
economic impact on a substantial
number of small entities. This common
interim final rule implements OMB final
guidance issued on December 26, 2013,
and will not have a significant economic
impact beyond the impact of the
December 2013 guidance.
Executive Order 12866 Determination
Pursuant to Executive Order 12866,
OMB’s Office of Information and
Regulatory Affairs (OIRA) has
designated this joint interim final rule to
be not significant.
Administrative Procedure Act (5 U.S.C.
553)
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Waiver of Proposed Rulemaking
In General
Under the Administrative Procedure
Act (APA), some of the agencies joining
in this issuance are generally required to
publish a notice of proposed rulemaking
and provide the public with an
opportunity to comment on proposed
regulations prior to establishing a final
rule. However, as noted earlier in the
joint preamble, OMB offered the public
two opportunities to comment on the
Uniform Guidance, first through an
advanced notice of proposed guidance
and, second, through a notice of
proposed guidance. OMB considered
over 300 comments submitted in
response to each of these notices. OMB
has directed agencies to adopt the
uniform guidance in part 200 without
change, except to the extent that an
agency can demonstrate that any
conflicting agency requirements are
required by statute or regulations, or
consistent with longstanding practice
and approved by OMB. Finally, OMB
made clear that the requirements in 2
CFR part 200, including the audit
requirements in subpart F, will apply,
starting on December 26, 2014, giving
recipients of all types of financial
assistance advance notice of when the
regulations would become effective.
Therefore, under 5 U.S.C. 553(b)(B),
there is good cause for waiving
proposed rulemaking as unnecessary.
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Department of Justice
The rule issued by the Department of
Justice concerns matters relating to
‘‘grants, benefits, or contracts,’’ 5 U.S.C.
553(a)(2), and is therefore exempt from
the requirement of prior notice and
comment.
Waiver of Delayed Effective Date
In General
Generally, those agencies that are
subject to the APA are required to delay
the effective date of their final
regulations by 30 days after publication,
as required under 5 U.S.C. 553(d),
unless an exception under subsection
(d) applies.
Under 5 U.S.C. 553(d), these agencies
may waive the delayed effective date
requirement if the they find good cause
and explain the basis for the waiver in
the final rulemaking document or if the
regulations grant or recognize an
exemption or relieve a restriction. In the
present case, there is good cause to
waive the delayed effective date for two
reasons.
First, OMB informed the public on
December 26, 2013, that agencies would
be required to adopt the Uniform
Guidance and make it effective by
December 26, 2014. The public has had
significant time to prepare for the
promulgation of these interim final
regulations.
Second, while these interim final
regulations are based on a new, more
effective method for establishing
government-wide requirements, the
substance of the regulations are, in most
cases, virtually identical to the
requirements that exist in current
agency regulations. In virtually all cases
where the new regulations depart from
prior OMB guidance to agencies, the
new regulations reduce burdens on the
public, for example, by increasing the
threshold for single audits from
$500,000 to $750,000.
Based on these considerations, those
agencies subject to the APA have
determined that there is good cause to
waive the delayed effective date for
these interim final regulations.
1532) requires that covered agencies
prepare a budgetary impact statement
before promulgating a rule that includes
any Federal mandate that may result in
the expenditure by State, local, and
tribal governments, in the aggregate, or
by the private sector, of $100 million or
more in any one year. If a budgetary
impact statement is required, section
205 of the Unfunded Mandates Act also
requires covered agencies to identify
and consider a reasonable number of
regulatory alternatives before
promulgating a rule. OMB has
determined that this joint interim final
rule will not result in expenditures by
State, local, and tribal governments, or
by the private sector, of $100 million or
more in any one year. Accordingly, the
Federal agencies participating in this
joint interim final rule have not
prepared a budgetary impact statement
or specifically addressed the regulatory
alternatives considered.
Executive Order 13132 Determination
OMB has determined that this joint
interim final rule does not have any
Federalism implications, as required by
Executive Order 13132.
Department of Justice
The rule issued by the Department of
Justice concerns matters relating to
‘‘grants, benefits, or contracts,’’ 5 U.S.C.
553(a)(2), and is therefore exempt from
the requirement of a 30-day delay in the
effective date of this rule.
Unfunded Mandates Reform Act of 1995
Determination
Section 202 of the Unfunded
Mandates Reform Act of 1995
(Unfunded Mandates Act) (2 U.S.C.
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List of Subjects
2 CFR Parts 1, 25, 170, 180, 200, 300,
400, 415, 416, 418, 422, 600, 700, 802,
910, 1000, 1103, 1201, 1327, 1402, 1800,
2205, 2300, 2400, 2500, 2600, 2701,
2800, 2900, 3002, 3187, 3255, 3374,
3474, 3603, and 5900; CFR Parts 761,
785, 1407, 1485, 1703, 1709, 1710, 1717,
1724, 1726, 1737, 1738, 1739, 1740,
1773, 1774, 1775, 1776, 1778, 1779,
1780, 1782, 1783, 1942, 1944, 1951,
1980, 3015, 3016, 3018, 3019, 3022,
3052, 3400, 3401, 3402, 3403, 3405,
3406, 3407, 3415, 3430, 3431, 3570,
3575, 4274, 4279, 4280, 4284, 4285, and
4290; 10 CFR Parts 600, 602, 605, and
733; 13 CFR Part 143; 14 CFR Parts 1260
and 1273; 15 CFR Parts 14 and 24; 20
CFR Parts 435 and 437; 21 CFR Parts
1403–1405; 22 CFR Parts 135, 145, and
226; 24 CFR Parts 84 and 85; 28 CFR
Parts 66 and 70; 34 CFR Parts 74, 75,
76, 77, 80, 101, 206, 222, 225, 226, 270,
280, 299, 300, 303, 350, 361, 363, 364,
365, 367, 369, 370, 373, 377, 380, 381,
385, 396, 400, 426, 460, 464, 491, 535,
606, 607, 608, 609, 611, 614, 628, 636,
637, 642, 643, 644, 645, 646, 647, 648,
650, 654, 655, 661, 662, 663, 664, 682,
692, 694, and 1100; 36 CFR Parts 1206,
1207, and 1210; 38 CFR Parts 41 and 43;
40 CFR Parts 30, 31, 33, 35, 40, 45, 46,
and 47; 43 CFR Part 12; 44 CFR Parts
13, 78, 79, 152, 201, 204, 206, 207, 208,
304, 360, and 361; 45 CFR Parts 74, 75,
92, 1235, 2510, 2520, 2541, 2543, 2551,
2552, and 2553; 45 CFR Parts 75, 602,
1157, 1174, 1180, and 1183; 49 CFR
Parts 18 and 19
Accounting, Administrative practice
and procedure, Adult education, Aged,
Agriculture, Appeal procedures,
American Samoa, Auditing, Audit
requirements, Bilingual education,
Blind, Business and Industry,
Broadband, Charter schools, Civil rights,
Colleges and universities, Community
development, Community facilities,
Communications, Copyright, Cost
principles, Cooperative agreements,
Credit, Credit enhancement, Cultural
exchange programs, Direct loan
programs, Economic development,
Education, Education of disadvantaged,
Education of individuals with
disabilities, Educational facilities,
Educational research, Educational study
programs, Elementary and secondary
education, Employment, Equal
educational opportunity, Electric power,
Electric power rates, Electric utilities,
Energy efficiency improvements,
Federally affected areas, Farmers,
Federal aid programs, Government
contracts, Guam, Home improvement,
Homeless, Human research subjects,
Hospitals, Indians, Industrial park,
Indians—education, Infants and
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Jkt 235001
children, Insurance, Intergovernmental
relations, International organizations,
Manpower training programs, Nonprofit
organizations, State and local
governments, Grant programs, Grant
programs—digital televisions, Grant
programs—education, Grant programs—
health, Grant programs housing and
community development, Grant
programs—social programs, Grants
administration, Guaranteed loans,
Homeless, Intergovernmental relations,
Inventions and patents, Loan programs,
Loan programs—agriculture, Loan
program—business and industry, Loan
programs—communications, Loan
programs—energy, Loan programs—
housing and community development,
Loan security, Migrant labor, Mortgage
insurance, Mortgages, Nonprofit
organizations, Northern Mariana
Islands, Pacific Islands Trust Territory,
Privacy, Private schools, Renewable
energy systems, Reporting and
recordkeeping requirements, Research
misconduct, Rural areas, Rural housing,
Scholarships and fellowships, School
construction, Schools, Science and
technology, Securities, Small business,
State and local governments, Student
aid, Subsidies, Telecommunications,
Teachers, Urban areas, Veterans, Virgin
Islands, Vocational education,
Vocational rehabilitation, Telephone,
Waste treatment and disposal, Waste
treatment and disposal—domestic,
Water pollution control, Water
resources, Water supply, Water
supply—domestic, Watersheds, Women.
2 CFR Part 1500
Accounting, Administrative practice
and procedure, Adult education, Aged,
Agriculture, Appeal procedures,
American Samoa, Auditing, Audit
requirements, Bilingual education,
Blind, Business and Industry,
Broadband, Charter schools, Civil rights,
Colleges and universities, Community
development, Community facilities,
Communications, Copyright, Cost
principles, Cooperative agreements,
Credit, Credit enhancement, Cultural
exchange programs, Direct loan
programs, Economic development,
Education, Education of disadvantaged,
Education of individuals with
disabilities, Educational facilities,
Educational research, Educational study
programs, Elementary and secondary
education, Employment, Equal
educational opportunity, Electric power,
Electric power rates, Electric utilities,
Energy efficiency improvements,
Federally affected areas, Farmers,
Federal aid programs, Government
contracts, Guam, Home improvement,
Homeless, Human research subjects,
Hospitals, Indians, Industrial park,
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Indians—education, Infants and
children, Insurance, Intergovernmental
relations, International organizations,
Manpower training programs, Nonprofit
organizations, State and local
governments, Grant programs, Grant
programs-—digital televisions, Grant
programs—education, Grant programs—
health, Grant programs housing and
community development, Grant
programs—social programs, Grants
administration, Guaranteed loans,
Homeless, Incorporation by reference,
Intergovernmental relations, Inventions
and patents, Loan programs, Loan
programs—agriculture, Loan programs—
business and industry, Loan programs—
communications, Loan programs—
energy, Loan programs—housing and
community development, Loan security,
Migrant labor, Mortgage insurance,
Mortgages, Nonprofit organizations,
Northern Mariana Islands, Pacific
Islands Trust Territory, Privacy, Private
schools, Renewable energy systems,
Reporting and recordkeeping
requirements, Research misconduct,
Rural areas, Rural housing, Scholarships
and fellowships, School construction,
Schools, Science and technology,
Securities, Small business, State and
local governments, Student aid,
Subsidies, Telecommunications,
Teachers, Urban areas, Veterans, Virgin
Islands, Vocational education,
Vocational rehabilitation, Telephone,
Waste treatment and disposal, Waste
treatment and disposal—domestic,
Water pollution control, Water
resources, Water supply, Water
supply—domestic, Watersheds, Women.
Executive Office of the President, Office
of Management and Budget
Under the authority of the Chief
Financial Officer Act of 1990 (31 U.S.C.
503), the Office of Management and
Budget amends 2 CFR parts 1, 25, 170,
180, and 200 by making the following
correcting amendments:
TITLE 2 —GRANTS AND
AGREEMENTS
CHAPTER I —OFFICE OF MANAGEMENT
AND BUDGET GOVERNMENTWIDE
GUIDANCE FOR GRANTS AND
AGREEMENTS
PART 1—ABOUT TITLE 2 OF THE
CODE OF FEDERAL REGULATIONS
AND SUBTITLE A
1. The authority citation for part 1
continues to read as follows:
■
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.
■
2. Revise § 1.215 to read as follows:
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§ 1.215 Relationship to previous
issuances.
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circulars or other documents, much of
the guidance in this subtitle existed
prior to the establishment of title 2 of
the CFR. Specifically:
Although some of the guidance was
organized differently within OMB
Guidance
in * * *
On
* * *
Previously
was in * * *
(a) Chapter I, part 180
Nonprocurement debarment and suspension ..
(b) Chapter I, part 182
Drug-free workplace requirements ...................
(c) Chapter II, part 200
Uniform administrative requirements, cost
principles, and audit requirements for federal awards.
OMB guidance that conforms with the government-wide common rule
(see 60 FR 33036, June 26, 1995).
OMB guidance (54 FR 4946, January 31, 1989) and a governmentwide common rule (as amended at 68 FR 66534, November 26,
2003).
OMB Circulars A–21, ‘‘Cost Principles for Educational Institutions’’
(Chapter II, part 225); A–87, ‘‘Cost Principles for State, Local and
Indian Tribal Governments’’ (Chapter II, part 225); A–89, ‘‘Federal
Domestic Assistance Program Information’’; ’’; A–102 and a government-wide common rule (53 FR 8034, March 11, 1988); A–110,
‘‘Uniform Administrative Requirements for Awards and Other
Agreements with Institutions of Higher Education, Hospitals, and
Other Nonprofit Organizations’’ (Chapter II, part 215); A–122, ‘‘Cost
Principles for Non-Profit Organizations’’ (Chapter II, part 230); and
A–133 ‘‘Audits of States, Local Governments and Non-Profit Organizations’’.
Appendix A to Part 25 [Amended]
PART 25—UNIVERSAL IDENTIFIER
AND SYSTEM OF AWARD
MANAGEMENT
8. Revise Appendix A to Part 25,
section I, paragraph c.2. and c.4.b. as
follows:
■
3. The authority citation for part 25
continues to read as follows:
■
Appendix A to Part 25—Award Term
Authority: Pub. L. 109–282; 31 U.S.C.
6102.
4. Revise the heading of 2 CFR part 25
to read as set forth above.
■
§§ 25.100 and 25.310
*
[Amended]
5. Amend §§ 25.100 and 25.310 and
Appendix A to Part 25 by removing
references to ‘‘Central Contractor
Registration’’ wherever they appear, and
adding, in their place, ‘‘System of
Award Management’’.
■
§§ 25.100, 25.110, 25.200, 25.205, 25.310,
and Appendix A to Part 25 [Amended]
6. Amend §§ 25.100, 25.110, 25.200,
25.205, 25.310, and Appendix A to Part
25 by removing references to ‘‘CCR’’
wherever they appear, and adding, in
their place, ‘‘SAM’’.
§§ 25.100, 25.110, 25.200, 25.205, 25.210,
25.215, 25.315, and Appendix A to
Part 25 [Amended]
7. Amend §§ 25.100, 25.110, 25.200,
25.205, 25.210, 25.215, 25.315, and
Appendix A to Part 25 by removing
references to ‘‘Dun and Bradstreet (D&B)
Data Universal Numbering System
(DUNS) number’’, ‘‘Data Universal
Numbering System (DUNS) Number’’,
‘‘DUNS’’ or ‘‘DUNS number’’ wherever
they appear, and adding, in their place,
‘‘unique entity identifier’’.
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*
*
*
*
4. * * *
4.b. The term does not include your
procurement of property and services needed
to carry out the project or program (for
further explanation, see 2 CFR 200.330).
PART 170—REPORTING SUBAWARD
AND EXECUTIVE COMPENSATION
INFORMATION
9. The authority citation for part 170
continues to read as follows:
■
■
■
I. * * *
C. * * *
2. Unique entity identifier means the
identifier required for SAM registration to
uniquely identify business entities.
Authority: Pub. L. 109–282; 31 U.S.C.
6102.
Appendix A to Part 170—[Amended]
10. Amend Appendix A to Part 170—
Award Term, section I, paragraph b.2.i.
by removing ‘‘https://www.ccr.gov’’ and
add, in its place, ‘‘https://
www.sam.gov’’.
■
§ 180.25
[Amended]
12. Amend § 180.25 paragraph (a),
second sentence by removing ‘‘has’’ and
adding, in its place ‘‘have’’.
■
§§ 180.45, 180.100, 180.155, 180.300,
180.320, 180.430, 180.500, 180.505,
180.510, 180.515, 180.520, 180.525, and
180.645 [Amended]
13. Amend §§ 180.45, 180.100,
180.155, 180.300, 180.320, 180.430,
180.500, 180.505, 180.510, 180.515,
180.520, 180.525, and 180.645 by
removing references to ‘‘the EPLS’’,
wherever they appear, and adding, in
their place ‘‘SAM Exclusions’’.
■
§ 180.155 and 180.500
[Amended]
14. Amend §§ 180.155 and 180.500 by
removing, wherever they appear ‘‘EPLS’’
and adding, in their place ‘‘SAM
Exclusions’’.
■ 15. Amend §§ 180.155 and 180.500 by
removing, wherever they appear
‘‘Excluded Parties List System’’ and
adding, in their place, ‘‘System for
Award Management Exclusions’’.
■ 16. Revise the heading of Subpart E to
read as follows:
■
Subpart E—System for Award
Management Exclusions
§ 180.505
[Amended]
17. Amend § 180.505 paragraph (c) by
removing ‘‘is’’ and adding, in its place
‘‘are’’.
■
PART 180—OMB GUIDELINES TO
AGENCIES ON GOVERNMENTWIDE
DEBARMENT AND SUSPENSION
(NONPROCUREMENT)
11. The authority citation for part 180
continues to read as follows:
■
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.
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§ 180.515
[Amended]
18. Amend § 180.515 paragraph (a)(7)
by removing ‘‘Dun and Bradstreet
Number (DUNS), or other similar code’’
and adding, in its place, ‘‘unique entity
identifier’’.
■ 19. Revise § 180.530 to read as
follows:
■
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§ 180.530 Where can I find SAM
Exclusions?
You may access SAM Exclusions
through the Internet, currently at
https://www.sam.gov.
■ 20. Revise § 180.945 to read as
follows:
§ 180.945 System for Award Management
Exclusions (SAM Exclusions).
System for Award Management
Exclusions (SAM Exclusions) means the
list maintained and disseminated by the
General Services Administration (GSA)
containing the names and other
information about persons who are
ineligible.
CHAPTER II—OFFICE OF MANAGEMENT
AND BUDGET GUIDANCE
PART 200—UNIFORM
ADMINISTRATIVE REQUIREMENTS,
COST PRINCIPLES, AND AUDIT
REQUIREMENTS FOR FEDERAL
AWARDS
21. The authority citation for part 200
continues to read as follows:
■
Authority: 31 U.S.C. 503.
§ 200.0
[Amended]
22. Amend § 200.0 as follows:
(a) Remove the acronyms, ‘‘D&B Dun
and Bradstreet’’ and ‘‘DUNS Data
Universal Numbering System’’.
(b) Correct the text ‘‘Generally
Accepted Government Accounting
Standards’’ to read ‘‘Generally Accepted
Government Auditing Standards’’.
(c) Correct the text ‘‘General
Accounting Office’’ to read
‘‘Government Accountability Office’’.
(d) Add the acronym, ‘‘PMS Payment
Management System’’ after the acronym
‘‘PII Personally Identifiable
Information’’.
■ 23. Revise § 200.7 to read as follows:
■
§ 200.7
Auditor.
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§ 200.19
costs.
Cognizant agency for indirect
*
*
*
*
*
(a) For IHEs: Appendix III to Part
200—Indirect (F&A) Costs Identification
and Assignment, and Rate
Determination for Institutions of Higher
Education (IHEs), paragraph C.11.
(b) For nonprofit organizations:
Appendix IV to Part 200—Indirect
(F&A) Costs Identification and
Assignment, and Rate Determination for
Nonprofit Organizations, paragraph
C.12.
(c) For state and local governments:
Appendix V to Part 200—State/Local
Governmentwide Central Service Cost
Allocation Plans, paragraph F.1.
(d) For Indian tribes: Appendix VII to
Part 200—States and Local Government
and Indian Tribe Indirect Cost Proposal,
paragraph D.1.
§ 200.32
■
[Removed and Reserved]
25. Remove and reserve § 200.32.
§ 200.42
[Amended]
26. In § 200.42, paragraph (b), remove
‘‘should’’ and add, in its place, ‘‘must’’.
■
§ 200.47
[Amended]
27. In § 200.47, paragraph (a), remove
‘‘are’’ and add, in its place, ‘‘is’’.
■
§ 200.50
[Amended]
28. In § 200.50, add ‘‘, also known as
the Yellow Book,’’ after ‘‘GAGAS’’.
■
§ 200.56
[Amended]
29. In § 200.56, third sentence, remove
‘‘should’’ and add, in its place, ‘‘must’’.
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§ 200.57
[Amended]
30. Amend § 200.57 by adding ‘‘, and
Appendix IX to Part 200—Hospital Cost
Frm 00014
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§ 200.68 Modified Total Direct Cost
(MTDC).
MTDC means all direct salaries and
wages, applicable fringe benefits,
materials and supplies, services, travel,
and up to the first $25,000 of each
subaward (regardless of the period of
performance of the subawards under the
award). MTDC excludes equipment,
capital expenditures, charges for patient
care, rental costs, tuition remission,
scholarships and fellowships,
participant support costs and the
portion of each subaward in excess of
$25,000. Other items may only be
excluded when necessary to avoid a
serious inequity in the distribution of
indirect costs, and with the approval of
the cognizant agency for indirect costs.
■ 32. In § 200.80, revise the first
sentence to read as follows:
§ 200.80
Program income.
Program income means gross income
earned by the non-Federal entity that is
directly generated by a supported
activity or earned as a result of the
Federal award during the period of
performance except as provided in
§ 200.307 paragraph (f).***
§ 200.90
[Amended]
33. In § 200.90, correct the text
‘‘Virgin Islands’’ to read ‘‘U.S. Virgin
Islands’’.
■ 34. In § 200.101, revise the table in
paragraph (b)(1), paragraph (c), the first
sentence of paragraph (d)(1), and
paragraphs (e)(1)(iv) through (v); and
add paragraph (e)(1)(vi) to read as
follows:
§ 200.101
*
■
PO 00000
Principles’’ after ‘‘this part’’ at the end
of the paragraph.
■ 31. Revise § 200.68 to read as follows:
■
■
Auditor means an auditor who is a
public accountant or a Federal, state,
local government, or Indian tribe audit
organization, which meets the general
VerDate Sep<11>2014
standards specified for external auditors
in generally accepted government
auditing standards (GAGAS). The term
auditor does not include internal
auditors of nonprofit organizations.
■ 24. Revise § 200.19 paragraphs (a), (b),
(c) and add a new paragraph (d) to read
as follows:
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Applicability.
*
*
(b) ***
(1) ***
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*
*
(c) Federal awarding agencies may
apply subparts A through E of this part
to for-profit entities, foreign public
entities, or foreign organizations, except
where the Federal awarding agency
determines that the application of these
subparts would be inconsistent with the
international obligations of the United
States or the statutes or regulations of a
foreign government.
(d) * * *
(1) The block grant awards authorized
by the Omnibus Budget Reconciliation
Act of 1981 (including Community
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Services, except to the extent that the
cost and accounting standards of OMB
apply to subrecipients of Community
Services Block Grant funds pursuant to
42 U.S.C. 9916(a)(1)(B); * * *
*
*
*
*
*
(e) * * *
(1) * * *
(iv) Aid to the Aged, Blind, and
Disabled (titles I, X, XIV, and XVI–
AABD of the Act, as amended);
(v) Medical Assistance (Medicaid)
(title XIX of the Act, 42 U.S.C. 1396–
1396w–5) not including the State
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Medicaid Fraud Control program
authorized by section 1903(a)(6)(B) of
the Social Security Act (42 U.S.C.
1396b(a)(6)(B)); and
(vi) Children’s Health Insurance
Program (title XXI of the Act, 42 U.S.C.
1397aa–1397mm).
*
*
*
*
*
■ 35. In § 200.102, revise paragraph (b)
and the first sentence of paragraph (c) to
read as follows:
§ 200.102
Exceptions.
*
*
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19DER2
*
*
ER19DE14.000
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(b) Exceptions on a case-by-case basis
for individual non-Federal entities may
be authorized by the Federal awarding
agency or cognizant agency for indirect
costs, except where otherwise required
by law or where OMB or other approval
is expressly required by this part.
(c) The Federal awarding agency may
apply more restrictive requirements to a
class of Federal awards or non-Federal
entities when approved by OMB, or
when, required by Federal statutes or
regulations, except for the requirements
in Subpart F—Audit Requirements of
this part. * * *
*
*
*
*
*
§ 200.104
[Amended]
36. Amend § 200.104 paragraph (g) by
removing ‘‘,’’ after ‘‘Organizations’’.
■ 37. In § 200.110, revise paragraph (a)
to read as follows:
■
§ 200.110
Effective/applicability date.
(a) The standards set forth in this part
which affect administration of Federal
awards issued by Federal awarding
agencies become effective once
implemented by Federal awarding
agencies or when any future amendment
to this part becomes final. Federal
awarding agencies must implement the
policies and procedures applicable to
Federal awards by promulgating a
regulation to be effective by December
26, 2014 unless different provisions are
required by statute or approved by
OMB. For the procurement standards in
§§ 200.317–200.326, non-Federal
entities may continue to comply with
the procurement standards in previous
OMB guidance (superseded by this part
as described in § 200.104) for one
additional fiscal year after this part goes
into effect. If a non-Federal entity
chooses to use the previous
procurement standards for an additional
fiscal year before adopting the
procurement standards in this part, the
non-Federal entity must document this
decision in their internal procurement
policies.
*
*
*
*
*
■ 38. In § 200.200, revise paragraph (a)
to read as follows:
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§ 200.200
Purpose.
(a) Sections 200.201 Use of grant
agreements (including fixed amount
awards), cooperative agreements, and
contracts through 200.208 Certifications
and representations prescribe
instructions and other pre-award
matters to be used in the announcement
and application process.
*
*
*
*
*
■ 39. In § 200.201, revise paragraph
(b)(1) to read as follows:
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§ 200.201 Use of grant agreements
(including fixed amount awards),
cooperative agreements, and contracts.
*
*
*
*
*
(b) * * *
(1) The Federal award amount is
negotiated using the cost principles (or
other pricing information) as a guide.
The Federal awarding agency or passthrough entity may use fixed amount
awards if the project scope is specific
and if adequate cost, historical, or unit
pricing data is available to establish a
fixed amount award based on a
reasonable estimate of actual cost.
Payments are based on meeting specific
requirements of the Federal award.
Accountability is based on performance
and results. Except in the case of
termination before completion of the
Federal award, there is no governmental
review of the actual costs incurred by
the non-Federal entity in performance of
the award. Some of the ways in which
the Federal award may be paid include,
but are not limited to:
*
*
*
*
*
■ 40. In § 200.203, amend paragraph
(c)(2) by removing the reference to
‘‘paragraph (b)’’ and adding in its place
‘‘paragraph (c)(4)’’, and revise paragraph
(c)(5) to read as follows:
§ 200.203 Notices of funding
opportunities.
*
*
*
*
*
(c) * * *
(5) Application Review Information
including the criteria and process to be
used to evaluate applications. See also
§§ 200.204 Federal awarding agency
review of merit proposals and 200.205
Federal awarding agency review of risk
posed by applicants. See also 2 CFR part
27 (forthcoming at time of publication).
■ 41. In § 200.205, revise paragraph (a)
to read as follows:
§ 200.205 Federal awarding agency review
of risk posed by applicants.
(a) Prior to making a Federal award,
the Federal awarding agency is required
by 31 U.S.C. 3321 and 41 U.S.C. 2313
note to review information available
through any OMB-designated
repositories of governmentwide
eligibility qualification or financial
integrity information, such as SAM
Exclusions and ‘‘Do Not Pay’’. See also
suspension and debarment requirements
at 2 CFR part 180 as well as individual
Federal agency suspension and
debarment regulations in title 2 of the
Code of Federal Regulations.
*
*
*
*
*
■ 42. Revise § 200.207 to read as
follows:
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§ 200.207
Specific conditions.
(a) The Federal awarding agency or
pass-through entity may impose
additional specific award conditions as
needed, in accordance with paragraphs
(b) and (c) of this section, under the
following circumstances:
(1) Based on the criteria set forth in
§ 200.205 Federal awarding agency
review of risk posed by applicants;
(2) When an applicant or recipient has
a history of failure to comply with the
general or specific terms and conditions
of a Federal award;
(3) When an applicant or recipient
fails to meet expected performance goals
as described in § 200.210 Information
contained in a Federal award; or
(4) When an applicant or recipient is
not otherwise responsible.
(b) These additional Federal award
conditions may include items such as
the following:
(1) Requiring payments as
reimbursements rather than advance
payments;
(2) Withholding authority to proceed
to the next phase until receipt of
evidence of acceptable performance
within a given period of performance;
(3) Requiring additional, more
detailed financial reports;
(4) Requiring additional project
monitoring;
(5) Requiring the non-Federal entity to
obtain technical or management
assistance; or
(6) Establishing additional prior
approvals.
(c) The Federal awarding agency or
pass-through entity must notify the
applicant or non-Federal entity as to:
(1) The nature of the additional
requirements;
(2) The reason why the additional
requirements are being imposed;
(3) The nature of the action needed to
remove the additional requirement, if
applicable;
(4) The time allowed for completing
the actions if applicable, and
(5) The method for requesting
reconsideration of the additional
requirements imposed.
(d) Any specific conditions must be
promptly removed once the conditions
that prompted them have been
corrected.
■ 43. In § 200.210. revise paragraphs
(a)(1) and (a)(2) to read as follows:
§ 200.210 Information contained in a
federal award.
*
*
*
*
*
(a) * * *
(1) Recipient name (which must
match the name associated with its
unique entity identifier as defined at 2
CFR 25.315);
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(2) Recipient’s unique entity
identifier;
*
*
*
*
*
■ 44. Add § 200.212 to subpart C to read
as follows:
§ 200.212
Suspension and debarment.
Non-federal entities and contractors
are subject to the non-procurement
debarment and suspension regulations
implementing Executive Orders 12549
and 12689, 2 CFR part 180. These
regulations restrict awards, subawards,
and contracts with certain parties that
are debarred, suspended, or otherwise
excluded from or ineligible for
participation in Federal assistance
programs or activities.
■ 45. Amend § 200.301, the first and
third sentence, by removing
‘‘governmentwide’’.
■ 46. In § 200.303, revise the second
sentence of paragraph (a) and revise
paragraphs (c) and (e) to read as follows:
§ 200.303
Internal controls.
*
*
*
*
*
(a) * * * These internal controls
should be in compliance with guidance
in ‘‘Standards for Internal Control in the
Federal Government’’ issued by the
Comptroller General of the United
States or the ‘‘Internal Control
Integrated Framework’’, issued by the
Committee of Sponsoring Organizations
of the Treadway Commission (COSO).
*
*
*
*
*
(c) Evaluate and monitor the nonFederal entity’s compliance with
statutes, regulations and the terms and
conditions of Federal awards.
*
*
*
*
*
(e) Take reasonable measures to
safeguard protected personally
identifiable information and other
information the Federal awarding
agency or pass-through entity designates
as sensitive or the non-Federal entity
considers sensitive consistent with
applicable Federal, state, local, and
tribal laws regarding privacy and
obligations of confidentiality.
■ 47. In § 200.305, revise paragraphs (b)
introductory text, (b)(2)(i), (b)(2)(ii),
(b)(6), and (b)(9) to read as follows:
§ 200.305
Payment.
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*
*
*
*
*
(b) For non-Federal entities other than
states, payments methods must
minimize the time elapsing between the
transfer of funds from the United States
Treasury or the pass-through entity and
the disbursement by the non-Federal
entity whether the payment is made by
electronic funds transfer, or issuance or
redemption of checks, warrants, or
payment by other means. See also
§ 200.302 Financial management
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paragraph (b)(6). Except as noted
elsewhere in this part, Federal agencies
must require recipients to use only
OMB-approved standard
governmentwide information collection
requests to request payment.
(2) * * *
(i) Advance payment mechanisms
include, but are not limited to, Treasury
check and electronic funds transfer and
must comply with applicable guidance
in 31 CFR part 208.
(ii) Non-Federal entities must be
authorized to submit requests for
advance payments and reimbursements
at least monthly when electronic fund
transfers are not used, and as often as
they like when electronic transfers are
used, in accordance with the provisions
of the Electronic Fund Transfer Act (15
U.S.C. 1693–1693r).
*
*
*
*
*
(6) Unless otherwise required by
Federal statutes, payments for allowable
costs by non-Federal entities must not
be withheld at any time during the
period of performance unless the
conditions of §§ 200.207 Specific
conditions, Subpart D—Post Federal
Award Requirements of this part,
200.338 Remedies for Noncompliance,
or one or more of the following applies:
*
*
*
*
*
(9) Interest earned amounts up to
$500 per year may be retained by the
non-Federal entity for administrative
expense. Any additional interest earned
on Federal advance payments deposited
in interest-bearing accounts must be
remitted annually to the Department of
Health and Human Services Payment
Management System (PMS) through an
electronic medium using either
Automated Clearing House (ACH)
network or a Fedwire Funds Service
payment. Remittances must include
pertinent information of the payee and
nature of payment in the memo area
(often referred to as ‘‘addenda records’’
by Financial Institutions) as that will
assist in the timely posting of interested
earned on federal funds. Pertinent
details include the Payee Account
Number (PAN) if the payment
originated from PMS, or Agency
information if the payment originated
from ASAP, NSF or another federal
agency payment system. The remittance
must be submitted as follows:
(i) For ACH Returns:
Routing Number: 051036706
Account number: 303000
Bank Name and Location: Credit
Gateway—ACH Receiver St. Paul, MN
(ii) For Fedwire Returns*:
Routing Number: 021030004
Account number: 75010501
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75883
Bank Name and Location: Federal
Reserve Bank Treas NYC/Funds
Transfer Division New York, NY
(* Please note organization initiating
payment is likely to incur a charge from
your Financial Institution for this type
of payment)
(iii) For International ACH Returns:
Beneficiary Account: Federal Reserve
Bank of New York/ITS (FRBNY/ITS)
Bank: Citibank N.A. (New York)
Swift Code: CITIUS33
Account Number: 36838868
Bank Address: 388 Greenwich Street,
New York, NY 10013 USA
Payment Details (Line 70): Agency
Name (abbreviated when possible) and
ALC Agency POC: Michelle Haney,
(301) 492–5065
(iv) For recipients that do not have
electronic remittance capability, please
make check** payable to: ‘‘The
Department of Health and Human
Services.’’
Mail Check to Treasury approved
lockbox:
HHS Program Support Center, P.O. Box
530231, Atlanta, GA 30353–0231
(** Please allow 4–6 weeks for
processing of a payment by check to be
applied to the appropriate PMS account)
(v) Any additional information/
instructions may be found on the PMS
Web site at https://www.dpm.psc.gov/.
■ 48. In § 200.306, revise paragraphs (a),
(c), and (d) and add paragraph (k) to
read as follows:
§ 200.306
Cost sharing or matching.
(a) Under Federal research proposals,
voluntary committed cost sharing is not
expected. It cannot be used as a factor
during the merit review of applications
or proposals, but may be considered if
it is both in accordance with Federal
awarding agency regulations and
specified in a notice of funding
opportunity. Criteria for considering
voluntary committed cost sharing and
any other program policy factors that
may be used to determine who may
receive a Federal award must be
explicitly described in the notice of
funding opportunity. See also
§§ 200.414 Indirect (F&A) costs, 200.203
Notices of funding opportunities, and
Appendix I to Part 200—Full Text of
Notice of Funding Opportunity.
*
*
*
*
*
(c) Unrecovered indirect costs,
including indirect costs on cost sharing
or matching may be included as part of
cost sharing or matching only with the
prior approval of the Federal awarding
agency. Unrecovered indirect cost
means the difference between the
amount charged to the Federal award
and the amount which could have been
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charged to the Federal award under the
non-Federal entity’s approved
negotiated indirect cost rate.
(d) Values for non-Federal entity
contributions of services and property
must be established in accordance with
the cost principles in Subpart E—Cost
Principles. If a Federal awarding agency
authorizes the non-Federal entity to
donate buildings or land for
construction/facilities acquisition
projects or long-term use, the value of
the donated property for cost sharing or
matching must be the lesser of
paragraphs (d)(1) or (2) of this section.
*
*
*
*
*
(k) For IHEs, see also OMB
memorandum M–01–06, dated January
5, 2001, Clarification of OMB A–21
Treatment of Voluntary Uncommitted
Cost Sharing and Tuition Remission
Costs.
■ 49. In § 200.307, revise paragraphs (d)
and (e)(2) and add paragraph (g) to read
as follows:
§ 200.307
Program income.
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*
*
*
*
*
(d) Property. Proceeds from the sale of
real property, equipment, or supplies
are not program income; such proceeds
will be handled in accordance with the
requirements of Subpart D—Post
Federal Award Requirements of this
part, Property Standards §§ 200.311 Real
property, 200.313 Equipment, and
200.314 Supplies, or as specifically
identified in Federal statutes,
regulations, or the terms and conditions
of the Federal award.
(e) * * *
(2) Addition. With prior approval of
the Federal awarding agency (except for
IHEs and nonprofit research
institutions, as described in paragraph
(e) of this section) program income may
be added to the Federal award by the
Federal agency and the non-Federal
entity. The program income must be
used for the purposes and under the
conditions of the Federal award.
*
*
*
*
*
(g) Unless the Federal statute,
regulations, or terms and conditions for
the Federal award provide otherwise,
the non-Federal entity has no obligation
to the Federal awarding agency with
respect to program income earned from
license fees and royalties for
copyrighted material, patents, patent
applications, trademarks, and
inventions made under a Federal award
to which 37 CFR part 401,’’Rights to
Inventions Made by Nonprofit
Organizations and Small Business Firms
Under Government Awards, Contracts
and Cooperative Agreements’’ is
applicable.
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50. In § 200.308, revise paragraphs
(c)(4), (c)(6), and (c)(7); add paragraph
(c)(8); and revise paragraphs (d) and
(g)(4) to read as follows:
■
§ 200.308
plans.
Revision of budget and program
*
*
*
*
(c) * * *
(4) The inclusion, unless waived by
the Federal awarding agency, of costs
that require prior approval in
accordance with Subpart E—Cost
Principles of this part or 45 CFR part 75
Appendix IX, ‘‘Principles for
Determining Costs Applicable to
Research and Development under
Awards and Contracts with Hospitals,’’
or 48 CFR part 31, ‘‘Contract Cost
Principles and Procedures,’’ as
applicable.
*
*
*
*
*
(6) Unless described in the
application and funded in the approved
Federal awards, the subawarding,
transferring or contracting out of any
work under a Federal award, including
fixed amount subawards as described in
§ 200.332 Fixed amount subawards.
This provision does not apply to the
acquisition of supplies, material,
equipment or general support services.
(7) Changes in the approved costsharing or matching provided by the
non-Federal entity. No other prior
approval requirements for specific items
may be imposed unless an exception
has been approved by OMB. See also
§§ 200.102 Exceptions and 200.407 Prior
written approval (prior approval).
(8) The need arises for additional
Federal funds to complete the project.
(d) Except for requirements listed in
paragraph (c)(1) of this section, the
Federal awarding agency is authorized,
at its option, to waive prior written
approvals required by paragraph (c) this
section. Such waivers may include
authorizing recipients to do any one or
more of the following:
*
*
*
*
*
(g) * * *
(4) No other prior approval
requirements for budget revisions may
be imposed unless an exception has
been approved by OMB.
[Amended]
51. Amend § 200.309, by adding
‘‘(except as described in § 200.461
Publication and printing costs)’’ after
‘‘performance’’.
■
§ 200.311
[Amended]
52. Amend § 200.311, paragraphs
(c)(1) and (c)(2) by adding ‘‘the’’ before
‘‘non-Federal entity’’.
■
PO 00000
§ 200.312
property.
Federally-owned and exempt
*
*
§ 200.309
53. In § 200.312, revise the first
sentence of paragraph (c) to read as
follows:
■
Frm 00018
Fmt 4701
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*
*
*
*
(c) Exempt federally-owned property
means property acquired under a
Federal award where the Federal
awarding agency has chosen to vest title
to the property to the non-Federal entity
without further obligation to the Federal
Government, based upon the explicit
terms and conditions of the Federal
award.* * *
§ 200.313
[Amended]
54. Amend § 200.313, paragraph (a)(1)
by removing ‘‘until funding for the
project ceases’’ and adding, in its place,
‘‘during the period of performance’’.
■
§ 200.315
[Amended]
55. Amend § 200.315, paragraph
(e)(1), first sentence by removing
‘‘addition, in’’.
■ 56. Revise § 200.318, paragraphs (a),
(c)(1), (h), and (j)(1) to read as follows:
■
§ 200.318
General procurement standards.
*
*
*
*
*
(a) The non-Federal entity must use
its own documented procurement
procedures which reflect applicable
State, local, and tribal laws and
regulations, provided that the
procurements conform to applicable
Federal law and the standards identified
in this part.
*
*
*
*
*
(c) * * *
(1) The non-Federal entity must
maintain written standards of conduct
covering conflicts of interest and
governing the actions of its employees
engaged in the selection, award and
administration of contracts. No
employee, officer, or agent may
participate in the selection, award, or
administration of a contract supported
by a Federal award if he or she has a real
or apparent conflict of interest. Such a
conflict of interest 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 or a
tangible personal benefit from a firm
considered for a contract. The officers,
employees, and agents of the nonFederal entity may neither solicit nor
accept gratuities, favors, or anything of
monetary value from contractors or
parties to subcontracts. However, nonFederal entities may set standards for
situations in which the financial interest
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is not substantial or the gift is an
unsolicited item of nominal value. The
standards of conduct must provide for
disciplinary actions to be applied for
violations of such standards by officers,
employees, or agents of the non-Federal
entity.
*
*
*
*
*
(h) The non-Federal entity must
award contracts only to responsible
contractors possessing the ability to
perform successfully under the terms
and conditions of a proposed
procurement. Consideration will be
given to such matters as contractor
integrity, compliance with public
policy, record of past performance, and
financial and technical resources. See
also § 200.212 Suspension and
debarment.
*
*
*
*
*
(j) * * *
(1) The non-Federal entity may use a
time and materials type contract only
after a determination that no other
contract is suitable and if the contract
includes a ceiling price that the
contractor exceeds at its own risk. Time
and materials type contract means a
contract whose cost to a non-Federal
entity is the sum of:
*
*
*
*
*
§ 200.319
[Amended]
57. Amend § 200.319, paragraph (a) by
removing ‘‘and invitations’’ and adding,
in its place ‘‘or invitations’’; and
paragraph (b) by removing ‘‘state or
local’’ and adding, in its place ‘‘state,
local, or tribal’’.
■ 58. Revise § 200.320, paragraphs (a),
(c)(2)(i), and (c)(2)(iii) to read as follows:
■
§ 200.320
followed.
Methods of procurement to be
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*
*
*
*
*
(a) Procurement by micro-purchases.
Procurement by micro-purchase is the
acquisition of supplies or services, the
aggregate dollar amount of which does
not exceed the micro-purchase
threshold (§ 200.67 Micro-purchase). To
the extent practicable, the non-Federal
entity must distribute micro-purchases
equitably among qualified suppliers.
Micro-purchases may be awarded
without soliciting competitive
quotations if the non-Federal entity
considers the price to be reasonable.
*
*
*
*
*
(c) * * *
(2) * * *
(i) Bids must be solicited from an
adequate number of known suppliers,
providing them sufficient response time
prior to the date set for opening the
bids, for state, local, and tribal
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governments, the invitation for bids
must be publically advertised;
*
*
*
*
*
(iii) All bids will be opened at the
time and place prescribed in the
invitation for bids, and for local and
tribal governments, the bids must be
opened publicly;
*
*
*
*
*
§ 200.322
59. Amend § 200.322, by removing
‘‘acquired by’’ and adding, in its place
‘‘acquired during’’.
■ 60. In § 200.331, revise paragraphs
(a)(1)(i), (a)(1)(ii), (a)(4), (a)(5), (b), and
(d)(1) to read as follows:
Requirements for pass-through
*
*
*
*
*
(a) * * *
(1) * * *
(i) Subrecipient name (which must
match the name associated with its
unique entity identifier);
(ii) Subrecipient’s unique entity
identifier;
*
*
*
*
*
(4) An approved federally recognized
indirect cost rate negotiated between the
subrecipient and the Federal
government or, if no such rate exists,
either a rate negotiated between the
pass-through entity and the subrecipient
(in compliance with this part), or a de
minimis indirect cost rate as defined in
§ 200.414 Indirect (F&A) costs,
paragraph (f) of this part.
(5) A requirement that the
subrecipient permit the pass-through
entity and auditors to have access to the
subrecipient’s records and financial
statements as necessary for the passthrough entity to meet the requirements
of this part; and
*
*
*
*
*
(b) Evaluate each subrecipient’s risk
of noncompliance with Federal statutes,
regulations, and the terms and
conditions of the subaward for purposes
of determining the appropriate
subrecipient monitoring described in
paragraphs (d) and (e) of this section,
which may include consideration of
such factors as:
*
*
*
*
*
(d) * * *
(1) Reviewing financial and
performance reports required by the
pass-through entity.
*
*
*
*
*
§ 200.337
[Amended]
61. Amend § 200.337 by removing
‘‘state or local’’ and adding, in its place
‘‘state, local, and tribal’’.
■
PO 00000
Frm 00019
Fmt 4701
Sfmt 4700
[Amended]
62. Amend § 200.340(c) by adding ’’
(forthcoming at time of publication)’’
after ‘‘2 CFR part 77’’.
■
§ 200.341
[Amended]
63. Amend § 200.341 by removing
‘‘proceedings which’’ and adding, in its
place ‘‘proceedings to which’’.
■
§ 200.343
[Amended]
■
§ 200.331
entities.
§ 200.340
75885
[Amended]
64. Amend § 200.343 by removing
‘‘Federal agency’’ from the introductory
text and adding, in its place ‘‘Federal
awarding agency’’; in paragraph (a) by
removing ‘‘by or the’’ and adding, in its
place ‘‘by the’’; and paragraph (d) by
removing ‘‘that is’’ and adding, in its
place ‘‘that are’’, and adding ‘‘,’’ after
due.
■
§ 200.344
[Amended]
65. Amend § 200.344, paragraph (a)
introductory text by removing ‘‘.’’ and
adding, in its place ‘‘;’’ and paragraph
(b) by adding ‘‘,’’ after section.
■
§ 200.400
[Amended]
66. Amend § 200.400, paragraph (f) by
adding ‘‘(including pre- and postdoctoral staff)’’ after ‘‘employees’’ and
paragraph (g) by removing ‘‘expressly’’
and adding, in its place ‘‘explicitly’’.
■
§ 200.404
[Amended]
67. Amend § 200.404, paragraph (b) by
adding ‘‘, local, tribal,’’ after ‘‘state’’.
■
§ 200.405
[Amended]
68. Amend § 200.405, paragraph (d)
by removing ‘‘should’’ and adding, in its
place ‘‘must’’.
■
§ 200.406
[Amended]
69. Amend § 200.406, paragraph (b)
second sentence by removing ‘‘should’’
and adding, in its place ‘‘must’’.
■ 70. In § 200.407, revise paragraphs (e)
through (v) and add paragraphs (w), (x)
and (y) to read as follows:
■
§ 200.407 Prior written approval (prior
approval).
*
*
*
*
*
(e) § 200.311 Real property;
(f) § 200.313 Equipment;
(g) § 200.332 Fixed amount
subawards;
(h) § 200.413 Direct costs, paragraph
(c);
(i) § 200.430 Compensation—personal
services, paragraph (h);
(j) § 200.431 Compensation—fringe
benefits;
(k) § 200.438 Entertainment costs;
(l) § 200.439 Equipment and other
capital expenditures;
(m) § 200.440 Exchange rates;
(n) § 200.441 Fines, penalties,
damages and other settlements;
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(o) § 200.442 Fund raising and
investment management costs;
(p) § 200.445 Goods or services for
personal use;
(q) § 200.447 Insurance and
indemnification;
(r) § 200.454 Memberships,
subscriptions, and professional activity
costs, paragraph (c);
(s) § 200.455 Organization costs;
(t) § 200.456 Participant support costs;
(u) § 200.458 Pre-award costs;
(v) § 200.462 Rearrangement and
reconversion costs;
(w) § 200.467 Selling and marketing
costs;
(x) § 200.470 Taxes (including Value
Added Tax); and
(y) § 200.474 Travel costs.
§ 200.413
[Amended]
71. Amend § 200.413, paragraph (f)(5)
by adding ‘‘See also § 200.442 Fund
raising and investment management
costs.’’ after the first sentence.
■ 72. In § 200.414, revise paragraphs (e)
introductory text, (e)(1), (e)(3), (e)(4),
(e)(5); add new paragraph (e)(6); revise
the first sentence of paragraph (f); and
revise paragraph (g) to read as follows:
■
§ 200.414
Indirect (F&A) costs.
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*
*
*
*
*
(e) Requirements for development and
submission of indirect (F&A) cost rate
proposals and cost allocation plans are
contained in Appendices III–VII and
Appendix IX as follows:
(1) Appendix III to Part 200—Indirect
(F&A) Costs Identification and
Assignment, and Rate Determination for
Institutions of Higher Education (IHEs);
*
*
*
*
*
(3) Appendix V to Part 200—State/
Local Governmentwide Central Service
Cost Allocation Plans;
(4) Appendix VI to Part 200—Public
Assistance Cost Allocation Plans;
(5) Appendix VII to Part 200—States
and Local Government and Indian Tribe
Indirect Cost Proposals; and
(6) Appendix IX to Part 200—Hospital
Cost Principles.
(f) In addition to the procedures
outlined in the appendices in paragraph
(e) of this section, any non-Federal
entity that has never received a
negotiated indirect cost rate, except for
those non-Federal entities described in
Appendix VII to Part 200—States and
Local Government and Indian Tribe
Indirect Cost Proposals, paragraph
D.1.b, may elect to charge a de minimis
rate of 10% of modified total direct
costs (MTDC) which may be used
indefinitely.***
(g) Any non-Federal entity that has a
current federally negotiated indirect
cost rate may apply for a one-time
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extension of the rates in that agreement
for a period of up to four years. This
extension will be subject to the review
and approval of the cognizant agency for
indirect costs. If an extension is granted
the non-Federal entity may not request
a rate review until the extension period
ends. At the end of the 4-year extension,
the non-Federal entity must re-apply to
negotiate a rate. Subsequent one-time
extensions (up to four years) are
permitted if a renegotiation is
completed between each extension
request.
§ 200.415
[Amended]
73. Amend § 200.415, paragraph (b)(1)
by adding ‘‘, and Appendix IX’’ after
‘‘Appendices III through VII’’; and
paragraph (c) by removing
‘‘corporation’’ and adding, in its place
‘‘nonprofit organization’’.
■ 74. In § 200.419, revise the second
sentence of paragraph (b)(2) to read as
follows:
■
§ 200.419 Cost accounting standards and
disclosure statement.
*
*
*
*
*
(b) * * *
(2) * * * An IHE must file
amendments to the DS–2 to the
cognizant agency for indirect costs six
months in advance of a disclosed
practice being changed to comply with
a new or modified standard, or when a
practice is changed for other
reasons.* * *
*
*
*
*
*
§ 200.430
[Amended]
75. Amend § 200.430, paragraph (g) by
removing ‘‘should’’ and adding, in its
place ‘‘must’’; and paragraph (h)(1)(ii)
by removing ‘‘(h)(9)’’ and adding, in its
place ‘‘(i)’’.
■
§ 200.431
[Amended]
76. Amend § 200.431, paragraph
(b)(3)(i) by removing ‘‘as indirect costs’’;
paragraph (e)(3) by removing ‘‘and they
are allocated as indirect costs’’; and
paragraph (h)(6) by adding ‘‘nonFederal’’ before ‘‘entity’’.
[Amended]
77. Amend § 200.433, paragraph (b) by
removing ‘‘(b)(1)’’ and adding, in its
place ‘‘(a)’’.
■
§ 200.434
[Amended]
78. Amend § 200.434, paragraph (c) by
removing ‘‘is no allowable’’ and adding,
in its place ‘‘may not be charged to the
Federal award’’; and paragraph (g)(1) by
removing ‘‘is not reimbursable’’ and
adding, in its place ‘‘may not be charged
to the Federal award’’.
■
PO 00000
Frm 00020
Fmt 4701
[Amended]
79. Amend § 200.435, paragraph
(b)(1)(ii)(D) by removing ‘‘for default’’.
■
§ 200.436
[Amended]
80. Amend § 200.436, paragraph (b) by
removing ‘‘Appendices IV through VIII’’
and adding, in its place ‘‘Appendices III
through IX’’; paragraph (c) introductory
text by removing ‘‘For this purpose’’ and
adding, in its place ‘‘For the purpose of
computing depreciation’’; and
paragraph (c)(3) by removing ‘‘entity, or
where’’ and adding, in its place ‘‘entity
where’’.
■ 81. In § 200.439, add a new paragraph
(b)(7) to read as follows:
■
§ 200.439 Equipment and other capital
expenditures.
*
*
*
*
*
(b) * * *
(7) Equipment and other capital
expenditures are unallowable as
indirect costs. See § 200.436
Depreciation.
■ 82. In § 200.440, revise paragraph (a)
to read as follows:
§ 200.440
Exchange rates.
(a) Cost increases for fluctuations in
exchange rates are allowable costs
subject to the availability of funding.
Prior approval of exchange rate
fluctuations is required only when the
change results in the need for additional
Federal funding, or the increased costs
result in the need to significantly reduce
the scope of the project. The Federal
awarding agency must however ensure
that adequate funds are available to
cover currency fluctuations in order to
avoid a violation of the Anti-Deficiency
Act.
*
*
*
*
*
§ 200.443
[Amended]
83. Amend § 200.443, paragraph (b)(3)
by removing ‘‘46*’’.
■ 84. In § 200.444, revise paragraph (b)
to read as follows:
■
■
§ 200.433
§ 200.435
Sfmt 4700
§ 200.444
General costs of government.
*
*
*
*
*
(b) For Indian tribes and Councils of
Governments (COGs) (see § 200.64 Local
government), up to 50% of salaries and
expenses directly attributable to
managing and operating Federal
programs by the chief executive and his
or her staff can be included in the
indirect cost calculation without
documentation.
§ 200.448
[Amended]
85. In § 200.448, amend paragraph
(b)(3) by removing the word ‘‘should’’
and adding in its place ‘‘must’’.
■
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§ 200.453
[Amended]
86. In § 200.453, amend paragraph (b)
by removing the word ‘‘should’’ and
adding in its place ‘‘must’’.
■
§ 200.457
[Amended]
87. Amend the first sentence of
§ 200.457 by removing the text ‘‘routine
and security to protect’’ and adding, in
its place ‘‘protection and security of’’.
■
§ 200.463
[Amended]
88. Amend § 200.463, paragraph (c),
the first sentence by removing ‘‘as a
direct cost’’.
■
§ 200.464
[Amended]
*
tkelley on DSK3SPTVN1PROD with RULES2
§ 200.518
*
*
*
*
(d) In the absence of an acceptable,
written non-Federal entity policy
regarding travel costs, the rates and
amounts established under 5 U.S.C.
5701–11, (‘‘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 must apply to travel
under Federal awards (48 CFR 31.205–
46(a)).
(e) Commercial air travel. (1) Airfare
costs in excess of the basic least
expensive unrestricted accommodations
class offered by commercial airlines are
unallowable except when such
accommodations would:
(i) Require circuitous routing;
(ii) Require travel during
unreasonable hours;
(iii) Excessively prolong travel;
(iv) Result in additional costs that
would offset the transportation savings;
or
(v) Offer accommodations not
reasonably adequate for the traveler’s
medical needs. The non-Federal entity
must justify and document these
conditions on a case-by-case basis in
order for the use of first-class or
business-class airfare to be allowable in
such cases.
(2) Unless a pattern of avoidance is
detected, the Federal government will
generally not question a non-Federal
entity’s determinations that customary
standard airfare or other discount airfare
is unavailable for specific trips if the
non-Federal entity can demonstrate that
such airfare was not available in the
specific case.
Jkt 235001
[Amended]
92. Amend § 200.502, paragraph (a),
by removing ‘‘should be based’’ and
adding, in its place ‘‘must be based.’’
■
§ 200.507
Travel costs.
20:19 Dec 18, 2014
§ 200.502
[Amended]
■
89. Amend § 200.464, paragraph (c),
the second sentence by removing
‘‘allowed either as a direct or indirect
cost’’ and adding, in its place ‘‘charged
to a Federal award’’.
■ 90. In § 200.474, remove paragraph
(c)(3), revise paragraphs (d) and (e), and
add paragraph (f) to read as follows:
VerDate Sep<11>2014
91. Amend § 200.501, paragraph (f),
by removing ‘‘should be considered’’
and adding, in its place ‘‘sets forth the
considerations’’; and paragraph (h), by
removing ‘‘should describe’’ with ‘‘must
describe’’.
(a) In paragraph (b), remove ‘‘Federal
statutes, regulations, and the terms and
conditions of the Federal award’’ and
add, in its place ‘‘provisions of laws,
regulations, contracts, and award
agreements’’.
■ (b) In paragraph (c), remove ‘‘report
and internal control’’ and add, in its
place ‘‘a report on internal control’’ in
the first sentence; and remove
‘‘modified opinion’’ and add, in its
place ‘‘disclaimer of opinion’’ in the
second sentence.
■ (c) In paragraph (d) (3) (i), remove
‘‘should be presented’’ and add, in its
place ‘‘must be presented’’.
■ (d) In paragraph (d) (3) (ii), remove
‘‘should be reported’’ and add, in its
place ‘‘must be reported’’.
§ 200.501
■
§ 200.474
(f) Air travel by other than
commercial carrier. Costs of travel by
non-Federal entity-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 airfare as
provided for in paragraph (d) of this
section, is unallowable.
75887
[Amended]
93. Amend § 200.507, paragraph
(b)(1), by adding ‘‘current ’’ before
‘‘program-specific audit guide’’.
■
§ 200.510
[Amended]
94. Amend § 200.510, paragraph
(b)(6), by removing ‘‘non-Federal entity’’
and adding, in its place ‘‘auditee.’’
■ 95. In § 200.512, revise the heading
and first sentence of paragraph (b)(2) to
read as follows:
■
§ 200.512
Report submission.
*
*
*
*
*
(b) * * *
(2) Exception for Indian Tribes and
Tribal Organizations. An auditee that is
an Indian tribe or a tribal organization
(as defined in the Indian SelfDetermination, Education and
Assistance Act (ISDEAA), 25 U.S.C.
450b(l)) may opt not to authorize the
FAC to make the reporting package
publicly available on a Web site, by
excluding the authorization for the FAC
publication in the statement described
in paragraph (b)(1) of this section.***
*
*
*
*
*
§ 200.513
[Amended]
96. Amend § 200.513, paragraph
(c)(5)(i), by removing ‘‘requirement of
§ 200.513 Responsibilities’’ and adding,
in its place ‘‘requirements of paragraph
(c) of this section’’.
■
§ 200.514
[Amended]
97. Amend § 200.514, paragraph
(d)(3), by removing ‘‘the auditor should’’
and adding, in its place ‘‘the auditor
must’’.
■
§ 200.515
■
[Amended]
98. Amend § 200.515 as follows:
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■
[Amended]
99. Amend § 200.518 as follows:
(a) In paragraph (a), remove
‘‘paragraphs (b) through (i)’’ and add, in
its place ‘‘paragraphs (b) through (h)’’.
■ (b) In paragraph (b)(1), in the table,
remove ‘‘Equal to $750,000’’ and add, in
its place ‘‘Equal to or exceed $750,000’’.
■ (c) In paragraph (b)(3), remove ‘‘loan
guarantees (loans) should not result’’
with ‘‘loan guarantees (loans) must not
result’’.
■
■
Appendix I to Part 200 [Amended]
100. Amend Appendix I to Part 200—
Full Text of Notice of Funding
Opportunity as follows:
■ (a) In the general discussion section,
amend the second sentence of the third
paragraph by removing ‘‘to include in
Section I information’’ and adding, in its
place ‘‘to include Section A
information’’.
■ (b) In the general discussion section,
amend the last sentence of third
paragraph by removing ‘‘The format
specifies a standard location for that
information in Section III.1 but that
does not preclude repeating the
information in Section I or creating a
cross reference between Sections I and
III.1’’ and adding, in its place ‘‘The
format specifies a standard location for
that information in Section C.1 but does
not preclude repeating the information
in Section A or creating a cross
reference between Section A and C.1’’.
■ (c) In Section B, second paragraph,
remove ‘‘section D’’ and add, in its place
‘‘Section D’’.
■ (d) In Section C.1, fifth sentence,
remove ‘‘Section IV’’ and add, in its
place ‘‘Section D’’.
■ (e) In Section C.1, last sentence,
remove references, wherever they
appear to ‘‘Section IV.5’’ and add, in
their place ‘‘Section D.6’’.
■ (f) In Section D.2.i, remove ‘‘Section
IV.3’’ and add, in its place ‘‘Section
D.4’’.
■
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(g) In the heading of Section D.3,
remove ‘‘Dun and Bradstreet Universal
Numbering System (DUNS) number’’
and add, in its place ‘‘Unique entity
identifier’’.
■ (h) In Section D.3, item (ii), remove ‘‘a
valid DUNS number’’ and add, in its
place ‘‘a valid unique entity identifier’’.
■ (i) In Section D.3, item (iii), remove
‘‘all applicable DUNS’’ and add, in its
place ‘‘all applicable unique entity
identifier’’.
■ (j) In Section E.1, second paragraph,
remove ‘‘Section III.2’’ and add, in its
place ‘‘Section C.2’’.
■ 101. In Appendix II to Part 200—
Contract Provisions for Non-Federal
Entity Contracts Under Federal Awards,
revise paragraphs (H), (I) and (J); and
remove paragraph (K) to read as follows:
■
Appendix II to Part 200—Contract
Provisions for Non-Federal Entity
Contracts Under Federal Awards
*
*
*
*
*
(H) Debarment and Suspension (Executive
Orders 12549 and 12689)—A contract award
(see 2 CFR 180.220) must not be made to
parties listed on the governmentwide
exclusions in the System for Award
Management (SAM), in accordance with the
OMB guidelines at 2 CFR 180 that implement
Executive Orders 12549 (3 CFR part 1986
Comp., p. 189) and 12689 (3 CFR part 1989
Comp., p. 235), ‘‘Debarment and
Suspension.’’ SAM Exclusions 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 Executive
Order 12549.
(I) Byrd Anti-Lobbying Amendment (31
U.S.C. 1352)—Contractors that apply or bid
for an award exceeding $100,000 must file
the required certification. Each tier certifies
to the tier above that it will not and has not
used Federal appropriated funds to pay any
person or organization for influencing or
attempting to influence an officer or
employee of any agency, a member of
Congress, officer or employee of Congress, or
an employee of a member of Congress in
connection with obtaining any Federal
contract, grant or any other award covered by
31 U.S.C. 1352. Each tier must also disclose
any lobbying with non-Federal funds that
takes place in connection with obtaining any
Federal award. Such disclosures are
forwarded from tier to tier up to the nonFederal award.
(J) See § 200.322 Procurement of recovered
materials.
102. Amend Appendix III to Part
200—Indirect (F&A) Costs Identification
and Assignment, and Rate
Determination for Institutions of Higher
Education (IHEs) as follows:
■ (a) In Section A.1.a, add paragraph (3)
as set forth below.
■ (b) In Section B.1., remove ‘‘this
indirect cost requirements’’ and add, in
its place ‘‘these indirect cost
requirements’’.
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■
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(c) In Section C.2., remove ‘‘subgrants
and subcontracts’’.
■ (d) In Section C.7.a, first sentence,
remove ‘‘Federal agencies must use the
negotiated rates except as provided in
paragraph (e) of § 200.414 Indirect
(F&A) costs, must paragraph (b) (1) for
indirect (F&A) costs’’ and add, in its
place ‘‘Except as provided in paragraph
(c)(1) of § 200.414 Indirect (F&A) costs,
Federal agencies must use the
negotiated rates’’
■ (e) In Section C.9.a, remove
‘‘subsection 1.a’’ and add, in its place
‘‘subsection C.1.a’’
■ (f) In Section C.10, remove ‘‘shall
include’’ and add, in its place ‘‘must
include’’.
■ (g) In Section C.11.a.(1), add ‘‘Where
a non-Federal entity only receives funds
as a subrecipient, § 200.331
Requirements for pass-through entities.’’
after the last sentence.
■ (h) In Section C.11.f(1), second
sentence, remove ‘‘Non-cognizant
Federal agencies for indirect costs,
which make Federal awards to an
educational institution,’’ and add, in its
place ‘‘Federal awarding agencies that
do not have cognizance for indirect
costs’’.
■ (i) In Section C.12, second paragraph,
remove ‘‘In order to provide mutually
agreed upon information for
management purposes’’ and add, in its
place ‘‘As provided in section C.10 of
this appendix’’.
■ (j) In Section F.2.a, remove ‘‘must’’
after ‘‘a proposed indirect cost rate’’.
■ (k) Revise F.2.b as set forth below.
■
Appendix III to Part 200—Indirect
(F&A) Costs Identification and
Assignment, and Rate Determination
for Institutions of Higher Education
(IHEs)
*
*
*
*
*
A. * * *
1. * * *
a. * * *
(3) Only mandatory cost sharing or cost
sharing specifically committed in the project
budget must be included in the organized
research base for computing the indirect
(F&A) cost rate or reflected in any allocation
of indirect costs. Salary costs above statutory
limits are not considered cost sharing.
*
*
*
*
*
F. * * *
2. * * *
b. The certificate must be signed on behalf
of the institution by the chief financial officer
or an individual designated by an individual
at a level no lower than vice president or
chief financial officer.
An indirect (F&A) cost rate is not binding
upon the Federal Government if the most
recent required proposal from the institution
has not been certified. Where it is necessary
to establish indirect (F&A) cost rates, and the
institution has not submitted a certified
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proposal for establishing such rates in
accordance with the requirements of this
section, the Federal Government must
unilaterally establish such rates. Such rates
may be based upon audited historical data or
such other data that have been furnished to
the cognizant agency for indirect costs and
for which it can be demonstrated that all
unallowable costs have been excluded. When
indirect (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.
*
*
*
*
*
Appendix IV to Part 200 [Amended]
■ 103. Amend Appendix IV to Part
200—Indirect (F&A) Costs Identification
and Assignment, and Rate
Determination for Nonprofit
Organizations as follows:
■ (a) In Section B.2.c, remove ‘‘such
contracts or subawards’’ and add, in its
place ‘‘such as subawards’’.
■ (b) In Section B.3.b.(4), sentence prior
to last sentence, remove ’’ where a major
project or activity explicitly requires
and budgets for administrative or
clerical services and other individuals
involved can be identified with the
program or activity’’ and add, in its
place ‘‘as described in § 200.413 Direct
Costs’’.
■ (c) In Section C.2.a., add ‘‘Where a
non-Federal entity only receives funds
as a subrecipient, see the requirements
of § 200.331 Requirements for passthrough entities.’’ after the last sentence.
■ (d) In Section D, add section number
‘‘1.’’ before ‘‘Required Certification.’’
and remove ‘‘j’’ in front of ‘‘Each
indirect cost rate’’ and add, in its place
‘‘2.’’.
■ 104. In Appendix V to Part 200—
State/Local Government and Indian
Tribe-Wide Central Service Cost
Allocation Plans, revise the heading to
read as follows:
Appendix V to Part 200—State/Local
Governmentwide Central Service Cost
Allocation Plans
*
*
*
*
*
105. Amend Appendix V to Part 200—
State/Local Governmentwide Central
Service Cost Allocation Plans as
follows:
■ (a) In Section A.2, the last sentence
remove ‘‘the Superintendent of
Documents, U.S. Government Printing
Office’’ and add, in its place ‘‘HHS Cost
Allocation Services or at their Web site
at https://rates.psc.gov’’.
■ (b) In Section E.2, the first sentence,
remove ‘‘allocated central service’’ and
add, in its place ‘‘allocation central
service*’’.
■
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106. Amend Appendix VI to Part
200—Public Assistance Cost Allocation
Plans as follows:
■ (a) In Section A, third sentence,
remove ‘‘Federal agencies’’ and add, in
its place ‘‘Federal awarding agencies’’.
■ (b) In Section E.1, remove ‘‘the
funding agencies’’ and add, in its place
‘‘Federal awarding agencies’’; and
remove ‘‘the cognizant audit agency’’
and add, in its place ‘‘the cognizant
agency for indirect costs’’.
■ (c) In Section E.2, remove ‘‘one
funding agency’’ and add, in its place
‘‘one Federal awarding agency’’.
■ (d) In Section E.3, remove ‘‘two or
more funding agencies’’ and add, in its
place ‘‘two or more Federal awarding
agencies’’; and remove ‘‘one funding
agency’’ and add, in its place ‘‘one
Federal awarding agency’’.
■ (e) In Section E.4, remove ‘‘the Federal
agencies’’ and add, in its place ‘‘the
Federal awarding agencies’’.
■
Appendix VII to Part 200 [Amended]
107. Amend Appendix VII to Part
200—States and Local Government and
Indian Tribe Indirect Cost Proposals as
follows:
■ (a) In Section A.3, remove ‘‘the
Superintendent of Documents, U.S.
Government Printing Office’’ and add,
in its place ‘‘HHS Cost Allocation
Services or at their Web site at https://
rates.psc.gov’’.
■ (b) In Section A.5, remove ‘‘Appendix
VII to Part 200—States and Local
Government and Indian Tribe Indirect
Cost Proposals’’ and add, in its place
‘‘Appendix VI to Part 200—Public
Assistance Cost Allocation Plans’’.
■ (c) In Section B.3, second sentence,
remove ‘‘Appendix VI’’ add, in its place
‘‘Appendix V.’’
■ (d) In Section C.3.e, remove
‘‘subcontracts’’ and add, in its place
‘‘subawards’’.
■ (e) In Section D.1.a, last sentence,
remove ‘‘the Common Rule’’ and add, in
its place ‘‘§ 200.333 Retention
Requirements for Records’’.
■ (f) In Section F.2, second sentence,
remove ‘‘Appendix VI’’ and add, in its
place ‘‘Appendix V’’.
■
Appendix IX to Part 200 [Amended]
108. Amend Appendix IX to Part
200—Hospital Cost Principles by
removing ‘‘Part 74’’ and adding, in its
place ‘‘Part 75’’.
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■
David Mader,
Controller.
Department of Health and Human
Services
For the reasons set forth in the
common preamble, under the authority
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of 5 U.S.C. 301 and the authorities listed
below, Part 200 of Title 2, Chapter III is
added and 45 CFR subtitle A is
amended as follows:
TITLE 2—GRANTS AND
AGREEMENTS
CHAPTER III—DEPARTMENT OF HEALTH
AND HUMAN SERVICES
■
1. Add part 300 to read as follows:
PART 300—UNIFORM
ADMINISTRATIVE REQUIREMENTS,
COST PRINCIPLES, AND AUDIT
REQUIREMENTS FOR FEDERAL
AWARDS
Authority: 5 U.S.C. 301, 2 CFR part 200.
§ 300.1
Adoption of 2 CFR Part 200.
Under the authority listed above, the
Department of Health and Human
Services adopts the Office of
Management and Budget (OMB)
Guidance in 2 CFR part 200, and has
codified the text, with HHS-specific
amendments in 45 CFR part 75. Thus,
this part gives regulatory effect to the
OMB guidance and supplements the
guidance as needed for the Department.
TITLE 45—PUBLIC WELFARE
Subtitle A—Department of Health and
Human Services
■
PART 74 [REMOVED AND RESERVED]
2. Remove and reserve 45 CFR part 74.
3. Part 75 is added to title 45 to read
as follows:
■
■
PART 75—UNIFORM ADMINISTRATIVE
REQUIREMENTS, COST PRINCIPLES,
AND AUDIT REQUIREMENTS FOR HHS
AWARDS
Subpart A—Acronyms and Definitions
Sec.
75.1 Acronyms.
75.2 Definitions.
Subpart B—General Provisions
75.100 Purpose.
75.101 Applicability.
75.102 Exceptions.
75.103 Authorities.
75.104 Supersession.
75.105 Effects on other issuances.
75.106 Agency implementation.
75.107 OMB responsibilities.
75.108 Inquiries.
75.109 Review date.
75.110 Effective/Applicability date.
75.111 English language.
75.112 Conflict of interest.
75.113 Mandatory disclosures.
Subpart C—Pre-Federal Award
Requirements and Contents of Federal
Awards.
75.200 Purpose.
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75889
75.201 Use of grant agreements (including
fixed amount awards), cooperative
agreements, and contracts.
75.202 Requirement to provide public
notice of Federal financial assistance
programs.
75.203 Notices of funding opportunities.
75.204 HHS funding agency review of
merit of proposals.
75.205 HHS awarding agency review of
risk posed by applicants.
75.206 Standard application requirements,
including forms for applying for HHS
financial assistance, and state plans.
75.207 Specific award conditions.
75.208 Certifications and Representations.
75.209 Pre-award costs.
75.210 Information contained in a Federal
award.
75.211 Public access to Federal award
information.
75.212 Suspension and Debarment.
75.213 Metric system of measurement.
75.214 Disclosure of Lobbying Activities.
75.215 Special Provisions for Awards to
Commercial Organizations.
75.216 Special Provisions for Awards to
Federal Agencies.
75.217 Participation by faith-based
organizations.
Subpart D—Post Federal Award
Requirements
Standards for Financial and Program
Management
75.300 Statutory and national policy
requirements.
75.301 Performance measurement.
75.302 Financial management and
standards for financial management
systems.
75.303 Internal controls.
75.304 Bonds.
75.305 Payment.
75.306 Cost sharing or matching.
75.307 Program income.
75.308 Revision of budget and program
plans.
75.309 Period of performance and
availability of funds.
75.310–75.315 [Reserved]
Property Standards
75.316 Purpose of property standards.
75.317 Insurance coverage.
75.318 Real property.
75.319 Federally-owned and exempt
property.
75.320 Equipment.
75.321 Supplies.
75.322 Intangible property and copyrights.
75.323 Property trust relationship.
75.324–75.325 [Reserved]
Procurement Standards
75.326 Procurements by states.
75.327 General procurement standards.
75.328 Competition.
75.329 Procurement procedures.
75.330 Contracting with small and
minority businesses, women’s business
enterprises, and labor surplus area firms.
75.331 Procurement of recovered materials.
75.332 Contract cost and price.
75.333 HHS awarding agency or passthrough entity review.
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75.334 Bonding requirements.
75.335 Contract provisions.
75.336–75.340 [Reserved]
75.413
75.414
75.415
Performance and Financial Monitoring and
Reporting
75.341 Financial reporting.
75.342 Monitoring and reporting program
performance.
75.343 Reporting on real property.
75.344–75.350 [Reserved]
Special Considerations for States, Local
Governments and Indian Tribes
75.416 Cost allocation plans and indirect
cost proposals.
75.417 Interagency service.
Subrecipient Monitoring and Management
75.351 Subrecipient and contractor
determinations.
75.352 Requirements for pass-through
entities.
75.353 Fixed amount subawards.
75.354–75.360 [Reserved]
Record Retention and Access
75.361 Retention requirements for records.
75.362 Requests for transfer or records.
75.363 Methods for collection,
transmission and storage of information.
75.364 Access to records.
75.365 Restrictions on public access to
records.
75.366–75.370 [Reserved]
Remedies for Noncompliance
75.371 Remedies for noncompliance.
75.372 Termination.
75.373 Notification of termination
requirement.
75.374 Opportunities to object, hearings,
and appeals.
75.375 Effects of suspension and
termination.
75.376–75.380 [Reserved]
Closeout
75.381 Closeout.
75.382–75.385 [Reserved]
Post-Closeout Adjustments and Continuing
Responsibilities
75.386 Post-Closeout Adjustments and
Continuing Responsibilities.
75.387–75.390 [Reserved]
Collection of Amounts Due
75.391 Collection of amounts due.
Subpart E—Cost Principles
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General Provisions
75.400 Policy guide
75.401 Application
Basic Considerations
75.402 Composition of Costs.
75.403 Factors affecting allowability of
costs.
75.404 Reasonable costs.
75.405 Allocable costs.
75.406 Applicable credits.
75.407 Prior written approval (prior
approval).
75.408 Limitation on allowance of costs.
75.409 Special considerations.
75.410 Collection of unallowable costs.
75.411 Adjustment of previously
negotiated indirect (F&A) cost rates
containing unallowable costs.
Direct and Indirect (F&A) Costs
75.412 Classification of costs.
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Direct costs.
Indirect (F&A) costs.
Required certifications.
Special Considerations for Institutions of
Higher Education
75.418 Costs incurred by states and local
governments.
75.419 Cost accounting standards and
disclosure statement.
General Provisions for Selected Items of Cost
75.420 Considerations for selected items of
cost.
75.421 Advertising and public relations.
75.422 Advisory councils.
75.423 Alcoholic beverages.
75.424 Alumni/ae activities.
75.425 Audit services.
75.426 Bad debts.
75.427 Bonding costs.
75.428 Collections of improper payments.
75.429 Commencement and convocation
costs.
75.430 Compensation—personal services.
75.431 Compensation—fringe benefits.
75.432 Conferences.
75.433 Contingency provisions.
75.434 Contributions and donations.
75.435 Defense and prosecution of criminal
and civil proceedings, claims, appeals,
and patent infringements.
75.436 Depreciation.
75.437 Employee health and welfare costs.
75.438 Entertainment costs.
75.439 Equipment and other capital
expenditures.
75.440 Exchange rates.
75.441 Fines, penalties, damages and other
settlements.
75.442 Fund raising and investment
management costs.
75.443 Gains and losses on disposition of
depreciable assets.
75.444 General costs of government.
75.445 Goods or services for personal use.
75.446 Idle facilities and idle capacity.
75.447 Insurance and indemnification.
75.448 Intellectual Property.
75.449 Interest.
75.450 Lobbying.
75.451 Losses on other awards or contracts.
75.452 Maintenance and repair costs.
75.453 Materials and supplies costs,
including costs of computing devices.
75.454 Memberships, subscriptions, and
professional activity costs.
75.455 Organization costs.
75.456 Participant support costs.
75.457 Plant and security costs.
75.458 Pre-award costs.
75.459 Professional services costs.
75.460 Proposal costs.
75.461 Publication and printing costs.
75.462 Rearrangement and reconversion
costs.
75.463 Recruiting costs.
75.464 Relocation costs of employees.
75.465 Rental costs of real property and
equipment.
75.466 Scholarships and student aid costs.
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75.467
75.468
75.469
75.470
75.471
75.472
75.473
75.474
75.475
Selling and marketing costs.
Specialized service facilities.
Student activity costs.
Taxes (including Value Added Tax).
Termination costs.
Training and education costs.
Transportation costs.
Travel costs.
Trustees.
HHS Specific Selected Items of Cost
75.476 Independent research and
development costs.
Subpart F—Audit Requirements
General
75.500 Purpose.
Audits
75.501 Audit requirements.
75.502 Basis for determining Federal
awards expended.
75.503 Relation to other audit
requirements.
75.504 Frequency of audits.
75.505 Sanctions.
75.506 Audit costs.
75.507 Program-specific audits.
Auditees
75.508 Auditee responsibilities.
75.509 Auditor selection.
75.510 Financial statements.
75.511 Audit findings follow-up.
75.512 Report submission.
Federal Agencies
75.513 Responsibilities.
Auditors
75.514 Scope of audit.
75.515 Audit reporting.
75.516 Audit findings.
75.517 Audit documentation.
75.518 Major program determination.
75.519 Criteria for Federal program risk.
75.520 Criteria for a low-risk auditee.
Management Decisions
75.521 Management Decision.
Appendix I to Part 75—Full Text of Notice
of Funding Opportunity
Appendix II to Part 75—Contract Provisions
for Non-Federal Entity Contracts Under
Federal Awards
Appendix III to Part 75—Indirect (F&A) Costs
Identification and Assignment, and Rate
Determination for Institutions of Higher
Education
Appendix IV to Part 75—Indirect (F&A) Costs
Identification and Assignment, and Rate
Determination for Nonprofit
Organizations
Appendix V to Part 75—State/Local
Governments-Wide Central Service Cost
Allocation Plans
Appendix VI to Part 75—Public Assistance
Cost Allocation Plans
Appendix VII to Part 75—States and Local
Government and Indian Tribe Indirect
Cost Proposals
Appendix VIII to Part 75—Nonprofit
Organizations Exempted from Subpart E
of Part 75
Appendix IX to Part 75—Principles for
Determining Costs Applicable to
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Research and Development Under Grants
and Contracts with Hospitals
Appendix X to Part 75—Data Collection
Form (SF-SAC)
Appendix XI to Part 75—Compliance
Supplement
Authority: 5 U.S.C. 301.
Subpart A—Acronyms and Definitions
§ 75.1
Acronyms.
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The following acronyms apply to this
part:
CAS Cost Accounting Standards
CFDA Catalog of Federal Domestic
Assistance
CFR Code of Federal Regulations
CMIA Cash Management Improvement Act
COG Councils of Governments
COSO Committee of Sponsoring
Organizations of the Treadway
Commission
EPA Environmental Protection Agency
ERISA Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1301–1461)
EUI Energy Usage Index
F&A Facilities and Administration
FAC Federal Audit Clearinghouse
FAIN Federal Award Identification Number
FAR Federal Acquisition Regulation
FFATA Federal Funding Accountability
and Transparency Act of 2006 or
Transparency Act—Public Law 109–282, as
amended by § 6202(a) of Public Law 110–
252 (31 U.S.C. 6101)
FICA Federal Insurance Contributions Act
FOIA Freedom of Information Act
FR Federal Register
FTE Full-time equivalent
GAAP Generally Accepted Accounting
Principles
GAGAS Generally Accepted Government
Auditing Standards
GAO Government Accountability Office
GOCO Government owned, contractor
operated
GSA General Services Administration
HHS U.S. Department of Health and Human
Services
IBS Institutional Base Salary
IHE Institutions of Higher Education
IRC Internal Revenue Code
ISDEAA Indian Self-Determination and
Education and Assistance Act
MTC Modified Total Cost
MTDC Modified Total Direct Cost
OMB Office of Management and Budget
PII Personally Identifiable Information
PMS Payment Management System
PRHP Post-retirement Health Plans
PTE Pass-through Entity
REUI Relative Energy Usage Index
SAM System for Award Management
SF 424 Standard Form 424 series and Form
Families Application for Federal
Assistance
SFA Student Financial Aid
SNAP Supplemental Nutrition Assistance
Program
SPOC Single Point of Contact
TANF Temporary Assistance for Needy
Families
TFM Treasury Financial Manual
U.S.C. United States Code
VAT Value Added Tax
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§ 75.2
Definitions.
These are the definitions for terms
used in this part. Different definitions
may be found in Federal statutes or
regulations that apply more specifically
to particular program or activities.
These definitions could be
supplemented by additional
instructional information provided in in
governmentwide standard information
collections.
Acquisition cost means the cost of the
asset including the cost to ready the
asset for its intended use. 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.
Acquisition costs for software includes
those development costs capitalized in
accordance with generally accepted
accounting principles (GAAP).
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 non-Federal
entity’s regular accounting practices.
Advance payment means a payment
that a Federal awarding agency or passthrough entity makes by any appropriate
payment mechanism, including a
predetermined payment schedule,
before the non-Federal entity disburses
the funds for program purposes.
Allocation means the process of
assigning a cost, or a group of costs, to
one or more cost objective(s), in
reasonable proportion to the benefit
provided or other equitable relationship.
The process may entail assigning a
cost(s) directly to a final cost objective
or through one or more intermediate
cost objectives.
Audit finding means deficiencies
which the auditor is required by
§ 75.516(a) to report in the schedule of
findings and questioned costs.
Auditee means any non-Federal entity
that expends Federal awards which
must be audited under Subpart F-of this
part.
Auditor means an auditor who is a
public accountant, or a Federal, state,
local government, or Indian Tribe audit
organization, which meets the general
standards specified for external auditors
in generally accepted government
auditing standards (GAGAS). The term
auditor does not include internal
auditors of nonprofit organizations.
Awardee (see Non-Federal entity).
Budget means the financial plan for
the project or program that the Federal
awarding agency or pass-through entity
approves during the Federal award
process or in subsequent amendments to
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the Federal award. It may include the
Federal and non-Federal share or only
the Federal share, as determined by the
Federal awarding agency or passthrough entity.
Capital assets means tangible or
intangible assets used in operations
having a useful life of more than one
year which are capitalized in
accordance with GAAP. Capital assets
include:
(1) Land, buildings (facilities),
equipment, and intellectual property
(including software) whether acquired
by purchase, construction, manufacture,
lease-purchase, exchange, or through
capital leases; and
(2) Additions, improvements,
modifications, replacements,
rearrangements, reinstallations,
renovations or alterations to capital
assets that materially increase their
value or useful life (not ordinary repairs
and maintenance).
Capital expenditures means
expenditures to acquire capital assets or
expenditures to make additions,
improvements, modifications,
replacements, rearrangements,
reinstallations, renovations, or
alterations to capital assets that
materially increase their value or useful
life.
Catalog of Federal Domestic
Assistance (CFDA) number means the
number assigned to a Federal program
in the CFDA.
CFDA program title means the title of
the program under which the Federal
award was funded in the CFDA.
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 state, local government, or Indian tribe
on a centralized basis to its departments
and agencies. The costs of these services
may be allocated or billed to users.
Claim means, depending on the
context, either:
(1) A written demand or written
assertion by one of the parties to a
Federal award seeking as a matter of
right:
(i) The payment of money in a sum
certain;
(ii) The adjustment or interpretation
of the terms and conditions of the
Federal award; or
(iii) Other relief arising under or
relating to a Federal award.
(2) A request for payment that is not
in dispute when submitted.
Class of Federal awards means a
group of Federal awards either awarded
under a specific program or group of
programs or to a specific type of nonFederal entity or group of non-Federal
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entities to which specific provisions or
exceptions may apply.
Closeout means the process by which
the Federal awarding agency or passthrough entity determines that all
applicable administrative actions and
all required work of the Federal award
have been completed and takes actions
as described in § 75.381.
Cluster of programs means a grouping
of closely related programs that share
common compliance requirements. The
types of clusters of programs are
research and development (R&D),
student financial aid (SFA), and other
clusters. ‘‘Other clusters’’ are as defined
by OMB in the compliance supplement
or as designated by a state for Federal
awards the state provides to its
subrecipients that meet the definition of
a cluster of programs. When designating
an ‘‘other cluster,’’ a state must identify
the Federal awards included in the
cluster and advise the subrecipients of
compliance requirements applicable to
the cluster, consistent with § 75.352(a).
A cluster of programs must be
considered as one program for
determining major programs, as
described in § 75.518, and, with the
exception of R&D as described in
§ 75.501(c), whether a program-specific
audit may be elected.
Cognizant agency for audit means the
Federal agency designated to carry out
the responsibilities described in
§ 75.513(a). The cognizant agency for
audit is not necessarily the same as the
cognizant agency for indirect costs. A
list of cognizant agencies for audit may
be found at the FAC Web site.
Cognizant agency for indirect costs
means the Federal agency responsible
for reviewing, negotiating, and
approving cost allocation plans or
indirect cost proposals developed under
this part on behalf of all Federal
agencies. The cognizant agency for
indirect cost is not necessarily the same
as the cognizant agency for audit. For
assignments of cognizant agencies see
the following:
(1) For IHEs: Appendix III to Part 75
C.11.
(2) For nonprofit organizations:
Appendix IV to Part 75 C.1.
(3) For state and local governments:
Appendix V to Part 75 F.1.
(4) For Indian tribes: Appendix VII to
Part 75 D.1.
Commercial organization means an
organization, institution, corporation, or
other legal entity, including, but not
limited to, partnerships, sole
proprietorships, and limited liability
companies, that is organized or operated
for the profit or benefit of its
shareholders or other owners. The term
includes small and large businesses and
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is used interchangeably with ‘‘for-profit
organization.’’
Compliance supplement means
Appendix XI to Part 75 (previously
known as the Circular A–133
Compliance Supplement).
Computing devices means machines
used to acquire, store, analyze, process,
and publish data and other information
electronically, including accessories (or
‘‘peripherals’’) for printing, transmitting
and receiving, or storing electronic
information. See also Supplies and
Information technology systems.
Contract means a legal instrument by
which a non-Federal entity purchases
property or services needed to carry out
the project or program under a Federal
award. The term as used in this part
does not include a legal instrument,
even if the non-Federal entity considers
it a contract, when the substance of the
transaction meets the definition of a
Federal award or subaward (see
Subaward).
Contractor means an entity that
receives a contract as defined in
Contract.
Cooperative agreement means a legal
instrument of financial assistance
between a Federal awarding agency or
pass-through entity and a non-Federal
entity that, consistent with 31 U.S.C.
6302–6305:
(1) Is used to enter into a relationship
the principal purpose of which is to
transfer anything of value from the
Federal awarding agency or passthrough entity to the non-Federal entity
to carry out a public purpose authorized
by a law of the United States (see 31
U.S.C. 6101(3)); and not to acquire
property or services for the Federal
Government or pass-through entity’s
direct benefit or use;
(2) Is distinguished from a grant in
that it provides for substantial
involvement between the Federal
awarding agency or pass-through entity
and the non-Federal entity in carrying
out the activity contemplated by the
Federal award.
(3) The term does not include:
(i) A cooperative research and
development agreement as defined in 15
U.S.C. 3710a; or
(ii) An agreement that provides only:
(a) Direct United States Government
cash assistance to an individual;
(B) A subsidy;
(C) A loan;
(D) A loan guarantee; or
(E) Insurance
Cooperative audit resolution means
the use of audit follow-up techniques
which promote prompt corrective action
by improving communication, fostering
collaboration, promoting trust, and
developing an understanding between
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the Federal agency and the non-Federal
entity. This approach is based upon:
(1) A strong commitment by Federal
agency and non-Federal entity
leadership to program integrity;
(2) Federal agencies strengthening
partnerships and working cooperatively
with non-Federal entities and their
auditors; and non-Federal entities and
their auditors working cooperatively
with Federal agencies;
(3) A focus on current conditions and
corrective action going forward;
(4) Federal agencies offering
appropriate relief for past
noncompliance when audits show
prompt corrective action has occurred;
and
(5) Federal agency leadership sending
a clear message that continued failure to
correct conditions identified by audits
which are likely to cause improper
payments, fraud, waste, or abuse is
unacceptable and will result in
sanctions.
Corrective action means action taken
by the auditee that:
(1) Corrects identified deficiencies;
(2) Produces recommended
improvements; or
(3) Demonstrates that audit findings
are either invalid or do not warrant
auditee action.
Cost allocation plan means central
service cost allocation plan or public
assistance cost allocation plan.
Cost objective means a program,
function, activity, award, organizational
subdivision, contract, or work unit for
which cost data are desired and for
which provision is made to accumulate
and measure the cost of processes,
products, jobs, capital projects, etc. A
cost objective may be a major function
of the non-Federal entity, a particular
service or project, a Federal award, or an
indirect (Facilities & Administrative
(F&A)) cost activity, as described in
Subpart E of this part. See also Final
cost objective and Intermediate cost
objective.
Cost sharing or matching means the
portion of project costs not paid by
Federal funds (unless otherwise
authorized by Federal statute). This may
include the value of allowable third
party in-kind contributions, as well as
expenditures by the recipient. See also
§ 75.306.
Cross-cutting audit finding means an
audit finding where the same
underlying condition or issue affects
Federal awards of more than one
Federal awarding agency or passthrough entity.
Departmental Appeals Board means
the independent office established in
the Office of the Secretary with
delegated authority from the Secretary
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to review and decide certain disputes
between recipients of HHS funds and
HHS awarding agencies under 45 CFR
part 16 and to perform other review,
adjudication and mediation services as
assigned.
Disallowed costs means those charges
to a Federal award that the Federal
awarding agency or pass-through entity
determines to be unallowable, in
accordance with the applicable Federal
statutes, regulations, or the terms and
conditions of the Federal award.
Equipment means tangible personal
property (including information
technology systems) having a useful life
of more than one year and a per-unit
acquisition cost which equals or
exceeds the lesser of the capitalization
level established by the non-Federal
entity for financial statement purposes,
or $5,000. See also Capital assets,
Computing devices, General purpose
equipment, Information technology
systems, Special purpose equipment,
and Supplies.
Excess property means property
acquired in whole or in part under the
control of any Federal awarding agency
that, as determined by the head of the
awarding agency or his/her delegate, is
no longer required for the agency’s
needs or the discharge of its
responsibilities.
Expenditure report means:
(1) For non-construction awards, the
SF–425 Federal Financial Report (FFR)
(or other OMB-approved equivalent
report);
(2) For construction awards, the SF–
271 ‘‘Outlay Report and Request for
Reimbursement’’ (or other OMBapproved equivalent report).
Expenditures means charges made by
a non-Federal entity to a project or
program for which a Federal award was
received.
(1) The charges may be reported on a
cash or accrual basis, as long as the
methodology is disclosed and is
consistently applied.
(2) For reports prepared on a cash
basis, expenditures are the sum of:
(i) Cash disbursements for direct
charges for property and services;
(ii) The amount of indirect expense
charged;
(iii) The value of third-party in-kind
contributions applied; and
(iv) The amount of cash advance
payments and payments made to
subrecipients.
(3) For reports prepared on an accrual
basis, expenditures are the sum of:
(i) Cash disbursements for direct
charges for property and services;
(ii) The amount of indirect expense
incurred;
(iii) The value of third-party in-kind
contributions applied; and
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(iv) The net increase or decrease in
the amounts owed by the non-Federal
entity for:
(A) Goods and other property
received;
(B) Services performed by employees,
contractors, subrecipients, and other
payees;
(C) Programs for which no current
services or performance are required
such as annuities, insurance claims, or
other benefit payments.
Federal agency means an ‘‘agency’’ as
defined at 5 U.S.C. 551(1) and further
clarified by 5 U.S.C. 552(f).
Federal Audit Clearinghouse FAC
means the clearinghouse designated by
OMB as the repository of record where
non-Federal entities are required to
transmit the reporting packages required
by Subpart F of this part. The mailing
address of the FAC is Federal Audit
Clearinghouse, Bureau of the Census,
1201 E. 10th Street, Jeffersonville, IN
47132 and the web address is: https://
harvester.census.gov/sac/. Any future
updates to the location of the FAC may
be found at the OMB Web site.
Federal award has the meaning,
depending on the context, in either
paragraph (1) or (2) of this definition:
(1)(i) The Federal financial assistance
that a non-Federal entity receives
directly from a Federal awarding agency
or indirectly from a pass-through entity,
as described in § 75.101; or
(ii) The cost-reimbursement contract
under the Federal Acquisition
Regulations that a non-Federal entity
receives directly from a Federal
awarding agency or indirectly from a
pass-through entity, as described in
§ 75.101.
(2) The instrument setting forth the
terms and conditions. The instrument is
the grant agreement, cooperative
agreement, other agreement for
assistance covered in paragraph (2) of
Federal financial assistance, or the costreimbursement contract awarded under
the Federal Acquisition Regulations.
(3) Federal award does not include
other contracts that a Federal agency
uses to buy goods or services from a
contractor or a contract to operate
Federal Government owned, contractor
operated facilities (GOCOs).
(4) See also definitions of Federal
financial assistance, grant agreement,
and cooperative agreement.
Federal award date means the date
when the Federal award is signed by the
authorized official of the Federal
awarding agency.
Federal awarding agency means the
Federal agency that provides a Federal
award directly to a non-Federal entity.
Federal financial assistance:
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(1) For grants and cooperative
agreements, Federal financial assistance
means assistance that non-Federal
entities receive or administer in the
form of:
(1) Grants;
(ii) Cooperative agreements;
(iii) Non-cash contributions or
donations of property (including
donated surplus property);
(iv) Direct appropriations;
(v) Food commodities; and
(vi) Other financial assistance (except
assistance listed in paragraph (b) of this
section).
(2) For Subpart F of this part, Federal
financial assistance also includes
assistance that non-Federal entities
receive or administer in the form of:
(i) Loans;
(ii) Loan Guarantees;
(iii) Interest subsidies; and
(iv) Insurance.
(c) Federal financial assistance does
not include amounts received as
reimbursement for services rendered to
individuals as described in § 75.502(h)
and (i).
Federal interest means, for purposes
of § 75.343 or when used in connection
with the acquisition or improvement of
real property, equipment, or supplies
under a Federal award, the dollar
amount that is the product of the:
(1) Federal share of total project costs;
and
(2) Current fair market value of the
property, improvements, or both, to the
extent the costs of acquiring or
improving the property were included
as project costs.
Federal program means:
(1) All Federal awards which are
assigned a single number in the CFDA.
(2) When no CFDA number is
assigned, all Federal awards to nonFederal entities from the same agency
made for the same purpose must be
combined and considered one program.
(3) Notwithstanding paragraphs (1)
and (2) of this definition, a cluster of
programs. The types of clusters of
programs are:
(i) Research and development (R&D);
(ii) Student financial aid (SFA); and
(iii) ‘‘Other clusters,’’ as described in
the definition of Cluster of Programs
Federal share means the portion of
total project costs that are paid by
Federal funds.
Final cost objective means a cost
objective which has allocated to it both
direct and indirect costs and, in the
non-Federal entity’s accumulation
system, is one of the final accumulation
points, such as a particular award,
internal project, or other direct activity
of a non-Federal entity. See also Cost
objective and Intermediate cost
objective.
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Fixed amount awards means a type of
grant agreement under which the
Federal awarding agency or passthrough entity provides a specific level
of support without regard to actual costs
incurred under the Federal award. This
type of Federal award reduces some of
the administrative burden and recordkeeping requirements for both the nonFederal entity and Federal awarding
agency or pass-through entity.
Accountability is based primarily on
performance and results. See
§§ 75.201(b) and 75.353.
Foreign organization means an entity
that is:
(1) A public or private organization
located in a country other than the
United States and its territories that is
subject to the laws of the country in
which it is located, irrespective of the
citizenship of project staff or place of
performance;
(2) A private nongovernmental
organization located in a country other
than the United States that solicits and
receives cash contributions from the
general public;
(3) A charitable organization located
in a country other than the United
States that is nonprofit and tax exempt
under the laws of its country of
domicile and operation, and is not a
university, college, accredited degreegranting institution of education, private
foundation, hospital, organization
engaged exclusively in research or
scientific activities, church, synagogue,
mosque or other similar entities
organized primarily for religious
purposes; or
(4) An organization located in a
country other than the United States not
recognized as a Foreign Public Entity.
Foreign public entity means:
(1) A foreign government or foreign
governmental entity;
(2) A public international
organization, which is an organization
entitled to enjoy privileges, exemptions,
and immunities as an international
organization under the International
Organizations Immunities Act (22
U.S.C. 288–288f);
(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.
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,
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reproduction and printing equipment,
and motor vehicles. See also Equipment
and Special Purpose Equipment.
GAAP has the meaning specified in
accounting standards issued by the
Government Accounting Standards
Board (GASB) and the Financial
Accounting Standards Board (FASB).
GAGAS, also known as the Yellow
Book, means generally accepted
government auditing standards issued
by the Comptroller General of the
United States, which are applicable to
financial audits.
Grant agreement means a legal
instrument of financial assistance
between a Federal awarding agency or
pass-through entity and a non-Federal
entity that, consistent with 31 U.S.C.
6302, 6304:
(1) Is used to enter into a relationship
the principal purpose of which is to
transfer anything of value from the
Federal awarding agency or passthrough entity to the non-Federal entity
to carry out a public purpose authorized
by a law of the United States (see 31
U.S.C. 6101(3)); and not to acquire
property or services for the Federal
awarding agency or pass-through
entity’s direct benefit or use;
(2) Is distinguished from a cooperative
agreement in that it does not provide for
substantial involvement between the
Federal awarding agency or passthrough entity and the non-Federal
entity in carrying out the activity
contemplated by the Federal award.
(3) Does not include an agreement
that provides only:
(i) Direct United States Government
cash assistance to an individual;
(ii) A subsidy;
(iii) A loan;
(iv) A loan guarantee; or
(v) Insurance.
Grantee (see Recipient)
HHS awarding agency means any
organization component of HHS that is
authorized to make and administer
awards.
Hospital means a facility licensed as
a hospital under the law of any state or
a facility operated as a hospital by the
United States, a state, or a subdivision
of a state.
Improper payment:
(1) Means any payment that should
not have been made or that was made
in an incorrect amount (including
overpayments and underpayments)
under statutory, contractual,
administrative, or other legally
applicable requirements; and
(b) Includes any payment to an
ineligible party, any payment for an
ineligible good or service, any duplicate
payment, any payment for a good or
service not received (except for such
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payments where authorized by law), any
payment that does not account for credit
for applicable discounts, and any
payment where insufficient or lack of
documentation prevents a reviewer from
discerning whether a payment was
proper.
Indian tribe means any Indian tribe,
band, nation, or other organized group
or community, including any Alaska
Native village or regional or village
corporation as defined in or established
pursuant to the Alaska Native Claims
Settlement Act (43 U.S.C. Chapter 33),
which is recognized as eligible for the
special programs and services provided
by the United States to Indians because
of their status as Indians (25 U.S.C.
450b(e)). See annually published Bureau
of Indian Affairs list of Indian Entities
Recognized and Eligible to Receive
Services.
Indirect (Facilities and
Administration or F&A) costs means
costs incurred for a common or joint
purpose benefitting more than one cost
objective, and not readily assignable to
the cost objectives specifically
benefitted, without effort
disproportionate to the results achieved.
To facilitate equitable distribution of
indirect expenses to the cost objectives
served, it may be necessary to establish
a number of pools of indirect (F&A)
costs. Indirect (F&A) cost pools must be
distributed to benefitted cost objectives
on bases that will produce an equitable
result in consideration of relative
benefits derived.
Indirect cost rate proposal means the
documentation prepared by a nonFederal entity to substantiate its request
for the establishment of an indirect cost
rate as described in Appendix III
through Appendix VII, and Appendix IX
of this part.
Information technology systems
means computing devices, ancillary
equipment, software, firmware, and
similar procedures, services (including
support services), and related resources.
See also Computing devices and
Equipment.
Institution of Higher Education (IHE)
is defined at 20 U.S.C. 1001.
Intangible property means property
having no physical existence, such as
trademarks, copyrights, patents and
patent applications and property, such
as loans, notes and other debt
instruments, lease agreements, stock
and other instruments of property
ownership (whether the property is
tangible or intangible).
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 or final cost
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objectives. See also Cost objective and
Final cost objective.
Internal controls means a process,
implemented by a non-Federal entity,
designed to provide reasonable
assurance regarding the achievement of
objectives in the following categories:
(1) Effectiveness and efficiency of
operations;
(2) Reliability of reporting for internal
and external use; and
(3) Compliance with applicable laws
and regulations.
Internal control over compliance
requirements for Federal awards means
a process implemented by a non-Federal
entity designed to provide reasonable
assurance regarding the achievement of
the following objectives for Federal
awards:
(1) Transactions are properly recorded
and accounted for, in order to:
(i) Permit the preparation of reliable
financial statements and Federal
reports;
(ii) Maintain accountability over
assets; and
(iii) Demonstrate compliance with
Federal statutes, regulations, and the
terms and conditions of the Federal
award;
(2) Transactions are executed in
compliance with:
(i) Federal statutes, regulations, and
the terms and conditions of the Federal
award that could have a direct and
material effect on a Federal program;
and
(ii) Any other Federal statutes and
regulations that are identified in the
Compliance Supplement; and
(3) Funds, property, and other assets
are safeguarded against loss from
unauthorized use or disposition.
Loan means a Federal loan or loan
guarantee received or administered by a
non-Federal entity, except as used in the
definition of Program income.
(1) The term ‘‘direct loan’’ means a
disbursement of funds by the Federal
Government to a non-Federal borrower
under a contract that requires the
repayment of such funds with or
without interest. The term includes the
purchase of, or participation in, a loan
made by another lender and financing
arrangements that defer payment for
more than 90 days, including the sale of
a Federal Government asset on credit
terms. The term does not include the
acquisition of a federally guaranteed
loan in satisfaction of default claims or
the price support loans of the
Commodity Credit Corporation.
(2) The term ‘‘direct loan obligation’’
means a binding agreement by a Federal
awarding agency to make a direct loan
when specified conditions are fulfilled
by the borrower.
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(3) The term ‘‘loan guarantee’’ means
any Federal Government guarantee,
insurance, or other pledge with respect
to the payment of all or a part of the
principal or interest on any debt
obligation of a non-Federal borrower to
a non-Federal lender, but does not
include the insurance of deposits,
shares, or other withdrawable accounts
in financial institutions.
(4) The term ‘‘loan guarantee
commitment’’ means a binding
agreement by a Federal awarding agency
to make a loan guarantee when specified
conditions are fulfilled by the borrower,
the lender, or any other party to the
guarantee agreement.
Local government means any unit of
government within a state, including a:
(1) County;
(2) Borough;
(3) Municipality;
(4) City;
(5) Town;
(6) Township;
(7) Parish;
(8) Local public authority, including
any public housing agency under the
United States Housing Act of 1937;
(9) Special district;
(10) School district;
(11) Intrastate district;
(12) Council of governments, whether
or not incorporated as a nonprofit
corporation under state law; and
(13) Any other agency or
instrumentality of a multi-, regional, or
intra-state or local government.
Major program means a Federal
program determined by the auditor to be
a major program in accordance with
§ 75.518 or a program identified as a
major program by a Federal awarding
agency or pass-through entity in
accordance with § 75.503(e).
Management decision means the
evaluation by the Federal awarding
agency or pass-through entity of the
audit findings and corrective action
plan and the issuance of a written
decision to the auditee as to what
corrective action is necessary.
Micro-purchase means a purchase of
supplies or services using simplified
acquisition procedures, the aggregate
amount of which does not exceed the
micro-purchase threshold. Micropurchase procedures comprise a subset
of a non-Federal entity’s small purchase
procedures. The non-Federal entity uses
such procedures in order to expedite the
completion of its lowest-dollar small
purchase transactions and minimize the
associated administrative burden and
cost. The micro-purchase threshold is
set by the Federal Acquisition
Regulation at 48 CFR Subpart 2.1
(Definitions). It is $3,000 except as
otherwise discussed in Subpart 2.1 of
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that regulation, but this threshold is
periodically adjusted for inflation.
Modified Total Direct Cost (MTDC)
means all direct salaries and wages,
applicable fringe benefits, materials and
supplies, services, travel, and up to the
first $25,000 of each subaward
(regardless of the period of performance
of the subawards under the award).
MTDC excludes equipment, capital
expenditures, charges for patient care,
rental costs, tuition remission,
scholarships and fellowships,
participant support costs and the
portion of each subaward in excess of
$25,000. Other items may only be
excluded when necessary to avoid a
serious inequity in the distribution of
indirect costs, and with the approval of
the cognizant agency for indirect costs.
Non-Federal entity means a state,
local government, Indian tribe,
institution of higher education (IHE), or
nonprofit organization that carries out a
Federal award as a recipient or
subrecipient.
Nonprofit organization means any
corporation, trust, association,
cooperative, or other organization, not
including IHEs, that:
(1) Is operated primarily for scientific,
educational, service, charitable, or
similar purposes in the public interest;
(2) Is not organized primarily for
profit; and
(3) Uses net proceeds to maintain,
improve, or expand the operations of
the organization.
Obligations means orders placed for
property and services, contracts and
subawards made, and similar
transactions during a given period that
require payment by the non-Federal
entity during the same or a future
period.
Office of Management and Budget
(OMB) means the Executive Office of
the President, Office of Management
and Budget.
Oversight agency for audit means the
Federal awarding agency that provides
the predominant amount of funding
directly to a non-Federal entity not
assigned a cognizant agency for audit.
When there is no direct funding, the
Federal awarding agency which is the
predominant source of pass-through
funding must assume the oversight
responsibilities. The duties of the
oversight agency for audit and the
process for any reassignments are
described in § 75.513(b).
Participant support costs means direct
costs for items such as stipends or
subsistence allowances, travel
allowances, and registration fees paid to
or on behalf of participants or trainees
(but not employees) in connection with
conferences, or training projects.
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Pass-through entity means a nonFederal entity that provides a subaward
to a subrecipient to carry out part of a
Federal program.
Performance goal means a target level
of performance expressed as a tangible,
measurable objective, against which
actual achievement can be compared,
including a goal expressed as a
quantitative standard, value, or rate. In
some instances (e.g., discretionary
research awards), this may be limited to
the requirement to submit technical
performance reports (to be evaluated in
accordance with agency policy).
Period of performance means the time
during which the non-Federal entity
may incur new obligations to carry out
the work authorized under the Federal
award. The Federal awarding agency or
pass-through entity must include start
and end dates of the period of
performance in the Federal award (see
§§ 75.210(a)(5) and 75.352(a)(1)(v)).
Personal property means property of
any kind except real property. It may be
tangible, having physical existence, or
intangible, such as copyrights, patents,
or securities.
Personally Identifiable Information
(PII) means information that can be used
to distinguish or trace an individual’s
identity, either alone or when combined
with other personal or identifying
information that is linked or linkable to
a specific individual. Some information
that is considered to be PII is available
in public sources such as telephone
books, public Web sites, and university
listings. This type of information is
considered to be Public PII and
includes, for example, first and last
name, address, work telephone number,
email address, home telephone number,
and general educational credentials. The
definition of PII is not anchored to any
single category of information or
technology. Rather, it requires a case-bycase assessment of the specific risk that
an individual can be identified. Non-PII
can become PII whenever additional
information is made publicly available,
in any medium and from any source,
that, when combined with other
available information, could be used to
identify an individual.
Principal Investigator/Program
Director (PI/PD) means the individual
(s) designated by the recipient to direct
the project or program being supported
by the grant. The PI/PD is responsible
and accountable to officials of the
recipient organization for the proper
conduct of the project, program, or
activity.
Prior approval means written
approval by an authorized HHS official
evidencing prior consent before a
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recipient undertakes certain activities or
incurs specific costs.
Program income means gross income
earned by the non-Federal entity that is
directly generated by a supported
activity or earned as a result of the
Federal award during the period of
performance except as provided in
§ 75.307(f). (See Period of performance.)
Program income includes but is not
limited to income from fees for services
performed, the use or rental or real or
personal property acquired under
Federal awards, the sale of commodities
or items fabricated under a Federal
award, license fees and royalties on
patents and copyrights, and principal
and interest on loans made with Federal
award funds. Interest earned on
advances of Federal funds is not
program income. Except as otherwise
provided in Federal statutes,
regulations, or the terms and conditions
of the Federal award, program income
does not include rebates, credits,
discounts, and interest earned on any of
them. See also § 75.307, § 75.407 and 35
U.S.C. 200–212 (applies to inventions
made under Federal awards).
Project costs means total allowable
costs incurred under a Federal award
and all required cost sharing and
voluntary committed cost sharing,
including third-party contributions.
Project period (see Period of
performance).
Property means real property or
personal property.
Protected Personally Identifiable
Information (Protected PII) Protected PII
means an individual’s first name or first
initial and last name in combination
with any one or more of types of
information, including, but not limited
to, social security number, passport
number, credit card numbers,
clearances, bank numbers, biometrics,
date and place of birth, mother’s maiden
name, criminal, medical and financial
records, educational transcripts. This
does not include PII that is required by
law to be disclosed. (See also Personally
Identifiable Information (PII)).
Questioned cost means a cost that is
questioned by the auditor because of an
audit finding:
(1) Which resulted from a violation or
possible violation of a statute,
regulation, or the terms and conditions
of a Federal award, including for funds
used to match Federal funds;
(2) Where the costs, at the time of the
audit, are not supported by adequate
documentation; or
(3) Where the costs incurred appear
unreasonable and do not reflect the
actions a prudent person would take in
the circumstances.
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Real property means land, including
land improvements, structures and
appurtenances thereto, but excludes
moveable machinery and equipment.
Recipient means an entity, usually but
not limited to non-Federal entities, that
receives a Federal award directly from
a Federal awarding agency to carry out
an activity under a Federal program.
The term recipient does not include
subrecipients. See also Non-Federal
entity.
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.
Research and Development (R&D)
means all research activities, both basic
and applied, and all development
activities that are performed by HHS
award recipients. 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.
Simplified acquisition threshold
means the dollar amount below which
a non-Federal entity may purchase
property or services using small
purchase methods. Non-Federal entities
adopt small purchase procedures in
order to expedite the purchase of items
costing less than the simplified
acquisition threshold. The simplified
acquisition threshold is set by the
Federal Acquisition Regulation at 48
CFR Subpart 2.1 and in accordance with
41 U.S.C. 1908. See also Micro-purchase
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. See
also Equipment and General purpose
equipment.
State means any state of the United
States, the District of Columbia, the
Commonwealth of Puerto Rico, the U.S.
Virgin Islands, Guam, American Samoa,
the Commonwealth of the Northern
Mariana Islands, and any agency or
instrumentality thereof exclusive of
local governments.
Student Financial Aid (SFA) means
Federal awards under those programs of
general student assistance, such as those
authorized by Title IV of the Higher
Education Act of 1965, as amended, (20
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U.S.C. 1070–1099d), which are
administered by the U.S. Department of
Education, and similar programs
provided by other Federal agencies. It
does not include Federal awards under
programs that provide fellowships or
similar Federal awards to students on a
competitive basis, or for specified
studies or research.
Subaward means an award provided
by a pass-through entity to a
subrecipient for the subrecipient to
carry out part of a Federal award
received by the pass-through entity. It
does not include payments to a
contractor or payments to an individual
that is a beneficiary of a Federal
program. A subaward may be provided
through any form of legal agreement,
including an agreement that the passthrough entity considers a contract.
Subrecipient means a non-Federal
entity that receives a subaward from a
pass-through entity to carry out part of
a Federal program; but does not include
an individual that is a beneficiary of
such program. A subrecipient may also
be a recipient of other Federal awards
directly from a Federal awarding
agency.
Supplies means all tangible personal
property other than those described in
Equipment. A computing device is a
supply if the acquisition cost is less
than the lesser of the capitalization level
established by the non-Federal entity for
financial statement purposes or $5,000,
regardless of the length of its useful life.
See also Computing devices and
Equipment.
Surplus property (see Excess property)
Suspension of award activities means
an action by the HHS awarding agency
requiring the recipient to cease all
activities on the award pending
corrective action by the recipient. It is
a separate action from suspension under
HHS regulations (2 CFR part 376)
implementing Executive Orders 12549
and 12689.
Termination means the ending of a
Federal award, in whole or in part at
any time prior to the planned end of
period of performance.
Third-party in-kind contributions
means the value of non-cash
contributions (i.e., property or services)
that:
(1) Benefit a federally assisted project
or program; and
(2) Are contributed by non-Federal
third parties, without charge, to a nonFederal entity under a Federal award.
Total Costs (see § 75.402).
Unliquidated obligations means, for
financial reports prepared on a cash
basis, obligations incurred by the nonFederal entity that have not been paid
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(liquidated). For reports prepared on an
accrual expenditure basis, these are
obligations incurred by the non-Federal
entity for which an expenditure has not
been recorded.
Unobligated balance means the
amount of funds authorized under a
Federal award that the non-Federal
entity has not obligated. The amount is
computed by subtracting the cumulative
amount of the non-Federal entity’s
unliquidated obligations and
expenditures of funds under the Federal
award from the cumulative amount of
the funds that the Federal awarding
agency or pass-through entity
authorized the non-Federal entity to
obligate.
Voluntary committed cost sharing
means cost sharing specifically pledged
on a voluntary basis in the proposal’s
budget or the Federal award on the part
of the non-Federal entity and that
becomes a binding requirement of
Federal award.
Subpart B—General Provisions
§ 75.100
Purpose.
(a)(1) This part establishes uniform
administrative requirements, cost
principles, and audit requirements for
Federal awards to non-Federal entities,
as described in § 75.101. HHS awarding
agencies must not impose additional or
inconsistent requirements, except as
provided in §§ 75.102 and 75.210, or
unless specifically required by Federal
statute, regulation, or Executive Order.
(2) This part provides the basis for a
systematic and periodic collection and
uniform submission by Federal agencies
of information on all Federal financial
assistance programs to the Office of
Management and Budget (OMB). It also
establishes Federal policies related to
the delivery of this information to the
public, including through the use of
electronic media. It prescribes the
manner in which General Services
Administration (GSA), OMB, and
Federal agencies that administer Federal
financial assistance programs are to
carry out their statutory responsibilities
under the Federal Program Information
Act (31 U.S.C. 6101–6106).
(b) Administrative requirements.
Subparts B through D of this part set
forth the uniform administrative
requirements for grant and cooperative
agreements, including the requirements
for HHS awarding agency management
of Federal grant programs before the
Federal award has been made, and the
requirements HHS awarding agencies
may impose on non-Federal entities in
the Federal award.
(c) Cost Principles. Subpart E of this
part establishes principles for
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determining the allowable costs
incurred by non-Federal entities under
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 Government 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 statute.
(d) Single Audit Requirements and
Audit Follow-up. Subpart F of this part
is issued pursuant to the Single Audit
Act Amendments of 1996, (31 U.S.C.
7501–7507). It sets forth standards for
obtaining consistency and uniformity
among Federal agencies for the audit of
non-Federal entities expending Federal
awards. These provisions also provide
the policies and procedures for HHS
awarding agencies and pass-through
entities when using the results of these
audits.
(e) For OMB guidance to Federal
awarding agencies on Challenges and
Prizes, please see M–10–11 Guidance on
the Use of Challenges and Prizes to
Promote Open Government, issued
March 8, 2010, or its successor.
§ 75.101
Applicability.
(a) General applicability to Federal
agencies. The requirements established
in this part apply to Federal agencies
that make Federal awards to nonFederal entities. These requirements are
applicable to all costs related to Federal
awards.
(b)(1) Applicability to different types
of Federal awards. The following table
describes what portions of this part
apply to which types of Federal awards.
The terms and conditions of Federalawards (including this part) flow down
to subawards to subrecipients unless a
particular section of this part or the
terms and conditions of the Federal
award specifically indicate otherwise.
This means that non-Federal entities
must comply with requirements in this
part regardless of whether the nonFederal entity is a recipient or
subrecipient of a Federal award. Passthrough entities must comply with the
requirements described in Subpart D of
this part, §§ 75.351 through 75.353, but
not any requirements in this part
directed towards Federal awarding
agencies unless the requirements of this
part or the terms and conditions of the
Federal award indicate otherwise.
This table must be read along with the
other provisions in this section
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The following portions of the
Part:
Are applicable to the following types of Federal Awards
(except as noted in paragraphs (d) and (e)) below:
Subpart A—Acronyms and
Definitions.
Subpart B—General Provisions, except for
§§ 75.111, 75.112. and
75.113..
Sections 75.111, 75.112,
and 75.113.
—All .................................................................................
Subparts C–D, except for
Subrecipient Monitoring
and Management.
—Grant agreements and cooperative agreements ........
Subpart D—Post Federal
Award Requirements,
Subrecipient Monitoring
and Management.
Subpart E—Cost Principles
—All .................................................................................
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Subpart F—Audit Requirements.
—All .................................................................................
—Grant agreements and cooperative agreements ........
—Grant agreements and cooperative agreements, except those providing food commodities.
—Cost-reimbursement contracts awarded under the
Federal Acquisition Regulations and cost-reimbursement and subcontracts under these contracts in accordance with the FAR.
—Fixed-price contracts and subcontracts awarded
under the Federal Acquisition Regulation whenever
cost analysis is performed or the contract requires
the determination or negotiation of costs.
—All .................................................................................
(2) Federal award of costreimbursement contract under the FAR
to a non-Federal entity. When a nonFederal entity is awarded a costreimbursement contract, only Subpart D
of this part, §§ 75.351 through 75.353 (in
addition to any FAR related
requirements for monitoring Subpart E
of this part and Subpart F of this part
are incorporated by reference into the
contract. However, when the Cost
Accounting Standards (CAS) are
applicable to the contract, they take
precedence over the requirements of
this part except for Subpart F of this
part when they are in conflict. In
addition, costs that are made
unallowable under 10 U.S.C. 2324(e)
and 41 U.S.C. 4304(a) as described in
the FAR subpart 31.2 and subpart
31.603 are always unallowable. For
requirements other than those covered
in Subpart D of this part, §§ 75.351
through 75.353, Subpart E of this partand Subpart F of this part, the terms of
the contract and the FAR apply.
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Are NOT applicable to the following types of Federal
Awards:
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—Agreements for: loans, loan guarantees, interest subsidies and insurance
—Cost-reimbursement contracts awarded under the
Federal Acquisition Regulations and cost-reimbursement and subcontracts under these contracts
—Fixed-price contracts and subcontracts awarded
under the Federal Acquisition Regulation whenever
cost analysis is performed or the contract requires
the determination or negotiation of costs
—Agreements for: loans, loan guarantees, interest subsidies and insurance
—Cost-reimbursement contracts awarded under the
Federal Acquisition Regulations and cost-reimbursement and subcontracts under these contracts
—Fixed-price contracts and subcontracts awarded
under the Federal Acquisition Regulation whenever
cost analysis is performed or the contract requires
the determination or negotiation of costs
—Grant agreements and cooperative agreements providing food commodities
—Fixed amount awards
—Agreements for: loans, loan guarantees, interest subsidies and insurance
—Federal awards to hospitals (See Appendix IX)
(3) With the exception of Subpart F of
this part, which is required by the
Single Audit Act, in any circumstances
where the provisions of Federal statutes
or regulations differ from the provisions
of this part, the provision of the Federal
statutes or regulations govern. This
includes, for agreements with Indian
tribes, the provisions of the Indian SelfDetermination and Education and
Assistance Act (ISDEAA), as amended,
25 U.S.C. 450–458ddd–2.
(c) HHS awarding agencies may apply
subparts A through E of this part to
Federal agencies (see § 75.215), forprofit entities, foreign public entities, or
foreign organizations, except where the
HHS awarding agency determines that
the application of these subparts would
be inconsistent with the international
obligations of the United States or the
statutes or regulations of a foreign
government.
(d) Except for § 75.202 and §§ 75.351
through 75.353 of Subpart D of this part,
the requirements in Subpart C of this
part, Subpart D of this part, and Subpart
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E of this part do not apply to the
following programs:
(1) The block grant awards authorized
by the Omnibus Budget Reconciliation
Act of 1981 (including Community
Services, except to the extent that the
cost and accounting standards of OMB
apply to subrecipients of Community
Services Block Grant funds pursuant to
42 U.S.C. 9916(a)(1)(B); Preventive
Health and Health Services; Alcohol,
Drug Abuse, and Mental Health
Services; Maternal and Child Health
Services; Social Services; Low-Income
Home Energy Assistance; States’
Program of Community Development
Block Grant Awards for Small Cities;
and Elementary and Secondary
Education other than programs
administered by the Secretary of
Education under title V, subtitle D,
chapter 2, section 583—the Secretary’s
discretionary award program) and both
the Alcohol and Drug Abuse Treatment
and Rehabilitation Block Grant Award
(42 U.S.C. 300x–21 to 300x–35 and 42
U.S.C. 300x–51 to 300x64) and the
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Mental Health Service for the Homeless
Block Grant Award (42 U.S.C. 300x to
300x–9) under the Public Health Service
Act.
(2) Federal awards to local education
agencies under 20 U.S.C. 7702–7703b,
(portions of the Impact Aid program);
(3) Payments under the Department of
Veterans Affairs’ State Home Per Diem
Program (38 U.S.C. 1741); and
(4) Federal awards authorized under
the Child Care and Development Block
Grant Act of 1990, as amended:
(i) Child Care and Development Block
Grant (42 U.S.C. 9858)
(ii) Child Care Mandatory and
Matching Funds of the Child Care and
Development Fund (42 U.S.C. 9858)
(e) Except for § 75.202, the guidance
in Subpart C of this part does not apply
to the following programs:
(1) Federal awards to carry out the
following programs of the Social
Security Act:
(i) Temporary Assistance for Needy
Families (title IV–A of the Social
Security Act, 42 U.S.C. 601–619);
(ii) Child Support Enforcement and
Establishment of Paternity (title IV–D of
the Social Security Act, 42 U.S.C. 651–
669b);
(iii) Foster Care and Adoption
Assistance (title IV–E of the Act, 42
U.S.C. 670–679c);
(iv) Aid to the Aged, Blind, and
Disabled (titles I, X, XIV, and XVI–
AABD of the Act, as amended);
(v) Medical Assistance (Medicaid)
(title XIX of the Act, 42 U.S.C. 1396–
1396w–5) not including the State
Medicaid Fraud Control program
authorized by § 1903(a)(6)(B) of the
Social Security Act (42 U.S.C.
1396b(a)(6)(B)); and
(vi) Children’s Health Insurance
Program (title XXI of the Act, 42 U.S.C.
1397aa–1397mm).
(2) A Federal award for an
experimental, pilot, or demonstration
project that is also supported by a
Federal award listed in paragraph (e)(1)
of this section;
(3) Federal awards under subsection
412(e) of the Immigration and
Nationality Act and subsection 501(a) of
the Refugee Education Assistance Act of
1980 (Pub. L. 96–422, 94 Stat. 1809), for
cash assistance, medical assistance, and
supplemental security income benefits
to refugees and entrants and the
administrative costs of providing the
assistance and benefits (8 U.S.C.
1522(e));
(4) Entitlement awards under the
following programs of The National
School Lunch Act:
(i) National School Lunch Program
(section 4 of the Act, 42 U.S.C. 1753),
(ii) Commodity Assistance (section 6
of the Act, 42 U.S.C. 1755),
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(iii) Special Meal Assistance (section
11 of the Act, 42 U.S.C. 1759a),
(iv) Summer Food Service Program for
Children (section 13 of the Act, 42
U.S.C. 1761), and
(v) Child and Adult Care Food
Program (section 17 of the Act, 42
U.S.C. 1766).
(5) Entitlement awards under the
following programs of The Child
Nutrition Act of 1966:
(i) Special Milk Program (section 3 of
the Act, 42 U.S.C. 1772),
(ii) School Breakfast Program (section
4 of the Act, 42 U.S.C. 1773), and
(iii) State Administrative Expenses
(section 7 of the Act, 42 U.S.C. 1776).
(6) Entitlement awards for State
Administrative Expenses under The
Food and Nutrition Act of 2008 (section
16 of the Act, 7 U.S.C. 2025).
(7) Non-discretionary Federal awards
under the following non-entitlement
programs:
(i) Special Supplemental Nutrition
Program for Women, Infants and
Children (section 17 of the Child
Nutrition Act of 1966) 42 U.S.C. 1786;
(ii) The Emergency Food Assistance
Programs (Emergency Food Assistance
Act of 1983) 7 U.S.C. 7501 note; and
(iii) Commodity Supplemental Food
Program (section 5 of the Agriculture
and Consumer Protection Act of 1973) 7
U.S.C. 612c note.
§ 75.102
Exceptions.
(a) With the exception of Subpart F of
this part, OMB may allow exceptions for
classes of Federal awards or non-Federal
entities 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 will be permitted only in unusual
circumstances. Exceptions for classes of
Federal awards or non-Federal entities
will be published on the OMB Web site
at www.whitehouse.gov/omb.
(b) Exceptions on a case-by-case basis
for individual non-Federal entities may
be authorized by the HHS awarding
agency or cognizant agency for indirect
costs except where otherwise required
by law or where OMB or other approval
is expressly required by this part. No
case-by-case exceptions may be granted
to the provisions of Subpart F of this
part.
(c) The HHS awarding agency may
apply more restrictive requirements to a
class of Federal awards or non-Federal
entities when approved by OMB, or
when required by Federal statutes or
regulations, except for the requirements
in Subpart F of this part. An HHS
awarding agency may apply less
restrictive requirements when making
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fixed amount awards as defined in
Subpart A of this part, except for those
requirements imposed by statute or in
Subpart F of this part.
(d) On a case-by-case basis, OMB will
approve new strategies for Federal
awards when proposed by the HHS
awarding agency in accordance with
OMB guidance (such as M–13–17) to
develop additional evidence relevant to
addressing important policy challenges
or to promote cost-effectiveness in and
across Federal programs. Proposals may
draw on the innovative program designs
discussed in M–13–17 to expand or
improve the use of effective practices in
delivering Federal financial assistance
while also encouraging innovation in
service delivery. Proposals submitted to
OMB in accordance with M–13–17 may
include requests to waive requirements
other than those in Subpart F of this
part.
§ 75.103
Authorities.
This part is issued under the
following authorities.
(a) Subpart B of this part through
Subpart D of this part are authorized
under 31 U.S.C. 503 (the Chief Financial
Officers Act, Functions of the Deputy
Director for Management), 31 U.S.C.
1111 (Improving Economy and
Efficiency of the United States
Government), 41 U.S.C. 1101–1131 (the
Office of Federal Procurement Policy
Act), Reorganization Plan No. 2 of 1970,
and Executive Order 11541, the Single
Audit Act Amendments of 1996, (31
U.S.C. 7501–7507), as well as The
Federal Program Information Act
(Public Law 95–220 and Public Law 98–
169, as amended, codified at 31 U.S.C.
6101–6106).
(b) Subpart E of this part is authorized
under the Budget and Accounting Act of
1921, as amended; the Budget and
Accounting Procedures Act of 1950, as
amended (31 U.S.C. 1101–1125); the
Chief Financial Officers Act of 1990 (31
U.S.C. 503–504); Reorganization Plan
No. 2 of 1970; and Executive Order No.
11541.
(c) Subpart F of this part is authorized
under the Single Audit Act
Amendments of 1996, (31 U.S.C. 7501–
7507).
§ 75.104
Supersession.
As described in § 75.110, this part
supersedes:
(a) The following OMB guidance
documents and regulations under Title
2 of the Code of Federal Regulations:
(1) A–21, ‘‘Cost Principles for
Educational Institutions’’ (2 CFR part
220);
(2) A–87, ‘‘Cost Principles for State,
Local and Indian Tribal Governments’’
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(2 CFR part 225) and also Federal
Register notice 51 FR 552 (January 6,
1986);
(3) A–89, ‘‘Federal Domestic
Assistance Program Information’’;
(4) A–102, ‘‘Grant Awards and
Cooperative Agreements with State and
Local Governments’’;
(5) A–110, ‘‘Uniform Administrative
Requirements for Awards and Other
Agreements with Institutions of Higher
Education, Hospitals, and Other
Nonprofit Organizations’’ (codified at 2
CFR 215);
(6) A–122, ‘‘Cost Principles for NonProfit Organizations’’ (2 CFR part 230);
(7) A–133, ‘‘Audits of States, Local
Governments and Non-Profit
Organizations, and
(8) Those sections of A–50 related to
audits performed under Subpart F of
this part.
(b) This part also supersedes HHS’
regulations at 45 CFR parts 74 and 92.
§ 75.105
Effect on other issuances.
For Federal awards subject to this
part, all administrative requirements,
program manuals, handbooks and other
non-regulatory materials that are
inconsistent with the requirements of
this part are superseded upon
implementation of this part by the HHS
awarding agency, except to the extent
they are required by statute or
authorized in accordance with the
provisions in § 75.102.
§ 75.106
Agency implementation.
HHS is implementing the language in
2 CFR part 200 in these codified
regulations.
§ 75.107
OMB responsibilities.
OMB will review HHS agency
regulations and implementation of 2
CFR part 200, and will provide
interpretations of policy requirements
and assistance to ensure 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.
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§ 75.108
Inquiries.
Inquiries concerning 2 CFR part 200
may be directed to the Office of Federal
Financial Management, Office of
Management and Budget, in
Washington, DC. Inquiries concerning
45 CFR part 75 should be addressed to
the HHS awarding agency, cognizant
agency for indirect costs, cognizant or
oversight agency for audit, or passthrough entity as appropriate.
§ 75.109
Review date.
OMB will review 2 CFR part 200 and
HHS will review 45 Part 75 at least
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every five years after December 26,
2013.
§ 75.110
Effective/Applicability date.
(a) The standards set forth in this part
which affect administration of Federal
awards issued by Federal agencies
become effective December 26, 2014.
For the procurement standards in 2 CFR
200.317–200.326, non-Federal entities
previously subject to OMB Circular A–
110 may continue to comply with the
procurement standards in previous
OMB guidance (superseded by this part
as described in 2 CFR 200.104) for one
additional fiscal year after this part goes
into effect. If an entity chooses to
remain with the previous procurement
standards for an additional fiscal year
before adopting the procurement
standards in this part, they must
document this decision in their internal
procurement policies, in accordance
with the guidance in Appendix XI to
this part.
(b) The standards set forth in Subpart
F of this part and any other standards
which apply directly to HHS agencies
will be effective December 26, 2013, and
will apply to audits of fiscal years
beginning on or after December 26,
2014.
§ 75.111
English language.
(a) All Federal financial assistance
announcements and Federal award
information must be in the English
language. Applications must be
submitted in the English language and
must be in the terms of U.S. dollars. If
the HHS awarding agency receives
applications in another currency, the
HHS awarding agency will evaluate the
application by converting the foreign
currency to United States currency
using the date specified for receipt of
the application.
(b) Non-Federal entities may translate
the Federal award and other documents
into another language. In the event of
inconsistency between any terms and
conditions of the Federal award and any
translation into another language, the
English language meaning will control.
Where a significant portion of the nonFederal entity’s employees who are
working on the Federal award are not
fluent in English, the non-Federal entity
must provide the Federal award in
English and the language(s) with which
employees are more familiar.
§ 75.112
Conflict of interest.
(a) HHS awarding agencies must
establish conflict of interest policies for
Federal awards. The non-Federal entity
must disclose in writing any potential
conflict of interest to the respective HHS
awarding agency or pass-through entity
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in accordance with applicable HHS
awarding agency’s policy. As a general
matter, HHS awarding agencies’ conflict
of interest policies must:
(1) Address conditions under which
outside activities, relationships, or
financial interests are proper or
improper;
(2) Provide for advance notification of
outside activities, relationships, or
financial interests, and a process of
review as appropriate; and
(3) Outline how financial conflicts of
interest may be addressed.
(b) Agencies with Public Health
Service (PHS) funded research will
ensure that any conflict of interest
policies are aligned with the
requirements of 42 CFR part 50, subpart
F.
§ 75.113
Mandatory disclosures.
The non-Federal entity or applicant
for a Federal award must disclose, in a
timely manner, in writing to the HHS
awarding agency or pass-through entity
all violations of Federal criminal law
involving fraud, bribery, or gratuity
violations potentially affecting the
Federal award. Failure to make required
disclosures can result in any of the
remedies described in § 75.371,
including suspension or debarment.
(See also 2 CFR parts 180 and 376, and
31 U.S.C. 3321).
Subpart C—Pre-Federal Award
Requirements and Contents of Federal
Awards
§ 75.200
Purpose.
(a) Sections 75.201 through 75.208
prescribe instructions and other preaward matters to be used in the
announcement and application process.
(b) Use of §§ 75.203, 75.204, 75.205,
and 75.207, is required only for
competitive Federal awards, but may
also be used by the HHS awarding
agency for non-competitive awards
where appropriate or where required by
Federal statute.
§ 75.201 Use of grant agreements
(including fixed amount awards),
cooperative agreements, and contracts.
(a) The HHS awarding agency or passthrough entity must decide on the
appropriate instrument for the Federal
award (i.e., grant agreement, cooperative
agreement, or contract) in accordance
with the Federal Grant and Cooperative
Agreement Act (31 U.S.C. 6301–08).
(b) Fixed Amount Awards. In addition
to the options described in paragraph (a)
of this section, HHS awarding agencies,
or pass-through entities as permitted in
§ 75.353, may use fixed amount awards
(see § 75.2 Fixed amount awards) to
which the following conditions apply:
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(1) The Federal award amount is
negotiated using the cost principles (or
other pricing information) as a guide.
The HHS awarding agency or passthrough entity may use fixed amount
awards if the project scope is specific
and if adequate cost, historical, or unit
pricing data is available to establish a
fixed amount award based on a
reasonable estimate of actual cost.
Payments are based on meeting specific
requirements of the Federal award.
Accountability is based on performance
and results. Except in the case of
termination before completion of the
Federal award, there is no governmental
review of the actual costs incurred by
the non-Federal entity in performance of
the award. Some of the ways in which
the Federal award may be paid include,
but are not limited to:
(i) In several partial payments, the
amount of each agreed upon in advance,
and the ‘‘milestone’’ or event triggering
the payment also agreed upon in
advance, and set forth in the Federal
award;
(ii) On a unit price basis, for a defined
unit or units, at a defined price or
prices, agreed to in advance of
performance of the Federal award and
set forth in the Federal award; or,
(iii) In one payment at Federal award
completion.
(2) A fixed amount award cannot be
used in programs which require
mandatory cost sharing or match.
(3) The non-Federal entity must
certify in writing to the HHS awarding
agency or pass-through entity at the end
of the Federal award that the project or
activity was completed or the level of
effort was expended. If the required
level of activity or effort was not carried
out, the amount of the Federal award
must be adjusted.
(4) Periodic reports may be
established for each Federal award.
(5) Changes in principal investigator,
project leader, project partner, or scope
of effort must receive the prior written
approval of the HHS awarding agency or
pass-through entity.
tkelley on DSK3SPTVN1PROD with RULES2
§ 75.202 Requirement to provide public
notice of Federal financial assistance
programs.
(a) The HHS awarding agency must
notify the public of Federal programs in
the Catalog of Federal Domestic
Assistance (CFDA), maintained by the
General Services Administration (GSA).
(1) The CFDA, or any OMBdesignated replacement, is the single,
authoritative, government-wide
comprehensive source of Federal
financial assistance program
information produced by the executive
branch of the Federal Government.
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(2) The information that the HHS
awarding agency must submit to GSA
for approval by OMB is listed in
paragraph (b) of this section. GSA must
prescribe the format for the submission.
(3) The HHS awarding agency may
not award Federal financial assistance
without assigning it to a program that
has been included in the CFDA as
required in this section unless there are
exigent circumstances requiring
otherwise, such as timing requirements
imposed by statute.
(b) For each program that awards
discretionary Federal awards, nondiscretionary Federal awards, loans,
insurance, or any other type of Federal
financial assistance, the HHS awarding
agency must submit the following
information to GSA:
(1) Program Description, Purpose,
Goals and Measurement. A brief
summary of the statutory or regulatory
requirements of the program and its
intended outcome. Where appropriate,
the Program Description, Purpose,
Goals, and Measurement should align
with the strategic goals and objectives
within the HHS awarding agency’s
performance plan and should support
the HHS awarding agency’s performance
measurement, management, and
reporting as required by Part 6 of OMB
Circular A–11;
(2) Identification of whether the
program makes Federal awards on a
discretionary basis or the Federal
awards are prescribed by Federal
statute, such as in the case of formula
grants.
(3) Projected total amount of funds
available for the program. Estimates
based on previous year funding are
acceptable if current appropriations are
not available at the time of the
submission;
(4) Anticipated Source of Available
Funds: The statutory authority for
funding the program and, to the extent
possible, agency, sub-agency, or, if
known, the specific program unit that
will issue the Federal awards, and
associated funding identifier (e.g.,
Treasury Account Symbol(s));
(5) General Eligibility Requirements:
The statutory, regulatory or other
eligibility factors or considerations that
determine the applicant’s qualification
for Federal awards under the program
(e.g., type of non-Federal entity); and
(6) Applicability of Single Audit
Requirements as required by Subpart F
of this part.
§ 75.203
Notices of funding opportunities.
For competitive grants and
cooperative agreements, the HHS
awarding agency must announce
specific funding opportunities by
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providing the following information in
a public notice:
(a) Summary Information in Notices
of Funding Opportunities. The HHS
awarding agency must display the
following information posted on the
OMB-designated government-wide Web
site for finding and applying for Federal
financial assistance, in a location
preceding the full text of the
announcement:
(1) HHS Awarding Agency Name;
(2) Funding Opportunity Title;
(3) Announcement Type (whether the
funding opportunity is the initial
announcement of this funding
opportunity or a modification of a
previously announced opportunity);
(4) Funding Opportunity Number
(required, if applicable). If the HHS
awarding agency has assigned or will
assign a number to the funding
opportunity announcement, this
number must be provided;
(5) Catalog of Federal Domestic
Assistance (CFDA) Number(s);
(6) Key Dates. Key dates include due
dates for applications or Executive
Order 12372 submissions, as well as for
any letters of intent or pre-applications.
For any announcement issued before a
program’s application materials are
available, key dates also include the
date on which those materials will be
released; and any other additional
information, as deemed applicable by
the relevant HHS awarding agency.
(b) The HHS awarding agency must
generally make all funding
opportunities available for application
for at least 60 calendar days. The HHS
awarding agency may make a
determination to have a less than 60
calendar day availability period but no
funding opportunity should be available
for less than 30 calendar days unless
exigent circumstances require as
determined by the HHS awarding
agency head or delegate.
(c) Full Text of Funding
Opportunities. The HHS awarding
agency must include the following
information in the full text of each
funding opportunity. For specific
instructions on the content required in
this section, refer to Appendix I of this
part.
(1) Full programmatic description of
the funding opportunity.
(2) Federal award information,
including sufficient information to help
an applicant make an informed decision
about whether to submit an application.
(See also § 75.414(c)(4)).
(3) Specific eligibility information,
including any factors or priorities that
affect an applicant’s or its application’s
eligibility for selection.
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(4) Application Preparation and
Submission Information, including the
applicable submission dates and time.
(5) Application Review Information
including the criteria and process to be
used to evaluate applications. See also
§§ 75.204 and 75.205. See also 2 CFR
part 27 (forthcoming at time of
publication).
(6) Federal Award Administration
Information. See also § 75.210.
§ 75.204 HHS funding agency review of
merit of proposals.
For competitive grants or cooperative
agreements, unless prohibited by
Federal statute, the HHS awarding
agency must design and execute a merit
review process for applications. This
process must be described or
incorporated by reference in the
applicable funding opportunity (see
Appendix I to this part.) See also
§ 75.203.
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§ 75.205 HHS awarding agency review of
risk posed by applicants.
(a) Prior to making a Federal award,
the HHS awarding agency is required by
31 U.S.C. 3321 and 41 U.S.C. 2313 note
to review information available through
any OMB-designated repositories of
government-wide eligibility
qualification or financial integrity
information, such as SAM Exclusions,
and ‘‘Do Not Pay.’’ See also suspension
and debarment requirements at 2 CFR
part 180 as well as HHS suspension and
debarment regulations at 2 CFR part
376.
(b) In addition, for competitive grants
or cooperative agreements, the HHS
awarding agency must have in place a
framework for evaluating the risks
posed by applicants before they receive
Federal awards. This evaluation may
incorporate results of the evaluation of
the applicant’s eligibility or the quality
of its application. If the HHS awarding
agency determines that a Federal award
will be made, special conditions that
correspond to the degree of risk assessed
may be applied to the Federal award.
Criteria to be evaluated must be
described in the announcement of
funding opportunity described in
§ 75.203.
(c) In evaluating risks posed by
applicants, the HHS awarding agency
may use a risk-based approach and may
consider any items such as the
following:
(1) Financial stability;
(2) Quality of management systems
and ability to meet the management
standards prescribed in this part;
(3) History of performance. The
applicant’s record in managing Federal
awards, if it is a prior recipient of
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Federal awards, including timeliness of
compliance with applicable reporting
requirements, conformance to the terms
and conditions of previous Federal
awards, and if applicable, the extent to
which any previously awarded amounts
will be expended prior to future awards;
(4) Reports and findings from audits
performed under Subpart F of this part
or the reports and findings of any other
available audits; and
(5) The applicant’s ability to
effectively implement statutory,
regulatory, or other requirements
imposed on non-Federal entities.
(d) In addition to this review, the HHS
awarding agency must comply with the
guidelines on government-wide
suspension and debarment in 2 CFR
part 180, and must require non-Federal
entities to comply with these
provisions. These provisions restrict
Federal awards, subawards and
contracts with certain parties that are
debarred, suspended or otherwise
excluded from or ineligible for
participation in Federal programs or
activities.
§ 75.206 Standard application
requirements, including forms for applying
for HHS financial assistance, and state
plans.
(a) Paperwork clearances. The HHS
awarding agency may only use
application information collections
approved by OMB under the Paperwork
Reduction Act of 1995 and OMB’s
implementing regulations in 5 CFR part
1320. Consistent with these
requirements, OMB will authorize
additional information collections only
on a limited basis.
(b) If applicable, the HHS awarding
agency may inform applicants and
recipients that they do not need to
provide certain information otherwise
required by the relevant information
collection.
(c) Forms for applying for HHS
financial assistance. HHS awarding
agencies should use the Standard Form
424 (SF–424 Application for Federal
Assistance) series (or its successor) and
its program narrative whenever
possible. Alternative mechanisms may
be used for formula grant programs
which do not require applicants to
apply for funds on a project basis.
(1) Applicants shall use the SF–424
series or those forms and instructions
prescribed by the HHS awarding agency.
(2) For Federal programs covered by
Executive Order 12372, as amended by
Executive Order 12416, the applicant
shall complete the appropriate sections
of the SF–424 indicating whether the
application was subject to review by the
State Single Point of Contact (SPOC).
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The name and address of the SPOC for
a particular State can be obtained from
the HHS 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. (See also 45
CFR part 100.)
(3) HHS awarding agencies that do not
use the SF–424 series will indicate on
the application form they prescribe
whether the application is subject to
review by the State under Executive
Order 12372.
(4) This section does not apply to
applications for subawards.
(5) Except where otherwise noted, or
granted by HHS deviation, HHS
awarding agencies shall direct
applicants to apply for HHS financial
assistance through Grants.gov, an OMBdesignated Web site for Find and Apply.
(d) State plans. The statutes for some
programs require States to submit plans
before receiving grants. Under
regulations implementing Executive
Order 12372, States are allowed to
simplify, consolidate and substitute
plans. This section contains additional
provisions for plans that are subject to
regulations implementing Executive
Order 12372.
(1) Requirements. A State need meet
only Federal administrative or
programmatic requirements for a plan
that are in statutes or codified
regulations.
(2) Assurances. In each plan, the State
will include an assurance that the State
will comply with all applicable Federal
statutes and regulations in effect with
respect to the periods for which it
receives grant funding. For this
assurance and other assurances required
in this plan, the State may:
(i) Cite by number the statutory or
regulatory provisions requiring the
assurances and affirm that it gives the
assurances required by those provisions,
(ii) Repeat the assurance language in
the statutes or regulations, or
(iii) Develop its own language to the
extent permitted by law.
(3) Amendments. A State will amend
a plan whenever necessary to reflect:
(i) New or revised Federal statutes or
regulations, or
(ii) A material change in any State
law, organization, policy, or State
agency operation. The State will obtain
approval for the amendment and its
effective date but need submit for
approval only the amended portions of
the plan.
§ 75.207
Specific award conditions.
(a) The HHS awarding agency or passthrough entity may impose additional
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specific award conditions as needed in
accordance with paragraphs (b) and (c)
of this section, under the following
circumstances:
(1) Based on the criteria set forth in
§ 75.205;
(2) When an applicant or recipient has
a history of failure to comply with the
general or specific terms and conditions
of a Federal award;
(3) When an applicant or recipient
fails to meet expected performance goals
as described in § 75.210, or;
(4) When the applicant or recipient is
not otherwise responsible.
(b) These additional Federal award
conditions may include items such as
the following:
(1) Requiring payments as
reimbursements rather than advance
payments;
(2) Withholding authority to proceed
to the next phase until receipt of
evidence of acceptable performance
within a given period of performance;
(3) Requiring additional, more
detailed financial reports;
(4) Requiring additional project
monitoring;
(5) Requiring the non-Federal entity to
obtain technical or management
assistance; or
(6) Establishing additional prior
approvals.
(c) The HHS awarding agency or passthrough entity must notify the applicant
or non-Federal entity as to:
(1) The nature of the additional
requirements;
(2) The reason why the additional
requirements are being imposed;
(3) The nature of the action needed to
remove the additional requirement, if
applicable;
(4) The time allowed for completing
the actions if applicable, and
(5) The method for requesting
reconsideration of the additional
requirements imposed.
(d) Any specific conditions must be
promptly removed once the conditions
that prompted them have been
corrected.
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§ 75.208 Certifications and
Representations.
Unless prohibited by Federal statutes
or regulations, each HHS awarding
agency or pass-through entity is
authorized to require the non-Federal
entity to submit certifications and
representations required by Federal
statutes, or regulations on an annual
basis. Submission may be required more
frequently if the non-Federal entity fails
to meet a requirement of a Federal
award.
(a) The funds governed under this
part shall be administered in
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compliance with the standards set forth
in 45 CFR part 87.
(b) For assurances under State plans,
see § 75.206(d)(2).
§ 75.209
Pre-award costs.
For requirements on costs incurred by
the applicant prior to the start date of
the period of performance of the Federal
award, see § 75.458.
§ 75.210 Information contained in a
Federal award.
A Federal award must include the
following information:
(a) General Federal Award
Information. The HHS awarding agency
must include the following general
Federal award information in each
Federal award:
(1) Recipient name (which must
match the name associated with their
unique entity identifier as defined in 2
CFR 25.315);
(2) Recipient’s unique entity
identifier;
(3) Unique Federal Award
Identification Number (FAIN);
(4) Federal Award Date (see § 75.2
Federal award date);
(5) Period of Performance Start and
End Date;
(6) Amount of Federal Funds
Obligated by this action,
(7) Total Amount of Federal Funds
Obligated;
(8) Total Amount of the Federal
Award;
(9) Budget Approved by the HHS
Awarding Agency;
(10) Total Approved Cost Sharing or
Matching, where applicable;
(11) Federal award project description
(to comply with statutory requirements
(e.g., FFATA));
(12) Name of HHS awarding agency
and contact information for awarding
official,
(13) CFDA Number and Program
Name;
(14) Identification of whether the
award is R&D; and
(15) Indirect cost rate for the Federal
award (including if the de minimis rate
is charged per § 75.414).
(b) General Terms and Conditions (1)
HHS awarding agencies must
incorporate the following general terms
and conditions either in the Federal
award or by reference, as applicable:
(i) Administrative requirements
implemented by the HHS awarding
agency as specified in this part.
(ii) National policy requirements.
These include statutory, executive
order, other Presidential directive, or
regulatory requirements that apply by
specific reference and are not programspecific. See § 75.300.
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(2) The Federal award must include
wording to incorporate, by reference,
the applicable set of general terms and
conditions, The reference must be to the
Web site at which the HHS awarding
agency maintains the general terms and
conditions.
(3) If a non-Federal entity requests a
copy of the full text of the general terms
and conditions, the HHS awarding
agency must provide it.
(4) Wherever the general terms and
conditions are publicly available, the
HHS awarding agency must maintain an
archive of previous versions of the
general terms and conditions, with
effective dates, for use by the nonFederal entity, auditors, or others.
(c) HHS Awarding Agency, Program,
or Federal Award Specific Terms and
Conditions. The HHS awarding agency
may include with each Federal award
any terms and conditions necessary to
communicate requirements that are in
addition to the requirements outlined in
the HHS awarding agency’s general
terms and conditions. Whenever
practicable, these specific terms and
conditions also should be shared on a
public Web site and in notices of
funding opportunities (as outlined in
§ 75.203) in addition to being included
in a Federal award. See also § 75.206.
(d) Federal Award Performance Goals.
The HHS awarding agency must include
in the Federal award an indication of
the timing and scope of expected
performance by the non-Federal entity
as related to the outcomes intended to
be achieved by the program. In some
instances (e.g., discretionary research
awards), this may be limited to the
requirement to submit technical
performance reports (to be evaluated in
accordance with HHS awarding agency
policy). Where appropriate, the Federal
award may include specific
performance goals, indicators,
milestones, or expected outcomes (such
as outputs, or services performed or
public impacts of any of these) with an
expected timeline for accomplishment.
Reporting requirements must be clearly
articulated such that, where
appropriate, performance during the
execution of the Federal award has a
standard against which non-Federal
entity performance can be measured.
The HHS awarding agency may include
program-specific requirements, as
applicable. These requirements should
be aligned with agency strategic goals,
strategic objectives or performance goals
that are relevant to the program. See
also OMB Circular A–11, Part 6 for
definitions of strategic objectives and
performance goals.
(e) Any other information required by
the HHS awarding agency.
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§ 75.211 Public access to Federal award
information.
(a) In accordance with statutory
requirements for Federal spending
transparency (e.g., FFATA), except as
noted in this section, for applicable
Federal awards the HHS awarding
agency must announce all Federal
awards publicly and publish the
required information on a publicly
available OMB-designated governmentwide Web site (at time of publication,
www.USAspending.gov).
(b) Nothing in this section may be
construed as requiring the publication
of information otherwise exempt under
the Freedom of Information Act (5
U.S.C. 552), or controlled unclassified
information pursuant to Executive
Order 13556.
§ 75.212
Suspension and Debarment.
Non-federal entities and contractors
are subject to the non-procurement
debarment and suspension regulations
implementing Executive Orders 12549
and 12689, 2 CFR parts 180 and 376.
These regulations restrict awards,
subawards and contracts with certain
parties that are debarred, suspended or
otherwise excluded from or ineligible
for participation in Federal assistance
programs or activities.
§ 75.213
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
United States trade and commerce. HHS
awarding agencies will follow the
provisions of Executive Order 12770.
§ 75.214
Disclosure of Lobbying Activities.
Recipients are subject to the
restrictions on lobbying as set forth in
45 CFR part 93.
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§ 75.215 Special Provisions for Awards to
Commercial Organizations as Recipients.
(a) This section contains provisions
that apply to awards to commercial
organizations. These provisions are in
addition to other applicable provisions
of this part, or they make exceptions
from other provisions of this part for
awards to commercial organizations.
(b) Prohibition against profit. Except
for awards under the Small Business
Innovation Research (SBIR) and Small
Business Technology Transfer Research
(STTR) programs (15 U.S.C. 638), no
HHS funds may be paid as profit to any
recipient even if the recipient is a
commercial organization. Profit is any
amount in excess of allowable direct
and indirect costs.
(c) Program Income. Except for grants
for research, program income earned by
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a commercial organization may not be
used to further eligible project or
program objectives except in the SBIR
and STTR programs.
(d)(1) Commercial organizations that
receive awards (including for-profit
hospitals) have two options regarding
audits:
(i) A financial related audit of a
particular award in accordance with
Generally Accepted Government
Auditing Standards issued by the
Comptroller General of the United
States, in those cases where the
commercial organization receives
awards under only one HHS program;
or, if awards are received under
multiple HHS programs, a financial
related audit of all awards in accordance
with Generally Accepted Government
Auditing Standards issued by the
Comptroller General of the United
States; or
(ii) An audit that meets the
requirements contained in subpart F.
(2) Commercial organizations that
receive annual awards totaling less than
the audit requirement threshold in
subpart F are exempt from HHS audit
requirements for that year, but records
must be available for review by
appropriate officials of Federal agencies
or the Government Accountability
Office. (See § 75.501).
§ 75.216 Special Provisions for Awards to
Federal Agencies.
(a) In order for an HHS awarding
agency to make a Federal award to a
Federal agency, the HHS awarding
agency must have statutory authority
that makes such Federal agency
explicitly eligible for a Federal award.
(b) All provisions of this part and
other HHS regulations apply to Federal
entities receiving Federal awards,
except for the following:
(1) Except for grants for research, any
program income earned by a Federal
institution must be used under the
deduction alternative. Any program
income earned after the end of grant
support should be returned to the
United States Treasury.
(2) No salary or fringe benefit
payments may be made from HHS
awarding agency grant funds to support
career, career-conditional, or other
Federal employees (civilian or
uniformed services) without permanent
appointments at a Federal institution
receiving a grant. While the level of
effort required for the project must be
allowed by the recipient as part of each
individual’s official duties, salary costs
associated with an individual
participating in an official capacity as a
Federal employee under a grant to that
Federal institution are not allowable
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costs under an HHS awarding agency
grant.
(3) Federal agencies may not be
reimbursed for indirect costs under
Federal awards.
§ 75.217 Participation by faith-based
organizations.
The funds provided under this part
must be administered in compliance
with the standards set forth in 45 CFR
part 87.
Subpart D—Post Federal Award
Requirements
Standards for Financial and Program
Management
§ 75.300 Statutory and national policy
requirements.
(a) The Federal awarding agency must
manage and administer the Federal
award in a manner so as to ensure that
Federal funding is expended and
associated programs are implemented in
full accordance with U.S. statutory and
public policy requirements: Including,
but not limited to, those protecting
public welfare, the environment, and
prohibiting discrimination. The Federal
awarding agency must communicate to
the non-Federal entity all relevant
public policy requirements, including
those in general appropriations
provisions, and incorporate them either
directly or by reference in the terms and
conditions of the Federal award.
(b) The non-Federal entity is
responsible for complying with all
requirements of the Federal award. For
all Federal awards, this includes the
provisions of FFATA, which includes
requirements on executive
compensation, and also requirements
implementing the Act for the nonFederal entity at 2 CFR part 25 and 2
CFR part 170. See also statutory
requirements for whistleblower
protections at 10 U.S.C. 2324 and 2409,
and 41 U.S.C. 4304, 4310, and 4712.
§ 75.301
Performance measurement.
The HHS awarding agency must
require the recipient to use OMB
approved standard information
collections when providing financial
and performance information. As
appropriate and in accordance with
above mentioned information
collections, the HHS awarding agency
must require the recipient to relate
financial data to performance
accomplishments of the Federal award.
Also, in accordance with above
mentioned standard information
collections, and when applicable,
recipients must also provide cost
information to demonstrate cost
effective practices (e.g., through unit
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cost data). The recipient’s performance
should be measured in a way that will
help the HHS awarding agency and
other non-Federal entities to improve
program outcomes, share lessons
learned, and spread the adoption of
promising practices. The HHS awarding
agency should provide recipients with
clear performance goals, indicators, and
milestones as described in § 75.210.
Performance reporting frequency and
content should be established to not
only allow the HHS awarding agency to
understand the recipient progress but
also to facilitate identification of
promising practices among recipients
and build the evidence upon which the
HHS awarding agency’s program and
performance decisions are made.
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§ 75.302 Financial management and
standards for financial management
systems.
(a) Each state must expend and
account for the Federal award in
accordance with state laws and
procedures for expending and
accounting for the state’s own funds. In
addition, the state’s and the other nonFederal entity’s financial management
systems, including records documenting
compliance with Federal statutes,
regulations, and the terms and
conditions of the Federal award, must
be sufficient to permit the preparation of
reports required by general and
program-specific terms and conditions;
and the tracing of funds to a level of
expenditures adequate to establish that
such funds have been used according to
the Federal statutes, regulations, and the
terms and conditions of the Federal
award. See also § 75.450.
(b) The financial management system
of each non-Federal entity must provide
for the following (see also §§ 75.361,
75.362, 75.363, 75.364, and 75.365):
(1) Identification, in its accounts, of
all Federal awards received and
expended and the Federal programs
under which they were received.
Federal program and Federal award
identification must include, as
applicable, the CFDA title and number,
Federal award identification number
and year, name of the HHS awarding
agency, and name of the pass-through
entity, if any.
(2) Accurate, current, and complete
disclosure of the financial results of
each Federal award or program in
accordance with the reporting
requirements set forth in §§ 75.341 and
75.342. If an HHS awarding agency
requires reporting on an accrual basis
from a recipient that maintains its
records on other than an accrual basis,
the recipient must not be required to
establish an accrual accounting system.
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This recipient may develop accrual data
for its reports on the basis of an analysis
of the documentation on hand.
Similarly, a pass-through entity must
not require a subrecipient to establish
an accrual accounting system and must
allow the subrecipient to develop
accrual data for its reports on the basis
of an analysis of the documentation on
hand.
(3) Records that identify adequately
the source and application of funds for
federally-funded activities. These
records must contain information
pertaining to Federal awards,
authorizations, obligations, unobligated
balances, assets, expenditures, income
and interest and be supported by source
documentation.
(4) Effective control over, and
accountability for, all funds, property,
and other assets. The non-Federal entity
must adequately safeguard all assets and
assure that they are used solely for
authorized purposes. See § 75.303.
(5) Comparison of expenditures with
budget amounts for each Federal award.
(6) Written procedures to implement
the requirements of § 75.305.
(7) Written procedures for
determining the allowability of costs in
accordance with Subpart E of this part
and the terms and conditions of the
Federal award.
§ 75.303
Internal controls.
The non-Federal entity must:
(a) Establish and maintain effective
internal control over the Federal award
that provides reasonable assurance that
the non-Federal entity is managing the
Federal award in compliance with
Federal statutes, regulations, and the
terms and conditions of the Federal
award. These internal controls should
be in compliance with guidance in
‘‘Standards for Internal Control in the
Federal Government,’’ issued by the
Comptroller General of the United
States or the ‘‘Internal Control
Integrated Framework,’’ issued by the
Committee of Sponsoring Organizations
of the Treadway Commission (COSO).
(b) Comply with Federal statutes,
regulations, and the terms and
conditions of the Federal awards.
(c) Evaluate and monitor the nonFederal entity’s compliance with
statutes, regulations and the terms and
conditions of Federal awards.
(d) Take prompt action when
instances of noncompliance are
identified including noncompliance
identified in audit findings.
(e) Take reasonable measures to
safeguard protected personally
identifiable information and other
information the HHS awarding agency
or pass-through entity designates as
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75905
sensitive or the non-Federal entity
considers sensitive consistent with
applicable Federal, state, local, and
tribal laws regarding privacy and
obligations of confidentiality.
§ 75.304
Bonds.
The HHS awarding agency may
include a provision on bonding,
insurance, or both in the following
circumstances:
(a) Where the Federal Government
guarantees or insures the repayment of
money borrowed by the recipient, the
HHS awarding agency, at its discretion,
may require adequate bonding and
insurance if the bonding and insurance
requirements of the non-Federal entity
are not deemed adequate to protect the
interest of the Federal Government.
(b) The HHS awarding agency may
require adequate fidelity bond coverage
where the non-Federal entity lacks
sufficient coverage to protect the
Federal Government’s interest.
(c) Where bonds are required in the
situations described above, the bonds
must be obtained from companies
holding certificates of authority as
acceptable sureties, as prescribed in 31
CFR part 223.
§ 75.305
Payment.
(a) For states, payments are governed
by Treasury-State CMIA agreements and
default procedures codified at 31 CFR
part 205 and TFM 4A–2000 Overall
Disbursing Rules for All Federal
Agencies.
(b) For non-Federal entities other than
states, payments methods must
minimize the time elapsing between the
transfer of funds from the United States
Treasury or the pass-through entity and
the disbursement by the non-Federal
entity whether the payment is made by
electronic funds transfer, or issuance or
redemption of checks, warrants, or
payment by other means. See also
§ 75.302(b)(6). Except as noted
elsewhere in these part, Federal
agencies must require recipients to use
only OMB-approved standard
government-wide information collection
requests to request payment.
(1) The non-Federal entity must be
paid in advance, provided it maintains
or demonstrates the willingness to
maintain both written procedures that
minimize the time elapsing between the
transfer of funds and disbursement by
the non-Federal entity, and financial
management systems that meet the
standards for fund control and
accountability as established in this
part. Advance payments to a nonFederal entity must be limited to the
minimum amounts needed and be timed
to be in accordance with the actual,
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immediate cash requirements of the
non-Federal entity in carrying out the
purpose of the approved program or
project. The timing and amount of
advance payments must be as close as
is administratively feasible to the actual
disbursements by the non-Federal entity
for direct program or project costs and
the proportionate share of any allowable
indirect costs. The non-Federal entity
must make timely payment to
contractors in accordance with the
contract provisions.
(2) Whenever possible, advance
payments must be consolidated to cover
anticipated cash needs for all Federal
awards made by the HHS awarding
agency to the recipient.
(i) Advance payment mechanisms
include, but are not limited to, Treasury
check and electronic funds transfer and
must comply with applicable guidance
in 31 CFR part 208.
(ii) Non-Federal entities must be
authorized to submit requests for
advance payments and reimbursements
at least monthly when electronic fund
transfers are not used, and as often as
they like when electronic transfers are
used, in accordance with the provisions
of the Electronic Fund Transfer Act (15
U.S.C. 1693–1693r).
(3) Reimbursement is the preferred
method when the requirements in
paragraph (b) cannot be met, when the
HHS awarding agency sets a specific
condition per § 75.207, or when the
non-Federal entity requests payment by
reimbursement. This method may be
used on any Federal award for
construction, or if the major portion of
the construction project is accomplished
through private market financing or
Federal loans, and the Federal award
constitutes a minor portion of the
project. When the reimbursement
method is used, the HHS awarding
agency or pass-through entity must
make payment within 30 calendar days
after receipt of the billing, unless the
HHS awarding agency or pass-through
entity reasonably believes the request to
be improper.
(4) If the non-Federal entity cannot
meet the criteria for advance payments
and the HHS awarding agency or passthrough entity has determined that
reimbursement is not feasible because
the non-Federal entity lacks sufficient
working capital, the HHS awarding
agency or pass-through entity may
provide cash on a working capital
advance basis. Under this procedure,
the HHS awarding agency or passthrough entity must advance cash
payments to the non-Federal entity to
cover its estimated disbursement needs
for an initial period generally geared to
the non-Federal entity’s disbursing
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cycle. Thereafter, the HHS awarding
agency or pass-through entity must
reimburse the non-Federal entity for its
actual cash disbursements. Use of the
working capital advance method of
payment requires that the pass-through
entity provide timely advance payments
to any subrecipients in order to meet the
subrecipient’s actual cash
disbursements. The working capital
advance method of payment must not be
used by the pass-through entity if the
reason for using this method is the
unwillingness or inability of the passthrough entity to provide timely
advance payments to the subrecipient to
meet the subrecipient’s actual cash
disbursements.
(5) Use of resources before requesting
cash advance payments. To the extent
available, the non-Federal entity must
disburse funds available from program
income (including repayments to a
revolving fund), rebates, refunds,
contract settlements, audit recoveries,
and interest earned on such funds
before requesting additional cash
payments.
(6) Unless otherwise required by
Federal statutes, payments for allowable
costs by non-Federal entities must not
be withheld at any time during the
period of performance unless the
conditions of §§ 75.207, Subpart D of
this part, 75.371, or one or more of the
following applies:
(i) The non-Federal entity has failed
to comply with the project objectives,
Federal statutes, regulations, or the
terms and conditions of the Federal
award.
(ii) The non-Federal entity is
delinquent in a debt to the United States
as defined in OMB Guidance A–129.
Under such conditions, the HHS
awarding agency or pass-through entity
may, upon reasonable notice, inform the
non-Federal entity that payments must
not be made for obligations incurred
after a specified date until the
conditions are corrected or the
indebtedness to the Federal Government
is liquidated. (See 45 CFR part 30).
(iii) A payment withheld for failure to
comply with Federal award conditions,
but without suspension of the Federal
award, must be released to the nonFederal entity upon subsequent
compliance. When a Federal award is
suspended, payment adjustments will
be made in accordance with § 75.375.
(iv) A payment must not be made to
a non-Federal entity for amounts that
are withheld by the non-Federal entity
from payment to contractors to assure
satisfactory completion of work. A
payment must be made when the nonFederal entity actually disburses the
withheld funds to the contractors or to
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escrow accounts established to assure
satisfactory completion of work.
(7) Standards governing the use of
banks and other institutions as
depositories of advance payments under
Federal awards are as follows:
(i) The HHS awarding agency and
pass-through entity must not require
separate depository accounts for funds
provided to a non-Federal entity or
establish any eligibility requirements for
depositories for funds provided to the
non-Federal entity. However, the nonFederal entity must be able to account
for the receipt, obligation and
expenditure of funds.
(ii) Advance payments of Federal
funds must be deposited and
maintained in insured accounts
whenever possible.
(8) The non-Federal entity must
maintain advance payments of Federal
awards in interest-bearing accounts,
unless the following apply:
(i) The non-Federal entity receives
less than $120,000 in Federal awards
per year.
(ii) The best reasonably available
interest-bearing account would not be
expected to earn interest in excess of
$500 per year on Federal cash balances.
(iii) 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.
(iv) A foreign government or banking
system prohibits or precludes interest
bearing accounts.
(9) Interest earned amounts up to
$500 per year may be retained by the
non-Federal entity for administrative
expense. Any additional interest earned
on Federal advance payments deposited
in interest-bearing accounts must be
remitted annually to the Department of
Health and Human Services Payment
Management System through an
electronic medium using either
Automated Clearing House (ACH)
network or a Fedwire Funds Service
payment. Remittances must include
pertinent information of the payee and
nature of payment in the memo area
(often referred to as ‘‘addenda records’’
by Financial Institutions) as that will
assist in the timely posting of interest
earned on federal funds. Pertinent
details include the Payee Account
Number (PAN) if the payment
originated from PMS, or Agency
information if the payment originated
from ASAP, NSF or another federal
agency payment system. The remittance
must be submitted as follows:
For ACH Returns:
Routing Number: 051036706
Account number: 303000
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Bank Name and Location: Credit
Gateway—ACH Receiver St. Paul, MN
For Fedwire Returns*:
Routing Number: 021030004
Account number: 75010501
Bank Name and Location: Federal
Reserve Bank Treas NYC/Funds
Transfer Division New York, NY
(* Please note organization initiating
payment is likely to incur a charge
from your Financial Institution for
this type of payment)
For International ACH Returns:
Beneficiary Account: Federal Reserve
Bank of New York/ITS (FRBNY/ITS)
Bank: Citibank N.A. (New York)
Swift Code: CITIUS33
Account Number: 36838868
Bank Address: 388 Greenwich Street,
New York, NY 10013 USA
Payment Details (Line 70): Agency
Name (abbreviated when possible)
and ALC Agency POC: Michelle
Haney, (301) 492–5065
For recipients that do not have
electronic remittance capability, please
make check** payable to:
‘‘The Department of Health and Human
Services’’
Mail Check to Treasury approved
lockbox:
HHS Program Support Center
P.O. Box 530231
Atlanta, GA 30353–0231
(** Please allow 4–6 weeks for
processing of a payment by check to
be applied to the appropriate PMS
account)
Any additional information/instructions
may be found on the PMS Web site at
https://www.dpm.psc.gov/.
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§ 75.306
Cost sharing or matching.
(a) Under Federal research proposals,
voluntary committed cost sharing is not
expected. It cannot be used as a factor
during the merit review of applications
or proposals, but may be considered if
it is both in accordance with HHS
awarding agency regulations and
specified in a notice of funding
opportunity. Criteria for considering
voluntary committed cost sharing and
any other program policy factors that
may be used to determine who may
receive a Federal award must be
explicitly described in the notice of
funding opportunity. Furthermore, only
mandatory cost sharing or cost sharing
specifically committed in the project
budget must be included in the
organized research base for computing
the indirect (F&A) cost rate or reflected
in any allocation of indirect costs. See
also §§ 75.414, 75.203, and Appendix I
to this part.
(b) For all Federal awards, any shared
costs or matching funds and all
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contributions, including cash and third
party in-kind contributions, must be
accepted as part of the non-Federal
entity’s cost sharing or matching when
such contributions meet all of the
following criteria:
(1) Are verifiable from the nonFederal entity’s records;
(2) Are not included as contributions
for any other Federal award;
(3) Are necessary and reasonable for
accomplishment of project or program
objectives;
(4) Are allowable under Subpart E of
this part;
(5) Are not paid by the Federal
Government under another Federal
award, except where the Federal statute
authorizing a program specifically
provides that Federal funds made
available for such program can be
applied to matching or cost sharing
requirements of other Federal programs;
(6) Are provided for in the approved
budget when required by the HHS
awarding agency; and
(7) Conform to other provisions of this
part, as applicable.
(c) Unrecovered indirect costs,
including indirect costs on cost sharing
or matching may be included as part of
cost sharing or matching. Unrecovered
indirect cost means the difference
between the amount charged to the
Federal award and the amount which
could have been charged to the Federal
award under the non-Federal entity’s
approved negotiated indirect cost rate.
(d) Values for non-Federal entity
contributions of services and property
must be established in accordance with
the cost principles in Subpart E. If an
HHS awarding agency authorizes the
non-Federal entity to donate buildings
or land for construction/facilities
acquisition projects or long-term use,
the value of the donated property for
cost sharing or matching must be the
lesser of paragraphs (d)(1) or (2) of this
section.
(1) The value of the remaining life of
the property recorded in the nonFederal entity’s accounting records at
the time of donation.
(2) The current fair market value.
However, when there is sufficient
justification, the HHS awarding agency
may approve the use of the current fair
market value of the donated property,
even if it exceeds the value described in
paragraph (1) of this section at the time
of donation.
(e) Volunteer services furnished by
third-party 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.
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Rates for third-party volunteer services
must be consistent with those paid for
similar work by the non-Federal entity.
In those instances in which the required
skills are not found in the non-Federal
entity, rates must be consistent with
those paid for similar work in the labor
market in which the non-Federal entity
competes for the kind of services
involved. In either case, paid fringe
benefits that are reasonable, necessary,
allocable, and otherwise allowable may
be included in the valuation.
(f) When a third-party organization
furnishes the services of an employee,
these services must be valued at the
employee’s regular rate of pay plus an
amount of fringe benefits that is
reasonable, necessary, allocable, and
otherwise allowable, and indirect costs
at either the third-party organization’s
approved federally negotiated indirect
cost rate or, a rate in accordance with
§ 75.414(f), provided these services
employ the same skill(s) for which the
employee is normally paid. Where
donated services are treated as indirect
costs, indirect cost rates will separate
the value of the donated services so that
reimbursement for the donated services
will not be made.
(g) Donated property from third
parties may include such items as
equipment, office supplies, laboratory
supplies, or workshop and classroom
supplies. Value assessed to donated
property included in the cost sharing or
matching share must not exceed the fair
market value of the property at the time
of the donation.
(h) The method used for determining
cost sharing or matching for third-partydonated equipment, buildings and land
for which title passes to the non-Federal
entity may differ according to the
purpose of the Federal award, if
paragraph (h)(1) or (2) of this section
applies.
(1) If the purpose of the Federal award
is to assist the non-Federal entity in the
acquisition of equipment, buildings or
land, the aggregate value of the donated
property may be claimed as cost sharing
or matching.
(2) If the purpose of the Federal award
is to support activities that require the
use of equipment, buildings or land,
normally only depreciation charges for
equipment and buildings may be made.
However, the fair market value of
equipment or other capital assets and
fair rental charges for land may be
allowed, provided that the HHS
awarding agency has approved the
charges. See also § 75.420.
(i) The value of donated property
must be determined in accordance with
the usual accounting policies of the
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non-Federal entity, with the following
qualifications:
(1) The value of donated land and
buildings must not exceed its fair
market value at the time of donation to
the non-Federal entity 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 non-Federal entity as required by
the Uniform Relocation Assistance and
Real Property Acquisition Policies Act
of 1970, as amended, (42 U.S.C. 4601–
4655) (Uniform Act) except as provided
in the implementing regulations at 49
CFR part 24.
(2) The value of donated equipment
must not exceed the fair market value of
equipment of the same age and
condition at the time of donation.
(3) The value of donated space must
not exceed the fair rental value of
comparable space as established by an
independent appraisal of comparable
space and facilities in a privately-owned
building in the same locality.
(4) The value of loaned equipment
must not exceed its fair rental value.
(j) For third-party in-kind
contributions, the fair market value of
goods and services must be documented
and to the extent feasible supported by
the same methods used internally by the
non-Federal entity.
(k) For IHEs, see also OMB
memorandum M–01–06, dated January
5, 2001, Clarification of OMB A–21
Treatment of Voluntary Uncommitted
Cost Sharing and Tuition Remission
Costs.
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§ 75.307
Program income.
(a) General. Non-Federal entities are
encouraged to earn income to defray
program costs where appropriate.
(b) Cost of generating program
income. If authorized by Federal
regulations or the Federal award, costs
incidental 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 Federal award.
(c) Governmental revenues. Taxes,
special assessments, levies, fines, and
other such revenues raised by a nonFederal entity are not program income
unless the revenues are specifically
identified in the Federal award or HHS
awarding agency regulations as program
income.
(1) The Patent and Trademark Laws
Amendments, 34 U.S.C. 200–212, apply
to inventions made under an award for
performance of experimental,
developmental, or research work.
(2) Unless the terms and conditions
for the Federal award provide
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otherwise, recipients shall have no
obligation to HHS with respect to
program income earned from license
fees and royalties for copyrighted
material, patents, patent applications,
trademarks, and inventions made under
a Federal award. However, no
scholarship, fellowship, training grant,
or other funding agreement made
primarily to a recipient for educational
purposes will contain any provision
giving the HHS awarding agency rights
to inventions made by the recipient.
(d) Property. Proceeds from the sale of
real property, equipment, or supplies,
are not program income; such proceeds
will be handled in accordance with the
requirements of Subpart D of this part,
§§ 75.318, 75.320, and 75.321, or as
specifically identified in Federal
statutes, regulations, or the terms and
conditions of the Federal award.
(e) Use of program income. If the HHS
awarding agency does not specify in its
regulations or the terms and conditions
of the Federal award, or give prior
approval for how program income is to
be used, paragraph (e)(1) of this section
must apply. For Federal awards made to
IHEs and nonprofit research
institutions, if the HHS awarding agency
does not specify in its regulations or the
terms and conditions of the Federal
award how program income is to be
used, paragraph (e)(2) of this section
must apply unless the recipient is
subject to conditions under § 75.207 or
§ 75.215. In specifying alternatives to
paragraphs (e)(1) and (2) of this section,
the HHS awarding agency may
distinguish between income earned by
the recipient and income earned by
subrecipients and between the sources,
kinds, or amounts of income. When the
HHS awarding agency authorizes the
approaches in paragraphs (e)(2) and (3)
of this section, program income in
excess of any amounts specified must
also be deducted from expenditures.
(1) Deduction. Ordinarily program
income must be deducted from total
allowable costs to determine the net
allowable costs. Program income must
be used for current costs unless the HHS
awarding agency authorizes otherwise.
Program income that the non-Federal
entity did not anticipate at the time of
the Federal award must be used to
reduce the Federal award and nonFederal entity contributions rather than
to increase the funds committed to the
project.
(2) Addition. With prior approval of
the HHS awarding agency (except for
IHEs and nonprofit research
institutions, as described in paragraph
(e) of this section), program income may
be added to the Federal award by the
Federal agency and the non-Federal
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entity. The program income must be
used for the purposes and under the
conditions of the Federal award.
(3) Cost sharing or matching. With
prior approval of the HHS awarding
agency, program income may be used to
meet the cost sharing or matching
requirement of the Federal award. The
amount of the Federal award remains
the same.
(f) Income after the period of
performance. There are no Federal
requirements governing the disposition
of income earned after the end of the
period of performance for the Federal
award, unless the HHS awarding agency
regulations or the terms and conditions
of the award provide otherwise. The
HHS awarding agency may negotiate
agreements with recipients regarding
appropriate uses of income earned after
the period of performance as part of the
grant closeout process. See also
§ 75.381.
(g) Unless the Federal statute,
regulations, or terms and conditions for
the Federal award provide otherwise,
the non-Federal entity has no obligation
to the HHS awarding agency with
respect to program income earned from
license fees and royalties for
copyrighted material, patents, patent
applications, trademarks, and
inventions made under a Federal award
to which 37 CFR part 401, ‘‘Rights to
Inventions Made by Nonprofit
Organizations and Small Business Firms
under Government Awards, Contracts
and Cooperative Agreements’’ is
applicable.
§ 75.308
plans.
Revision of budget and program
(a) The approved budget for the
Federal award summarizes the financial
aspects of the project or program as
approved during the Federal award
process. It may include either the
Federal and non-Federal share (see
§ 75.2 Federal share) or only the Federal
share, depending upon HHS awarding
agency requirements. It must be related
to performance for program evaluation
purposes whenever appropriate.
(b) Recipients are required to report
deviations from budget or project scope
or objective, and request prior approvals
from HHS awarding agencies for budget
and program plan revisions, in
accordance with this section.
(c) For non-construction Federal
awards, recipients must request prior
approvals from HHS 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).
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(2) Change in a key person specified
in the application or the Federal award.
(3) The disengagement from the
project 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 inclusion, unless waived by
the HHS awarding agency, of costs that
require prior approval in accordance
with Subpart E of this part or Appendix
IX of this part, or 48 CFR part 31, as
applicable.
(5) The transfer of funds budgeted for
participant support costs as defined in
§ 75.2 Participant support costs to other
categories of expense.
(6) Unless described in the
application and funded in the approved
Federal awards, the subawarding,
transferring or contracting out of any
work under a Federal award. This
provision does not apply to the
acquisition of supplies, material,
equipment or general support services.
(7) Changes in the approved costsharing or matching provided by the
non-Federal entity. No other prior
approval requirements for specific items
may be imposed unless an exception
has been approved by OMB. See also
§§ 75.102 and 75.407.
(8) A fixed amount subaward as
described in § 75.353.
(9) The inclusion of research patient
care costs in research awards made for
the performance of research work.
(10) The provision of subawards by a
pass-through entity on fixed amounts up
to the Simplified Acquisition
Threshold, provided that the subawards
meet the requirements for fixed amount
awards in § 75.201. See § 75.353.
(11) The recipient wishes to dispose
of, replace, or encumber title to real
property, equipment, or intangible
property that are acquired or improved
with a Federal award. See §§ 75.318,
75.320, 75.322, and 75.323.
(12) The need arises for additional
Federal funds to complete the project.
(d) Except for requirements listed in
paragraph (c)(1) of this section, the HHS
awarding agencies are authorized, at
their option, to waive prior written
approvals required by paragraph (c) this
section. Such waivers may include
authorizing recipients to do any one or
more of the following:
(1) Incur project costs 90 calendar
days before the HHS awarding agency
makes the Federal award. Expenses
more than 90 calendar days pre-award
require prior approval of the HHS
awarding agency. All costs incurred
before the HHS awarding agency makes
the Federal award are at the recipient’s
risk (i.e., the HHS awarding agency is
under no obligation to reimburse such
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costs if for any reason the recipient does
not receive a Federal award or if the
Federal award is less than anticipated
and inadequate to cover such costs). See
also § 75.458.
(2) Initiate a one-time extension of the
period of performance by up to 12
months unless one or more of the
conditions outlined in paragraphs
(d)(2)(i) through (iii) of this section
apply. For one-time extensions, the
recipient must notify the HHS awarding
agency in writing with the supporting
reasons and revised period of
performance at least 10 calendar days
before the end of the period of
performance specified in the Federal
award. This one-time extension may not
be exercised merely for the purpose of
using unobligated balances. Extensions
require explicit prior HHS awarding
agency approval when:
(i) The terms and conditions of the
Federal 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 periods of
performance.
(4) For Federal awards that support
research, unless the HHS awarding
agency provides otherwise in the
Federal award or in the HHS awarding
agency’s regulations, the prior approval
requirements described in paragraph (d)
are automatically waived (i.e., recipients
need not obtain such prior approvals)
unless one of the conditions included in
paragraph (d)(2) applies.
(e) The HHS awarding agency may, at
its option, restrict the transfer of funds
among direct cost categories or
programs, functions and activities for
Federal awards in which the Federal
share of the project exceeds the
Simplified Acquisition Threshold and
the cumulative amount of such transfers
exceeds or is expected to exceed 10
percent of the total budget as last
approved by the HHS awarding agency.
The HHS awarding agency cannot
permit a transfer that would cause any
Federal appropriation to be used for
purposes other than those consistent
with the appropriation.
(f) All other changes to nonconstruction budgets, except for the
changes described in paragraph (c) of
this section, do not require prior
approval (see also § 75.407).
(g) For construction Federal awards,
the recipient must request prior written
approval promptly from the HHS
awarding agency for budget revisions
whenever paragraph (g)(1), (2), or (3) of
this section applies.
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75909
(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 Subpart E
of this part.
(4) No other prior approval
requirements for budget revisions may
be imposed unless an exception has
been approved by OMB.
(5) When an HHS awarding agency
makes a Federal award that provides
support for construction and nonconstruction work, the HHS awarding
agency may require the recipient to
obtain prior approval from the HHS
awarding agency before making any
fund or budget transfers between the
two types of work supported.
(h) When requesting approval for
budget revisions, the recipient must use
the same format for budget information
that was used in the application, unless
the HHS awarding agency indicates a
letter of request suffices.
(i) Within 30 calendar days from the
date of receipt of the request for budget
revisions, the HHS awarding agency
must 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 HHS awarding
agency must inform the recipient in
writing of the date when the recipient
may expect the decision.
(j) All approvals granted in keeping
with the provisions of this section shall
not be valid unless they are in writing,
and signed by at least one of the
following HHS officials:
(1) The Head of the HHS awarding
agency that made the award or
subordinate official with proper
delegated authority from the Head,
including the Head of the Regional
Office of the HHS awarding agency that
made the award; or
(2) The responsible Grants Officer of
the HHS awarding agency that made the
award or an individual duly authorized
by the Grants Officer.
§ 75.309 Period of performance and
availability of funds.
(a) A non-Federal entity may charge to
the Federal award only allowable costs
incurred during the period of
performance (except as described in
§ 75.461) and any costs incurred before
the HHS awarding agency or passthrough entity made the Federal award
that were authorized by the Federal
awarding agency or pass-through entity.
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Funds available to pay allowable costs
during the period of performance
include both Federal funds awarded and
carryover balances.
(b) A non-Federal entity must
liquidate all obligations incurred under
the award not later than 90 days after
the end of the funding period (or as
specified in a program regulation) to
coincide with the submission of the
final Federal Financial Report (FFR).
This deadline may be extended with
prior written approval from the HHS
awarding agency.
§ 75.310–§ 75.315
[Reserved]
Property Standards
§ 75.316
Purpose of property standards.
Sections 75.317 through 75.323 set
forth uniform standards governing
management and disposition of property
furnished by HHS or whose cost was
charged directly to a project supported
by an HHS award. The HHS awarding
agency may not impose additional
requirements, unless specifically
required to do so by Federal statute. The
recipient may use its own property
management standards and procedures
provided they meet the provisions of
these sections.
§ 75.317
Insurance coverage.
The non-Federal entity must, at a
minimum, provide the equivalent
insurance coverage for real property and
equipment acquired or improved with
Federal funds as provided to other
property owned by the non-Federal
entity. Federally-owned property need
not be insured unless required by the
terms and conditions of the Federal
award.
tkelley on DSK3SPTVN1PROD with RULES2
§ 75.318
Real property.
(a) Title. Subject to the obligations
and conditions set forth in this section,
title to real property acquired or
improved under a Federal award will
vest upon acquisition in the non-Federal
entity.
(b) Use. (1) Except as otherwise
provided by Federal statutes or by the
HHS awarding agency, real property
will be used for the originally
authorized purpose as long as needed
for that purpose, during which time the
non-Federal entity must not dispose of
or encumber its title or other interests.
(2) The non-Federal entity shall
obtain written approval from the HHS
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
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projects (i.e., awards) or programs that
have purpose consistent with those
authorized for support by the HHS
awarding agency.
(c) Disposition. When real property is
no longer needed as provided in
subsection (b), the non-Federal entity
must obtain disposition instructions
from the HHS awarding agency or passthrough entity. The instructions must
provide for one of the following
alternatives:
(1) Retain title after compensating the
HHS awarding agency. The amount paid
to the HHS awarding agency will be
computed by applying the HHS
awarding agency’s percentage of
participation in the cost of the original
purchase (and costs of any
improvements) to the fair market value
of the property. However, in those
situations where the non-Federal entity
is disposing of real property acquired or
improved with a Federal award and
acquiring replacement real property
under the same Federal award, the net
proceeds from the disposition may be
used as an offset to the cost of the
replacement property.
(2) Sell the property and compensate
the HHS awarding agency. The amount
due to the HHS awarding agency will be
calculated by applying the HHS
awarding agency’s percentage of
participation in the cost of the original
purchase (and cost of any
improvements) to the proceeds of the
sale after deduction of any actual and
reasonable selling and fixing-up
expenses. If the Federal award has not
been closed out, the net proceeds from
sale may be offset against the original
cost of the property. When the nonFederal entity is directed to sell
property, sales procedures must be
followed that provide for competition to
the extent practicable and result in the
highest possible return.
(3) Transfer title to the HHS awarding
agency or to a third party designated/
approved by the HHS awarding agency.
The non-Federal entity is entitled to be
paid an amount calculated by applying
the non-Federal entity’s percentage of
participation in the purchase of the real
property (and cost of any
improvements) to the current fair
market value of the property.
§ 75.319 Federally-owned and exempt
property.
(a) Title to Federally-owned property
remains vested in the Federal
Government. The non-Federal entity
must submit annually an inventory
listing of Federally-owned property in
its custody to the HHS awarding agency.
Upon completion of the Federal award
or when the property is no longer
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needed, the non-Federal entity must
report the property to the HHS awarding
agency for further Federal agency
utilization.
(b) If the HHS awarding agency has no
further need for the property, it must
declare the property excess and report it
for disposal to the appropriate Federal
disposal authority, unless the HHS
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 nonprofit organizations in accordance with
Executive Order 12999). The HHS
awarding agency must issue appropriate
instructions to the non-Federal entity.
(c) Exempt Federally-owned property
means property acquired under a
Federal award where the HHS awarding
agency has chosen to vest title to the
property to the non-Federal entity
without further obligation to the Federal
Government, based upon the explicit
terms and conditions of the Federal
award. The HHS awarding agency may
exercise this option when statutory
authority exists. Absent statutory
authority and specific terms and
conditions of the Federal award, title to
exempt Federally-owned property
acquired under the Federal award
remains with the Federal Government.
§ 75.320
Equipment.
See also § 75.439.
(a) Title. Subject to the obligations
and conditions set forth in this section,
title to equipment acquired under a
Federal award will vest upon
acquisition in the non-Federal entity.
Unless a statute specifically authorizes
the Federal agency to vest title in the
non-Federal entity without further
obligation to the Federal Government,
and the Federal agency elects to do so,
the title must be a conditional title. Title
must vest in the non-Federal entity
subject to the following conditions:
(1) Use the equipment for the
authorized purposes of the project
during the period of performance, or
until the property is no longer needed
for the purposes of the project.
(2) Not encumber the property
without approval of the HHS awarding
agency or pass-through entity.
(3) Use and dispose of the property in
accordance with paragraphs (b), (c) and
(e) of this section.
(b) A state must use, manage and
dispose of equipment acquired under a
Federal award by the state in
accordance with state laws and
procedures. Other non-Federal entities
must follow paragraphs (c) through (e)
of this section.
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(c) Use. (1) Equipment must be used
by the non-Federal entity in the program
or project for which it was acquired as
long as needed, whether or not the
project or program continues to be
supported by the Federal award, and the
non-Federal entity must not encumber
the property without prior approval of
the HHS awarding agency. When no
longer needed for the original program
or project, the equipment may be used
in other activities supported by the HHS
awarding agency, in the following order
of priority:
(i) Activities under a Federal award
from the HHS awarding agency which
funded the original program or project,
then
(ii) Activities under Federal awards
from other HHS awarding agencies. This
includes consolidated equipment for
information technology systems.
(2) During the time that equipment is
used on the project or program for
which it was acquired, the non-Federal
entity must also make the equipment
available for use on other projects or
programs currently or previously
supported by the Federal Government,
provided that such use will not interfere
with the work on the projects or
program for which it was originally
acquired. First preference for other use
must be given to other programs or
projects supported by the HHS awarding
agency that financed the equipment and
second preference must be given to
programs or projects under Federal
awards from other Federal awarding
agencies. Use for non-federally-funded
programs or projects is also permissible.
User fees should be considered if
appropriate.
(3) Notwithstanding the
encouragement in § 75.307 to earn
program income, the non-Federal entity
must not use equipment acquired with
the Federal award to provide services
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.
(4) When acquiring replacement
equipment, the non-Federal entity 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 subject to the
approval of the HHS awarding agency.
(d) Management requirements.
Procedures for managing equipment
(including replacement equipment),
whether acquired in whole or in part
under a Federal award, until disposition
takes place will, as a minimum, meet
the following requirements:
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(1) Property records must be
maintained that include a description of
the property, a serial number or other
identification number, the source of
funding for the property (including the
FAIN), who holds title, the acquisition
date, and cost of the property,
percentage of Federal participation in
the project costs for the Federal award
under which the property was acquired,
the location, use and condition of the
property, and any ultimate disposition
data including the date of disposal and
sale price of the property.
(2) A physical inventory of the
property must be taken and the results
reconciled with the property records at
least once every two years.
(3) A control system must be
developed to ensure adequate
safeguards to prevent loss, damage, or
theft of the property. Any loss, damage,
or theft must be investigated.
(4) Adequate maintenance procedures
must be developed to keep the property
in good condition.
(5) If the non-Federal entity is
authorized or required to sell the
property, proper sales procedures must
be established to ensure the highest
possible return.
(e) Disposition. When original or
replacement equipment acquired under
a Federal award is no longer needed for
the original project or program or for
other activities currently or previously
supported by a HHS awarding agency,
except as otherwise provided in Federal
statutes, regulations, or HHS awarding
agency disposition instructions, the
non-Federal entity must request
disposition instructions from the HHS
awarding agency if required by the
terms and conditions of the Federal
award. Disposition of the equipment
will be made as follows, in accordance
with HHS awarding agency disposition
instructions:
(1) Items of equipment with a current
per unit fair market value of $5,000 or
less may be retained, sold or otherwise
disposed of with no further obligation to
the HHS awarding agency.
(2) Except as provided in § 75.319(b),
or if the HHS awarding agency fails to
provide requested disposition
instructions within 120 days, items of
equipment with a current per-unit fairmarket value in excess of $5,000 may be
retained by the non-Federal entity or
sold. The HHS awarding agency is
entitled to an amount calculated by
multiplying the current market value or
proceeds from sale by the HHS
awarding agency’s percentage of
participation in the cost of the original
purchase. If the equipment is sold, the
HHS awarding agency may permit the
non-Federal entity to deduct and retain
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75911
from the Federal share $500 or ten
percent of the proceeds, whichever is
less, for its selling and handling
expenses.
(3) The non-Federal entity may
transfer title to the property to the
Federal Government or to an eligible
third party provided that, in such cases,
the non-Federal entity must be entitled
to compensation for its attributable
percentage of the current fair market
value of the property.
(4) In cases where a non-Federal
entity fails to take appropriate
disposition actions, the HHS awarding
agency may direct the non-Federal
entity to take disposition actions.
§ 75.321
Supplies.
See also § 75.453.
(a) Title to supplies will vest in the
non-Federal entity upon acquisition. If
there is a residual inventory of unused
supplies exceeding $5,000 in total
aggregate value upon termination or
completion of the project or program
and the supplies are not needed for any
other Federal award, the non-Federal
entity must retain the supplies for use
on other activities or sell them, but
must, in either case, compensate the
Federal Government for its share. The
amount of compensation must be
computed in the same manner as for
equipment. See § 75.320(e)(2) for the
calculation methodology.
(b) As long as the Federal Government
retains an interest in the supplies, the
non-Federal entity must not use
supplies acquired under a Federal
award to provide services to other
organizations for a fee that is less than
private companies charge for equivalent
services, unless specifically authorized
by Federal statute.
§ 75.322 Intangible property and
copyrights.
(a) Title to intangible property (see
§ 75.2 Intangible property) acquired
under a Federal award vests upon
acquisition in the non-Federal entity.
The non-Federal entity must use that
property for the originally-authorized
purpose, and must not encumber the
property without approval of the HHS
awarding agency. When no longer
needed for the originally authorized
purpose, disposition of the intangible
property must occur in accordance with
the provisions in § 75.320(e).
(b) The non-Federal entity may
copyright any work that is subject to
copyright and was developed, or for
which ownership was acquired, under a
Federal award. The HHS awarding
agency reserves a royalty-free,
nonexclusive and irrevocable right to
reproduce, publish, or otherwise use the
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work for Federal purposes, and to
authorize others to do so.
(c) The non-Federal entity is subject
to applicable regulations governing
patents and inventions, including
government-wide regulations issued by
the Department of Commerce at 37 CFR
part 401.
(d) The Federal Government has the
right to:
(1) Obtain, reproduce, publish, or
otherwise use the data produced under
a Federal award; and
(2) Authorize others to receive,
reproduce, publish, or otherwise use
such data
(e) Freedom of Information Act
(FOIA).
(1) In response to a Freedom of
Information Act (FOIA) request for
research data relating to published
research findings produced under a
Federal award that were used by the
Federal Government in developing an
agency action that has the force and
effect of law, the HHS awarding agency
must request, and the non-Federal entity
must 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 HHS awarding agency obtains the
research data solely in response to a
FOIA request, the HHS awarding 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
Federal agency and the non-Federal
entity. This fee is in addition to any fees
the HHS awarding agency may assess
under the FOIA (5 U.S.C. 552(a)(4)(A)).
(2) Published research findings means
when:
(i) Research findings are published in
a peer-reviewed scientific or technical
journal; or
(ii) A Federal agency publicly and
officially cites the research findings in
support of an agency action that has the
force and effect of law. ‘‘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.
(3) Research data means 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:
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(i) 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
(ii) 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.
(f) The requirements set forth in
paragraph (e)(1) of this section do not
apply to commercial organizations
§ 75.323
Property trust relationship.
Real property, equipment, and
intangible property, that are acquired or
improved with a Federal award must be
held in trust by the non-Federal entity
as trustee for the beneficiaries of the
project or program under which the
property was acquired or improved. The
HHS awarding agency may require the
non-Federal entity to record liens or
other appropriate notices of record to
indicate that personal or real property
has been acquired or improved with a
Federal award and that use and
disposition conditions apply to the
property.
§ 75.324—§ 75.325
[Reserved]
Procurement Standards
§ 75.326
Procurements by states.
When procuring property and services
under a Federal award, a state must
follow the same policies and procedures
it uses for procurements from its nonFederal funds. The state will comply
with § 75.331 and ensure that every
purchase order or other contract
includes any clauses required by
§ 75.335. All other non-Federal entities,
including subrecipients of a state, will
follow §§ 75.327 through 75.335.
§ 75.327
General procurement standards.
(a) The non-Federal entity must use
its own documented procurement
procedures which reflect applicable
State, local, and tribal laws and
regulations, provided that the
procurements conform to applicable
Federal law and the standards identified
in this part.
(b) Non-Federal entities must
maintain oversight to ensure that
contractors perform in accordance with
the terms, conditions, and specifications
of their contracts or purchase orders.
(c)(1) The non-Federal entity must
maintain written standards of conduct
covering conflicts of interest and
governing the actions of its employees
engaged in the selection, award and
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administration of contracts. No
employee, officer, or agent may
participate in the selection, award, or
administration of a contract supported
by a Federal award if he or she has a real
or apparent conflict of interest. Such a
conflict of interest 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 or a
tangible personal benefit from a firm
considered for a contract. The officers,
employees, and agents of the nonFederal entity may neither solicit nor
accept gratuities, favors, or anything of
monetary value from contractors or
parties to subcontracts. However, nonFederal entities may set standards for
situations in which the financial interest
is not substantial or the gift is an
unsolicited item of nominal value. The
standards of conduct must provide for
disciplinary actions to be applied for
violations of such standards by officers,
employees, or agents of the non-Federal
entity.
(2) If the non-Federal entity has a
parent, affiliate, or subsidiary
organization that is not a state, local
government, or Indian tribe, the nonFederal entity must also maintain
written standards of conduct covering
organizational conflicts of interest.
Organizational conflicts of interest
means that because of relationships
with a parent company, affiliate, or
subsidiary organization, the non-Federal
entity is unable or appears to be unable
to be impartial in conducting a
procurement action involving a related
organization.
(d) The non-Federal entity’s
procedures must avoid acquisition of
unnecessary or duplicative items.
Consideration should be given to
consolidating or breaking out
procurements to obtain a more
economical purchase. Where
appropriate, an analysis will be made of
lease versus purchase alternatives, and
any other appropriate analysis to
determine the most economical
approach.
(e) To foster greater economy and
efficiency, and in accordance with
efforts to promote cost-effective use of
shared services across the Federal
Government, the non-Federal entity is
encouraged to enter into state and local
intergovernmental agreements or interentity agreements where appropriate for
procurement or use of common or
shared goods and services.
(f) The non-Federal entity is
encouraged to use Federal excess and
surplus property in lieu of purchasing
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new equipment and property whenever
such use is feasible and reduces project
costs.
(g) The non-Federal entity is
encouraged to use value engineering
clauses in contracts for construction
projects of sufficient size to offer
reasonable opportunities for cost
reductions. Value engineering is a
systematic and creative analysis of each
contract item or task to ensure that its
essential function is provided at the
overall lower cost.
(h) The non-Federal entity must
award contracts only to responsible
contractors possessing the ability to
perform successfully under the terms
and conditions of a proposed
procurement. Consideration will be
given to such matters as contractor
integrity, compliance with public
policy, record of past performance, and
financial and technical resources. In
certain circumstances, contracts with
certain parties are restricted by agencies’
implementation of Executive Orders
12549 and 12689. (See 2 CFR part 376.)
(i) The non-Federal entity must
maintain records sufficient to detail the
history of procurement. These records
will include, but are not necessarily
limited to the following: rationale for
the method of procurement, selection of
contract type, contractor selection or
rejection, and the basis for the contract
price.
(j)(1) The non-Federal entity may use
a time and materials type contract only
after a determination that no other
contract is suitable and if the contract
includes a ceiling price that the
contractor exceeds at its own risk. Time
and materials type contract means a
contract whose cost to a non-Federal
entity is the sum of:
(i) The actual cost of materials; and
(ii) Direct labor hours charged at fixed
hourly rates that reflect wages, general
and administrative expenses, and profit.
(2) Since this formula generates an
open-ended contract price, a time-andmaterials contract provides no positive
profit incentive to the contractor for cost
control or labor efficiency. Therefore,
each contract must set a ceiling price
that the contractor exceeds at its own
risk. Further, the non-Federal entity
awarding such a contract must assert a
high degree of oversight in order to
obtain reasonable assurance that the
contractor is using efficient methods
and effective cost controls.
(k) The non-Federal entity alone must
be responsible, in accordance with good
administrative practice and sound
business judgment, for the settlement of
all contractual and administrative issues
arising out of procurements. These
issues include, but are not limited to,
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source evaluation, protests, disputes,
and claims. These standards do not
relieve the non-Federal entity of any
contractual responsibilities under its
contracts. The HHS awarding agency
will not substitute its judgment for that
of the non-Federal entity unless the
matter is primarily a Federal concern.
Violations of law will be referred to the
local, tribal, state, or Federal authority
having proper jurisdiction.
(l) The type of procuring instruments
used must 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.
§ 75.328
Competition.
(a) All procurement transactions must
be conducted in a manner providing full
and open competition consistent with
the standards of this section. In order to
ensure objective contractor performance
and eliminate unfair competitive
advantage, contractors that develop or
draft specifications, requirements,
statements of work, or invitations for
bids or requests for proposals must be
excluded from competing for such
procurements. Some of the situations
considered to be restrictive of
competition include but are not limited
to:
(1) Placing unreasonable requirements
on firms in order for them to qualify to
do business;
(2) Requiring unnecessary experience
and excessive bonding;
(3) Noncompetitive pricing practices
between firms or between affiliated
companies;
(4) Noncompetitive contracts to
consultants that are on retainer
contracts;
(5) Organizational conflicts of interest;
(6) Specifying only a ‘‘brand name’’
product instead of allowing ‘‘an equal’’
product to be offered and describing the
performance or other relevant
requirements of the procurement; and
(7) Any arbitrary action in the
procurement process.
(b) The non-Federal entity must
conduct procurements in a manner that
prohibits the use of statutorily or
administratively imposed state, local, or
tribal geographical preferences in the
evaluation of bids or proposals, except
in those cases where applicable Federal
statutes expressly mandate or encourage
geographic preference. Nothing in this
section preempts state licensing laws.
When contracting for architectural and
engineering (A/E) services, geographic
location may be a selection criterion
provided its application leaves an
appropriate number of qualified firms,
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given the nature and size of the project,
to compete for the contract.
(c) The non-Federal entity must have
written procedures for procurement
transactions. These procedures must
ensure that all solicitations:
(1) Incorporate a clear and accurate
description of the technical
requirements for the material, product,
or service to be procured. Such
description must not, in competitive
procurements, contain features which
unduly restrict competition. The
description may include a statement of
the qualitative nature of the material,
product or service to be procured and,
when necessary, must set forth those
minimum essential characteristics and
standards to which it must conform if it
is to satisfy its intended use. Detailed
product specifications should be
avoided if at all possible. When it is
impractical or uneconomical to make a
clear and accurate description of the
technical requirements, a ‘‘brand name
or equivalent’’ description may be used
as a means to define the performance or
other salient requirements of
procurement. The specific features of
the named brand which must be met by
offers must be clearly stated; and
(2) Identify all requirements which
the offerors must fulfill and all other
factors to be used in evaluating bids or
proposals.
(d) The non-Federal entity must
ensure that all prequalified lists of
persons, firms, or products which are
used in acquiring goods and services are
current and include enough qualified
sources to ensure maximum open and
free competition. Also, the non-Federal
entity must not preclude potential
bidders from qualifying during the
solicitation period.
§ 75.329
Procurement procedures.
The non-Federal entity must use one
of the following methods of
procurement.
(a) Procurement by micro-purchases.
Procurement by micro-purchase is the
acquisition of supplies or services, the
aggregate dollar amount of which does
not exceed the micro-purchase
threshold (See micro-purchase). To the
extent practicable, the non-Federal
entity must distribute micro-purchases
equitably among qualified suppliers.
Micro-purchases may be awarded
without soliciting competitive
quotations if the non-Federal entity
considers the price to be reasonable.
(b) Procurement by small purchase
procedures. Small purchase procedures
are those relatively simple and informal
procurement methods for securing
services, supplies, or other property that
do not cost more than the Simplified
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Acquisition Threshold. If small
purchase procedures are used, price or
rate quotations must be obtained from
an adequate number of qualified
sources.
(c) Procurement by sealed bids
(formal advertising). Bids are publicly
solicited and a firm fixed price contract
(lump sum or unit price) is awarded to
the responsible bidder whose bid,
conforming with all the material terms
and conditions of the invitation for bids,
is the lowest in price. The sealed bid
method is the preferred method for
procuring construction, if the conditions
in paragraph (c)(1) of this section apply.
(1) In order for sealed bidding to be
feasible, the following conditions
should be present:
(i) A complete, adequate, and realistic
specification or purchase description is
available;
(ii) Two or more responsible bidders
are willing and able to compete
effectively for the business; and
(iii) The procurement lends itself to a
firm fixed price contract and the
selection of the successful bidder can be
made principally on the basis of price.
(2) If sealed bids are used, the
following requirements apply:
(i) Bids must be solicited from an
adequate number of known suppliers,
providing them sufficient response time
prior to the date set for opening the
bids, for state, local, and tribal
governments, the invitation for bids
must be publically advertised;
(ii) The invitation for bids, which will
include any specifications and pertinent
attachments, must define the items or
services in order for the bidder to
properly respond;
(iii) All bids will be opened at the
time and place prescribed in the
invitation for bids, for state, local, and
tribal governments, the bids must be
opened publically;
(iv) A firm fixed price contract award
will be made in writing to the lowest
responsive and responsible bidder.
Where specified in bidding documents,
factors such as discounts, transportation
cost, and life cycle costs must be
considered in determining which bid is
lowest. Payment discounts will only be
used to determine the low bid when
prior experience indicates that such
discounts are usually taken advantage
of; and
(v) Any or all bids may be rejected if
there is a sound documented reason.
(d) Procurement by competitive
proposals. The technique of competitive
proposals is normally conducted with
more than one source submitting an
offer, and either a fixed price or costreimbursement type contract is
awarded. It is generally used when
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conditions are not appropriate for the
use of sealed bids. If this method is
used, the following requirements apply:
(1) Requests for proposals must be
publicized and identify all evaluation
factors and their relative importance.
Any response to publicized requests for
proposals must be considered to the
maximum extent practical;
(2) Proposals must be solicited from
an adequate number of qualified
sources;
(3) The non-Federal entity must have
a written method for conducting
technical evaluations of the proposals
received and for selecting recipients;
(4) Contracts must be awarded to the
responsible firm whose proposal is most
advantageous to the program, with price
and other factors considered; and
(5) The non-Federal entity may use
competitive proposal procedures for
qualifications-based procurement of
architectural/engineering (A/E)
professional services whereby
competitors’ qualifications are evaluated
and the most qualified competitor is
selected, subject to negotiation of fair
and reasonable compensation. The
method, where price is not used as a
selection factor, can only be used in
procurement of A/E professional
services. It cannot be used to purchase
other types of services though A/E firms
are a potential source to perform the
proposed effort.
(e) [Reserved]
(f) Procurement by noncompetitive
proposals. Procurement by
noncompetitive proposals is
procurement through solicitation of a
proposal from only one source and may
be used only when one or more of the
following circumstances apply:
(1) The item is available only from a
single source;
(2) The public exigency or emergency
for the requirement will not permit a
delay resulting from competitive
solicitation;
(3) The HHS awarding agency or passthrough entity expressly authorizes
noncompetitive proposals in response to
a written request from the non-Federal
entity; or
(4) After solicitation of a number of
sources, competition is determined
inadequate.
§ 75.330 Contracting with small and
minority businesses, women’s business
enterprises, and labor surplus area firms.
(a) The non-Federal entity must take
all necessary affirmative steps to assure
that minority businesses, women’s
business enterprises, and labor surplus
area firms are used when possible.
(b) Affirmative steps must include:
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(1) Placing qualified small and
minority businesses and women’s
business enterprises on solicitation lists;
(2) Assuring that small and minority
businesses, and women’s business
enterprises are solicited whenever they
are potential sources;
(3) Dividing total requirements, when
economically feasible, into smaller tasks
or quantities to permit maximum
participation by small and minority
businesses, and women’s business
enterprises;
(4) Establishing delivery schedules,
where the requirement permits, which
encourage participation by small and
minority businesses, and women’s
business enterprises;
(5) Using the services and assistance,
as appropriate, of such organizations as
the Small Business Administration and
the Minority Business Development
Agency of the Department of Commerce;
and
(6) Requiring the prime contractor, if
subcontracts are to be let, to take the
affirmative steps listed in paragraphs
(b)(1) through (5) of this section.
§ 75.331 Procurement of recovered
materials.
A non-Federal entity that is a state
agency or agency of a political
subdivision of a state and its contractors
must comply with section 6002 of the
Solid Waste Disposal Act, as amended
by the Resource Conservation and
Recovery Act. The requirements of
Section 6002 include procuring only
items designated in guidelines of the
Environmental Protection Agency (EPA)
at 40 CFR part 247 that contain the
highest percentage of recovered
materials practicable, consistent with
maintaining a satisfactory level of
competition, where the purchase price
of the item exceeds $10,000 or the value
of the quantity acquired during the
preceding fiscal year exceeded $10,000;
procuring solid waste management
services in a manner that maximizes
energy and resource recovery; and
establishing an affirmative procurement
program for procurement of recovered
materials identified in the EPA
guidelines.
§ 75.332
Contract cost and price.
(a) The non-Federal entity must
perform a cost or price analysis in
connection with every procurement
action in excess of the Simplified
Acquisition Threshold including
contract modifications. The method and
degree of analysis is dependent on the
facts surrounding the particular
procurement situation, but as a starting
point, the non-Federal entity must make
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independent estimates before receiving
bids or proposals.
(b) The non-Federal entity must
negotiate profit as a separate element of
the price for each contract in which
there is no price competition and in all
cases where cost analysis is performed.
To establish a fair and reasonable profit,
consideration must be given to the
complexity of the work to be performed,
the risk borne by the contractor, the
contractor’s investment, the amount of
subcontracting, the quality of its record
of past performance, and industry profit
rates in the surrounding geographical
area for similar work.
(c) Costs or prices based on estimated
costs for contracts under the Federal
award are allowable only to the extent
that costs incurred or cost estimates
included in negotiated prices would be
allowable for the non-Federal entity
under Subpart E of this part. The nonFederal entity may reference its own
cost principles that comply with the
Federal cost principles.
(d) The cost plus a percentage of cost
and percentage of construction cost
methods of contracting must not be
used.
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§ 75.333 HHS awarding agency or passthrough entity review.
(a) The non-Federal entity must make
available, upon request of the HHS
awarding agency or pass-through entity,
technical specifications on proposed
procurements where the HHS awarding
agency or pass-through entity believes
such review is needed to ensure that the
item or service specified is the one
being proposed for acquisition. This
review generally will take place prior to
the time the specification is
incorporated into a solicitation
document. However, if the non-Federal
entity desires to have the review
accomplished after a solicitation has
been developed, the HHS awarding
agency or pass-through entity may still
review the specifications, with such
review usually limited to the technical
aspects of the proposed purchase.
(b) The non-Federal entity must make
available upon request, for the HHS
awarding agency or pass-through entity
pre-procurement review, procurement
documents, such as requests for
proposals or invitations for bids, or
independent cost estimates, when:
(1) The non-Federal entity’s
procurement procedures or operation
fails to comply with the procurement
standards in this part;
(2) The procurement is expected to
exceed the Simplified Acquisition
Threshold and is to be awarded without
competition or only one bid or offer is
received in response to a solicitation;
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(3) The procurement, which is
expected to exceed the Simplified
Acquisition Threshold, specifies a
‘‘brand name’’ product;
(4) The proposed contract is more
than the Simplified Acquisition
Threshold and is to be awarded to other
than the apparent low bidder under a
sealed bid procurement; or
(5) A proposed contract modification
changes the scope of a contract or
increases the contract amount by more
than the Simplified Acquisition
Threshold.
(c) The non-Federal entity is exempt
from the pre-procurement review in
paragraph (b) of this section if the HHS
awarding agency or pass-through entity
determines that its procurement systems
comply with the standards of this part.
(1) The non-Federal entity may
request that its procurement system be
reviewed by the HHS awarding agency
or pass-through entity to determine
whether its system meets these
standards in order for its system to be
certified. Generally, these reviews must
occur where there is continuous highdollar funding, and third party contracts
are awarded on a regular basis;
(2) The non-Federal entity may selfcertify its procurement system. Such
self-certification must not limit the HHS
awarding agency’s right to survey the
system. Under a self-certification
procedure, the HHS awarding agency
may rely on written assurances from the
non-Federal entity that it is complying
with these standards. The non-Federal
entity must cite specific policies,
procedures, regulations, or standards as
being in compliance with these
requirements and have its system
available for review.
§ 75.334
Bonding requirements.
For construction or facility
improvement contracts or subcontracts
exceeding the Simplified Acquisition
Threshold, the HHS awarding agency or
pass-through entity may accept the
bonding policy and requirements of the
non-Federal entity provided that the
HHS awarding agency or pass-through
entity has made a determination that the
Federal interest is adequately protected.
If such a determination has not been
made, the minimum requirements must
be as follows:
(a) A bid guarantee from each bidder
equivalent to five percent of the bid
price. The ‘‘bid guarantee’’ must consist
of a firm commitment such as a bid
bond, certified check, or other
negotiable instrument accompanying a
bid as assurance that the bidder will,
upon acceptance of the bid, execute
such contractual documents as may be
required within the time specified.
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(b) 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.
(c) A payment bond on the part of the
contractor for 100 percent of the
contract price. A ‘‘payment bond’’ is one
executed in connection with a contract
to assure payment as required by law of
all persons supplying labor and material
in the execution of the work provided
for in the contract.
(d) 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.
§ 75.335
Contract provisions.
The non-Federal entity’s contracts
must contain the applicable provisions
described in Appendix II to this part.
§ 75.336–§ 75.340
[Reserved]
Performance and Financial Monitoring
and Reporting
§ 75.341
Financial reporting.
Unless otherwise approved by OMB,
the HHS awarding agency may solicit
only the standard, OMB-approved
government-wide data elements for
collection of financial information (at
time of publication the Federal
Financial Report or such future
collections as may be approved by OMB
and listed on the OMB Web site). This
information must be collected with the
frequency required by the terms and
conditions of the Federal award, but no
less frequently than annually nor more
frequently than quarterly except in
unusual circumstances, for example
where more frequent reporting is
necessary for the effective monitoring of
the Federal award or could significantly
affect program outcomes, and preferably
in coordination with performance
reporting.
§ 75.342 Monitoring and reporting program
performance.
(a) Monitoring by the non-Federal
entity. The non-Federal entity is
responsible for oversight of the
operations of the Federal award
supported activities. The non-Federal
entity must monitor its activities under
Federal awards to assure compliance
with applicable Federal requirements
and performance expectations are being
achieved. Monitoring by the nonFederal entity must cover each program,
function or activity. See also § 75.352.
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(b) Non-construction performance
reports. The HHS awarding agency must
use standard, OMB-approved data
elements for collection of performance
information (including performance
progress reports, Research Performance
Progress Report, or such future
collections as may be approved by OMB
and listed on the OMB Web site).
(1) The non-Federal entity must
submit performance reports at the
interval required by the HHS awarding
agency or pass-through entity to best
inform improvements in program
outcomes and productivity. Intervals
must be no less frequent than annually
nor more frequent than quarterly except
in unusual circumstances, for example
where more frequent reporting is
necessary for the effective monitoring of
the Federal award or could significantly
affect program outcomes. Annual
reports must be due 90 calendar days
after the reporting period; quarterly or
semiannual reports must be due 30
calendar days after the reporting period.
Alternatively, the HHS awarding agency
or pass-through entity may require
annual reports before the anniversary
dates of multiple year Federal awards.
The final performance report will be
due 90 calendar days after the period of
performance end date. If a justified
request is submitted by a non-Federal
entity, the HHS awarding agency may
extend the due date for any performance
report.
(2) The non-Federal entity must
submit performance reports using OMBapproved government-wide standard
information collections when providing
performance information. As
appropriate in accordance with the
above-mentioned information
collections, these reports will contain,
for each Federal award, brief
information on the following unless
other collections are approved by OMB:
(i) A comparison of actual
accomplishments to the objectives of the
Federal award established for the
period. Where the accomplishments of
the Federal award can be quantified, a
computation of the cost (for example,
related to units of accomplishment) may
be required if that information will be
useful. Where performance trend data
and analysis would be informative to
the HHS awarding agency program, the
HHS awarding agency should include
this as a performance reporting
requirement.
(ii) The reasons why established goals
were not met, if appropriate.
(iii) Additional pertinent information
including, when appropriate, analysis
and explanation of cost overruns or high
unit costs.
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(c) Construction performance reports.
For the most part, onsite technical
inspections and certified percentage of
completion data are relied on heavily by
HHS awarding agencies and passthrough entities to monitor progress
under Federal awards and subawards
for construction. The HHS awarding
agency may require additional
performance reports only when
considered necessary.
(d) Significant developments. Events
may occur between the scheduled
performance reporting dates that have
significant impact upon the supported
activity. In such cases, the non-Federal
entity must inform the HHS awarding
agency or pass-through entity as soon as
the following types of conditions
become known:
(1) Problems, delays, or adverse
conditions which will materially impair
the ability to meet the objective of the
Federal award. This disclosure must
include a statement of the action taken,
or contemplated, and any assistance
needed to resolve the situation.
(2) Favorable developments which
enable meeting time schedules and
objectives sooner or at less cost than
anticipated or producing more or
different beneficial results than
originally planned.
(e) The HHS awarding agency may
make site visits as warranted by
program needs.
(f) The HHS awarding agency may
waive any performance report required
by this part if not needed.
§ 75.343
Reporting on real property.
The HHS awarding agency or passthrough entity must require a nonFederal entity to submit reports at least
annually on the status of real property
in which the Federal Government
retains an interest, unless the Federal
interest in the real property extends 15
years or longer. In those instances where
the Federal interest attached is for a
period of 15 years or more, the HHS
awarding agency or pass-through entity,
at its option, may require the nonFederal entity to report at various multiyear frequencies (e.g., every two years or
every three years, not to exceed a fiveyear reporting period; or an HHS
awarding agency or pass-through entity
may require annual reporting for the
first three years of a Federal award and
thereafter require reporting every five
years).
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§ 75.344–§ 75.350
[Reserved]
Subrecipient Monitoring and
Management
§ 75.351 Subrecipient and contractor
determinations.
The non-Federal entity may
concurrently receive Federal awards as
a recipient, a subrecipient, and a
contractor, depending on the substance
of its agreements with HHS awarding
agencies and pass-through entities.
Therefore, a pass-through entity must
make case-by-case determinations
whether each agreement it makes for the
disbursement of Federal program funds
casts the party receiving the funds in the
role of a subrecipient or a contractor.
The HHS awarding agency may supply
and require recipients to comply with
additional guidance to support these
determinations provided such guidance
does not conflict with this section.
(a) Subrecipients. A subaward is for
the purpose of carrying out a portion of
a Federal award and creates a Federal
assistance relationship with the
subrecipient. See § 75.2 Subaward.
Characteristics which support the
classification of the non-Federal entity
as a subrecipient include when the nonFederal entity:
(1) Determines who is eligible to
receive what Federal assistance;
(2) Has its performance measured in
relation to whether objectives of a
Federal program were met;
(3) Has responsibility for
programmatic decision making;
(4) Is responsible for adherence to
applicable Federal program
requirements specified in the Federal
award; and
(5) In accordance with its agreement,
uses the Federal funds to carry out a
program for a public purpose specified
in authorizing statute, as opposed to
providing goods or services for the
benefit of the pass-through entity.
(b) Contractors. A contract is for the
purpose of obtaining goods and services
for the non-Federal entity’s own use and
creates a procurement relationship with
the contractor. See § 75.2 Contract.
Characteristics indicative of a
procurement relationship between the
non-Federal entity and a contractor are
when the non-Federal entity receiving
the Federal funds:
(1) Provides the goods and services
within normal business operations;
(2) Provides similar goods or services
to many different purchasers;
(3) Normally operates in a competitive
environment;
(4) Provides goods or services that are
ancillary to the operation of the Federal
program; and
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(5) Is not subject to compliance
requirements of the Federal program as
a result of the agreement, though similar
requirements may apply for other
reasons.
(c) Use of judgment in making
determination. In determining whether
an agreement between a pass-through
entity and another non-Federal entity
casts the latter as a subrecipient or a
contractor, the substance of the
relationship is more important than the
form of the agreement. All of the
characteristics listed above may not be
present in all cases, and the passthrough entity must use judgment in
classifying each agreement as a
subaward or a procurement contract.
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§ 75.352
entities.
Requirements for pass-through
All pass-through entities must:
(a) Ensure that every subaward is
clearly identified to the subrecipient as
a subaward and includes the following
information at the time of the subaward
and if any of these data elements
change, include the changes in
subsequent subaward modification.
When some of this information is not
available, the pass-through entity must
provide the best information available to
describe the Federal award and
subaward. Required information
includes:
(1) Federal Award Identification.
(i) Subrecipient name (which must
match the name associated with their
unique entity identifier);
(ii) Subrecipient’s unique entity
identifier;
(iii) Federal Award Identification
Number (FAIN);
(iv) Federal Award Date (see § 75.2
Federal award date);
(v) Subaward Period of Performance
Start and End Date;
(vi) Amount of Federal Funds
Obligated by this action;
(vii) Total Amount of Federal Funds
Obligated to the subrecipient;
(viii) Total Amount of the Federal
Award;
(ix) Federal award project description,
as required to be responsive to the
Federal Funding Accountability and
Transparency Act (FFATA);
(x) Name of HHS awarding agency,
pass-through entity, and contact
information for awarding official,
(xi) CFDA Number and Name; the
pass-through entity must identify the
dollar amount made available under
each Federal award and the CFDA
number at time of disbursement;
(xii) Identification of whether the
award is R&D; and
(xiii) Indirect cost rate for the Federal
award (including if the de minimis rate
is charged per § 75.414).
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(2) All requirements imposed by the
pass-through entity on the subrecipient
so that the Federal award is used in
accordance with Federal statutes,
regulations and the terms and
conditions of the Federal award.
(3) Any additional requirements that
the pass-through entity imposes on the
subrecipient in order for the passthrough entity to meet its own
responsibility to the HHS awarding
agency including identification of any
required financial and performance
reports;
(4) An approved federally recognized
indirect cost rate negotiated between the
subrecipient and the Federal
Government or, if no such rate exists,
either a rate negotiated between the
pass-through entity and the subrecipient
(in compliance with this part), or a de
minimis indirect cost rate as defined in
§ 75.414(f).
(5) A requirement that the
subrecipient permit the pass-through
entity and auditors to have access to the
subrecipient’s records and financial
statements as necessary for the passthrough entity to meet the requirements
of this part; and
(6) Appropriate terms and conditions
concerning closeout of the subaward.
(b) Evaluate each subrecipient’s risk
of noncompliance with Federal statutes,
regulations, and the terms and
conditions of the subaward for purposes
of determining the appropriate
subrecipient monitoring described in
paragraphs (d) and (e) of this section,
which may include consideration of
such factors as:
(1) The subrecipient’s prior
experience with the same or similar
subawards;
(2) The results of previous audits
including whether or not the
subrecipient receives a Single Audit in
accordance with Subpart F, and the
extent to which the same or similar
subaward has been audited as a major
program;
(3) Whether the subrecipient has new
personnel or new or substantially
changed systems; and
(4) The extent and results of HHS
awarding agency monitoring (e.g., if the
subrecipient also receives Federal
awards directly from a HHS awarding
agency).
(c) Consider imposing specific
subaward conditions upon a
subrecipient if appropriate as described
in § 75.207.
(d) Monitor the activities of the
subrecipient as necessary to ensure that
the subaward is used for authorized
purposes, in compliance with Federal
statutes, regulations, and the terms and
conditions of the subaward; and that
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75917
subaward performance goals are
achieved. Pass-through entity
monitoring of the subrecipient must
include:
(1) Reviewing financial and
performance reports required by the
pass-through entity.
(2) Following-up and ensuring that
the subrecipient takes timely and
appropriate action on all deficiencies
pertaining to the Federal award
provided to the subrecipient from the
pass-through entity detected through
audits, on-site reviews, and other
means.
(3) Issuing a management decision for
audit findings pertaining to the Federal
award provided to the subrecipient from
the pass-through entity as required by
§ 75.521.
(e) Depending upon the pass-through
entity’s assessment of risk posed by the
subrecipient (as described in paragraph
(b) of this section), the following
monitoring tools may be useful for the
pass-through entity to ensure proper
accountability and compliance with
program requirements and achievement
of performance goals:
(1) Providing subrecipients with
training and technical assistance on
program-related matters; and
(2) Performing on-site reviews of the
subrecipient’s program operations;
(3) Arranging for agreed-uponprocedures engagements as described in
§ 75.425.
(f) Verify that every subrecipient is
audited as required by Subpart F of this
part when it is expected that the
subrecipient’s Federal awards expended
during the respective fiscal year equaled
or exceeded the threshold set forth in
§ 75.501.
(g) Consider whether the results of the
subrecipient’s audits, on-site reviews, or
other monitoring indicate conditions
that necessitate adjustments to the passthrough entity’s own records.
(h) Consider taking enforcement
action against noncompliant
subrecipients as described in § 75.371
and in program regulations.
§ 75.353
Fixed amount subawards.
With prior written approval from the
HHS awarding agency, a pass-through
entity may provide subawards based on
fixed amounts up to the Simplified
Acquisition Threshold, provided that
the subawards meet the requirements
for fixed amount awards in § 75.201.
§ 75.354–§ 75.360
[Reserved]
Record Retention and Access
§ 75.361 Retention requirements for
records.
Financial records, supporting
documents, statistical records, and all
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other non-Federal entity records
pertinent to a Federal award must be
retained for a period of three years from
the date of submission of the final
expenditure report or, for Federal
awards that are renewed quarterly or
annually, from the date of the
submission of the quarterly or annual
financial report, respectively, as
reported to the HHS awarding agency or
pass-through entity in the case of a
subrecipient. HHS awarding agencies
and pass-through entities must not
impose any other record retention
requirements upon non-Federal entities.
The only exceptions are the following:
(a) If any litigation, claim, or audit is
started before the expiration of the 3year period, the records must be
retained until all litigation, claims, or
audit findings involving the records
have been resolved and final action
taken.
(b) When the non-Federal entity is
notified in writing by the HHS awarding
agency, cognizant agency for audit,
oversight agency for audit, cognizant
agency for indirect costs, or passthrough entity to extend the retention
period.
(c) Records for real property and
equipment acquired with Federal funds
must be retained for 3 years after final
disposition.
(d) When records are transferred to or
maintained by the HHS awarding
agency or pass-through entity, the 3-year
retention requirement is not applicable
to the non-Federal entity.
(e) Records for program income
transactions after the period of
performance. In some cases, recipients
must report program income after the
period of performance. Where there is
such a requirement, the retention period
for the records pertaining to the earning
of the program income starts from the
end of the non-Federal entity’s fiscal
year in which the program income is
earned.
(f) Indirect cost rate proposals and
cost allocations plans. This paragraph
applies 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
proposal, plan, or other computation is
required to be submitted to the Federal
Government (or to the pass-through
entity) to form the basis for negotiation
of the rate, then the 3-year retention
period for its supporting records starts
from the date of such submission.
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(2) If not submitted for negotiation. If
the proposal, plan, or other computation
is not required to be submitted to the
Federal Government (or to the passthrough entity) for negotiation purposes,
then the 3-year retention period for the
proposal, plan, or computation and its
supporting records starts from the end
of the fiscal year (or other accounting
period) covered by the proposal, plan,
or other computation.
§ 75.362
Requests for transfer or records.
The HHS awarding agency must
request transfer of certain records to its
custody from the non-Federal entity
when it determines that the records
possess long-term retention value.
However, in order to avoid duplicate
recordkeeping, the HHS awarding
agency may make arrangements for the
non-Federal entity to retain any records
that are continuously needed for joint
use.
§ 75.363 Methods for collection,
transmission and storage of information.
In accordance with Executive Order
13642, the HHS awarding agency and
the non-Federal entity should,
whenever practicable, collect, transmit,
and store Federal award-related
information in open and machine
readable formats rather than in closed
formats or on paper. The HHS awarding
agency or pass-through entity must
always provide or accept paper versions
of Federal award-related information to
and from the non-Federal entity upon
request. If paper copies are submitted,
the HHS awarding agency or passthrough entity must not require more
than an original and two copies. When
original records are electronic and
cannot be altered, there is no need to
create and retain paper copies. When
original records are paper, electronic
versions may be substituted through the
use of duplication or other forms of
electronic media provided that they are
subject to periodic quality control
reviews, provide reasonable safeguards
against alteration, and remain readable.
§ 75.364
Access to records.
(a) Records of non-Federal entities.
The HHS awarding agency, Inspectors
General, the Comptroller General of the
United States, and the pass-through
entity, or any of their authorized
representatives, must have the right of
access to any documents, papers, or
other records of the non-Federal entity
which are pertinent to the Federal
award, in order to make audits,
examinations, excerpts, and transcripts.
The right also includes timely and
reasonable access to the non-Federal
entity’s personnel for the purpose of
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interview and discussion related to such
documents.
(b) Only under extraordinary and rare
circumstances would such access
include review of the true name of
victims of a crime. Routine monitoring
cannot be considered extraordinary and
rare circumstances that would
necessitate access to this information.
When access to the true name of victims
of a crime is necessary, appropriate
steps to protect this sensitive
information must be taken by both the
non-Federal entity and the HHS
awarding agency. Any such access,
other than under a court order or
subpoena pursuant to a bona fide
confidential investigation, must be
approved by the head of the HHS
awarding agency or delegate.
(c) Expiration of right of access. The
rights of access in this section are not
limited to the required retention period
but last as long as the records are
retained. HHS awarding agencies and
pass-through entities must not impose
any other access requirements upon
non-Federal entities.
§ 75.365 Restrictions on public access to
records.
No HHS awarding agency may place
restrictions on the non-Federal entity
that limit public access to the records of
the non-Federal entity pertinent to a
Federal award, except for protected
personally identifiable information (PII)
or when the HHS awarding agency can
demonstrate that such records will be
kept confidential and would have been
exempted from disclosure pursuant to
the Freedom of Information Act (5
U.S.C. 552) or controlled unclassified
information pursuant to Executive
Order 13556 if the records had belonged
to the HHS awarding agency. The
Freedom of Information Act (5 U.S.C.
552) (FOIA) does not apply to those
records that remain under a non-Federal
entity’s control except as required under
§ 75.322. Unless required by Federal,
state, local, or tribal statute, non-Federal
entities are not required to permit
public access to their records. The nonFederal entity’s records provided to a
Federal agency generally will be subject
to FOIA and applicable exemptions.
§ 75.366–§ 75.370
[Reserved]
Remedies for Noncompliance
§ 75.371
Remedies for noncompliance.
If a non-Federal entity fails to comply
with Federal statutes, regulations, or the
terms and conditions of a Federal
award, the HHS awarding agency or
pass-through entity may impose
additional conditions, as described in
§ 75.207. If the HHS awarding agency or
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pass-through entity determines that
noncompliance cannot be remedied by
imposing additional conditions, the
HHS awarding agency or pass-through
entity may take one or more of the
following actions, as appropriate in the
circumstances:
(a) Temporarily withhold cash
payments pending correction of the
deficiency by the non-Federal entity or
more severe enforcement action by the
HHS awarding agency or pass-through
entity.
(b) 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.
(c) Wholly or partly suspend
(suspension of award activities) or
terminate the Federal award.
(d) Initiate suspension or debarment
proceedings as authorized under 2 CFR
part 180 and HHS awarding agency
regulations at 2 CFR part 376 (or in the
case of a pass-through entity,
recommend such a proceeding be
initiated by a HHS awarding agency).
(e) Withhold further Federal awards
for the project or program.
(f) Take other remedies that may be
legally available.
tkelley on DSK3SPTVN1PROD with RULES2
§ 75.372
Termination.
(a) The Federal award may be
terminated in whole or in part as
follows:
(1) By the HHS awarding agency or
pass-through entity, if a non-Federal
entity fails to comply with terms and
conditions of a Federal award;
(2) By the HHS awarding agency or
pass-through entity for cause;
(3) By the HHS awarding agency or
pass-through entity with the consent of
the non-Federal entity, in which case
the two parties must agree upon the
termination conditions, including the
effective date and, in the case of partial
termination, the portion to be
terminated; or
(4) By the non-Federal entity upon
sending to the HHS awarding agency or
pass-through entity 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 HHS awarding agency or passthrough entity determines in the case of
partial termination that the reduced or
modified portion of the Federal award
or subaward will not accomplish the
purposes for which the Federal award
was made, the HHS awarding agency or
pass-through entity may terminate the
Federal award in its entirety.
(b) When a Federal award is
terminated or partially terminated, both
the HHS awarding agency or pass-
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through entity and the non-Federal
entity remain responsible for
compliance with the requirements in
§§ 75.381and 75.386.
§ 75.373 Notification of termination
requirement.
(a) The HHS awarding agency or passthrough entity must provide to the nonFederal entity a notice of termination.
(b) If the Federal award is terminated
for the non-Federal entity’s failure to
comply with the Federal statutes,
regulations, or terms and conditions of
the Federal award, the notification must
state that the termination decision may
be considered in evaluating future
applications received from the nonFederal entity.
(c) Upon termination of a Federal
award, the HHS awarding agency must
provide the information required under
FFATA to the Federal Web site
established to fulfill the requirements of
FFATA, and update or notify any other
relevant government-wide systems or
entities of any indications of poor
performance as required by 41 U.S.C.
417b and 31 U.S.C. 3321 and
implementing guidance at 2 CFR part 77
(forthcoming at time of publication). See
also the requirements for Suspension
and Debarment at 2 CFR part 180.
§ 75.374 Opportunities to object, hearings,
and appeals.
(a) Upon taking any remedy for noncompliance, the HHS awarding agency
must provide the non-Federal entity an
opportunity to object and provide
information and documentation
challenging the suspension or
termination action, in accordance with
written processes and procedures
published by the HHS awarding agency.
The HHS awarding agency or passthrough entity must comply with any
requirements for hearings, appeals or
other administrative proceedings to
which the non-Federal entity is entitled
under any statute or regulation
applicable to the action involved.
(b) See also:
(1) 42 CFR part 50, subpart D for the
Public Health Service Appeals
Procedures,
(2) 45 CFR part 16 for the Procedures
of the Departmental Appeals Board, and
(3) 45 CFR part 95, subpart A for the
time limits for states to file claims.
(4) 45 CFR part 95, subpart E for the
State cost allocation plan disapprovals.
§ 75.375 Effects of suspension and
termination.
Costs to the non-Federal entity
resulting from obligations incurred by
the non-Federal entity during a
suspension or after termination of a
Federal award or subaward are not
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allowable unless the HHS awarding
agency or pass-through entity expressly
authorizes them in the notice of
suspension or termination or
subsequently. However, costs during
suspension or after termination are
allowable if:
(a) The costs result from obligations
which were properly incurred by the
non-Federal entity before the effective
date of suspension or termination, are
not in anticipation of it; and
(b) The costs would be allowable if
the Federal award was not suspended or
expired normally at the end of the
period of performance in which the
termination takes effect.
§ 75.376–§ 75.380
[Reserved]
Closeout
§ 75.381
Closeout.
The HHS awarding agency or passthrough entity will close-out the Federal
award when it determines that all
applicable administrative actions and
all required work of the Federal award
have been completed by the non-Federal
entity. This section specifies the actions
the non-Federal entity and HHS
awarding agency or pass-through entity
must take to complete this process at the
end of the period of performance.
(a) The non-Federal entity must
submit, no later than 90 calendar days
after the end date of the period of
performance, all financial, performance,
and other reports as required by the
terms and conditions of the Federal
award. The HHS awarding agency or
pass-through entity may approve
extensions when requested by the nonFederal entity.
(b) Unless the HHS awarding agency
or pass-through entity authorizes an
extension, a non-Federal entity must
liquidate all obligations incurred under
the Federal award not later than 90
calendar days after the end date of the
period of performance as specified in
the terms and conditions of the Federal
award.
(c) The HHS awarding agency or passthrough entity must make prompt
payments to the non-Federal entity for
allowable reimbursable costs under the
Federal award being closed out.
(d) The non-Federal entity must
promptly refund any balances of
unobligated cash that the HHS awarding
agency or pass-through entity paid in
advance or paid and that are not
authorized to be retained by the nonFederal entity for use in other projects.
See OMB Circular A–129 and see
§ 75.391 for requirements regarding
unreturned amounts that become
delinquent debts.
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(e) Consistent with the terms and
conditions of the Federal award, the
HHS awarding agency or pass-through
entity must make a settlement for any
upward or downward adjustments to
the Federal share of costs after closeout
reports are received.
(f) The non-Federal entity must
account for any real and personal
property acquired with Federal funds or
received from the Federal Government
in accordance with §§ 75.317 through
75.323 and 75.343.
(g) The HHS awarding agency or passthrough entity should complete all
closeout actions for Federal awards no
later than 180 calendar days after
receipt and acceptance of all required
final reports.
§ 75.382–§ 75.385
[Reserved]
Post-Closeout Adjustments and
Continuing Responsibilities
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§ 75.386 Post-Closeout Adjustments and
Continuing Responsibilities.
(a) The closeout of a Federal award
does not affect any of the following:
(1) The right of the HHS awarding
agency or pass-through entity to
disallow costs and recover funds on the
basis of a later audit or other review.
The HHS awarding agency or passthrough entity must make any cost
disallowance determination and notify
the non-Federal entity within the record
retention period.
(2) The obligation of the non-Federal
entity to return any funds due as a result
of later refunds, corrections, or other
transactions including final indirect cost
rate adjustments.
(3) Audit requirements in Subpart F of
this part.
(4) Property management and
disposition requirements in §§ 75.317
through 75.323.
(5) Records retention as required in
§§ 75.361 through 75.365.
(b) After closeout of the Federal
award, a relationship created under the
Federal award may be modified or
ended in whole or in part with the
consent of the HHS awarding agency or
pass-through entity and the non-Federal
entity, provided the responsibilities of
the non-Federal entity 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 non-Federal
entity, as appropriate.
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§ 75.387–§ 75.390
[Reserved]
Subpart E—Cost Principles
and support the accumulation of costs
as required by the principles, and must
provide for adequate documentation to
support costs charged to the Federal
award.
(e) In reviewing, negotiating and
approving cost allocation plans or
indirect cost proposals, the cognizant
agency for indirect costs should
generally assure that the non-Federal
entity is applying these cost accounting
principles on a consistent basis during
their review and negotiation of indirect
cost proposals. Where wide variations
exist in the treatment of a given cost
item by the non-Federal entity, the
reasonableness and equity of such
treatments should be fully considered.
See § 75.2 Indirect (facilities &
administrative (F&A)) costs.
(f) For non-Federal entities that
educate and engage students in
research, the dual role of students as
both trainees and employees (including
pre- and post-doctoral staff) contributing
to the completion of Federal awards for
research must be recognized in the
application of these principles.
(g) The non-Federal entity may not
earn or keep any profit resulting from
Federal financial assistance, unless
explicitly authorized by the terms and
conditions of the Federal award. See
also § 75.307.
General Provisions
§ 75.401
Collection of Amounts Due
§ 75.391
Collection of amounts due.
(a) Any funds paid to the non-Federal
entity in excess of the amount to which
the non-Federal entity is finally
determined to be entitled under the
terms of the Federal award constitute a
debt to the Federal Government. If not
paid within 90 calendar days after
demand, the HHS awarding agency may
reduce the debt by:
(1) Making an administrative offset
against other requests for
reimbursements;
(2) Withholding advance payments
otherwise due to the non-Federal entity;
or
(3) Other action permitted by Federal
statute.
(b) Except where otherwise provided
by statutes or regulations, the HHS
awarding agency will charge interest on
an overdue debt in accordance with the
Federal Claims Collection Standards (31
CFR parts 900 through 999). The date
from which interest is computed is not
extended by litigation or the filing of
any form of appeal. (See also HHS
Claims Collection regulations at 45 CFR
part 30.)
§ 75.400
Policy guide.
The application of these cost
principles is based on the fundamental
premises that:
(a) The non-Federal entity is
responsible for the efficient and
effective administration of the Federal
award through the application of sound
management practices.
(b) The non-Federal entity assumes
responsibility for administering Federal
funds in a manner consistent with
underlying agreements, program
objectives, and the terms and conditions
of the Federal award.
(c) The non-Federal entity, in
recognition of its own unique
combination of staff, facilities, and
experience, has the primary
responsibility for employing whatever
form of sound organization and
management techniques may be
necessary in order to assure proper and
efficient administration of the Federalaward.
(d) The application of these cost
principles should require no significant
changes in the internal accounting
policies and practices of the nonFederal entity. However, the accounting
practices of the non-Federal entity must
be consistent with these cost principles
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Application.
(a) General. These principles must be
used in determining the allowable costs
of work performed by the non-Federal
entity under Federal awards. These
principles also must be used by the nonFederal entity 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:
(1) 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.
(2) For IHEs, capitation awards, which
are awards based on case counts or
number of beneficiaries according to the
terms and conditions of the Federal
award.
(3) Fixed amount awards. See also
§§ 75.2 Fixed amount awards and
75.201.
(4) Federal awards to hospitals (see
Appendix IX to Part 75).
(5) Other awards under which the
non-Federal entity is not required to
account to the Federal Government for
actual costs incurred.
(b) Federal Contract. Where a Federal
contract awarded to a non-Federal entity
is subject to the Cost Accounting
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Standards (CAS), it incorporates the
applicable CAS clauses, Standards, and
CAS administration requirements per
the 48 CFR Chapter 99 and 48 CFR part
30 (FAR Part 30). CAS applies directly
to the CAS-covered contract and the
Cost Accounting Standards at 48 CFR
parts 9904 or 9905 takes precedence
over the cost principles in this Subpart
E with respect to the allocation of costs.
When a contract with a non-Federal
entity is subject to full CAS coverage,
the allowability of certain costs under
the cost principles will be affected by
the allocation provisions of the Cost
Accounting Standards (e.g., CAS 414–48
CFR 9904.414, and CAS 417–48 CFR
9904.417), apply rather the allowability
provisions of § 75.449. In complying
with those requirements, the nonFederal entity’s application of cost
accounting practices for estimating,
accumulating, and reporting costs for
other Federal awards and other cost
objectives under the CAS-covered
contract still must be consistent with its
cost accounting practices for the CAScovered contracts. In all cases, only one
set of accounting records needs to be
maintained for the allocation of costs by
the non-Federal entity.
(c) Exemptions. Some nonprofit
organizations, because of their size and
nature of operations, can be considered
to be similar to for-profit entities for
purpose of applicability of cost
principles. Such nonprofit organizations
must operate under Federal cost
principles applicable to for-profit
entities located at 48 CFR 31.2. A listing
of these organizations is contained in
Appendix VIII to Part 75. Other
organizations, as approved by the
cognizant agency for indirect costs, may
be added from time to time.
Basic Considerations
§ 75.402
Composition of Costs.
Total cost. The total cost of a Federal
award is the sum of the allowable direct
and allocable indirect costs less any
applicable credits.
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§ 75.403
costs.
Factors affecting allowability of
Except where otherwise authorized by
statute, costs must meet the following
general criteria in order to be allowable
under Federal awards:
(a) Be necessary and reasonable for
the performance of the Federal award
and be allocable thereto under these
principles.
(b) Conform to any limitations or
exclusions set forth in these principles
or in the Federal award as to types or
amount of cost items.
(c) Be consistent with policies and
procedures that apply uniformly to both
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federally-financed and other activities of
the non-Federal entity.
(d) Be accorded consistent treatment.
A cost may not be assigned to a Federal
award as a 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.
(e) Be determined in accordance with
generally accepted accounting
principles (GAAP), except, for state and
local governments and Indian tribes
only, as otherwise provided for in this
part.
(f) Not be included as a cost or used
to meet cost sharing or matching
requirements of any other federallyfinanced program in either the current
or a prior period. See also § 75.306(b).
(g) Be adequately documented. See
also §§ 75.300 through 75.309.
§ 75.404
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 the non-Federal entity is
predominantly federally-funded. In
determining reasonableness of a given
cost, consideration must be given to:
(a) Whether the cost is of a type
generally recognized as ordinary and
necessary for the operation of the nonFederal entity or the proper and
efficient performance of the Federal
award.
(b) The restraints or requirements
imposed by such factors as: Sound
business practices; arm’s-length
bargaining; Federal, state, local, tribal,
and other laws and regulations; and
terms and conditions of the Federal
award.
(c) Market prices for comparable
goods or services for the geographic
area.
(d) Whether the individuals
concerned acted with prudence in the
circumstances considering their
responsibilities to the non-Federal
entity, its employees, where applicable
its students or membership, the public
at large, and the Federal Government.
(e) Whether the non-Federal entity
significantly deviates from its
established practices and policies
regarding the incurrence of costs, which
may unjustifiably increase the Federal
award’s cost.
§ 75.405
Allocable costs.
(a) A cost is allocable to a particular
Federal award or other cost objective if
the goods or services involved are
chargeable or assignable to that Federal
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award or cost objective in accordance
with relative benefits received. This
standard is met if the cost:
(1) Is incurred specifically for the
Federal award;
(2) Benefits both the Federal award
and other work of the non-Federal entity
and can be distributed in proportions
that may be approximated using
reasonable methods; and
(3) Is necessary to the overall
operation of the non-Federal entity and
is assignable in part to the Federal
award in accordance with the principles
in this subpart.
(b) All activities which benefit from
the non-Federal entity’s indirect (F&A)
cost, including unallowable activities
and donated services by the non-Federal
entity or third parties, will receive an
appropriate allocation of indirect costs.
(c) Any cost allocable to a particular
Federal award under the principles
provided for in this part may not be
charged to other Federal awards to
overcome fund deficiencies, to avoid
restrictions imposed by Federal statutes,
regulations, or terms and conditions of
the Federal awards, or for other reasons.
However, this prohibition would not
preclude the non-Federal entity from
shifting costs that are allowable under
two or more Federal awards in
accordance with existing Federal
statutes, regulations, or the terms and
conditions of the Federal awards.
(d) 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 must 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 paragraph (c) of
this section, the costs may be allocated
or transferred to benefitted projects on
any reasonable documented basis.
Where the purchase of equipment or
other capital asset is specifically
authorized under a Federal award, the
costs are assignable to the Federal award
regardless of the use that may be made
of the equipment or other capital asset
involved when no longer needed for the
purpose for which it was originally
required. See also §§ 75.317 through
75.323 and 75.439.
(e) If the contract is subject to CAS,
costs must be allocated to the contract
pursuant to the Cost Accounting
Standards. To the extent that CAS is
applicable, the allocation of costs in
accordance with CAS takes precedence
over the allocation provisions in this
part.
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§ 75.406
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Applicable credits.
(a) Applicable credits refer to those
receipts or reduction-of-expendituretype transactions that offset or reduce
expense items allocable to the Federal
award as direct or indirect (F&A) 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 non-Federal entity relate to
allowable costs, they must 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 non-Federal entity
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) must be recognized in
determining the rates or amounts to be
charged to the Federal award. (See
§§ 75.436 and 75.468, for areas of
potential application in the matter of
Federal financing of activities.)
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§ 75.407 Prior written approval (prior
approval).
(a) Under any given Federal award,
the reasonableness and allocability of
certain items of costs may be difficult to
determine. In order to avoid subsequent
disallowance or dispute based on
unreasonableness or non-allocability,
the non-Federal entity may seek the
prior written approval of the cognizant
agency for indirect costs or the HHS
awarding agency in advance of the
incurrence of special or unusual costs.
Prior written approval should include
the timeframe or scope of the agreement.
The absence of prior written approval
on any element of cost will not, in itself,
affect the reasonableness or allocability
of that element, unless prior approval is
specifically required for allowability as
described under certain circumstances
in the following sections of this part:
(1) § 75.201 Use of grant agreements
(including fixed amount awards),
cooperative agreements, and contracts,
paragraph (b)(5);
(2) § 75.306 Cost sharing or matching;
(3) § 75.307 Program income;
(4) § 75.308 Revision of budget and
program plans;
(5) § 75.309 Period of performance
and availability of funds;
(6) § 75.318 Real property;
(7) § 75.320 Equipment;
(8) § 75.353 Fixed amount subawards;
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(9) § 75.413 Direct costs, paragraph
(c);
(10) § 75.430 Compensation—personal
services, paragraph (h);
(11) § 75.431 Compensation—fringe
benefits;
(12) § 75.438 Entertainment costs;
(13) § 75.439 Equipment and other
capital expenditures;
(14) § 75.440 Exchange rates;
(15) § 75.441 Fines, penalties,
damages and other settlements;
(16) § 75.442 Fund raising and
investment management costs;
(17) § 75.445 Goods or services for
personal use;
(18) § 75.447 Insurance and
indemnification;
(19) § 75.454 Memberships,
subscriptions, and professional activity
costs, paragraph (c);
(20) § 75.455 Organization costs;
(21) § 75.456 Participant support
costs;
(22) § 75.458 Pre-award costs;
(23) § 75.462 Rearrangement and
reconversion costs;
(24) § 75.467 Selling and marketing
costs;
(25) § 75.470 Taxes (including Value
Added Tax) paragraph (c); and
(26) § 75.474 Travel costs.
(b) A request by a subrecipient for
prior approval will be addressed in
writing to the recipient. The recipient
will promptly review such request and
shall approve or disapprove the request
in writing. A recipient will not approve
any budget or project revision which is
inconsistent with the purpose or terms
and conditions of the Federal-award to
the recipient. If the revision, requested
by the subrecipient would result in a
change to the recipient’s approved
project which requires Federal prior
approval, the recipient will obtain the
HHS awarding agency’s approval before
approving the subrecipient’s request.
(c) For cost-reimbursement contracts
under the FAR, the recipient shall
obtain prior written approval in
accordance with FAR 52.244–2.
§ 75.408
Limitation on allowance of costs.
The Federal award may be subject to
statutory requirements that limit the
allowability of costs. When the
maximum amount allowable under a
limitation is less than the total amount
determined in accordance with the
principles in this part, the amount not
recoverable under the Federal award
may not be charged to the Federal
award.
§ 75.409
Special considerations.
In addition to the basic considerations
regarding the allowability of costs
highlighted in this subpart, certain
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sections in this subpart describe special
considerations and requirements
applicable to states, local governments,
Indian tribes, and IHEs. In addition,
certain provisions among the items of
cost in this subpart are only applicable
to certain types of non-Federal entities,
as specified in the following sections:
(a) Direct and Indirect (F&A) Costs
(§§ 75.412 through 75.415);
(b) Special Considerations for States,
Local Governments and Indian Tribes
(§§ 75.416 and 75.417); and
(c) Special Considerations for
Institutions of Higher Education
(§§ 75.418 and 75.419).
§ 75.410
Collection of unallowable costs.
Payments made for costs determined
to be unallowable by either the HHS
awarding agency, cognizant agency for
indirect costs, or pass-through entity,
either as direct or indirect costs, must be
refunded (including interest) to the
Federal Government in accordance with
instructions from the Federal agency
that determined the costs are
unallowable unless Federal statute or
regulation directs otherwise. See also
Subpart D of this part, §§ 75.300 through
75.309.
§ 75.411 Adjustment of previously
negotiated indirect (F&A) cost rates
containing unallowable costs.
(a) Negotiated indirect (F&A) cost
rates based on a proposal later found to
have included costs that:
(1) Are unallowable as specified by
Federal statutes, regulations or the terms
and conditions of a Federal award; or
(2) Are unallowable because they are
not allocable to the Federal award(s),
must be adjusted, or a refund must 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).
(b) For rates covering a future fiscal
year of the non-Federal entity, the
unallowable costs will be removed from
the indirect (F&A) cost pools and the
rates appropriately adjusted.
(c) 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
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rates are finalized to avoid duplicate
recovery of the unallowable costs by the
Federal Government.
(d) For rates covering the current
period, either a rate adjustment or a
refund, as described in paragraphs (b)
and (c) of this section, must be required
by the cognizant agency for indirect
costs. The choice of method must be at
the discretion of the cognizant agency
for indirect costs, based on its judgment
as to which method would be most
practical.
(e) 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.
Direct and Indirect (F&A) Costs
§ 75.412
Classification of costs.
There is no universal rule for
classifying certain costs as either direct
or indirect (F&A) 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 incurred for the same
purpose be treated consistently in like
circumstances either as a direct or an
indirect (F&A) cost in order to avoid
possible double-charging of Federal
awards. Guidelines for determining
direct and indirect (F&A) costs charged
to Federal awards are provided in this
subpart.
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§ 75.413
Direct costs.
(a) General. Direct costs are those
costs that can be identified specifically
with a particular final cost objective,
such as a Federal award, or other
internally or externally funded 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 indirect (F&A) costs. See also
§ 75.405.
(b) Application to Federal awards.
Identification with the Federal award
rather than the nature of the goods and
services involved is the determining
factor in distinguishing direct from
indirect (F&A) costs of Federal awards.
Typical costs charged directly to a
Federal award are the compensation of
employees who work on that award,
their related fringe benefit costs, the
costs of materials and other items of
expense incurred for the Federal award.
If directly related to a specific award,
certain costs that otherwise would be
treated as indirect costs may also
include extraordinary utility
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consumption, the cost of materials
supplied from stock or services
rendered by specialized facilities or
other institutional service operations.
(c) The salaries of administrative and
clerical staff should normally be treated
as indirect (F&A) costs. Direct charging
of these costs may be appropriate only
if all of the following conditions are
met:
(1) Administrative or clerical services
are integral to a project or activity;
(2) Individuals involved can be
specifically identified with the project
or activity;
(3) Such costs are explicitly included
in the budget or have the prior written
approval of the Federal awarding
agency; and
(4) The costs are not also recovered as
indirect costs.
(d) Minor items. Any direct cost of
minor amount may be treated as an
indirect (F&A) cost for reasons of
practicality where such accounting
treatment for that item of cost is
consistently applied to all Federal and
non-Federal cost objectives.
(e) The costs of certain activities are
not allowable as charges to Federal
awards. However, even though these
costs are unallowable for purposes of
computing charges to Federal awards,
they nonetheless must be treated as
direct costs for purposes of determining
indirect (F&A) cost rates and be
allocated their equitable share of the
non-Federal entity’s indirect costs if
they represent activities which:
(1) Include the salaries of personnel,
(2) Occupy space, and
(3) Benefit from the non-Federal
entity’s indirect (F&A) costs.
(f) For nonprofit organizations, the
costs of activities performed by the nonFederal entity primarily as a service to
members, clients, or the general public
when significant and necessary to the
non-Federal entity’s mission must be
treated as direct costs whether or not
allowable, and be allocated an equitable
share of indirect (F&A) costs. Some
examples of these types of activities
include:
(1) Maintenance of membership rolls,
subscriptions, publications, and related
functions. See also § 75.454.
(2) Providing services and information
to members, legislative or
administrative bodies, or the public. See
also §§ 75.454 and 75.450.
(3) Promotion, lobbying, and other
forms of public relations. See also
§§ 75.421 and 75.450.
(4) Conferences except those held to
conduct the general administration of
the non-Federal entity. See also
§ 75.432.
(5) Maintenance, protection, and
investment of special funds not used in
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operation of the non-Federal entity. See
also § 75.442.
(6) Administration of group benefits
on behalf of members or clients,
including life and hospital insurance,
annuity or retirement plans, and
financial aid. See also § 75.431.
§ 75.414
Indirect (F&A) costs.
(a) Facilities and Administration
Classification. For major IHEs and major
nonprofit organizations, indirect (F&A)
costs must be classified within two
broad categories: ‘‘Facilities’’ and
‘‘Administration.’’ ‘‘Facilities’’ is
defined as depreciation on buildings,
equipment and capital improvement,
interest on debt associated with certain
buildings, equipment and capital
improvements, and operations and
maintenance expenses.
‘‘Administration’’ is defined as general
administration and general expenses
such as the director’s office, accounting,
personnel and all other types of
expenditures not listed specifically
under one of the subcategories of
‘‘Facilities’’ (including cross allocations
from other pools, where applicable). For
nonprofit organizations, library
expenses are included in the
‘‘Administration’’ category; for
institutions of higher education, they
are included in the ‘‘Facilities’’
category. Major IHEs are defined as
those required to use the Standard
Format for Submission as noted in
Appendix III to Part 75.C. 11. Major
nonprofit organizations are those which
receive more than $10 million dollars in
direct Federal funding.
(b) Diversity of nonprofit
organizations. Because of the diverse
characteristics and accounting practices
of nonprofit organizations, it is not
possible to specify the types of cost
which may be classified as indirect
(F&A) cost in all situations.
Identification with a Federal award
rather than the nature of the goods and
services involved is the determining
factor in distinguishing direct from
indirect (F&A) costs of Federal awards.
However, typical examples of indirect
(F&A) cost for many nonprofit
organizations may include depreciation
on buildings and equipment, the costs
of operating and maintaining facilities,
and general administration and general
expenses, such as the salaries and
expenses of executive officers,
personnel administration, and
accounting.
(c) Federal Agency Acceptance of
Negotiated Indirect Cost Rates. (See also
§ 75.306.)
(1) The negotiated rates must be
accepted by all Federal awarding
agencies. An HHS awarding agency may
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use a rate different from the negotiated
rate for a class of Federal awards or a
single Federal award only when
required by Federal statute or
regulation, or when approved by a
Federal awarding agency head or
delegate based on documented
justification as described in paragraph
(c)(3) of this section.
(2) The HHS awarding agency head or
delegate must notify OMB of any
approved deviations.
(3) The HHS awarding agency must
implement, and make publicly
available, the policies, procedures and
general decision making criteria that
their programs will follow to seek and
justify deviations from negotiated rates.
(4) As required under § 75.203(c), the
HHS awarding agency must include in
the notice of funding opportunity the
policies relating to indirect cost rate
reimbursement, matching, or cost share
as approved. See also Appendix I.C.2
and D.6 of this part. As appropriate, the
HHS agency should incorporate
discussion of these policies into their
outreach activities with non-Federal
entities prior to the posting of a notice
of funding opportunity.
(d) Pass-through entities are subject to
the requirements in § 75.352(a)(4).
(e) Requirements for development and
submission of indirect (F&A) cost rate
proposals and cost allocation plans are
contained in Appendices III–VII, and
Appendix IX as follows:
(1) Appendix III to Part 75—Indirect
(F&A) Costs Identification and
Assignment, and Rate Determination for
Institutions of Higher Education (IHEs);
(2) Appendix IV to Part 75—Indirect
(F&A) Costs Identification and
Assignment, and Rate Determination for
Nonprofit Organizations;
(3) Appendix V to Part 75—State/
Local Government and Indian TribeWide Central Service Cost Allocation
Plans;
(4) Appendix VI to Part 75—Public
Assistance Cost Allocation Plans;
(5) Appendix VII to Part 75—States
and Local Government and Indian Tribe
Indirect Cost Proposals; and
(6) Appendix IX to Part 75—
Principles for Determining Costs
Applicable to Research and
Development Under Grants and
Contracts with Hospitals.
(f) In addition to the procedures
outlined in the appendices in paragraph
(e) of this section, any non-Federal
entity that has never received a
negotiated indirect cost rate, except for
those non-Federal entities described in
Appendix VII to part 75 (D)(1)(b) may
elect to charge a de minimis rate of 10%
of modified total direct costs (MTDC)
which may be used indefinitely. As
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described in § 75.403, costs must be
consistently charged as either indirect
or direct costs, but may not be double
charged or inconsistently charged as
both. If chosen, this methodology once
elected must be used consistently for all
Federal awards until such time as a nonFederal entity chooses to negotiate for a
rate, which the non-Federal entity may
apply to do at any time.
(g) Any non-Federal entity that has a
current federally negotiated indirect
cost rate may apply for a one-time
extension of the rates in that agreement
for a period of up to four years. This
extension will be subject to the review
and approval of the cognizant agency for
indirect costs. If an extension is granted
the non-Federal entity may not request
a rate review until the extension period
ends. At the end of the 4-year extension,
the non-Federal entity must re-apply to
negotiate a rate. Subsequent one-time
extensions (up to four years) are
permitted if a renegotiation is
completed between each extension
request.
§ 75.415
Required certifications.
Required certifications include:
(a) To assure that expenditures are
proper and in accordance with the terms
and conditions of the Federal award and
approved project budgets, the annual
and final fiscal reports or vouchers
requesting payment under the
agreements must include a certification,
signed by an official who is authorized
to legally bind the non-Federal entity,
which reads as follows: ‘‘By signing this
report, I certify to the best of my
knowledge and belief that the report is
true, complete, and accurate, and the
expenditures, disbursements and cash
receipts are for the purposes and
objectives set forth in the terms and
conditions of the Federal award. I am
aware that any false, fictitious, or
fraudulent information, or the omission
of any material fact, may subject me to
criminal, civil or administrative
penalties for fraud, false statements,
false claims or otherwise. (U.S. Code
Title 18, Section 1001 and Title 31,
Sections 3729–3730 and 3801–3812).’’
(b) Certification of cost allocation plan
or indirect (F&A) cost rate proposal.
Each cost allocation plan or indirect
(F&A) cost rate proposal must comply
with the following:
(1) A proposal to establish a cost
allocation plan or an indirect (F&A) cost
rate, whether submitted to a Federal
cognizant agency for indirect costs or
maintained on file by the non-Federal
entity, must be certified by the nonFederal entity using the Certificate of
Cost Allocation Plan or Certificate of
Indirect Costs as set forth in Appendices
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III through VII, and Appendix IX. The
certificate must be signed on behalf of
the non-Federal entity by an individual
at a level no lower than vice president
or chief financial officer of the nonFederal entity that submits the proposal.
(2) Unless the non-Federal entity has
elected the option under § 75.414(f), the
Federal Government may either
disallow all indirect (F&A) costs or
unilaterally establish such a plan or rate
when the non-Federal entity fails to
submit a certified proposal for
establishing such a plan or rate in
accordance with the requirements. Such
a plan or rate may be based upon
audited historical data or such other
data that have been furnished to the
cognizant agency for indirect costs 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 the
non-Federal entity failed to submit a
certified proposal, the plan or rate
established will be set to ensure that
potentially unallowable costs will not
be reimbursed.
(c) Certifications by non-profit
organizations as appropriate that they
did not meet the definition of a major
non-profit organization as defined in
§ 75.414(a).
(d) See also § 75.450 for another
required certification.
Special Considerations for States, Local
Governments and Indian Tribes
§ 75.416 Cost allocation plans and indirect
cost proposals.
(a) For states, local governments and
Indian tribes, certain services, such as
motor pools, computer centers,
purchasing, accounting, etc., are
provided to operating agencies on a
centralized basis. Since Federal 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.
(b) Individual operating agencies
(governmental department or agency),
normally charge Federal awards for
indirect costs through an indirect cost
rate. A separate indirect cost rate(s)
proposal for each operating agency is
usually necessary to claim indirect costs
under Federal-awards. Indirect costs
include:
(1) The indirect costs originating in
each department or agency of the
governmental unit carrying out Federal
awards; and
(2) The costs of central governmental
services distributed through the central
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service cost allocation plan and not
otherwise treated as direct costs.
(c) The requirements for development
and submission of cost allocation plans
(for central service costs and public
assistance programs) and indirect cost
rate proposals are contained in
appendices IV, V and VI to this part.
§ 75.417
Interagency service.
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-rated 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 V to this part.
Special Considerations for Institutions
of Higher Education
§ 75.418 Costs incurred by states and
local governments.
Costs incurred or paid by a state or
local government on behalf of its IHEs
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 IHEs, are
allowable costs of such IHEs 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
§§ 75.402 through 75.411;
(b) The costs are properly supported
by approved cost allocation plans in
accordance with applicable Federal cost
accounting principles in this part; and
(c) The costs are not otherwise borne
directly or indirectly by the Federal
Government.
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§ 75.419 Cost accounting standards and
disclosure statement.
(a) An IHE that receives aggregate
Federal awards totaling $50 million or
more in Federal awards subject to this
part in its most recently completed
fiscal year must comply with the Cost
Accounting Standards Board’s cost
accounting standards located at 48 CFR
9905.501, 9905.502, 9905.505, and
9905.506. CAS-covered contracts
awarded to the IHEs are subject to the
CAS requirements at 48 CFR parts 9900
through 9999 and 48 CFR part 30 (FAR
Part 30).
(b) Disclosure statement. An IHE that
receives aggregate Federal awards
totaling $50 million or more subject to
this part during its most recently
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completed fiscal year must disclose its
cost accounting practices by filing a
Disclosure Statement (DS–2), which is
reproduced in Appendix III to part 75.
With the approval of the cognizant
agency for indirect costs, an IHE may
meet the DS–2 submission by
submitting the DS–2 for each business
unit that received $50 million or more
in Federal awards.
(1) The DS–2 must be submitted to the
cognizant agency for indirect costs with
a copy to the IHE’s cognizant agency for
audit.
(2) An IHE is responsible for
maintaining an accurate DS–2 and
complying with disclosed cost
accounting practices. An IHE must file
amendments to the DS–2 to the
cognizant agency for indirect costs six
months in advance of a disclosed
practice being changed to comply with
a new or modified standard, or when a
practice is changed for other reasons.
An IHE may proceed with implementing
the change only if it has not been
notified by the Federal cognizant agency
for indirect costs that either a longer
period will be needed for review or
there are concerns with the potential
change within the six months period.
Amendments of a DS–2 may be
submitted at any time. Resubmission of
a complete, updated DS–2 is
discouraged except when there are
extensive changes to disclosed
practices.
(3) Cost and funding adjustments.
Cost adjustments must be made by the
cognizant agency for indirect costs if an
IHE fails to comply with the cost
policies in this part or fails to
consistently follow its established or
disclosed cost accounting practices
when estimating, accumulating or
reporting the costs of Federal awards,
and the aggregate cost impact on Federal
awards is material. The cost adjustment
must normally be made on an aggregate
basis for all affected Federal awards
through an adjustment of the IHE’s
future F&A costs rates or other means
considered appropriate by the cognizant
agency for indirect costs. 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.
(4) Overpayments. Excess amounts
paid in the aggregate by the Federal
Government under Federal awards due
to a noncompliant cost accounting
practice used to estimate, accumulate,
or report costs must be credited or
refunded, as deemed appropriate by the
cognizant agency for indirect costs.
Interest applicable to the excess
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amounts paid in the aggregate during
the period of noncompliance must also
be determined and collected in
accordance with applicable HHS agency
regulations.
(5) Compliant cost accounting
practice changes. Changes from one
compliant cost accounting practice to
another compliant practice that are
approved by the cognizant agency for
indirect costs may require cost
adjustments if the change has a material
effect on Federal awards and the
changes are deemed appropriate by the
cognizant agency for indirect costs.
(6) Responsibilities. The cognizant
agency for indirect cost must:
(i) Determine cost adjustments for all
Federal awards in the aggregate on
behalf of the Federal Government.
Actions of the cognizant agency for
indirect cost in making cost adjustment
determinations must be coordinated
with all affected HHS awarding agencies
to the extent necessary.
(ii) Prescribe guidelines and establish
internal procedures to promptly
determine on behalf of the Federal
Government that a DS–2 adequately
discloses the IHE’s cost accounting
practices and that the disclosed
practices are compliant with applicable
CAS and the requirements of this part.
(iii) Distribute to all affected Federal
awarding agencies any DS–2
determination of adequacy or
noncompliance.
General Provisions for Selected Items of
Cost
§ 75.420
of cost.
Considerations for selected items
This section provides principles to be
applied in establishing the allowability
of certain items involved in determining
cost, in addition to the requirements of
§§ 75.402 through 75.411. These
principles apply whether or not a
particular item of cost is properly
treated as direct cost or indirect (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, and
based on the principles described in
§§ 75.402 through 75.411. In case of a
discrepancy between the provisions of a
specific Federal award and the
provisions below, the Federal award
governs. Criteria outlined in § 75.403
must be applied in determining
allowability. See also § 75.102.
§ 75.421
Advertising and public relations.
(a) The term advertising costs means
the costs of advertising media and
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corollary administrative costs.
Advertising media include magazines,
newspapers, radio and television, direct
mail, exhibits, electronic or computer
transmittals, and the like.
(b) The only allowable advertising
costs are those which are solely for:
(1) The recruitment of personnel
required by the non-Federal entity for
performance of a Federal award (See
also § 75.463);
(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 nonFederal entities are reimbursed for
disposal costs at a predetermined
amount; or
(4) Program outreach and other
specific purposes necessary to meet the
requirements of the Federal award.
(c) The term ‘‘public relations’’
includes community relations and
means those activities dedicated to
maintaining the image of the nonFederal entity or maintaining or
promoting understanding and favorable
relations with the community or public
at large or any segment of the public.
(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 the Federal
award (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 to
keep the public informed on matters of
public concern, such as notices of
funding opportunities, financial matters,
etc.
(e) Unallowable advertising and
public relations costs include the
following:
(1) All advertising and public
relations costs other than as specified in
paragraphs (b) and (d) of this section;
(2) Costs of meetings, conventions,
convocations, or other events related to
other activities of the entity (see also
§ 75.432), including:
(i) Costs of displays, demonstrations,
and exhibits;
(ii) Costs of meeting rooms,
hospitality suites, and other special
facilities used in conjunction with
shows and other special events; and
(iii) Salaries and wages of employees
engaged in setting up and displaying
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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
non-Federal entity.
(3) Limited in scope to one or more
of the following types of compliance
requirements: activities allowed or
unallowed; allowable costs/cost
principles; eligibility; and reporting.
§ 75.426
Bad debts.
Costs incurred by advisory councils or
committees are unallowable unless
authorized by statute, the HHS awarding
agency or as an indirect cost where
allocable to Federal awards. See
§ 75.444, applicable to states, local
governments and Indian tribes.
Bad debts (debts which have been
determined to be uncollectable),
including losses (whether actual or
estimated) arising from uncollectable
accounts and other claims, are
unallowable. Related collection costs,
and related legal costs, arising from
such debts after they have been
determined to be uncollectable are also
unallowable. See also § 75.428.
§ 75.423
§ 75.427
§ 75.422
Advisory councils.
Alcoholic beverages.
Costs of alcoholic beverages are
unallowable.
§ 75.424
Alumni/ae activities.
Costs incurred by IHEs for, or in
support of, alumni/ae activities are
unallowable.
§ 75.425
Audit services.
(a) A reasonably proportionate share
of the costs of audits required by, and
performed in accordance with, the
Single Audit Act Amendments of 1996
(31 U.S.C. 7501–7507), as implemented
by requirements of this part, are
allowable. However, the following audit
costs are unallowable:
(1) Any costs when audits required by
the Single Audit Act and Subpart F of
this part—have not been conducted or
have been conducted but not in
accordance therewith; and
(2) Any costs of auditing a nonFederal entity that is exempted from
having an audit conducted under the
Single Audit Act and Subpart F of this
part because its expenditures under
Federal awards are less than $750,000
during the non-Federal entity’s fiscal
year.
(b) The costs of a financial statement
audit of a non-Federal entity that does
not currently have a Federal award may
be included in the indirect cost pool for
a cost allocation plan or indirect cost
proposal.
(c) Pass-through entities may charge
Federal awards for the cost of agreedupon-procedures engagements to
monitor subrecipients (in accordance
with Subpart D of this part, §§ 75.351
through 75.353) which are exempted
from the requirements of the Single
Audit Act and Subpart F of this part.
This cost is allowable only if the agreedupon-procedures engagements are:
(1) Conducted in accordance with
GAGAS attestation standards;
(2) Paid for and arranged by the passthrough entity; and
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Bonding costs.
(a) Bonding costs arise when the HHS
awarding agency requires assurance
against financial loss to itself or others
by reason of the act or default of the
non-Federal entity. They arise also in
instances where the non-Federal entity
requires similar assurance, including:
Bonds as bid, performance, payment,
advance payment, infringement, and
fidelity bonds for employees and
officials.
(b) Costs of bonding required
pursuant to the terms and conditions of
the Federal award are allowable.
(c) Costs of bonding required by the
non-Federal entity in the general
conduct of its operations are allowable
as an indirect cost to the extent that
such bonding is in accordance with
sound business practice and the rates
and premiums are reasonable under the
circumstances.
§ 75.428 Collections of improper
payments.
The costs incurred by a non-Federal
entity to recover improper payments are
allowable as either direct or indirect
costs, as appropriate. Amounts collected
may be used by the non-Federal entity
in accordance with cash management
standards set forth in § 75.305.
§ 75.429
costs.
Commencement and convocation
For IHEs, costs incurred for
commencements and convocations are
unallowable, except as provided for in
Appendix III.B.9, as student activity
costs.
§ 75.430 Compensation—personal
services.
(a) General. Compensation for
personal services includes all
remuneration, paid currently or
accrued, for services of employees
rendered during the period of
performance under the Federal award,
including but not necessarily limited to
wages and salaries. Compensation for
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personal services may also include
fringe benefits which are addressed in
§ 75.431. Costs of compensation are
allowable to the extent that they satisfy
the specific requirements of this part,
and that the total compensation for
individual employees:
(1) Is reasonable for the services
rendered and conforms to the
established written policy of the nonFederal entity consistently applied to
both Federal and non-Federal activities;
(2) Follows an appointment made in
accordance with a non-Federal entity’s
laws and/or rules or written policies
and meets the requirements of Federal
statute, where applicable; and
(3) Is determined and supported as
provided in paragraph (i) of this section,
when applicable.
(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 non-Federal entity. In cases where
the kinds of employees required for
Federal awards are not found in the
other activities of the non-Federal
entity, 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 nonFederal entity competes for the kind of
employees involved.
(c) Professional activities outside the
non-Federal entity. Unless an
arrangement is specifically authorized
by an HHS awarding agency, a nonFederal entity must follow its written
non-Federal entity-wide policies and
practices concerning the permissible
extent of professional services that can
be provided outside the non-Federal
entity for non-organizational
compensation. Where such non-Federal
entity-wide written policies do not exist
or do not adequately define the
permissible extent of consulting or other
non-organizational activities undertaken
for extra outside pay, the Federal
Government may require that the effort
of professional staff working on Federal
awards be allocated between:
(1) Non-Federal entity activities, and
(2) Non-organizational professional
activities. If the HHS awarding agency
considers the extent of nonorganizational professional effort
excessive or inconsistent with the
conflicts-of-interest terms and
conditions of the Federal award,
appropriate arrangements governing
compensation will be negotiated on a
case-by-case basis.
(d) Unallowable costs. (1) Costs which
are unallowable under other sections of
these principles must not be allowable
under this section solely on the basis
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that they constitute personnel
compensation.
(2) The allowable compensation for
certain employees is subject to a ceiling
in accordance with statute. For the
amount of the ceiling for costreimbursement contracts, the covered
compensation subject to the ceiling, the
covered employees, and other relevant
provisions, see 10 U.S.C. 2324(e)(1)(P),
and 41 U.S.C. 1127 and 4304(a)(16). For
other types of Federal awards, other
statutory ceilings may apply.
(e) Special considerations. Special
considerations in determining
allowability of compensation will be
given to any change in a non-Federal
entity’s compensation policy resulting
in a substantial increase in its
employees’ level of compensation
(particularly when the change was
concurrent with an increase in the ratio
of Federal awards to other activities) or
any change in the treatment of
allowability of specific types of
compensation due to changes in Federal
policy.
(f) Incentive compensation. Incentive
compensation to employees based on
cost reduction, or efficient performance,
suggestion awards, safety awards, etc., is
allowable to the extent that the overall
compensation is determined to be
reasonable and such costs are paid or
accrued pursuant to an agreement
entered into in good faith between the
non-Federal entity and the employees
before the services were rendered, or
pursuant to an established plan
followed by the non-Federal entity so
consistently as to imply, in effect, an
agreement to make such payment.
(g) Nonprofit organizations. For
compensation to members of nonprofit
organizations, trustees, directors,
associates, officers, or the immediate
families thereof, determination must be
made that such compensation is
reasonable for the actual personal
services rendered rather than a
distribution of earnings in excess of
costs. This may include director’s and
executive committee member’s fees,
incentive awards, allowances for off-site
pay, incentive pay, location allowances,
hardship pay, and cost-of-living
differentials.
(h) Institutions of higher education
(IHEs). (1) Certain conditions require
special consideration and possible
limitations in determining allowable
personnel compensation costs under
Federal awards. Among such conditions
are the following:
(i) Allowable activities. Charges to
Federal awards may include reasonable
amounts for activities contributing and
directly related to work under an
agreement, such as delivering special
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lectures about specific aspects of the
ongoing activity, writing reports and
articles, developing and maintaining
protocols (human, animals, etc.),
managing substances/chemicals,
managing and securing project-specific
data, coordinating research subjects,
participating in appropriate seminars,
consulting with colleagues and graduate
students, and attending meetings and
conferences.
(ii) Incidental activities. Incidental
activities for which supplemental
compensation is allowable under
written institutional policy (at a rate not
to exceed institutional base salary) need
not be included in the records described
in paragraph (i) of this section to
directly charge payments of incidental
activities, such activities must either be
specifically provided for in the Federal
award budget or receive prior written
approval by the HHS awarding agency.
(2) Salary basis. Charges for work
performed on Federal awards by faculty
members during the academic year are
allowable at the IBS rate. Except as
noted in paragraph (h)(1)(ii) of this
section, in no event will charges to
Federal awards, irrespective of the basis
of computation, exceed the
proportionate share of the IBS for that
period. This principle applies to all
members of faculty at an institution. IBS
is defined as the annual compensation
paid by an IHE for an individual’s
appointment, whether that individual’s
time is spent on research, instruction,
administration, or other activities. IBS
excludes any income that an individual
earns outside of duties performed for
the IHE. Unless there is prior approval
by the HHS awarding agency, charges of
a faculty member’s salary to a Federal
award must not exceed the
proportionate share of the IBS for the
period during which the faculty member
worked on the award.
(3) Intra-Institution of Higher
Education (IHE) consulting. Intra-IHE
consulting by faculty is assumed to be
undertaken as an IHE obligation
requiring no compensation in addition
to IBS. However, in unusual cases
where consultation is across
departmental lines or involves a
separate or remote operation, and the
work performed by the faculty member
is in addition to his or her regular
responsibilities, any charges for such
work representing additional
compensation above IBS are allowable
provided that such consulting
arrangements are specifically provided
for in the Federal award or approved in
writing by the HHS awarding agency.
(4) Extra Service Pay normally
represents overload compensation,
subject to institutional compensation
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policies for services above and beyond
IBS. Where extra service pay is a result
of Intra-IHE consulting, it is subject to
the same requirements of paragraph (b)
above. It is allowable if all of the
following conditions are met:
(i) The non-Federal entity establishes
consistent written policies which apply
uniformly to all faculty members, not
just those working on Federal awards.
(ii) The non-Federal entity establishes
a consistent written definition of work
covered by IBS which is specific enough
to determine conclusively when work
beyond that level has occurred. This
may be described in appointment letters
or other documentations.
(iii) The supplementation amount
paid is commensurate with the IBS rate
of pay and the amount of additional
work performed. See paragraph (h)(2) of
this section.
(iv) The salaries, as supplemented,
fall within the salary structure and pay
ranges established by and documented
in writing or otherwise applicable to the
non-Federal entity.
(v) The total salaries charged to
Federal awards including extra service
pay are subject to the Standards of
Documentation as described in
paragraph (i) of this section.
(5) Periods outside the academic year.
(i) Except as specified for teaching
activity in paragraph (h)(5)(ii) of this
section, charges for work performed by
faculty members on Federal awards
during periods not included in the base
salary period will be at a rate not in
excess of the IBS.
(ii) Charges for teaching activities
performed by faculty members on
Federal awards during periods not
included in IBS period will be based on
the normal written policy of the IHE
governing compensation to faculty
members for teaching assignments
during such periods.
(6) Part-time faculty. Charges for work
performed on Federal awards by faculty
members having only part-time
appointments will be determined at a
rate not in excess of that regularly paid
for part-time assignments.
(7) Sabbatical leave costs. Rules for
sabbatical leave are as follow:
(i) Costs of leaves of absence by
employees for performance of graduate
work or sabbatical study, travel, or
research are allowable provided the IHE
has a uniform written 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 IHE.
(ii) Where sabbatical leave is included
in fringe benefits for which a cost is
determined for assessment as a direct
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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
IHE’s actual experience under its
sabbatical leave policy.
(8) Salary rates for non-faculty
members. Non-faculty full-time
professional personnel may also earn
‘‘extra service pay’’ in accordance with
the non-Federal entity’s written policy
and consistent with paragraph (h)(1)(i)
of this section.
(i) Standards for Documentation of
Personnel Expenses (1) Charges to
Federal awards for salaries and wages
must be based on records that accurately
reflect the work performed. These
records must:
(i) Be supported by a system of
internal control which provides
reasonable assurance that the charges
are accurate, allowable, and properly
allocated;
(ii) Be incorporated into the official
records of the non-Federal entity;
(iii) Reasonably reflect the total
activity for which the employee is
compensated by the non-Federal entity,
not exceeding 100% of compensated
activities (for IHE, this per the IHE’s
definition of IBS);
(iv) Encompass both federally assisted
and all other activities compensated by
the non-Federal entity on an integrated
basis, but may include the use of
subsidiary records as defined in the
non-Federal entity’s written policy;
(v) Comply with the established
accounting policies and practices of the
non-Federal entity (See paragraph
(h)(1)(ii) of this section for treatment of
incidental work for IHEs.); and
(vi) [Reserved]
(vii) Support the distribution of the
employee’s salary or wages among
specific activities or cost objectives if
the employee works on more than one
Federal award; a Federal award and
non-Federal award; an indirect cost
activity and a direct cost activity; two or
more indirect activities which are
allocated using different allocation
bases; or an unallowable activity and a
direct or indirect cost activity.
(viii) Budget estimates (i.e., estimates
determined before the services are
performed) alone do not qualify as
support for charges to Federal awards,
but may be used for interim accounting
purposes, provided that:
(A) The system for establishing the
estimates produces reasonable
approximations of the activity actually
performed;
(B) Significant changes in the
corresponding work activity (as defined
by the non-Federal entity’s written
policies) are identified and entered into
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the records in a timely manner. 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; and
(C) The non-Federal entity’s system of
internal controls includes processes to
review after-the-fact interim charges
made to a Federal awards based on
budget estimates. All necessary
adjustment must be made such that the
final amount charged to the Federal
award is accurate, allowable, and
properly allocated.
(ix) Because practices vary as to the
activity constituting a full workload (for
IHEs, IBS), records may reflect
categories of activities expressed as a
percentage distribution of total
activities.
(x) It is recognized that teaching,
research, service, and administration are
often inextricably intermingled in an
academic setting. When recording
salaries and wages charged to Federal
awards for IHEs, a precise assessment of
factors that contribute to costs is
therefore not always feasible, nor is it
expected.
(2) For records which meet the
standards required in paragraph (i)(1) of
this section, the non-Federal entity will
not be required to provide additional
support or documentation for the work
performed, other than that referenced in
paragraph (i)(3) of this section.
(3) In accordance with Department of
Labor regulations implementing the Fair
Labor Standards Act (FLSA) (29 CFR
part 516), charges for the salaries and
wages of nonexempt employees, in
addition to the supporting
documentation described in this
section, must also be supported by
records indicating the total number of
hours worked each day.
(4) Salaries and wages of employees
used in meeting cost sharing or
matching requirements on Federal
awards must be supported in the same
manner as salaries and wages claimed
for reimbursement from Federal awards.
(5) For states, local governments and
Indian tribes, substitute processes or
systems for allocating salaries and
wages to Federal awards may be used in
place of or in addition to the records
described in paragraph (i)(1) of this
section if approved by the cognizant
agency for indirect cost. Such systems
may include, but are not limited to,
random moment sampling, ‘‘rolling’’
time studies, case counts, or other
quantifiable measures of work
performed.
(i) Substitute systems which use
sampling methods (primarily for
Temporary Assistance for Needy
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Families (TANF), the Supplemental
Nutrition Assistance Program (SNAP),
Medicaid, and other public assistance
programs) must meet acceptable
statistical sampling standards including:
(A) 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 paragraph (i)(5)(iii) of this
section;
(B) The entire time period involved
must be covered by the sample; and
(C) The results must be statistically
valid and applied to the period being
sampled.
(ii) Allocating charges for the sampled
employees’ supervisors, clerical and
support staffs, based on the results of
the sampled employees, will be
acceptable.
(iii) Less than full compliance with
the statistical sampling standards noted
in paragraph (i)(5)(i) of this section may
be accepted by the cognizant agency for
indirect costs 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 non-Federal entity will result in
lower costs to Federal awards than a
system which complies with the
standards.
(6) Cognizant agencies for indirect
costs are encouraged to approve
alternative proposals based on outcomes
and milestones for program performance
where these are clearly documented.
Where approved by the Federal
cognizant agency for indirect costs,
these plans are acceptable as an
alternative to the requirements of
paragraph (i)(1) of this section.
(7) For Federal awards of similar
purpose activity or instances of
approved blended funding, a nonFederal entity may submit performance
plans that incorporate funds from
multiple Federal awards and account for
their combined use based on
performance-oriented metrics, provided
that such plans are approved in advance
by all involved HHS awarding agencies.
In these instances, the non-Federal
entity must submit a request for waiver
of the requirements based on
documentation that describes the
method of charging costs, relates the
charging of costs to the specific activity
that is applicable to all fund sources,
and is based on quantifiable measures of
the activity in relation to time charged.
(8) For a non-Federal entity where the
records do not meet the standards
described in this section, the Federal
Government may require personnel
activity reports, including prescribed
certifications, or equivalent
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documentation that support the records
as required in this section.
§ 75.431
Compensation—fringe benefits.
(a) 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 (vacation, familyrelated, sick or military), employee
insurance, pensions, and
unemployment benefit plans. Except as
provided elsewhere in these principles,
the costs of fringe benefits are allowable
provided that the benefits are reasonable
and are required by law, non-Federal
entity-employee agreement, or an
established policy of the non-Federal
entity.
(b) Leave. 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, family-related leave,
sick leave, holidays, court leave,
military leave, administrative leave, and
other similar benefits, are allowable if
all of the following criteria are met:
(1) They are provided under
established written leave policies;
(2) The costs are equitably allocated to
all related activities, including Federal
awards; and,
(3) The accounting basis (cash or
accrual) selected for costing each type of
leave is consistently followed by the
non-Federal entity or specified grouping
of employees.
(i) When a non-Federal entity 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.
(ii) The accrual basis may be only
used for those types of leave for which
a liability as defined by GAAP exists
when the leave is earned. When a nonFederal entity uses the accrual basis of
accounting, allowable leave costs are the
lesser of the amount accrued or funded.
(c) 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 § 75.447);
pension plan costs (see paragraph (i) of
this section); and other similar benefits
are allowable, provided such benefits
are granted under established written
policies. Such benefits, must 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
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employees whose salaries and wages are
chargeable to such Federal awards and
other activities, and charged as direct or
indirect costs in accordance with the
non-Federal entity’s accounting
practices.
(d) Fringe benefits may be assigned to
cost objectives by identifying specific
benefits to specific individual
employees or by allocating on the basis
of entity-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 nonFederal entity demonstrates that costs in
relationship to salaries and wages do
not differ significantly for different
groups of employees.
(e) Insurance. See also § 75.447(d)(1)
and (2).
(1) Provisions for a reserve under a
self-insurance program for
unemployment compensation or
workers’ compensation are allowable to
the extent that the provisions represent
reasonable estimates of the liabilities for
such compensation, and the types of
coverage, extent of coverage, and rates
and premiums would have been
allowable had insurance been
purchased to cover the risks. However,
provisions for self-insured liabilities
which do not become payable for more
than one year after the provision is
made must not exceed the present value
of the liability.
(2) Costs of insurance on the lives of
trustees, officers, or other employees
holding positions of similar
responsibility are allowable only to the
extent that the insurance represents
additional compensation. The costs of
such insurance when the non-Federal
entity is named as beneficiary are
unallowable.
(3) 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., postretirement health benefits), are
allowable in the year of payment
provided that the non-Federal entity
follows a consistent costing policy.
(f) Automobiles. That portion of
automobile costs furnished by the entity
that relates to personal use by
employees (including transportation to
and from work) is unallowable as fringe
benefit or indirect (F&A) costs
regardless of whether the cost is
reported as taxable income to the
employees.
(g) Pension Plan Costs. Pension plan
costs which are incurred in accordance
with the established policies of the nonFederal entity are allowable, provided
that:
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(1) Such policies meet the test of
reasonableness.
(2) The methods of cost allocation are
not discriminatory.
(3) For entities using accrual based
accounting, the cost assigned to each
fiscal year is determined in accordance
with GAAP.
(4) The costs assigned to a given fiscal
year are 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 calendar days after each
quarter of the year to which such costs
are assignable are unallowable. NonFederal entity may elect to follow the
‘‘Cost Accounting Standard for
Composition and Measurement of
Pension Costs’’ (48 CFR 9904.412).
(5) Pension plan termination
insurance premiums paid pursuant to
the Employee Retirement Income
Security Act (ERISA) of 1974 (29 U.S.C.
1301–1461) are allowable. Late payment
charges on such premiums are
unallowable. Excise taxes on
accumulated funding deficiencies and
other penalties imposed under ERISA
are unallowable.
(6) 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 non-Federal entity.
(i) 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.
(ii) 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 for indirect costs) are
allowable in the year funded. The
cognizant agency for indirect costs 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 non-Federal entity’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.
(iii) Amounts funded by the nonFederal entity in excess of the
actuarially determined amount for a
fiscal year may be used as the nonFederal entity’s contribution in future
periods.
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(iv) When a non-Federal entity
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 is allowable if
amortized over a period of years in
accordance with GAAP.
(v) The Federal Government must
receive an equitable share of any
previously allowed pension costs
(including earnings thereon) which
revert or inure to the non-Federal entity
in the form of a refund, withdrawal, or
other credit.
(h) Post-Retirement Health. Postretirement health plans (PRHP) refers to
costs of health insurance or health
services not included in a pension plan
covered by paragraph (g) of this section
for retirees and their spouses,
dependents, and survivors. PRHP 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 non-Federal
entity.
(1) For PRHP financed on a pay-asyou-go method, allowable costs will be
limited to those representing actual
payments to retirees or their
beneficiaries.
(2) PRHP 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
Federal cognizant agency for indirect
costs 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 non-Federal
entity’s contributions to the PRHP fund.
Adjustments may be made by cash
refund, reduction in current year’s
PRHP costs, or other equitable
procedures to compensate the Federal
Government for the time value of
Federal reimbursements in excess of
contributions to the PRHP fund.
(3) Amounts funded in excess of the
actuarially determined amount for a
fiscal year may be used as the Federal
Government’s contribution in a future
period.
(4) When a non-Federal entity
converts to an acceptable actuarial cost
method and funds PRHP costs in
accordance with this method, the initial
unfunded liability attributable to prior
years is allowable if amortized over a
period of years in accordance with
GAAP, or, if no such GAAP period
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exists, over a period negotiated with the
cognizant agency for indirect costs.
(5) To be allowable in the current
year, the PRHP costs must be paid either
to:
(i) An insurer or other benefit
provider as current year costs or
premiums, or
(ii) 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 must
receive an equitable share of any
amounts of previously allowed postretirement benefit costs (including
earnings thereon) which revert or inure
to the non-Federal entity in the form of
a refund, withdrawal, or other credit.
(i) Severance Pay. (1) Severance pay,
also commonly referred to as dismissal
wages, is a payment in addition to
regular salaries and wages, by nonFederal entities to workers whose
employment is being terminated. Costs
of severance pay are allowable only to
the extent that in each case, it is
required by law, employer-employee
agreement, established policy that
constitutes, in effect, an implied
agreement on the non-Federal entity’s
part, or circumstances of the particular
employment.
(2) Costs of severance payments are
divided into two categories as follows:
(i) Actual normal turnover severance
payments must be allocated to all
activities; or, where the non-Federal
entity provides for a reserve for normal
severances, such method will be
acceptable if the charge to current
operations is reasonable in light of
payments actually made for normal
severances over a representative past
period, and if amounts charged are
allocated to all activities of the nonFederal entity.
(ii) Measurement of costs of abnormal
or mass severance pay by means of an
accrual will not achieve equity to both
parties. Thus, accruals for this purpose
are not allowable. However, the Federal
Government recognizes its obligation to
participate, to the extent of its fair share,
in any specific payment. Prior approval
by the Federal awarding agency or
cognizant agency for indirect cost, as
appropriate, is required.
(3) Costs incurred in certain severance
pay packages which are in an amount in
excess of the normal severance pay paid
by the non-Federal entity to an
employee upon termination of
employment and are paid to the
employee contingent upon a change in
management control over, or ownership
of, the non-Federal entity’s assets, are
unallowable.
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(4) Severance payments to foreign
nationals employed by the non-Federal
entity outside the United States, to the
extent that the amount exceeds the
customary or prevailing practices for the
non-Federal entity in the United States,
are unallowable, unless they are
necessary for the performance of Federal
programs and approved by the HHS
awarding agency.
(5) Severance payments to foreign
nationals employed by the non-Federal
entity outside the United States due to
the termination of the foreign national
as a result of the closing of, or
curtailment of activities by, the nonFederal entity in that country, are
unallowable, unless they are necessary
for the performance of Federal programs
and approved by the HHS awarding
agency.
(j)(1) For IHEs only. Fringe benefits in
the form of tuition or remission of
tuition for individual employees are
allowable, provided such benefits are
granted in accordance with established
non-Federal entity policies, and are
distributed to all non-Federal entity
activities on an equitable basis. Tuition
benefits for family members other than
the employee are unallowable.
(2) Fringe benefits in the form of
tuition or remission of tuition for
individual employees not employed by
IHEs are limited to the tax-free amount
allowed per section 127 of the Internal
Revenue Code as amended.
(3) IHEs may offer employees tuition
waivers or tuition reductions for
undergraduate education under IRC
Section 117(d) as amended, provided
that the benefit does not discriminate in
favor of highly compensated employees.
Federal reimbursement of tuition or
remission of tuition is also limited to
the institution for which the employee
works. See § 75.466, for treatment of
tuition remission provided to students.
(k) For IHEs whose costs are paid by
state or local governments, fringe benefit
programs (such as pension costs and
FICA) and any other benefits costs
specifically incurred on behalf of, and
in direct benefit to, the non-Federal
entity, are allowable costs of such nonFederal entities whether or not these
costs are recorded in the accounting
records of the non-Federal entities,
subject to the following:
(1) The costs meet the requirements of
Basic Considerations in §§ 75.402
through 75.411;
(2) The costs are properly supported
by approved cost allocation plans in
accordance with applicable Federal cost
accounting principles; and
(3) The costs are not otherwise borne
directly or indirectly by the Federal
Government.
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§ 75.432
Conferences.
A conference is defined as a meeting,
retreat, seminar, symposium, workshop
or event whose primary purpose is the
dissemination of technical information
beyond the non-Federal entity and is
necessary and reasonable for successful
performance under the Federal award.
Allowable conference costs paid by the
non-Federal entity as a sponsor or host
of the conference may include rental of
facilities, speakers’ fees, costs of meals
and refreshments, local transportation,
and other items incidental to such
conferences unless further restricted by
the terms and conditions of the Federal
award. As needed, the costs of
identifying, but not providing, locally
available dependent-care resources are
allowable. Conference hosts/sponsors
must exercise discretion and judgment
in ensuring that conference costs are
appropriate, necessary and managed in
a manner that minimizes costs to the
Federal award. The HHS awarding
agency may authorize exceptions where
appropriate for programs including
Indian tribes, children, and the elderly.
See also §§ 75.438, 75.456, 75.474, and
75.475.
§ 75.433
Contingency provisions.
(a) Contingency is that part of a
budget estimate of future costs (typically
of large construction projects, IT
systems, or other items as approved by
the HHS awarding agency) which is
associated with possible events or
conditions arising from causes the
precise outcome of which is
indeterminable at the time of estimate,
and that experience shows will likely
result, in aggregate, in additional costs
for the approved activity or project.
Amounts for major project scope
changes, unforeseen risks, or
extraordinary events may not be
included.
(b) It is permissible for contingency
amounts other than those excluded in
paragraph (a) of this section to be
explicitly included in budget estimates,
to the extent they are necessary to
improve the precision of those
estimates. Amounts must be estimated
using broadly-accepted cost estimating
methodologies, specified in the budget
documentation of the Federal award,
and accepted by the HHS awarding
agency. As such, contingency amounts
are to be included in the Federal award.
In order for actual costs incurred to be
allowable, they must comply with the
cost principles and other requirements
in this part (see also §§ 75.300 through
75.309 of Subpart D of this part and
75.403); be necessary and reasonable for
proper and efficient accomplishment of
project or program objectives, and be
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verifiable from the non-Federal entity’s
records.
(c) Payments made by the HHS
awarding agency to the non-Federal
entity’s ‘‘contingency reserve’’ or any
similar payment made for events the
occurrence of which cannot be foretold
with certainty as to the time or
intensity, or with an assurance of their
happening, are unallowable, except as
noted in §§ 75.431 and 75.447.
§ 75.434
Contributions and donations.
(a) Costs of contributions and
donations, including cash, property, and
services, from the non-Federal entity to
other entities, are unallowable.
(b) The value of services and property
donated to the non-Federal entity may
not be charged to the Federal award
either as a direct or indirect (F&A) cost.
The value of donated services and
property may be used to meet cost
sharing or matching requirements (see
§ 75.306). Depreciation on donated
assets is permitted in accordance with
§ 75.436, as long as the donated
property is not counted towards cost
sharing or matching requirements.
(c) Services donated or volunteered to
the non-Federal entity may be furnished
to a non-Federal entity by professional
and technical personnel, consultants,
and other skilled and unskilled labor.
The value of these services may not be
charged to the Federal award 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
provisions of § 75.306.
(d) To the extent feasible, services
donated to the non-Federal entity will
be supported by the same methods used
to support the allocability of regular
personnel services.
(e) The following provisions apply to
nonprofit organizations. The value of
services donated to the nonprofit
organization utilized in the performance
of a direct cost activity must be
considered in the determination of the
non-Federal entity’s indirect cost rate(s)
and, accordingly, must be allocated a
proportionate share of applicable
indirect costs when the following
circumstances exist:
(1) The aggregate value of the services
is material;
(2) The services are supported by a
significant amount of the indirect costs
incurred by the non-Federal entity;
(i) In those instances where there is
no basis for determining the fair market
value of the services rendered, the nonFederal entity and the cognizant agency
for indirect costs must negotiate an
appropriate allocation of indirect cost to
the services.
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(ii) Where donated services directly
benefit a project supported by the
Federal award, the indirect costs
allocated to the services will be
considered as a part of the total costs of
the project. Such indirect costs may be
reimbursed under the Federal award or
used to meet cost sharing or matching
requirements.
(f) Fair market value of donated
services must be computed as described
in § 75.306.
(g) Personal Property and Use of
Space.
(1) Donated personal property and use
of space may be furnished to a nonFederal entity. The value of the personal
property and space may not be charged
to the Federal award either as a direct
or indirect cost.
(2) The value of the donations may be
used to meet cost sharing or matching
share requirements under the conditions
described in §§ 75.300 through 75.309 of
subpart D of this part. The value of the
donations must be determined in
accordance with §§ 75.300 through
75.309. Where donations are treated as
indirect costs, indirect cost rates will
separate the value of the donations so
that reimbursement will not be made.
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§ 75.435 Defense and prosecution of
criminal and civil proceedings, claims,
appeals, and patent infringements.
(a) Definitions for the purposes of this
section.
(1) Conviction 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.
(2) Costs include the services of inhouse or private counsel, accountants,
consultants, or others engaged to assist
the non-Federal entity before, during,
and after commencement of a judicial or
administrative proceeding, that bear a
direct relationship to the proceeding.
(3) Fraud means:
(i) Acts of fraud or corruption or
attempts to defraud the Federal
Government or to corrupt its agents,
(ii) Acts that constitute a cause for
debarment or suspension (as specified
in agency regulations), and
(iii) Acts which violate the False
Claims Act (31 U.S.C. 3729–3732) or the
Anti-kickback Act (41 U.S.C. 1320a–
7b(b)).
(4) Penalty does not include
restitution, reimbursement, or
compensatory damages.
(5) Proceeding includes an
investigation.
(b) Costs. (1) Except as otherwise
described herein, costs incurred in
connection with any criminal, civil or
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administrative proceeding (including
filing of a false certification)
commenced by the Federal Government,
a state, local government, or foreign
government, or joined by the Federal
Government (including a proceeding
under the False Claims Act), against the
non-Federal entity, (or commenced by
third parties or a current or former
employee of the non-Federal entity who
submits a whistleblower complaint of
reprisal in accordance with 10 U.S.C.
2409 or 41 U.S.C. 4712), are not
allowable if the proceeding:
(i) Relates to a violation of, or failure
to comply with, a Federal, state, local or
foreign statute, regulation or the terms
and conditions of the Federal award, by
the non-Federal entity (including its
agents and employees); and
(ii) Results in any of the following
dispositions:
(A) In a criminal proceeding, a
conviction.
(B) In a civil or administrative
proceeding involving an allegation of
fraud or similar misconduct, a
determination of non-Federal entity
liability.
(C) In the case of any civil or
administrative proceeding, the
disallowance of costs or the imposition
of a monetary penalty, or an order
issued by the HHS awarding agency
head or delegate to the non-Federal
entity to take corrective action under 10
U.S.C. 2409 or 41 U.S.C. 4712.
(D) A final decision by an appropriate
Federal official to debar or suspend the
non-Federal entity, to rescind or void a
Federal award, or to terminate a Federal
award by reason of a violation or failure
to comply with a statute, regulation, or
the terms and conditions of the Federal
award.
(E) A disposition by consent or
compromise, if the action could have
resulted in any of the dispositions
described in paragraphs (b)(1)(ii)(A)
through (D) of this section.
(2) If more than one proceeding
involves the same alleged misconduct,
the costs of all such proceedings are
unallowable if any results in one of the
dispositions shown in paragraph (b) of
this section.
(c) If a proceeding referred to in
paragraph (b) of this section is
commenced by the Federal Government
and is resolved by consent or
compromise pursuant to an agreement
by the non-Federal entity and the
Federal Government, then the costs
incurred may be allowed to the extent
specifically provided in such agreement.
(d) If a proceeding referred to in
paragraph (b) of this section is
commenced by a state, local or foreign
government, the authorized Federal
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official may allow the costs incurred if
such authorized official determines that
the costs were incurred as a result of:
(1) A specific term or condition of the
Federal award, or
(2) Specific written direction of an
authorized official of the HHS awarding
agency.
(e) Costs incurred in connection with
proceedings described in paragraph (b)
of this section, which are not made
unallowable by that subsection, may be
allowed but only to the extent that:
(1) The costs are reasonable and
necessary in relation to the
administration of the Federal award and
activities required to deal with the
proceeding and the underlying cause of
action;
(2) Payment of the reasonable,
necessary, allocable and otherwise
allowable costs incurred is not
prohibited by any other provision(s) of
the Federal award;
(3) The costs are not recovered from
the Federal Government or a third party,
either directly as a result of the
proceeding or otherwise; and,
(4) An authorized Federal official
must determine the percentage of costs
allowed considering the complexity of
litigation, generally accepted principles
governing the award of legal fees in civil
actions involving the United States, and
such other factors as may be
appropriate. Such percentage must not
exceed 80 percent. However, if an
agreement reached under paragraph (c)
of this section has explicitly considered
this 80 percent limitation and permitted
a higher percentage, then the full
amount of costs resulting from that
agreement are allowable.
(f) Costs incurred by the non-Federal
entity in connection with the defense of
suits brought by its employees or exemployees under section 2 of the Major
Fraud Act of 1988 (18 U.S.C. 1031),
including the cost of all relief necessary
to make such employee whole, where
the non-Federal entity was found liable
or settled, are unallowable.
(g) Costs of prosecution of claims
against the Federal Government,
including appeals of final HHS agency
decisions, 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
Federal award.
(i) Costs which may be unallowable
under this section, including directly
associated costs, must be segregated and
accounted for separately. During the
pendency of any proceeding covered by
paragraphs (b) and (f) of this section, the
Federal Government must generally
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withhold payment of such costs.
However, if in its best interests, the
Federal Government may provide for
conditional payment upon provision of
adequate security, or other adequate
assurance, and agreement to repay all
unallowable costs, plus interest, if the
costs are subsequently determined to be
unallowable.
tkelley on DSK3SPTVN1PROD with RULES2
§ 75.436
Depreciation.
(a) Depreciation is the method for
allocating the cost of fixed assets to
periods benefitting from asset use. The
non-Federal entity may be compensated
for the use of its buildings, capital
improvements, equipment, and software
projects capitalized in accordance with
GAAP, provided that they are used,
needed in the non-Federal entity’s
activities, and properly allocated to
Federal awards. Such compensation
must be made by computing
depreciation.
(b) The allocation for depreciation
must be made in accordance with
Appendices III through IX.
(c) Depreciation is computed applying
the following rules. The computation of
depreciation must be based on the
acquisition cost of the assets involved.
For an asset donated to the non-Federal
entity by a third party, its fair market
value at the time of the donation must
be considered as the acquisition cost.
Such assets may be depreciated or
claimed as matching but not both. For
the purpose of computing depreciation,
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;
(3) Any portion of the cost of
buildings and equipment contributed by
or for the non-Federal entity, where law
or agreement prohibits recovery; and
(4) Any asset acquired solely for the
performance of a non-Federal award.
(d) When computing depreciation
charges, the following must be observed:
(1) The period of useful service or
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, historical data, 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 must
reflect the pattern of consumption of the
asset during its useful life. In the
absence of clear evidence indicating that
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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
must be presumed to be the appropriate
method. Depreciation methods once
used may not be changed unless
approved in advance by the cognizant
agency. The depreciation methods used
to calculate the depreciation amounts
for indirect (F&A) rate purposes must be
the same methods used by the nonFederal entity for its financial
statements.
(3) 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
must 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 cognizant agency may authorize
a non-Federal entity to use more than
these three groupings. When a nonFederal entity elects to depreciate its
buildings by its components, the same
depreciation methods must be used for
indirect (F&A) purposes and financial
statements purposes, as described in
paragraphs (d)(1) and (2) of this section.
(4) No depreciation may be allowed
on any assets that have outlived their
depreciable lives.
(5) Where the depreciation method is
introduced to replace the use allowance
method, depreciation must 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 total amount of use
allowance and depreciation for an asset
(including imputed depreciation
applicable to periods prior to the
conversion from the use allowance
method as well as depreciation after the
conversion) may not exceed the total
acquisition cost of the asset.
(e) Charges for 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, adequate
depreciation records showing the
amount of depreciation taken each
period must also be maintained.
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§ 75.437
costs.
75933
Employee health and welfare
(a) Costs incurred in accordance with
the non-Federal entity’s documented
policies for the improvement of working
conditions, employer-employee
relations, employee health, and
employee performance are allowable.
(b) Such costs will be equitably
apportioned to all activities of the nonFederal entity. Income generated from
any of these activities will be credited
to the cost thereof unless such income
has been irrevocably sent to employee
welfare organizations.
(c) Losses resulting from operating
food services are allowable only if the
non-Federal entity’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:
(1) Where the non-Federal entity can
demonstrate unusual circumstances;
and
(2) With the approval of the cognizant
agency for indirect costs.
§ 75.438
Entertainment costs.
Costs of entertainment, including
amusement, diversion, and social
activities and any associated costs are
unallowable, except where specific
costs that might otherwise be
considered entertainment have a
programmatic purpose and are
authorized either in the approved
budget for the Federal award or with
prior written approval of the HHS
awarding agency.
§ 75.439 Equipment and other capital
expenditures.
(a) See § 75.2 for the definitions of
Capital expenditures, Equipment,
Special purpose equipment, General
purpose equipment, Acquisition cost,
and Capital assets.
(b) The following rules of allowability
must apply to equipment and other
capital expenditures:
(1) Capital expenditures for general
purpose equipment, buildings, and land
are unallowable as direct charges,
except with the prior written approval
of the HHS awarding agency or passthrough entity.
(2) Capital expenditures for special
purpose equipment are allowable as
direct costs, provided that items with a
unit cost of $5,000 or more have the
prior written approval of the HHS
awarding agency or pass-through entity.
(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
written approval of the HHS awarding
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agency, or pass-through entity. See
§ 75.436 for rules on the allowability of
depreciation on buildings, capital
improvements, and equipment. See also
§ 75.465.
(4) When approved as a direct charge
pursuant to paragraphs (b)(1) through
(3) of this section, capital expenditures
will be charged in the period in which
the expenditure is incurred, or as
otherwise determined appropriate and
negotiated with the HHS awarding
agency.
(5) 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 depreciation on the
equipment, or by amortizing the amount
to be written off over a period of years
negotiated with the Federal cognizant
agency for indirect cost.
(6) Cost of equipment disposal. If the
non-Federal entity is instructed by the
HHS awarding agency to otherwise
dispose of or transfer the equipment the
costs of such disposal or transfer are
allowable.
§ 75.440
Exchange rates.
(a) Cost increases for fluctuations in
exchange rates are allowable costs
subject to the availability of funding.
Prior approval of exchange rate
fluctuations is required only when the
change results in the need for additional
Federal funding, or the increased costs
result in the need to significantly reduce
the scope of the project. The HHS
awarding agency must however ensure
that adequate funds are available to
cover currency fluctuations in order to
avoid a violation of the Anti-Deficiency
Act.
(b) The non-Federal entity is required
to make reviews of local currency gains
to determine the need for additional
federal funding before the expiration
date of the Federal award. Subsequent
adjustments for currency increases may
be allowable only when the non-Federal
entity provides the HHS awarding
agency with adequate source
documentation from a commonly used
source in effect at the time the expense
was made, and to the extent that
sufficient Federal funds are available.
tkelley on DSK3SPTVN1PROD with RULES2
§ 75.441 Fines, penalties, damages and
other settlements.
Costs resulting from non-Federal
entity violations of, alleged violations
of, or failure to comply with, Federal,
state, tribal, local or foreign laws and
regulations are unallowable, except
when incurred as a result of compliance
with specific provisions of the Federal
award, or with prior written approval of
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the HHS awarding agency. See also
§ 75.435.
§ 75.442 Fund raising and investment
management costs.
(a) Costs of organized fund raising,
including financial campaigns,
endowment drives, solicitation of gifts
and bequests, and similar expenses
incurred to raise capital or obtain
contributions are unallowable. Fund
raising costs for the purposes of meeting
the Federal program objectives are
allowable with prior written approval
from the Federal awarding agency.
Proposal costs are covered in § 75.460.
(b) Costs of investment counsel and
staff and similar expenses incurred to
enhance income from investments are
unallowable except when associated
with investments covering pension, selfinsurance, or other funds which include
Federal participation allowed by this
part.
(c) Costs related to the physical
custody and control of monies and
securities are allowable.
(d) Both allowable and unallowable
fund raising and investment activities
must be allocated an appropriate share
of indirect costs under the conditions
described in § 75.413.
§ 75.443 Gains and losses on disposition
of depreciable assets.
(a) Gains and losses on the sale,
retirement, or other disposition of
depreciable property must 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) is
the difference between the amount
realized on the property and the
undepreciated basis of the property.
(b) Gains and losses from the
disposition of depreciable property
must not be recognized as a separate
credit or charge under the following
conditions:
(1) The gain or loss is processed
through a depreciation account and is
reflected in the depreciation allowable
under §§ 75.436 and 75.439.
(2) 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.
(3) A loss results from the failure to
maintain permissible insurance, except
as otherwise provided in § 75.447.
(4) Compensation for the use of the
property was provided through use
allowances in lieu of depreciation.
(5) Gains and losses arising from mass
or extraordinary sales, retirements, or
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other dispositions must be considered
on a case-by-case basis.
(c) Gains or losses of any nature
arising from the sale or exchange of
property other than the property
covered in paragraph (a) of this section,
e.g., land, must be excluded in
computing Federal award costs.
(d) When assets acquired with Federal
funds, in part or wholly, are disposed
of, the distribution of the proceeds must
be made in accordance with §§ 75.317
through 75.323.
§ 75.444
General costs of government.
(a) For states, local governments, and
Indian Tribes, the general costs of
government are unallowable (except as
provided in § 75.474). Unallowable
costs include:
(1) Salaries and expenses of the Office
of the Governor of a state or the chief
executive of a local government or the
chief executive of an Indian tribe;
(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 judicial branch of a
government;
(4) Costs of prosecutorial activities
unless treated as a direct cost to a
specific program if authorized by statute
or regulation (however, this does not
preclude the allowability of other legal
activities of the Attorney General as
described in § 75.435); 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 Indian tribes and Councils of
Governments (COGs) (see § 75.2 Local
government), up to 50% of salaries and
expenses directly attributable to
managing and operating Federal
programs by the chief executive and his
or her staff can be included in the
indirect cost calculation without
documentation.
§ 75.445
use.
Goods or services for personal
(a) Costs of goods or services for
personal use of the non-Federal entity’s
employees are unallowable regardless of
whether the cost is reported as taxable
income to the employees.
(b) Costs of housing (e.g.,
depreciation, maintenance, utilities,
furnishings, rent), housing allowances
and personal living expenses are only
allowable as direct costs regardless of
whether reported as taxable income to
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the employees. In addition, to be
allowable direct costs must be approved
in advance by an HHS awarding agency.
tkelley on DSK3SPTVN1PROD with RULES2
§ 75.446
Idle facilities and idle capacity.
(a) As used in this section the
following terms have the meanings set
forth in this section:
(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 non-Federal entity.
(2) Idle facilities means completely
unused facilities that are excess to the
non-Federal entity’s current needs.
(3) Idle capacity means the unused
capacity of partially used facilities. It is
the difference between:
(i) 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;
(ii) The extent to which the facility
was actually used to meet demands
during the accounting period. A multishift 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, and depreciation. These costs
could include the costs of idle public
safety emergency facilities,
telecommunications, or information
technology system capacity that is built
to withstand major fluctuations in load,
e.g., consolidated data centers.
(b) The costs of idle facilities are
unallowable except to the extent that:
(1) They are necessary to meet
workload requirements which may
fluctuate and are allocated appropriately
to all benefiting programs; 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,
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provided that the capacity is reasonably
anticipated to be necessary to carry out
the purpose of the Federal award 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.
§ 75.447
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
non-Federal entity’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 HHS
awarding agency has specifically
required or approved such costs.
(3) Costs allowed for business
interruption or other similar insurance
must exclude coverage of management
fees.
(4) Costs of insurance on the lives of
trustees, officers, or other employees
holding positions of similar
responsibilities are allowable only to the
extent that the insurance represents
additional compensation (see § 75.431).
The cost of such insurance when the
non-Federal entity is identified as the
beneficiary is unallowable.
(5) Insurance against defects. Costs of
insurance with respect to any costs
incurred to correct defects in the nonFederal entity’s materials or
workmanship are unallowable.
(6) Medical liability (malpractice)
insurance. Medical liability insurance is
an allowable cost of Federal research
programs only to the extent that the
Federal research programs involve
human subjects or training of
participants in research techniques.
Medical liability insurance costs must
be treated as a direct cost and must be
assigned to individual projects based on
the manner in which the insurer
allocates the risk to the population
covered by the insurance.
(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
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75935
award. However, 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, must 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 nonFederal entity’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)(i) 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:
(A) Submitted and adjudicated but
not paid;
(B) Submitted but not adjudicated;
and
(C) Incurred but not submitted.
(ii) 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 nonFederal entity. If individual
departments or agencies of the nonFederal entity experience significantly
different levels of claims for a particular
risk, those differences are to be
recognized by the use of separate
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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 or
unrestricted account), refunds must be
made to the Federal Government for its
share of funds transferred, including
earned or imputed interest from the date
of transfer and debt interest, if
applicable, chargeable in accordance
with applicable Federal cognizant
agency for indirect cost, claims
collection regulations.
(e) Insurance refunds must be credited
against insurance costs in the year the
refund is received.
(f) Indemnification includes securing
the non-Federal entity against liabilities
to third persons and other losses not
compensated by insurance or otherwise.
The Federal Government is obligated to
indemnify the non-Federal entity only
to the extent expressly provided for in
the Federal award, except as provided
in paragraph (c) of this section.
tkelley on DSK3SPTVN1PROD with RULES2
§ 75.448
Intellectual Property.
(a) Patent costs. (1) The following
costs related to securing patents and
copyrights are allowable:
(i) Costs 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;
(ii) Costs 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
(iii) General counseling services
relating to patent and copyright matters,
such as advice on patent and copyright
laws, regulations, clauses, and employee
intellectual property agreements (See
also § 75.459).
(2) The following costs related to
securing patents and copyrights are
unallowable:
(i) Costs of preparing disclosures,
reports, and other documents, and of
searching the art to make disclosures
not required by the Federal award;
(ii) 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.
(b) Royalties and other costs for use of
patents and copyrights. (1) Royalties on
a patent or copyright or amortization of
the cost of acquiring by purchase a
copyright, patent, or rights thereto,
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necessary for the proper performance of
the Federal award are allowable unless:
(i) The Federal Government already
has a license or the right to free use of
the patent or copyright.
(ii) The patent or copyright has been
adjudicated to be invalid, or has been
administratively determined to be
invalid.
(iii) The patent or copyright is
considered to be unenforceable.
(iv) The patent or copyright is
expired.
(2) 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, such as:
(i) Royalties paid to persons,
including corporations, affiliated with
the non-Federal entity.
(ii) Royalties paid to unaffiliated
parties, including corporations, under
an agreement entered into in
contemplation that a Federal award
would be made.
(iii) Royalties paid under an
agreement entered into after a Federal
award is made to a non-Federal entity.
(3) In any case involving a patent or
copyright formerly owned by the nonFederal entity, the amount of royalty
allowed must not exceed the cost which
would have been allowed had the nonFederal entity retained title there.
§ 75.449
Interest.
(a) General. Costs incurred for interest
on borrowed capital, temporary use of
endowment funds, or the use of the nonFederal entity’s own funds, however
represented, are unallowable. Financing
costs (including interest) to acquire,
construct, or replace capital assets are
allowable, subject to the conditions in
this section.
(b)(1) Capital assets are defined in
§ 75.2 Capital assets. An asset cost
includes (as applicable) acquisition
costs, construction costs, and other costs
capitalized in accordance with GAAP.
(2) For non-Federal entity fiscal years
beginning on or after January 1, 2016,
intangible assets include patents and
computer software. For software
development projects, only interest
attributable to the portion of the project
costs capitalized in accordance with
GAAP is allowable.
(c) Conditions for all non-Federal
entities. (1) The non-Federal entity uses
the capital assets in support of Federal
awards;
(2) The allowable asset costs to
acquire facilities and equipment are
limited to a fair market value available
to the non-Federal entity from an
unrelated (arm’s length) third party.
(3) The non-Federal entity obtains the
financing via an arm’s-length
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transaction (that is, a transaction with
an unrelated third party); or claims
reimbursement of actual interest cost at
a rate available via such a transaction.
(4) The non-Federal entity limits
claims for Federal reimbursement of
interest costs to the least expensive
alternative. For example, a capital lease
may be determined less costly than
purchasing through debt financing, in
which case reimbursement must be
limited to the amount of interest
determined if leasing had been used.
(5) The non-Federal entity expenses
or capitalizes allowable interest cost in
accordance with GAAP.
(6) Earnings generated by the
investment of borrowed funds pending
their disbursement for the asset costs are
used to offset the current period’s
allowable interest cost, whether that
cost is expensed or capitalized. Earnings
subject to being reported to the Federal
Internal Revenue Service under
arbitrage requirements are excludable.
(7) The following conditions must
apply to debt arrangements over $1
million to purchase or construct
facilities, unless the non-Federal entity
makes an initial equity contribution to
the purchase of 25 percent or more. For
this purpose, ‘‘initial equity
contribution’’ means the amount or
value of contributions made by the nonFederal entity for the acquisition of
facilities prior to occupancy.
(i) The non-Federal entity must
reduce claims for reimbursement of
interest cost by an amount equal to
imputed interest earnings on excess
cash flow attributable to the portion of
the facility used for Federal awards.
(ii) The non-Federal entity must
impute interest on excess cash flow as
follows:
(A) Annually, the non-Federal entity
must prepare a cumulative (from the
inception of the project) report of
monthly cash inflows and outflows,
regardless of the funding source. For
this purpose, inflows consist of Federal
reimbursement for depreciation,
amortization of capitalized construction
interest, and annual interest cost.
Outflows consist of initial equity
contributions, debt principal payments
(less the pro-rata share attributable to
the cost of land), and interest payments.
(B) To compute monthly cash inflows
and outflows, the non-Federal entity
must divide the annual amounts
determined in step (i) by the number of
months in the year (usually 12) that the
building is in service.
(C) For any month in which
cumulative cash inflows exceed
cumulative outflows, interest must be
calculated on the excess inflows for that
month and be treated as a reduction to
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allowable interest cost. The rate of
interest to be used must be the threemonth Treasury bill closing rate as of
the last business day of that month.
(8) Interest attributable to a fully
depreciated asset is unallowable.
(d) Additional conditions for states,
local governments and Indian tribes. For
costs to be allowable, the non-Federal
entity must have incurred the interest
costs for buildings after October 1, 1980,
or for land and equipment after
September 1, 1995.
(1) The requirement to offset interest
earned on borrowed funds against
current allowable interest cost
(paragraph (c)(5) of this section) also
applies to earnings on debt service
reserve funds.
(2) The non-Federal entity will
negotiate the amount of allowable
interest cost related to the acquisition of
facilities with asset costs of $1 million
or more, as outlined in paragraph (c)(7)
of this section. For this purpose, a nonFederal entity must consider only cash
inflows and outflows attributable to that
portion of the real property used for
Federal awards.
(e) Additional conditions for IHEs.
For costs to be allowable, the IHE must
have incurred the interest costs after
September 23, 1982, in connection with
acquisitions of capital assets that
occurred after that date.
(f) Additional condition for nonprofit
organizations. For costs to be allowable,
the nonprofit organization incurred the
interest costs after September 29, 1995,
in connection with acquisitions of
capital assets that occurred after that
date.
(g) The interest allowability
provisions of this section do not apply
to a nonprofit organization subject to
‘‘full coverage’’ under the Cost
Accounting Standards (CAS), as defined
at 48 CFR 9903.201–2(a). The nonFederal entity’s Federal awards are
instead subject to CAS 414 (48 CFR
9904.414), and CAS 417 (48 CFR
9904.417).
tkelley on DSK3SPTVN1PROD with RULES2
§ 75.450
Lobbying.
(a) 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 is governed by
relevant statutes, including among
others, the provisions of 31 U.S.C. 1352,
as well as the common rule, ‘‘New
Restrictions on Lobbying’’ published at
55 FR 6736 (February 26, 1990),
including definitions, and the Office of
Management and Budget ‘‘Governmentwide Guidance for New Restrictions on
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Lobbying’’ and notices published at 54
FR 52306 (December 20, 1989), 55 FR
24540 (June 15, 1990), 57 FR 1772
(January 15, 1992), and 61 FR 1412
(January 19, 1996).
(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
Federal award 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
Federal award or regulatory matter on
any basis other than the merits of the
matter.
(c) In addition to the above, the
following restrictions are applicable to
nonprofit organizations and IHEs:
(1) Costs associated with the
following activities are unallowable:
(i) 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;
(ii) 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 in
the United States;
(iii) Any attempt to influence:
(A) The introduction of Federal or
state legislation;
(B) 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);
(C) 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
(D) Any government official or
employee in connection with a decision
to sign or veto enrolled legislation;
(iv) 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.
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(2) The following activities are
excepted from the coverage of paragraph
(c)(1) of this section:
(i) 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 non-Federal entity’s member of
congress, legislative body or a
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;
(ii) Any lobbying made unallowable
by paragraph (c)(1)(iii) of this section to
influence state legislation in order to
directly reduce the cost, or to avoid
material impairment of the non-Federal
entity’s authority to perform the grant,
contract, or other agreement; or
(iii) Any activity specifically
authorized by statute to be undertaken
with funds from the Federal award.
(iv) Any activity excepted from the
definitions of ‘‘lobbying’’ or
‘‘influencing legislation’’ by the Internal
Revenue Code provisions that require
nonprofit organizations to limit their
participation in direct and ‘‘grass roots’’
lobbying activities in order to retain
their charitable deduction status and
avoid punitive excise taxes, IRC
secs.501(c)(3), 501(h), 4911(a),
including:
(A) Nonpartisan analysis, study, or
research reports;
(B) Examinations and discussions of
broad social, economic, and similar
problems; and
(C) Information provided upon
request by a legislator for technical
advice and assistance, as defined by IRC
sec. 4911(d)(2) and 26 CFR 56.4911–
2(c)(1)–(c)(3).
(v) When a non-Federal entity seeks
reimbursement for indirect (F&A) costs,
total lobbying costs must be separately
identified in the indirect (F&A) cost rate
proposal, and thereafter treated as other
unallowable activity costs in accordance
with the procedures of § 75.413.
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(vi) The non-Federal entity must
submit as part of its annual indirect
(F&A) cost rate proposal a certification
that the requirements and standards of
this section have been complied with.
(See also § 75.415.)
(vii)(A) Time logs, calendars, or
similar records are not required to be
created for purposes of complying with
the record keeping requirements in
§ 75.302 with respect to lobbying costs
during any particular calendar month
when:
(1) The employee engages in lobbying
(as defined in paragraphs (c)(1) and
(c)(2) of this section) 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 non-Federal entity has not
materially misstated allowable or
unallowable costs of any nature,
including legislative lobbying costs.
(B) When conditions in paragraph
(c)(2)(vii)(A)(1) and (2) of this section
are met, non-Federal entities 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
paragraphs (c)(2)(vii)(A)(1) and (2) of
this section 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.
(viii) The HHS awarding agency must
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 must be binding in
any subsequent settlements, audits, or
investigations with respect to that grant
or contract for purposes of
interpretation of this part, provided,
however, that this must not be
construed to prevent a contractor or
non-Federal entity from contesting the
lawfulness of such a determination.
tkelley on DSK3SPTVN1PROD with RULES2
§ 75.451 Losses on other awards or
contracts.
Any excess of costs over income
under any other award or contract of
any nature is unallowable. This
includes, but is not limited to, the nonFederal entity’s contributed portion by
reason of cost-sharing agreements or any
under-recoveries through negotiation of
flat amounts for indirect (F&A) costs.
Also, any excess of costs over
authorized funding levels transferred
from any award or contract to another
award or contract is unallowable. All
losses are not allowable indirect (F&A)
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costs and are required to be included in
the appropriate indirect cost rate base
for allocation of indirect costs.
§ 75.452
Maintenance and repair costs.
(e) Costs of membership in
organizations whose primary purpose is
lobbying are unallowable. See also
§ 75.450.
Costs incurred for utilities, insurance,
security, necessary maintenance,
janitorial services, 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 must be treated as capital
expenditures (see § 75.439). These costs
are only allowable to the extent not paid
through rental or other agreements.
§ 75.455
§ 75.453 Materials and supplies costs,
including costs of computing devices.
§ 75.457
(a) Costs incurred for materials,
supplies, and fabricated parts necessary
to carry out a Federal award are
allowable.
(b) Purchased materials and supplies
must be charged at their actual prices,
net of applicable credits. Withdrawals
from general stores or stockrooms must
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) Materials and supplies used for the
performance of a Federal award may be
charged as direct costs. In the specific
case of computing devices, charging as
direct costs is allowable for devices that
are essential and allocable, but not
solely dedicated, to the performance of
a Federal award.
(d) Where federally-donated or
furnished materials are used in
performing the Federal award, such
materials will be used without charge.
§ 75.454 Memberships, subscriptions, and
professional activity costs.
(a) Costs of the non-Federal entity’s
membership in business, technical, and
professional organizations are
allowable.
(b) Costs of the non-Federal entity’s
subscriptions to business, professional,
and technical periodicals are allowable.
(c) Costs of membership in any civic
or community organization are
allowable with prior approval by the
HHS awarding agency or pass-through
entity.
(d) Costs of membership in any
country club or social or dining club or
organization are unallowable.
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Organization costs.
Costs such as incorporation fees,
brokers’ fees, fees to promoters,
organizers or management consultants,
attorneys, accountants, or investment
counselor, whether or not employees of
the non-Federal entity in connection
with establishment or reorganization of
an organization, are unallowable except
with prior approval of the HHS
awarding agency.
§ 75.456
Participant support costs.
Participant support costs are defined
in § 75.2. Participant support costs are
allowable with the prior approval of the
HHS awarding agency.
Plant and security costs.
Necessary and reasonable expenses
incurred for protection and security of
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;
protective (non-military) gear, devices,
and equipment; contractual security
services; and consultants. Capital
expenditures for plant security purposes
are subject to § 75.439.
§ 75.458
Pre-award costs.
Pre-award costs are those incurred
prior to the effective date of the Federal
award directly pursuant to the
negotiation and in anticipation of the
Federal award where such costs are
necessary for efficient and timely
performance of the scope of work. Such
costs are allowable only to the extent
that they would have been allowable if
incurred after the date of the Federal
award and only with the written
approval of the HHS awarding agency.
§ 75.459
Professional services 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
non-Federal entity, are allowable,
subject to paragraphs (b) and (c) of this
section 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 § 75.435.
(b) In determining the allowability of
costs in a particular case, no single
factor or any special combination of
factors is necessarily determinative.
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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 non-Federal
entity’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 non-Federal entity’s business (i.e.,
what new problems have arisen).
(5) Whether the proportion of Federal
work to the non-Federal entity’s total
business is such as to influence the nonFederal entity 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 awards.
(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-federally funded
activities.
(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
paragraph (b) of this section, to be
allowable, retainer fees must be
supported by evidence of bona fide
services available or rendered.
§ 75.460
Proposal costs.
Proposal costs are the costs of
preparing bids, proposals, or
applications on potential Federal and
non-Federal awards or projects,
including the development of data
necessary to support the non-Federal
entity’s bids or proposals. Proposal costs
of the current accounting period of both
successful and unsuccessful bids and
proposals normally should be treated as
indirect (F&A) costs and allocated
currently to all activities of the nonFederal entity. No proposal costs of past
accounting periods will be allocable to
the current period.
tkelley on DSK3SPTVN1PROD with RULES2
§ 75.461
Publication and printing costs.
(a) Publication costs for electronic and
print media, including distribution,
promotion, and general handling are
allowable. If these costs are not
identifiable with a particular cost
objective, they should be allocated as
indirect costs to all benefiting activities
of the non-Federal entity.
(b) Page charges for professional
journal publications are allowable
where:
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(1) The publications report work
supported by the Federal Government;
and
(2) The charges are levied impartially
on all items published by the journal,
whether or not under a Federal award.
(c) The non-Federal entity may charge
the Federal award before closeout for
the costs of publication as prescribed in
paragraphs (a) or (b) of this section or
sharing of research results if the costs
are not incurred during the period of
performance of the Federal award.
§ 75.462
costs.
Rearrangement and reconversion
(a) Costs incurred for ordinary and
normal rearrangement and alteration of
facilities are allowable as indirect costs.
Special arrangements and alterations
costs incurred specifically for a Federal
award are allowable as a direct cost with
the prior approval of the HHS awarding
agency or pass-through entity.
(b) Costs incurred in the restoration or
rehabilitation of the non-Federal entity’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.
§ 75.463
Recruiting costs.
(a) Subject to paragraphs (b) and (c) of
this section, 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 the nonFederal entity’s standard recruitment
program. Where the non-Federal entity
uses employment agencies, costs not in
excess of standard commercial rates for
such services are allowable.
(b) Special emoluments, fringe
benefits, and salary allowances incurred
to attract professional personnel that do
not meet the test of reasonableness or do
not conform with the established
practices of the non-Federal entity, are
unallowable.
(c) Where relocation costs incurred
incident to recruitment of a new
employee have been funded in whole or
in part to a Federal award, and the
newly hired employee resigns for
reasons within the employee’s control
within 12 months after hire, the non-
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75939
Federal entity will be required to refund
or credit the Federal share of such
relocation costs to the Federal
Government. See also § 75.464.
(d) Short-term, travel visa costs (as
opposed to longer-term, immigration
visas) are generally allowable expenses
that may be proposed as a direct cost.
Since short-term visas are issued for a
specific period and purpose, they can be
clearly identified as directly connected
to work performed on a Federal award.
For these costs to be directly charged to
a Federal award, they must:
(1) Be critical and necessary for the
conduct of the project;
(2) Be allowable under the applicable
cost principles;
(3) Be consistent with the non-Federal
entity’s cost accounting practices and
non-Federal entity policy; and
(4) Meet the definition of ‘‘direct cost’’
as described in the applicable cost
principles.
§ 75.464
Relocation costs of employees.
(a) Relocation costs are costs incident
to the permanent change of duty
assignment (for an indefinite period or
for a stated period of not less than 12
months) of an existing employee or
upon recruitment of a new employee.
Relocation costs are allowable, subject
to the limitations described in
paragraphs (b), (c), and (d) of this
section, provided that:
(1) The move is for the benefit of the
employer.
(2) Reimbursement to the employee is
in accordance with an established
written policy consistently followed by
the employer.
(3) The reimbursement does not
exceed the employee’s actual (or
reasonably estimated) expenses.
(b) Allowable relocation costs for
current employees are limited to the
following:
(1) The costs of transportation of the
employee, members of his or her
immediate family and his household,
and personal effects to the new location.
(2) The costs of finding a new home,
such as advance trips by employees and
spouses to locate living quarters and
temporary lodging during the transition
period, up to maximum period of 30
calendar days.
(3) Closing costs, such as brokerage,
legal, and appraisal fees, incident to the
disposition of the employee’s former
home. These costs, together with those
described in (4), are limited to 8 per
cent of the sales price of the employee’s
former home.
(4) The continuing costs of ownership
(for up to six months) of the vacant
former home after the settlement or
lease date of the employee’s new
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permanent home, such as maintenance
of buildings and grounds (exclusive of
fixing-up expenses), utilities, taxes, and
property insurance.
(5) Other necessary and reasonable
expenses normally incident to
relocation, such as the costs of canceling
an unexpired lease, transportation of
personal property, and purchasing
insurance against loss of or damages to
personal property. The cost of canceling
an unexpired lease is limited to three
times the monthly rental.
(c) Allowable relocation costs for new
employees are limited to those
described in paragraphs (b)(1) and (2) of
this section. When relocation costs
incurred incident to the recruitment of
new employees have been charged to a
Federal award and the employee resigns
for reasons within the employee’s
control within 12 months after hire, the
non-Federal entity must refund or credit
the Federal Government for its share of
the cost. However, the costs of travel to
an overseas location must be considered
travel costs in accordance with § 75.474,
and not § 75.464, for the purpose of this
paragraph if dependents are not
permitted at the location for any reason
and the costs do not include costs of
transporting household goods.
(d) The following costs related to
relocation are unallowable:
(1) Fees and other costs associated
with acquiring a new home.
(2) A loss on the sale of a former
home.
(3) Continuing mortgage principal and
interest payments on a home being sold.
(4) Income taxes paid by an employee
related to reimbursed relocation costs.
tkelley on DSK3SPTVN1PROD with RULES2
§ 75.465 Rental costs of real property and
equipment.
(a) Subject to the limitations
described in paragraphs (b) and (c) 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 non-Federal entity continued to
own the property. This amount would
include expenses such as depreciation,
maintenance, taxes, and insurance.
(c) Rental costs under ‘‘less-thanarm’s-length’’ leases are allowable only
up to the amount (as explained in
paragraph (b) of this section). For this
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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:
(1) Divisions of the non-Federal
entity;
(2) The non-Federal entity under
common control through common
officers, directors, or members; and
(3) The non-Federal entity and a
director, trustee, officer, or key
employee of the non-Federal entity or
an immediate family member, either
directly or through corporations, trusts,
or similar arrangements in which they
hold a controlling interest. For example,
the non-Federal entity may establish a
separate corporation for the sole
purpose of owning property and leasing
it back to the non-Federal entity.
(4) Family members include one party
with any of the following relationships
to another party:
(i) Spouse, and parents thereof;
(ii) Children, and spouses thereof;
(iii) Parents, and spouses thereof;
(iv) Siblings, and spouses thereof;
(v) Grandparents and grandchildren,
and spouses thereof;
(vi) Domestic partner and parents
thereof, including domestic partners of
any individual in 2 through 5 of this
definition; and
(vii) Any individual related by blood
or affinity whose close association with
the employee is the equivalent of a
family relationship.
(5) 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
paragraph (b) of this section) that would
be allowed had the non-Federal entity
purchased the property on the date the
lease agreement was executed. The
provisions of GAAP must 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 § 75.449.
Unallowable costs include amounts
paid for profit, management fees, and
taxes that would not have been incurred
had the non-Federal entity purchased
the property.
(6) The rental of any property owned
by any individuals or entities affiliated
with the non-Federal entity, to include
commercial or residential real estate, for
purposes such as the home office
workspace is unallowable.
§ 75.466
costs.
Scholarships and student aid
(a) Costs of scholarships, fellowships,
and other programs of student aid at
IHEs are allowable only when the
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purpose of the Federal award is to
provide training to selected participants
and the charge is approved by the HHS
awarding 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 Federal
award;
(2) Tuition remission and other
support are provided in accordance
with established policy of the IHE and
consistently provided in a like manner
to students in return for similar
activities conducted under Federal
awards as well as other activities; and
(3) During the academic period, the
student is enrolled in an advanced
degree program at a non-Federal entity
or affiliated institution and the activities
of the student in relation to the Federal
award 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 IHE’s practice to similarly
compensate students under Federal
awards as well as other activities.
(b) Charges for tuition remission and
other forms of compensation paid to
students as, or in lieu of, salaries and
wages must be subject to the reporting
requirements in § 75.430, and must be
treated as direct or indirect cost in
accordance with the actual work being
performed. Tuition remission may be
charged on an average rate basis. See
also § 75.431.
§ 75.467
Selling and marketing costs.
Costs of selling and marketing any
products or services of the non-Federal
entity (unless allowed under § 75.421)
are unallowable, except as direct costs,
with prior approval by the HHS
awarding agency when necessary for the
performance of the Federal award.
§ 75.468
Specialized service facilities.
(a) The costs of services provided by
highly complex or specialized facilities
operated by the non-Federal entity, such
as computing facilities, wind tunnels,
and reactors are allowable, provided the
charges for the services meet the
conditions of either paragraphs (b) or (c)
of this section, and, in addition, take
into account any items of income or
Federal financing that qualify as
applicable credits under § 75.406.
(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:
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(1) Does not discriminate between
activities under Federal awards and
other activities of the non-Federal
entity, including usage by the nonFederal entity for internal purposes, and
(2) Is designed to recover only the
aggregate costs of the services. The costs
of each service must consist normally of
both its direct costs and its allocable
share of all indirect (F&A) costs. Rates
must be adjusted at least biennially, and
must 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 indirect (F&A) costs.
(d) Under some extraordinary
circumstances, where it is in the best
interest of the Federal Government and
the non-Federal entity to establish
alternative costing arrangements, such
arrangements may be worked out with
the Federal cognizant agency for
indirect costs.
§ 75.469
Student activity costs.
Costs incurred for intramural
activities, student publications, student
clubs, and other student activities, are
unallowable, unless specifically
provided for in the Federal award.
tkelley on DSK3SPTVN1PROD with RULES2
§ 75.470
Tax).
Taxes (including Value Added
(a) For states, local governments and
Indian tribes:
(1) 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.
(2) Gasoline taxes, motor vehicle fees,
and other taxes that are in effect user
fees for benefits provided to the Federal
Government are allowable.
(3) This provision does not restrict the
authority of the HHS awarding agency
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 for indirect costs may
accept a reasonable approximation
thereof.
(b) For nonprofit organizations and
IHEs:
(1) In general, taxes which the nonFederal entity is required to pay and
which are paid or accrued in accordance
with GAAP, and payments made to
local governments in lieu of taxes which
are commensurate with the local
government services received are
allowable, except for:
(i) Taxes from which exemptions are
available to the non-Federal entity
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directly or which are available to the
non-Federal entity based on an
exemption afforded the Federal
Government and, in the latter case,
when the HHS awarding agency makes
available the necessary exemption
certificates,
(ii) Special assessments on land
which represent capital improvements,
and
(iii) Federal income taxes.
(2) Any refund of taxes, and any
payment to the non-Federal entity of
interest thereon, which were allowed as
Federal award costs, will be credited
either as a cost reduction or cash refund,
as appropriate, to the Federal
Government. However, any interest
actually paid or credited to an nonFederal entity 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 nonFederal entity has been reimbursed by
the Federal Government for the taxes,
interest, and penalties.
(c) Value Added Tax (VAT) Foreign
taxes charged for the purchase of goods
or services that a non-Federal entity is
legally required to pay in country is an
allowable expense under Federal
awards. Foreign tax refunds or
applicable credits under Federal awards
refer to receipts, or reduction of
expenditures, which operate to offset or
reduce expense items that are allocable
to Federal awards as direct or indirect
costs. To the extent that such credits
accrued or received by the non-Federal
entity relate to allowable cost, these
costs must be credited to the HHS
awarding agency either as costs or cash
refunds. If the costs are credited back to
the Federal award, the non-Federal
entity may reduce the Federal share of
costs by the amount of the foreign tax
reimbursement, or where Federal award
has not expired, use the foreign
government tax refund for approved
activities under the Federal award with
prior approval of the HHS awarding
agency.
§ 75.471
Termination costs.
Termination of a Federal award
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 in this section.
They are to be used in conjunction with
the other provisions of this part in
termination situations.
(a) The cost of items reasonably
usable on the non-Federal entity’s other
work must not be allowable unless the
non-Federal entity submits evidence
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75941
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
non-Federal entity, the HHS awarding
agency should consider the non-Federal
entity’s plans and orders for current and
scheduled activity. Contemporaneous
purchases of common items by the nonFederal entity must be regarded as
evidence that such items are reasonably
usable on the non-Federal entity’s other
work. Any acceptance of common items
as allocable to the terminated portion of
the Federal award must 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 non-Federal
entity, certain costs cannot be
discontinued immediately after the
effective date of termination, such costs
are generally allowable within the
limitations set forth in this part, except
that any such costs continuing after
termination due to the negligent or
willful failure of the non-Federal entity
to discontinue such costs must 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 non-Federal entity,
(2) The interest of the Federal
Government is protected by transfer of
title or by other means deemed
appropriate by the HHS awarding
agency (see also § 75.320(d)), 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 non-Federal entity 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
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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:
(i) The preparation and presentation
to the Federal awarding agency of
settlement claims and supporting data
with respect to the terminated portion of
the Federal award, unless the
termination is for cause (see Subpart D
of this part, §§ 75.371 through 75.375);
and
(ii) 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.
(f) Claims under subawards, including
the allocable portion of claims which
are common to the Federal award and
to other work of the non-Federal entity,
are generally allowable. An appropriate
share of the non-Federal entity’s
indirect costs may be allocated to the
amount of settlements with contractors
and/or subrecipients, provided that the
amount allocated is otherwise
consistent with the basic guidelines
contained in § 75.414. The indirect costs
so allocated must exclude the same and
similar costs claimed directly or
indirectly as settlement expenses.
§ 75.472
Training and education costs.
The cost of training and education
provided for employee development is
allowable.
tkelley on DSK3SPTVN1PROD with RULES2
§ 75.473
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 indirect
(F&A) cost accounts if the non-Federal
entity follows a consistent, equitable
procedure in this respect. Outbound
freight, if reimbursable under the terms
and conditions of the Federal award,
should be treated as a direct cost.
§ 75.474
Travel costs.
(a) General. Travel costs are the
expenses for transportation, lodging,
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subsistence, and related items incurred
by employees who are in travel status
on official business of the non-Federal
entity. 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
non-Federal entity’s non-federallyfunded activities and in accordance
with non-Federal entity’s written travel
reimbursement policies.
Notwithstanding the provisions of
§ 75.444, travel costs of officials covered
by that section are allowable with the
prior written approval of the Federal
awarding agency or pass-through entity
when they are specifically related to the
Federal award.
(b) Lodging and subsistence. Costs
incurred by employees and officers for
travel, including costs of lodging, other
subsistence, and incidental expenses,
must be considered reasonable and
otherwise allowable only to the extent
such costs do not exceed charges
normally allowed by the non-Federal
entity in its regular operations as the
result of the non-Federal entity’s written
travel policy. In addition, if these costs
are charged directly to the Federal
award documentation must justify that:
(1) Participation of the individual is
necessary to the Federal award; and
(2) The costs are reasonable and
consistent with non-Federal entity’s
established travel policy.
(c)(1) Temporary dependent care costs
(as dependent is defined in 26 U.S.C.
152) above and beyond regular
dependent care that directly results
from travel to conferences is allowable
provided that:
(i) The costs are a direct result of the
individual’s travel for the Federal
award;
(ii) The costs are consistent with the
non-Federal entity’s documented travel
policy for all entity travel; and
(iii) Are only temporary during the
travel period.
(2) Travel costs for dependents are
unallowable, except for travel of
duration of six months or more with
prior approval of the HHS awarding
agency. See also § 75.432.
(d) In the absence of an acceptable,
written non-Federal entity policy
regarding travel costs, the rates and
amounts established under 5 U.S.C.
5701–11, or by the Administrator of
General Services, or by the President (or
his or her designee) pursuant to any
provisions of such subchapter must
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apply to travel under Federal awards (48
CFR 31.205–46(a)).
(e) Commercial air travel. (1) Airfare
costs in excess of the basic least
expensive unrestricted accommodations
class offered by commercial airlines are
unallowable except when such
accommodations would:
(i) Require circuitous routing;
(ii) Require travel during
unreasonable hours;
(iii) Excessively prolong travel;
(iv) Result in additional costs that
would offset the transportation savings;
or
(v) Offer accommodations not
reasonably adequate for the traveler’s
medical needs. The non-Federal entity
must justify and document these
conditions on a case-by-case basis in
order for the use of first-class or
business-class airfare to be allowable in
such cases.
(2) Unless a pattern of avoidance is
detected, the Federal Government will
generally not question a non-Federal
entity’s determinations that customary
standard airfare or other discount airfare
is unavailable for specific trips if the
non-Federal entity can demonstrate that
such airfare was not available in the
specific case.
(f) Air travel by other than
commercial carrier. Costs of travel by
non-Federal entity-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 airfare as
provided for in paragraph (d) of this
section, is unallowable.
§ 75.475
Trustees.
Travel and subsistence costs of
trustees (or directors) at IHEs and
nonprofit organizations are allowable.
See also § 75.474.
HHS Selected Items of Cost
§ 75.476 Independent research and
development costs.
Independent research and
development is research and
development which is conducted by an
organization, and which is not
sponsored by Federal or non-Federal
awards, contracts, or other agreements.
Independent research and development
shall be allocated its proportionate share
of indirect costs on the same basis as the
allocation of indirect costs to sponsored
research and development. The cost of
independent research and development,
including their proportionate share of
indirect costs, are unallowable.
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Subpart F—Audit Requirements
General
§ 75.500
Purpose.
This part sets forth standards for
obtaining consistency and uniformity
among HHS agencies for the audit of
non-Federal entities expending Federal
awards.
Audits
tkelley on DSK3SPTVN1PROD with RULES2
§ 75.501
Audit requirements.
(a) Audit required. A non-Federal
entity that expends $750,000 or more
during the non-Federal entity’s fiscal
year in Federal awards must have a
single or program-specific audit
conducted for that year in accordance
with the provisions of this part.
(b) Single audit. A non-Federal entity
that expends $750,000 or more during
the non-Federal entity’s fiscal year in
Federal awards must have a single audit
conducted in accordance with § 75.514
except when it elects to have a programspecific audit conducted in accordance
with paragraph (c) of this section.
(c) Program-specific audit election.
When an auditee expends Federal
awards under only one Federal program
(excluding R&D) and the Federal
program’s statutes, regulations, or the
terms and conditions of the Federal
award do not require a financial
statement audit of the auditee, the
auditee may elect to have a programspecific audit conducted in accordance
with § 75.507. A program-specific audit
may not be elected for R&D unless all
of the Federal awards expended were
received from the same Federal agency,
or the same Federal agency and the
same pass-through entity, and that
Federal agency, or pass-through entity
in the case of a subrecipient, approves
in advance a program-specific audit.
(d) Exemption when Federal awards
expended are less than $750,000. A
non-Federal entity that expends less
than $750,000 during the non-Federal
entity’s fiscal year in Federal awards is
exempt from Federal audit requirements
for that year, except as noted in
§ 75.503, but records must be available
for review or audit by appropriate
officials of the Federal agency, passthrough entity, and Government
Accountability Office (GAO).
(e) Federally Funded Research and
Development Centers (FFRDC).
Management of an auditee that owns or
operates a FFRDC may elect to treat the
FFRDC as a separate entity for purposes
of this part.
(f) Subrecipients and Contractors. An
auditee may simultaneously be a
recipient, a subrecipient, and a
contractor. Federal awards expended as
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a recipient or a subrecipient are subject
to audit under this part. The payments
received for goods or services provided
as a contractor are not Federal awards.
Section 75.351 sets forth the
considerations in determining whether
payments constitute a Federal award or
a payment for goods or services
provided as a contractor.
(g) Compliance responsibility for
contractors. In most cases, the auditee’s
compliance responsibility for
contractors is only to ensure that the
procurement, receipt, and payment for
goods and services comply with Federal
statutes, regulations, and the terms and
conditions of Federal awards. Federal
award compliance requirements
normally do not pass through to
contractors. However, the auditee is
responsible for ensuring compliance for
procurement transactions which are
structured such that the contractor is
responsible for program compliance or
the contractor’s records must be
reviewed to determine program
compliance. Also, when these
procurement transactions relate to a
major program, the scope of the audit
must include determining whether these
transactions are in compliance with
Federal statutes, regulations, and the
terms and conditions of Federal awards.
(h) For-profit subrecipient. Since this
part does not apply to for-profit
subrecipients, the pass-through entity is
responsible for establishing
requirements, as necessary, to ensure
compliance by for-profit subrecipients.
The agreement with the for-profit
subrecipient must describe applicable
compliance requirements and the forprofit subrecipient’s compliance
responsibility. Methods to ensure
compliance for Federal awards made to
for-profit subrecipients may include
pre-award audits, monitoring during the
agreement, and post-award audits. See
also § 75.352.
(i) Recipients and subrecipients that
are commercial organizations (including
for-profit hospitals) have two options
regarding audits:
(1) A financial related audit (as
defined in the Government Auditing
Standards, GPO Stock #020–000–00–
265–4) of a particular award in
accordance with Government Auditing
Standards, in those cases where the
recipient receives awards under only
one HHS program; or, if awards are
received under multiple HHS programs,
a financial related audit of all HHS
awards in accordance with Government
Auditing Standards; or
(2) An audit that meets the
requirements contained in this subpart.
(j) Commercial organizations that
receive annual HHS awards totaling less
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75943
than $750,000 are exempt from
requirements for a non-Federal audit for
that year, but records must be available
for review by appropriate officials of
Federal agencies.
(k) See also § 75.215.
§ 75.502 Basis for determining Federal
awards expended.
(a) Determining Federal awards
expended. The determination of when a
Federal award is expended must be
based on when the activity related to the
Federal award occurs. Generally, the
activity pertains to events that require
the non-Federal entity to comply with
Federal statutes, regulations, and the
terms and conditions of Federal awards,
such as: expenditure/expense
transactions associated with awards
including grants, cost-reimbursement
contracts under the FAR, compacts with
Indian Tribes, cooperative agreements,
and direct appropriations; the
disbursement of funds to subrecipients;
the use of loan proceeds under loan and
loan guarantee programs; the receipt of
property; the receipt of surplus
property; the receipt or use of program
income; the distribution or use of food
commodities; the disbursement of
amounts entitling the non-Federal entity
to an interest subsidy; and the period
when insurance is in force.
(b) Loan and loan guarantees (loans).
Since the Federal Government is at risk
for loans until the debt is repaid, the
following guidelines must be used to
calculate the value of Federal awards
expended under loan programs, except
as noted in paragraphs (c) and (d) of this
section:
(1) Value of new loans made or
received during the audit period; plus
(2) Beginning of the audit period
balance of loans from previous years for
which the Federal Government imposes
continuing compliance requirements;
plus
(3) Any interest subsidy, cash, or
administrative cost allowance received.
(c) Loan and loan guarantees (loans)
at IHEs. When loans are made to
students of an IHE but the IHE does not
make the loans, then only the value of
loans made during the audit period
must be considered Federal awards
expended in that audit period. The
balance of loans for previous audit
periods is not included as Federal
awards expended because the lender
accounts for the prior balances.
(d) Prior loan and loan guarantees
(loans). Loans, the proceeds of which
were received and expended in prior
years, are not considered Federal
awards expended under this part when
the Federal statutes, regulations, and the
terms and conditions of Federal awards
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pertaining to such loans impose no
continuing compliance requirements
other than to repay the loans.
(e) Endowment funds. The cumulative
balance of Federal awards for
endowment funds that are federally
restricted are considered Federal awards
expended in each audit period in which
the funds are still restricted.
(f) Free rent. Free rent received by
itself is not considered a Federal award
expended under this part. However, free
rent received as part of a Federal award
to carry out a Federal program must be
included in determining Federal awards
expended and subject to audit under
this part.
(g) Valuing non-cash assistance.
Federal non-cash assistance, such as
free rent, food commodities, donated
property, or donated surplus property,
must be valued at fair market value at
the time of receipt or the assessed value
provided by the HHS agency.
(h) Medicare. Medicare payments to a
non-Federal entity for providing patient
care services to Medicare-eligible
individuals are not considered Federal
awards expended under this part.
(i) Medicaid. Medicaid payments to a
subrecipient for providing patient care
services to Medicaid-eligible
individuals are not considered Federal
awards expended under this part unless
a state requires the funds to be treated
as Federal awards expended because
reimbursement is on a costreimbursement basis.
(j) Certain loans provided by the
National Credit Union Administration.
For purposes of this part, loans made
from the National Credit Union Share
Insurance Fund and the Central
Liquidity Facility that are funded by
contributions from insured non-Federal
entities are not considered Federal
awards expended.
tkelley on DSK3SPTVN1PROD with RULES2
§ 75.503 Relation to other audit
requirements.
(a) An audit conducted in accordance
with this part must be in lieu of any
financial audit of Federal awards which
a non-Federal entity is required to
undergo under any other Federal statute
or regulation. To the extent that such
audit provides a Federal agency with
the information it requires to carry out
its responsibilities under Federal statute
or regulation, a Federal agency must
rely upon and use that information.
(b) Notwithstanding paragraph (a) of
this section, a Federal agency,
Inspectors General, or GAO may
conduct or arrange for additional audits
which are necessary to carry out its
responsibilities under Federal statute or
regulation. The provisions of this part
do not authorize any non-Federal entity
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to constrain, in any manner, such
Federal agency from carrying out or
arranging for such additional audits,
except that the Federal agency must
plan such audits to not be duplicative
of other audits of Federal awards. Prior
to commencing such an audit, the
Federal agency or pass-through entity
must review the FAC for recent audits
submitted by the non-Federal entity,
and to the extent such audits meet a
Federal agency or pass-through entity’s
needs, the Federal agency or passthrough entity must rely upon and use
such audits. Any additional audits must
be planned and performed in such a
way as to build upon work performed,
including the audit documentation,
sampling, and testing already
performed, by other auditors.
(c) The provisions of this part do not
limit the authority of Federal agencies to
conduct, or arrange for the conduct of,
audits and evaluations of Federal
awards, nor limit the authority of any
Federal agency Inspector General or
other Federal official. For example,
requirements that may be applicable
under the FAR or CAS and the terms
and conditions of a cost-reimbursement
contract may include additional
applicable audits to be conducted or
arranged for by Federal agencies.
(d) Federal agency to pay for
additional audits. A Federal agency that
conducts or arranges for additional
audits must, consistent with other
applicable Federal statutes and
regulations, arrange for funding the full
cost of such additional audits.
(e) Request for a program to be
audited as a major program. An HHS
awarding agency may request that an
auditee have a particular Federal
program audited as a major program in
lieu of the HHS awarding agency
conducting or arranging for the
additional audits. To allow for planning,
such requests should be made at least
180 calendar days prior to the end of the
fiscal year to be audited. The auditee,
after consultation with its auditor,
should promptly respond to such a
request by informing the HHS awarding
agency whether the program would
otherwise be audited as a major program
using the risk-based audit approach
described in § 75.518 and, if not, the
estimated incremental cost. The HHS
awarding agency must then promptly
confirm to the auditee whether it wants
the program audited as a major program.
If the program is to be audited as a
major program based upon this HHS
awarding agency request, and the HHS
awarding agency agrees to pay the full
incremental costs, then the auditee must
have the program audited as a major
program. A pass-through entity may use
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the provisions of this paragraph for a
subrecipient.
§ 75.504
Frequency of audits.
Except for the provisions for biennial
audits provided in paragraphs (a) and
(b) of this section, audits required by
this part must be performed annually.
Any biennial audit must cover both
years within the biennial period.
(a) A state, local government, or
Indian tribe that is required by
constitution or statute, in effect on
January 1, 1987, to undergo its audits
less frequently than annually, is
permitted to undergo its audits pursuant
to this part biennially. This requirement
must still be in effect for the biennial
period.
(b) Any nonprofit organization that
had biennial audits for all biennial
periods ending between July 1, 1992,
and January 1, 1995, is permitted to
undergo its audits pursuant to this part
biennially.
§ 75.505
Sanctions.
In cases of continued inability or
unwillingness to have an audit
conducted in accordance with this part,
Federal agencies and pass-through
entities must take appropriate action as
provided in § 75.371.
§ 75.506
Audit costs.
See § 75.425.
§ 75.507
Program-specific audits.
(a) Program-specific audit guide
available. In many cases, a programspecific audit guide will be available to
provide specific guidance to the auditor
with respect to internal controls,
compliance requirements, suggested
audit procedures, and audit reporting
requirements. A listing of current
program-specific audit guides can be
found in the compliance supplement
beginning with the 2014 supplement
including HHS awarding agency contact
information and a Web site where a
copy of the guide can be obtained.
When a current program-specific audit
guide is available, the auditor must
follow GAGAS and the guide when
performing a program-specific audit.
(b) Program-specific audit guide not
available. (1) When a current programspecific audit guide is not available, the
auditee and auditor must have basically
the same responsibilities for the Federal
program as they would have for an audit
of a major program in a single audit.
(2) The auditee must prepare the
financial statement(s) for the Federal
program that includes, at a minimum, a
schedule of expenditures of Federal
awards for the program and notes that
describe the significant accounting
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policies used in preparing the schedule,
a summary schedule of prior audit
findings consistent with the
requirements of § 75.511(b), and a
corrective action plan consistent with
the requirements of § 75.511(c).
(3) The auditor must:
(i) Perform an audit of the financial
statement(s) for the Federal program in
accordance with GAGAS;
(ii) Obtain an understanding of
internal controls and perform tests of
internal controls over the Federal
program consistent with the
requirements of § 75.514(c) for a major
program;
(iii) Perform procedures to determine
whether the auditee has complied with
Federal statutes, regulations, and the
terms and conditions of Federal awards
that could have a direct and material
effect on the Federal program consistent
with the requirements of § 75.514(d) for
a major program;
(iv) Follow up on prior audit findings,
perform procedures to assess the
reasonableness of the summary
schedule of prior audit findings
prepared by the auditee in accordance
with the requirements of § 75.511, and
report, as a current year audit finding,
when the auditor concludes that the
summary schedule of prior audit
findings materially misrepresents the
status of any prior audit finding; and
(v) Report any audit findings
consistent with the requirements of
§ 75.516.
(4) The auditor’s report(s) may be in
the form of either combined or separate
reports and may be organized differently
from the manner presented in this
section. The auditor’s report(s) must
state that the audit was conducted in
accordance with this part and include
the following:
(i) An opinion (or disclaimer of
opinion) as to whether the financial
statement(s) of the Federal program is
presented fairly in all material respects
in accordance with the stated
accounting policies;
(ii) A report on internal control
related to the Federal program, which
must describe the scope of testing of
internal control and the results of the
tests;
(iii) A report on compliance which
includes an opinion (or disclaimer of
opinion) as to whether the auditee
complied with laws, regulations, and
the terms and conditions of Federal
awards which could have a direct and
material effect on the Federal program;
and
(iv) A schedule of findings and
questioned costs for the Federal
program that includes a summary of the
auditor’s results relative to the Federal
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program in a format consistent with
§ 75.515(d)(1) and findings and
questioned costs consistent with the
requirements of § 75.515(d)(3).
(c) Report submission for programspecific audits. (1) The audit must be
completed and the reporting required by
paragraph (c)(2) or (c)(3) of this section
submitted within the earlier of 30
calendar days after receipt of the
auditor’s report(s), or nine months after
the end of the audit period, unless a
different period is specified in a
program-specific audit guide. Unless
restricted by Federal law or regulation,
the auditee must make report copies
available for public inspection. Auditees
and auditors must ensure that their
respective parts of the reporting package
do not include protected personally
identifiable information.
(2) When a program-specific audit
guide is available, the auditee must
electronically submit to the FAC the
data collection form prepared in
accordance with § 75.512(b), as
applicable to a program-specific audit,
and the reporting required by the
program-specific audit guide.
(3) When a program-specific audit
guide is not available, the reporting
package for a program-specific audit
must consist of the financial
statement(s) of the Federal program, a
summary schedule of prior audit
findings, and a corrective action plan as
described in paragraph (b)(2) of this
section, and the auditor’s report(s)
described in paragraph (b)(4) of this
section. The data collection form
prepared in accordance with
§ 75.512(b), as applicable to a programspecific audit, and one copy of this
reporting package must be electronically
submitted to the FAC.
(d) Other sections of this part may
apply. Program-specific audits are
subject to:
(1) § 75.500 through § 75.503(d);
(2) § 75.504 through § 75.506;
(3) § 75.508 through § 75.509;
(4) § 75.511;
(5) § 75.512(e) through (h);
(6) § 75.513;
(7) § 75.516 through § 75.517;
(8) § 75.521, and
(9) Other referenced provisions of this
part unless contrary to the provisions of
this section, a program-specific audit
guide, or program statutes and
regulations.
Auditees
§ 75.508
Auditee responsibilities.
The auditee must:
(a) Procure or otherwise arrange for
the audit required by this part in
accordance with § 75.509, and ensure it
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is properly performed and submitted
when due in accordance with § 75.512.
(b) Prepare appropriate financial
statements, including the schedule of
expenditures of Federal awards in
accordance with § 75.510.
(c) Promptly follow up and take
corrective action on audit findings,
including preparation of a summary
schedule of prior audit findings and a
corrective action plan in accordance
with § 75.511(b) and § 75.511(c),
respectively.
(d) Provide the auditor with access to
personnel, accounts, books, records,
supporting documentation, and other
information as needed for the auditor to
perform the audit required by this part.
§ 75.509
Auditor selection.
(a) Auditor procurement. In procuring
audit services, the auditee must follow
the procurement standards prescribed
by the Procurement Standards in
§§ 75.326 through 75.335 of Subpart D
of this part or the FAR (48 CFR part 42),
as applicable. When procuring audit
services, the objective is to obtain highquality audits. In requesting proposals
for audit services, the objectives and
scope of the audit must be made clear
and the non-Federal entity must request
a copy of the audit organization’s peer
review report which the auditor is
required to provide under GAGAS.
Factors to be considered in evaluating
each proposal for audit services include
the responsiveness to the request for
proposal, relevant experience,
availability of staff with professional
qualifications and technical abilities,
the results of peer and external quality
control reviews, and price. Whenever
possible, the auditee must make positive
efforts to utilize small businesses,
minority-owned firms, and women’s
business enterprises, in procuring audit
services as stated in § 75.330, or the
FAR (48 CFR part 42), as applicable.
(b) Restriction on auditor preparing
indirect cost proposals. An auditor who
prepares the indirect cost proposal or
cost allocation plan may not also be
selected to perform the audit required
by this part when the indirect costs
recovered by the auditee during the
prior year exceeded $1 million. This
restriction applies to the base year used
in the preparation of the indirect cost
proposal or cost allocation plan and any
subsequent years in which the resulting
indirect cost agreement or cost
allocation plan is used to recover costs.
(c) Use of Federal auditors. Federal
auditors may perform all or part of the
work required under this part if they
comply fully with the requirements of
this part.
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Financial statements.
(a) Financial statements. The auditee
must prepare financial statements that
reflect its financial position, results of
operations or changes in net assets, and,
where appropriate, cash flows for the
fiscal year audited. The financial
statements must be for the same
organizational unit and fiscal year that
is chosen to meet the requirements of
this part. However, non-Federal entitywide financial statements may also
include departments, agencies, and
other organizational units that have
separate audits in accordance with
§ 75.514(a) and prepare separate
financial statements.
(b) Schedule of expenditures of
Federal awards. The auditee must also
prepare a schedule of expenditures of
Federal awards for the period covered
by the auditee’s financial statements
which must include the total Federal
awards expended as determined in
accordance with § 75.502. While not
required, the auditee may choose to
provide information requested by HHS
awarding agencies and pass-through
entities to make the schedule easier to
use. For example, when a Federal
program has multiple Federal award
years, the auditee may list the amount
of Federal awards expended for each
Federal award year separately. At a
minimum, the schedule must:
(1) List individual Federal programs
by Federal agency. For a cluster of
programs, provide the cluster name, list
individual Federal programs within the
cluster of programs, and provide the
applicable Federal agency name. For
R&D, total Federal awards expended
must be shown either by individual
Federal award or by Federal agency and
major subdivision within the Federal
agency. For example, the National
Institutes of Health is a major
subdivision in the Department of Health
and Human Services.
(2) For Federal awards received as a
subrecipient, the name of the passthrough entity and identifying number
assigned by the pass-through entity
must be included.
(3) Provide total Federal awards
expended for each individual Federal
program and the CFDA number or other
identifying number when the CFDA
information is not available. For a
cluster of programs also provide the
total for the cluster.
(4) Include the total amount provided
to subrecipients from each Federal
program.
(5) For loan or loan guarantee
programs described in § 75.502(b),
identify in the notes to the schedule the
balances outstanding at the end of the
audit period. This is in addition to
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including the total Federal awards
expended for loan or loan guarantee
programs in the schedule.
(6) Include notes that describe that
significant accounting policies used in
preparing the schedule, and note
whether or not the auditee elected to
use the 10% de minimis cost rate as
covered in § 75.414.
§ 75.511
Audit findings follow-up.
(a) General. The auditee is responsible
for follow-up and corrective action on
all audit findings. As part of this
responsibility, the auditee must prepare
a summary schedule of prior audit
findings. The auditee must also prepare
a corrective action plan for current year
audit findings. The summary schedule
of prior audit findings and the
corrective action plan must include the
reference numbers the auditor assigns to
audit findings under § 75.516(c). Since
the summary schedule may include
audit findings from multiple years, it
must include the fiscal year in which
the finding initially occurred. The
corrective action plan and summary
schedule of prior audit findings must
include findings relating to the financial
statements which are required to be
reported in accordance with GAGAS.
(b) Summary schedule of prior audit
findings. The summary schedule of
prior audit findings must report the
status of all audit findings included in
the prior audit’s schedule of findings
and questioned costs. The summary
schedule must also include audit
findings reported in the prior audit’s
summary schedule of prior audit
findings except audit findings listed as
corrected in accordance with paragraph
(b)(1) of this section, or no longer valid
or not warranting further action in
accordance with paragraph (b)(3) of this
section.
(1) When audit findings were fully
corrected, the summary schedule need
only list the audit findings and state that
corrective action was taken.
(2) When audit findings were not
corrected or were only partially
corrected, the summary schedule must
describe the reasons for the finding’s
recurrence and planned corrective
action, and any partial corrective action
taken. When corrective action taken is
significantly different from corrective
action previously reported in a
corrective action plan or in the Federal
agency’s or pass-through entity’s
management decision, the summary
schedule must provide an explanation.
(3) When the auditee believes the
audit findings are no longer valid or do
not warrant further action, the reasons
for this position must be described in
the summary schedule. A valid reason
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for considering an audit finding as not
warranting further action is that all of
the following have occurred:
(i) Two years have passed since the
audit report in which the finding
occurred was submitted to the FAC;
(ii) The Federal agency or passthrough entity is not currently following
up with the auditee on the audit
finding; and
(iii) A management decision was not
issued.
(c) Corrective action plan. At the
completion of the audit, the auditee
must prepare, in a document separate
from the auditor’s findings described in
§ 75.516, a corrective action plan to
address each audit finding included in
the current year auditor’s reports. The
corrective action plan must provide the
name(s) of the contact person(s)
responsible for corrective action, the
corrective action planned, and the
anticipated completion date. If the
auditee does not agree with the audit
findings or believes corrective action is
not required, then the corrective action
plan must include an explanation and
specific reasons.
§ 75.512
Report submission.
(a) General. (1) The audit must be
completed and the data collection form
described in paragraph (b) of this
section and reporting package described
in paragraph (c) of this section must be
submitted within the earlier of 30
calendar days after receipt of the
auditor’s report(s), or nine months after
the end of the audit period. If the due
date falls on a Saturday, Sunday, or
Federal holiday, the reporting package
is due the next business day.
(2) Unless restricted by Federal
statutes or regulations, the auditee must
make copies available for public
inspection. Auditees and auditors must
ensure that their respective parts of the
reporting package do not include
protected personally identifiable
information.
(b) Data Collection. The FAC is the
repository of record for Subpart F of this
part reporting packages and the data
collection form. All Federal agencies,
pass-through entities and others
interested in a reporting package and
data collection form must obtain it by
accessing the FAC.
(1) The auditee must submit required
data elements described in Appendix X
to part 75, which state whether the audit
was completed in accordance with this
part and provides information about the
auditee, its Federal programs, and the
results of the audit. The data must
include information available from the
audit required by this part that is
necessary for Federal agencies to use the
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audit to ensure integrity for Federal
programs. The data elements and format
must be approved by OMB, available
from the FAC, and include collections
of information from the reporting
package described in paragraph (c) of
this section. A senior level
representative of the auditee (e.g., state
controller, director of finance, chief
executive officer, or chief financial
officer) must sign a statement to be
included as part of the data collection
that says that the auditee complied with
the requirements of this part, the data
were prepared in accordance with this
part (and the instructions accompanying
the form), the reporting package does
not include protected personally
identifiable information, the
information included in its entirety is
accurate and complete, and that the
FAC is authorized to make the reporting
package and the form publicly available
on a Web site.
(2) Exception for Indian Tribes and
Tribal Organizations. An auditee that is
an Indian tribe or a tribal organization
(as defined in the Indian SelfDetermination, Education and
Assistance Act (ISDEAA), 25 U.S.C.
450b(l)) may opt not to authorize the
FAC to make the reporting package
publicly available on a Web site, by
excluding the authorization for the FAC
publication in the statement described
in paragraph (b)(1) of this section. If this
option is exercised, the auditee becomes
responsible for submitting the reporting
package directly to any pass-through
entities through which it has received a
Federal award and to pass-through
entities for which the summary
schedule of prior audit findings
reported the status of any findings
related to Federal awards that the passthrough entity provided. Unless
restricted by Federal statute or
regulation, if the auditee opts not to
authorize publication, it must make
copies of the reporting package available
for public inspection.
(3) Using the information included in
the reporting package described in
paragraph (c) of this section, the auditor
must complete the applicable data
elements of the data collection form.
The auditor must sign a statement to be
included as part of the data collection
form that indicates, at a minimum, the
source of the information included in
the form, the auditor’s responsibility for
the information, that the form is not a
substitute for the reporting package
described in paragraph (c) of this
section, and that the content of the form
is limited to the collection of
information prescribed by OMB.
(c) Reporting package. The reporting
package must include the:
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(1) Financial statements and schedule
of expenditures of Federal awards
discussed in § 75.510(a) and (b),
respectively;
(2) Summary schedule of prior audit
findings discussed in § 75.511(b);
(3) Auditor’s report(s) discussed in
§ 75.515; and
(4) Corrective action plan discussed in
§ 75.511(c).
(d) Submission to FAC. The auditee
must electronically submit to the FAC
the data collection form described in
paragraph (b) of this section and the
reporting package described in
paragraph (c) of this section.
(e) Requests for management letters
issued by the auditor. In response to
requests by a Federal agency or passthrough entity, auditees must submit a
copy of any management letters issued
by the auditor.
(f) Report retention requirements.
Auditees must keep one copy of the data
collection form described in paragraph
(b) of this section and one copy of the
reporting package described in
paragraph (c) of this section on file for
three years from the date of submission
to the FAC.
(g) FAC responsibilities. The FAC
must make available the reporting
packages received in accordance with
paragraph (c) of this section and
§ 75.507(c) to the public, except for
Indian tribes exercising the option in
(b)(2) of this section, and maintain a
data base of completed audits, provide
appropriate information to Federal
agencies, and follow up with known
auditees that have not submitted the
required data collection forms and
reporting packages.
(h) Electronic filing. Nothing in this
part must preclude electronic
submissions to the FAC in such manner
as may be approved by OMB.
Federal Agencies
§ 75.513
Responsibilities.
(a)(1) Cognizant agency for audit
responsibilities. A non-Federal entity
expending more than $50 million a year
in Federal awards must have a
cognizant agency for audit. The
designated cognizant agency for audit
must be the Federal awarding agency
that provides the predominant amount
of direct funding to a non-Federal entity
unless OMB designates a specific
cognizant agency for audit.
(2) To provide for continuity of
cognizance, the determination of the
predominant amount of direct funding
must be based upon direct Federal
awards expended in the non-Federal
entity’s fiscal years ending in 2009,
2014, 2019 and every fifth year
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75947
thereafter. For example, audit
cognizance for periods ending in 2011
through 2015 will be determined based
on Federal awards expended in 2009.
(3) Notwithstanding the manner in
which audit cognizance is determined,
a Federal awarding agency with
cognizance for an auditee may reassign
cognizance to another Federal awarding
agency that provides substantial funding
and agrees to be the cognizant agency
for audit. Within 30 calendar days after
any reassignment, both the old and the
new cognizant agency for audit must
provide notice of the change to the FAC,
the auditee, and, if known, the auditor.
The cognizant agency for audit must:
(i) Provide technical audit advice and
liaison assistance to auditees and
auditors.
(ii) Obtain or conduct quality control
reviews on selected audits made by nonFederal auditors, and provide the results
to other interested organizations.
Cooperate and provide support to the
Federal agency designated by OMB to
lead a government-wide project to
determine the quality of single audits by
providing a statistically reliable estimate
of the extent that single audits conform
to applicable requirements, standards,
and procedures; and to make
recommendations to address noted
audit quality issues, including
recommendations for any changes to
applicable requirements, standards and
procedures indicated by the results of
the project. This government-wide audit
quality project must be performed once
every 6 years beginning in 2018 or at
such other interval as determined by
OMB, and the results must be public.
(iii) Promptly inform other affected
Federal agencies and appropriate
Federal law enforcement officials of any
direct reporting by the auditee or its
auditor required by GAGAS or statutes
and regulations.
(iv) Advise the community of
independent auditors of any noteworthy
or important factual trends related to the
quality of audits stemming from quality
control reviews. Significant problems or
quality issues consistently identified
through quality control reviews of audit
reports must be referred to appropriate
state licensing agencies and professional
bodies.
(v) Advise the auditor, HHS awarding
agencies, and, where appropriate, the
auditee of any deficiencies found in the
audits when the deficiencies require
corrective action by the auditor. When
advised of deficiencies, the auditee
must work with the auditor to take
corrective action. If corrective action is
not taken, the cognizant agency for audit
must notify the auditor, the auditee, and
applicable HHS awarding agencies and
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pass-through entities of the facts and
make recommendations for follow-up
action. Major inadequacies or repetitive
substandard performance by auditors
must be referred to appropriate state
licensing agencies and professional
bodies for disciplinary action.
(vi) Coordinate, to the extent
practical, audits or reviews made by or
for Federal agencies that are in addition
to the audits made pursuant to this part,
so that the additional audits or reviews
build upon rather than duplicate audits
performed in accordance with this part.
(vii) Coordinate a management
decision for cross-cutting audit findings
(as defined in § 75.2 Cross-cutting audit
finding) that affect the Federal programs
of more than one agency when
requested by any Federal awarding
agency whose awards are included in
the audit finding of the auditee.
(viii) Coordinate the audit work and
reporting responsibilities among
auditors to achieve the most costeffective audit.
(ix) Provide advice to auditees as to
how to handle changes in fiscal years.
(b) Oversight agency for audit
responsibilities. An auditee who does
not have a designated cognizant agency
for audit will be under the general
oversight of the Federal agency
determined in accordance with § 75.2
Oversight agency for audit. A Federal
agency with oversight for an auditee
may reassign oversight to another
Federal agency that agrees to be the
oversight agency for audit. Within 30
calendar days after any reassignment,
both the old and the new oversight
agency for audit must provide notice of
the change to the FAC, the auditee, and,
if known, the auditor. The oversight
agency for audit:
(1) Must provide technical advice to
auditees and auditors as requested.
(2) May assume all or some of the
responsibilities normally performed by
a cognizant agency for audit.
(c) HHS awarding agency
responsibilities. The HHS awarding
agency must perform the following for
the Federal awards it makes (See also
the requirements of § 75.210):
(1) Ensure that audits are completed
and reports are received in a timely
manner and in accordance with the
requirements of this part.
(2) Provide technical advice and
counsel to auditees and auditors as
requested.
(3) Follow-up on audit findings to
ensure that the recipient takes
appropriate and timely corrective
action. As part of audit follow-up, the
HHS awarding agency must:
(i) Issue a management decision as
prescribed in § 75.521;
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(ii) Monitor the recipient taking
appropriate and timely corrective
action;
(iii) Use cooperative audit resolution
mechanisms (see § 75.2 Cooperative
audit resolution) to improve Federal
program outcomes through better audit
resolution, follow-up, and corrective
action; and
(iv) Develop a baseline, metrics, and
targets to track, over time, the
effectiveness of the Federal agency’s
process to follow-up on audit findings
and on the effectiveness of Single
Audits in improving non-Federal entity
accountability and their use by HHS
awarding agencies in making award
decisions.
(4) Provide OMB annual updates to
the compliance supplement and work
with OMB to ensure that the compliance
supplement focuses the auditor to test
the compliance requirements most
likely to cause improper payments,
fraud, waste, abuse or generate audit
finding for which the Federal awarding
agency will take sanctions.
(5) Provide OMB with the name of a
single audit accountable official from
among the senior policy officials of the
HHS awarding agency who must be:
(i) Responsible for ensuring that the
agency fulfills all the requirements of
paragraph (c) of this section and
effectively uses the single audit process
to reduce improper payments and
improve Federal program outcomes.
(ii) Held accountable to improve the
effectiveness of the single audit process
based upon metrics as described in
paragraph (c)(3)(iv) of this section.
(iii) Responsible for designating the
Federal agency’s key management single
audit liaison.
(6) Provide OMB with the name of a
key management single audit liaison
who must:
(i) Serve as the Federal awarding
agency’s management point of contact
for the single audit process both within
and outside the Federal Government.
(ii) Promote interagency coordination,
consistency, and sharing in areas such
as coordinating audit follow-up;
identifying higher-risk non-Federal
entities; providing input on single audit
and follow-up policy; enhancing the
utility of the FAC; and studying ways to
use single audit results to improve
Federal award accountability and best
practices.
(iii) Oversee training for the HHS
awarding agency’s program management
personnel related to the single audit
process.
(iv) Promote the HHS awarding
agency’s use of cooperative audit
resolution mechanisms.
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(v) Coordinate the HHS awarding
agency’s activities to ensure appropriate
and timely follow-up and corrective
action on audit findings.
(vi) Organize the Federal cognizant
agency for audit’s follow-up on crosscutting audit findings that affect the
Federal programs of more than one HHS
awarding agency.
(vii) Ensure the HHS awarding agency
provides annual updates of the
compliance supplement to OMB.
(viii) Support the HHS awarding
agency’s single audit accountable
official’s mission.
Auditors
§ 75.514
Scope of audit.
(a) General. The audit must be
conducted in accordance with GAGAS.
The audit must cover the entire
operations of the auditee, or, at the
option of the auditee, such audit must
include a series of audits that cover
departments, agencies, and other
organizational units that expended or
otherwise administered Federal awards
during such audit period, provided that
each such audit must encompass the
financial statements and schedule of
expenditures of Federal awards for each
such department, agency, and other
organizational unit, which must be
considered to be a non-Federal entity.
The financial statements and schedule
of expenditures of Federal awards must
be for the same audit period.
(b) Financial statements. The auditor
must determine whether the financial
statements of the auditee are presented
fairly in all material respects in
accordance with generally accepted
accounting principles. The auditor must
also determine whether the schedule of
expenditures of Federal awards is stated
fairly in all material respects in relation
to the auditee’s financial statements as
a whole.
(c) Internal control. (1) The
compliance supplement provides
guidance on internal controls over
Federal programs based upon the
guidance in Standards for Internal
Control in the Federal Government
issued by the Comptroller General of the
United States and the Internal Control—
Integrated Framework, issued by the
Committee of Sponsoring Organizations
of the Treadway Commission (COSO).
(2) In addition to the requirements of
GAGAS, the auditor must perform
procedures to obtain an understanding
of internal control over Federal
programs sufficient to plan the audit to
support a low assessed level of control
risk of noncompliance for major
programs.
(3) Except as provided in paragraph
(c)(4) of this section, the auditor must:
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(i) Plan the testing of internal control
over compliance for major programs to
support a low assessed level of control
risk for the assertions relevant to the
compliance requirements for each major
program; and
(ii) Perform testing of internal control
as planned in paragraph (c)(3)(i) of this
section.
(4) When internal control over some
or all of the compliance requirements
for a major program are likely to be
ineffective in preventing or detecting
noncompliance, the planning and
performing of testing described in
paragraph (c)(3) of this section are not
required for those compliance
requirements. However, the auditor
must report a significant deficiency or
material weakness in accordance with
§ 75.516, assess the related control risk
at the maximum, and consider whether
additional compliance tests are required
because of ineffective internal control.
(d) Compliance. (1) In addition to the
requirements of GAGAS, the auditor
must determine whether the auditee has
complied with Federal statutes,
regulations, and the terms and
conditions of Federal awards that may
have a direct and material effect on each
of its major programs.
(2) The principal compliance
requirements applicable to most Federal
programs and the compliance
requirements of the largest Federal
programs are included in the
compliance supplement.
(3) For the compliance requirements
related to Federal programs contained in
the compliance supplement, an audit of
these compliance requirements will
meet the requirements of this part.
Where there have been changes to the
compliance requirements and the
changes are not reflected in the
compliance supplement, the auditor
must determine the current compliance
requirements and modify the audit
procedures accordingly. For those
Federal programs not covered in the
compliance supplement, the auditor
must follow the compliance
supplement’s guidance for programs not
included in the supplement.
(4) The compliance testing must
include tests of transactions and such
other auditing procedures necessary to
provide the auditor sufficient
appropriate audit evidence to support
an opinion on compliance.
(e) Audit follow-up. The auditor must
follow-up on prior audit findings,
perform procedures to assess the
reasonableness of the summary
schedule of prior audit findings
prepared by the auditee in accordance
with § 75.511(b), and report, as a current
year audit finding, when the auditor
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concludes that the summary schedule of
prior audit findings materially
misrepresents the status of any prior
audit finding. The auditor must perform
audit follow-up procedures regardless of
whether a prior audit finding relates to
a major program in the current year.
(f) Data Collection Form. As required
in § 75.512(b)(3), the auditor must
complete and sign specified sections of
the data collection form.
§ 75.515
Audit reporting.
The auditor’s report(s) may be in the
form of either combined or separate
reports and may be organized differently
from the manner presented in this
section. The auditor’s report(s) must
state that the audit was conducted in
accordance with this part and include
the following:
(a) An opinion (or disclaimer of
opinion) as to whether the financial
statements are presented fairly in all
material respects in accordance with
generally accepted accounting
principles and an opinion (or disclaimer
of opinion) as to whether the schedule
of expenditures of Federal awards is
fairly stated in all material respects in
relation to the financial statements as a
whole.
(b) A report on internal control over
financial reporting and compliance with
provisions of laws, regulations,
contracts, or award agreements,
noncompliance with which could have
a material effect on the financial
statements. This report must describe
the scope of testing of internal control
and compliance and the results of the
tests, and, where applicable, it will refer
to the separate schedule of findings and
questioned costs described in paragraph
(d) of this section.
(c) A report on compliance for each
major program and a report on internal
control over compliance. This report
must describe the scope of testing of
internal control over compliance,
include an opinion or disclaimer of
opinion as to whether the auditee
complied with Federal statutes,
regulations, and the terms and
conditions of Federal awards which
could have a direct and material effect
on each major program and refer to the
separate schedule of findings and
questioned costs described in paragraph
(d) of this section.
(d) A schedule of findings and
questioned costs which must include
the following three components:
(1) A summary of the auditor’s results,
which must include:
(i) The type of report the auditor
issued on whether the financial
statements audited were prepared in
accordance with GAAP (i.e., unmodified
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opinion, qualified opinion, adverse
opinion, or disclaimer of opinion);
(ii) Where applicable, a statement
about whether significant deficiencies
or material weaknesses in internal
control were disclosed by the audit of
the financial statements;
(iii) A statement as to whether the
audit disclosed any noncompliance that
is material to the financial statements of
the auditee;
(iv) Where applicable, a statement
about whether significant deficiencies
or material weaknesses in internal
control over major programs were
disclosed by the audit;
(v) The type of report the auditor
issued on compliance for major
programs (i.e., unmodified opinion,
qualified opinion, adverse opinion, or
disclaimer of opinion);
(vi) A statement as to whether the
audit disclosed any audit findings that
the auditor is required to report under
§ 75.516(a);
(vii) An identification of major
programs by listing each individual
major program; however in the case of
a cluster of programs only the cluster
name as shown on the Schedule of
Expenditures of Federal Awards is
required;
(viii) The dollar threshold used to
distinguish between Type A and Type B
programs, as described in § 75.518(b)(1),
or (b)(3) when a recalculation of the
Type A threshold is required for large
loan or loan guarantees; and
(ix) A statement as to whether the
auditee qualified as a low-risk auditee
under § 75.520.
(2) Findings relating to the financial
statements which are required to be
reported in accordance with GAGAS.
(3) Findings and questioned costs for
Federal awards which must include
audit findings as defined in § 75.516(a).
(i) Audit findings (e.g., internal
control findings, compliance findings,
questioned costs, or fraud) that relate to
the same issue must be presented as a
single audit finding. Where practical,
audit findings should be organized by
Federal agency or pass-through entity.
(ii) Audit findings that relate to both
the financial statements and Federal
awards, as reported under paragraphs
(d)(2) and (d)(3) of this section,
respectively, must be reported in both
sections of the schedule. However, the
reporting in one section of the schedule
may be in summary form with a
reference to a detailed reporting in the
other section of the schedule.
(e) Nothing in this part precludes
combining of the audit reporting
required by this section with the
reporting required by § 75.512(b) when
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allowed by GAGAS and Appendix X to
Part 75.
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§ 75.516
Audit findings.
(a) Audit findings reported. The
auditor must report the following as
audit findings in a schedule of findings
and questioned costs:
(1) Significant deficiencies and
material weaknesses in internal control
over major programs and significant
instances of abuse relating to major
programs. The auditor’s determination
of whether a deficiency in internal
control is a significant deficiency or
material weakness for the purpose of
reporting an audit finding is in relation
to a type of compliance requirement for
a major program identified in the
Compliance Supplement.
(2) Material noncompliance with the
provisions of Federal statutes,
regulations, or the terms and conditions
of Federal awards related to a major
program. The auditor’s determination of
whether a noncompliance with the
provisions of Federal statutes,
regulations, or the terms and conditions
of Federal awards is material for the
purpose of reporting an audit finding is
in relation to a type of compliance
requirement for a major program
identified in the compliance
supplement.
(3) Known questioned costs that are
greater than $25,000 for a type of
compliance requirement for a major
program. Known questioned costs are
those specifically identified by the
auditor. In evaluating the effect of
questioned costs on the opinion on
compliance, the auditor considers the
best estimate of total costs questioned
(likely questioned costs), not just the
questioned costs specifically identified
(known questioned costs). The auditor
must also report known questioned
costs when likely questioned costs are
greater than $25,000 for a type of
compliance requirement for a major
program. In reporting questioned costs,
the auditor must include information to
provide proper perspective for judging
the prevalence and consequences of the
questioned costs.
(4) Known questioned costs that are
greater than $25,000 for a Federal
program which is not audited as a major
program. Except for audit follow-up, the
auditor is not required under this part
to perform audit procedures for such a
Federal program; therefore, the auditor
will normally not find questioned costs
for a program that is not audited as a
major program. However, if the auditor
does become aware of questioned costs
for a Federal program that is not audited
as a major program (e.g., as part of audit
follow-up or other audit procedures)
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and the known questioned costs are
greater than $25,000, then the auditor
must report this as an audit finding.
(5) The circumstances concerning
why the auditor’s report on compliance
for each major program is other than an
unmodified opinion, unless such
circumstances are otherwise reported as
audit findings in the schedule of
findings and questioned costs for
Federal awards.
(6) Known or likely fraud affecting a
Federal award, unless such fraud is
otherwise reported as an audit finding
in the schedule of findings and
questioned costs for Federal awards.
This paragraph does not require the
auditor to report publicly information
which could compromise investigative
or legal proceedings or to make an
additional reporting when the auditor
confirms that the fraud was reported
outside the auditor’s reports under the
direct reporting requirements of
GAGAS.
(7) Instances where the results of
audit follow-up procedures disclosed
that the summary schedule of prior
audit findings prepared by the auditee
in accordance with § 75.511(b)
materially misrepresents the status of
any prior audit finding.
(b) Audit finding detail and clarity.
Audit findings must be presented in
sufficient detail and clarity for the
auditee to prepare a corrective action
plan and take corrective action, and for
Federal agencies and pass-through
entities to arrive at a management
decision. The following specific
information must be included, as
applicable, in audit findings:
(1) Federal program and specific
Federal award identification including
the CFDA title and number, Federal
award identification number and year,
name of Federal agency, and name of
the applicable pass-through entity.
When information, such as the CFDA
title and number or Federal award
identification number, is not available,
the auditor must provide the best
information available to describe the
Federal award.
(2) The criteria or specific
requirement upon which the audit
finding is based, including the Federal
statutes, regulations, or the terms and
conditions of the Federal awards.
Criteria generally identify the required
or desired state or expectation with
respect to the program or operation.
Criteria provide a context for evaluating
evidence and understanding findings.
(3) The condition found, including
facts that support the deficiency
identified in the audit finding.
(4) A statement of cause that identifies
the reason or explanation for the
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condition or the factors responsible for
the difference between the situation that
exists (condition) and the required or
desired state (criteria), which may also
serve as a basis for recommendations for
corrective action.
(5) The possible asserted effect to
provide sufficient information to the
auditee and Federal agency, or passthrough entity in the case of a
subrecipient, to permit them to
determine the cause and effect to
facilitate prompt and proper corrective
action. A statement of the effect or
potential effect should provide a clear,
logical link to establish the impact or
potential impact of the difference
between the condition and the criteria.
(6) Identification of questioned costs
and how they were computed. Known
questioned costs must be identified by
applicable CFDA number(s) and
applicable Federal award identification
number(s).
(7) Information to provide proper
perspective for judging the prevalence
and consequences of the audit findings,
such as whether the audit findings
represent an isolated instance or a
systemic problem. Where appropriate,
instances identified must be related to
the universe and the number of cases
examined and be quantified in terms of
dollar value. The auditor should report
whether the sampling was a statistically
valid sample.
(8) Identification of whether the audit
finding was a repeat of a finding in the
immediately prior audit and if so any
applicable prior year audit finding
numbers.
(9) Recommendations to prevent
future occurrences of the deficiency
identified in the audit finding.
(10) Views of responsible officials of
the auditee.
(c) Reference numbers. Each audit
finding in the schedule of findings and
questioned costs must include a
reference number in the format meeting
the requirements of the data collection
form submission required by § 75.512(b)
to allow for easy referencing of the audit
findings during follow-up.
§ 75.517
Audit documentation.
(a) Retention of audit documentation.
The auditor must retain audit
documentation and reports for a
minimum of three years after the date of
issuance of the auditor’s report(s) to the
auditee, unless the auditor is notified in
writing by the cognizant agency for
audit, oversight agency for audit,
cognizant agency for indirect costs, or
pass-through entity to extend the
retention period. When the auditor is
aware that the Federal agency, passthrough entity, or auditee is contesting
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an audit finding, the auditor must
contact the parties contesting the audit
finding for guidance prior to destruction
of the audit documentation and reports.
(b) Access to audit documentation.
Audit documentation must be made
available upon request to the cognizant
or oversight agency for audit or its
designee, cognizant agency for indirect
cost, a Federal agency, or GAO at the
completion of the audit, as part of a
quality review, to resolve audit findings,
or to carry out oversight responsibilities
consistent with the purposes of this
part. Access to audit documentation
includes the right of Federal agencies to
obtain copies of audit documentation, as
is reasonable and necessary.
§ 75.518
Major program determination.
(a) General. The auditor must use a
risk-based approach to determine which
Federal programs are major programs.
This risk-based approach must include
consideration of: Current and prior
audit experience, oversight by Federal
Total Federal awards expended
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$750,000.
Total Federal awards expended times .03.
$3 million.
Total Federal awards expended times .003.
$30 million.
Total Federal awards expended times .0015.
periods (in the most recent audit period
in the case of a biennial audit), and, in
the most recent audit period, the
program must have not had:
(i) Internal control deficiencies which
were identified as material weaknesses
in the auditor’s report on internal
control for major programs as required
under § 75.515(c);
(ii) A modified opinion on the
program in the auditor’s report on major
programs as required under § 75.515(c);
or
(iii) Known or likely questioned costs
that exceed five percent of the total
Federal awards expended for the
program.
(2) Notwithstanding paragraph (c)(1)
of this section, OMB may approve an
HHS awarding agency’s request that a
Type A program may not be considered
low risk for a certain recipient. For
example, it may be necessary for a large
Type A program to be audited as a major
program each year at a particular
recipient to allow the HHS awarding
agency to comply with 31 U.S.C. 3515.
The HHS awarding agency must notify
the recipient and, if known, the auditor
of OMB’s approval at least 180 calendar
days prior to the end of the fiscal year
to be audited.
(d) Step three. (1) The auditor must
identify Type B programs which are
high-risk using professional judgment
and the criteria in § 75.519. However,
the auditor is not required to identify
more high-risk Type B programs than at
least one fourth the number of low-risk
Type A programs identified as low-risk
under Step 2 (paragraph (c) of this
section). Except for known material
weakness in internal control or
compliance problems as discussed in
§ 75.519(b)(1), (b)(2), and (c)(1), a single
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agencies and pass-through entities, and
the inherent risk of the Federal this
program. The process in paragraphs (b)
through (h) of this section must be
followed.
(b) Step one. (1) The auditor must
identify the larger Federal programs,
which must be labeled Type A
programs. Type A programs are defined
as Federal programs with Federal
awards expended during the audit
period exceeding the levels outlined in
the table in this paragraph (b)(1):
Type A/B threshold
(i) Equal to or exceed $750,000 but less than or equal to $25 million ...
(ii) Exceed $25 million but less than or equal to $100 million .................
(iii) Exceed $100 million but less than or equal to $1 billion ...................
(iv) Exceed $1 billion but less than or equal to $10 billion ......................
(v) Exceed $10 billion but less than or equal to $20 billion .....................
(vi) Exceed $20 billion ..............................................................................
(2) Federal programs not labeled Type
A under paragraph (b)(1) of this section
must be labeled Type B programs.
(3) The inclusion of large loan and
loan guarantees (loans) must not result
in the exclusion of other programs as
Type A programs. When a Federal
program providing loans exceeds four
times the largest non-loan program it is
considered a large loan program, and
the auditor must consider this Federal
program as a Type A program and
exclude its values in determining other
Type A programs. This recalculation of
the Type A program is performed after
removing the total of all large loan
programs. For the purposes of this
paragraph a program is only considered
to be a Federal program providing loans
if the value of Federal awards expended
for loans within the program comprises
fifty percent or more of the total Federal
awards expended for the program. A
cluster of programs is treated as one
program and the value of Federal
awards expended under a loan program
is determined as described in § 75.502.
(4) For biennial audits permitted
under § 75.504, the determination of
Type A and Type B programs must be
based upon the Federal awards
expended during the two-year period.
(c) Step two. (1) The auditor must
identify Type A programs which are
low-risk. In making this determination,
the auditor must consider whether the
requirements in § 75.519(c), the results
of audit follow-up, or any changes in
personnel or systems affecting the
program indicate significantly increased
risk and preclude the program from
being low risk. For a Type A program
to be considered low-risk, it must have
been audited as a major program in at
least one of the two most recent audit
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criteria in risk would seldom cause a
Type B program to be considered highrisk. When identifying which Type B
programs to risk assess, the auditor is
encouraged to use an approach which
provides an opportunity for different
high-risk Type B programs to be audited
as major over a period of time.
(2) The auditor is not expected to
perform risk assessments on relatively
small Federal programs. Therefore, the
auditor is only required to perform risk
assessments on Type B programs that
exceed twenty-five percent (0.25) of the
Type A threshold determined in Step 1
(paragraph (b) of this section).
(e) Step four. At a minimum, the
auditor must audit all of the following
as major programs:
(1) All Type A programs not
identified as low risk under step two
(paragraph (c)(1) of this section).
(2) All Type B programs identified as
high-risk under step three (paragraph (d)
of this section).
(3) Such additional programs as may
be necessary to comply with the
percentage of coverage rule discussed in
paragraph (f) of this section. This may
require the auditor to audit more
programs as major programs than the
number of Type A programs.
(f) Percentage of coverage rule. If the
auditee meets the criteria in § 75.520,
the auditor need only audit the major
programs identified in Step 4 (paragraph
(e)(1) and (2) of this section) and such
additional Federal programs with
Federal awards expended that, in
aggregate, all major programs
encompass at least 20 percent (0.20) of
total Federal awards expended.
Otherwise, the auditor must audit the
major programs identified in Step 4
(paragraphs (e)(1) and (2) of this section)
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and such additional Federal programs
with Federal awards expended that, in
aggregate, all major programs
encompass at least 40 percent (0.40) of
total Federal awards expended.
(g) Documentation of risk. The auditor
must include in the audit
documentation the risk analysis process
used in determining major programs.
(h) Auditor’s judgment. When the
major program determination was
performed and documented in
accordance with this Subpart, the
auditor’s judgment in applying the riskbased approach to determine major
programs must be presumed correct.
Challenges by Federal agencies and
pass-through entities must only be for
clearly improper use of the
requirements in this part. However,
Federal agencies and pass-through
entities may provide auditors guidance
about the risk of a particular Federal
program and the auditor must consider
this guidance in determining major
programs in audits not yet completed.
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§ 75.519
Criteria for Federal program risk.
(a) General. The auditor’s
determination should be based on an
overall evaluation of the risk of
noncompliance occurring that could be
material to the Federal program. The
auditor must consider criteria, such as
described in paragraphs (b), (c), and (d)
of this section, to identify risk in
Federal programs. Also, as part of the
risk analysis, the auditor may wish to
discuss a particular Federal program
with auditee management and the
Federal agency or pass-through entity.
(b) Current and prior audit
experience. (1) Weaknesses in internal
control over Federal programs would
indicate higher risk. Consideration
should be given to the control
environment over Federal programs and
such factors as the expectation of
management’s adherence to Federal
statutes, regulations, and the terms and
conditions of Federal awards and the
competence and experience of
personnel who administer the Federal
programs.
(i) A Federal program administered
under multiple internal control
structures may have higher risk. When
assessing risk in a large single audit, the
auditor must consider whether
weaknesses are isolated in a single
operating unit (e.g., one college campus)
or pervasive throughout the entity.
(ii) When significant parts of a Federal
program are passed through to
subrecipients, a weak system for
monitoring subrecipients would
indicate higher risk.
(2) Prior audit findings would
indicate higher risk, particularly when
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the situations identified in the audit
findings could have a significant impact
on a Federal program or have not been
corrected.
(3) Federal programs not recently
audited as major programs may be of
higher risk than Federal programs
recently audited as major programs
without audit findings.
(c) Oversight exercised by Federal
agencies and pass-through entities. (1)
Oversight exercised by Federal agencies
or pass-through entities could be used to
assess risk. For example, recent
monitoring or other reviews performed
by an oversight entity that disclosed no
significant problems would indicate
lower risk, whereas monitoring that
disclosed significant problems would
indicate higher risk.
(2) Federal agencies, with the
concurrence of OMB, may identify
Federal programs that are higher risk.
OMB will provide this identification in
the compliance supplement.
(d) Inherent risk of the Federal
program. (1) The nature of a Federal
program may indicate risk.
Consideration should be given to the
complexity of the program and the
extent to which the Federal program
contracts for goods and services. For
example, Federal programs that disburse
funds through third party contracts or
have eligibility criteria may be of higher
risk. Federal programs primarily
involving staff payroll costs may have
high risk for noncompliance with
requirements of § 75.430, but otherwise
be at low risk.
(2) The phase of a Federal program in
its life cycle at the Federal agency may
indicate risk. For example, a new
Federal program with new or interim
regulations may have higher risk than
an established program with time-tested
regulations. Also, significant changes in
Federal programs, statutes, regulations,
or the terms and conditions of Federal
awards may increase risk.
(3) The phase of a Federal program in
its life cycle at the auditee may indicate
risk. For example, during the first and
last years that an auditee participates in
a Federal program, the risk may be
higher due to start-up or closeout of
program activities and staff.
(4) Type B programs with larger
Federal awards expended would be of
higher risk than programs with
substantially smaller Federal awards
expended.
§ 75.520
Criteria for a low-risk auditee.
An auditee that meets all of the
following conditions for each of the
preceding two audit periods must
qualify as a low-risk auditee and be
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eligible for reduced audit coverage in
accordance with § 75.518.
(a) Single audits were performed on
an annual basis in accordance with the
provisions of this Subpart, including
submitting the data collection form and
the reporting package to the FAC within
the timeframe specified in § 75.512 . A
non-Federal entity that has biennial
audits does not qualify as a low-risk
auditee.
(b) The auditor’s opinion on whether
the financial statements were prepared
in accordance with GAAP, or a basis of
accounting required by state law, and
the auditor’s in relation to opinion on
the schedule of expenditures of Federal
awards were unmodified.
(c) There were no deficiencies in
internal control which were identified
as material weaknesses under the
requirements of GAGAS.
(d) The auditor did not report a
substantial doubt about the auditee’s
ability to continue as a going concern.
(e) None of the Federal programs had
audit findings from any of the following
in either of the preceding two audit
periods in which they were classified as
Type A programs:
(1) Internal control deficiencies that
were identified as material weaknesses
in the auditor’s report on internal
control for major programs as required
under § 75.515(c);
(2) A modified opinion on a major
program in the auditor’s report on major
programs as required under § 75.515(c);
or
(3) Known or likely questioned costs
that exceeded five percent of the total
Federal awards expended for a Type A
program during the audit period.
Management Decisions
§ 75.521
Management Decision.
(a) General. The management decision
must clearly state whether or not the
audit finding is sustained, the reasons
for the decision, and the expected
auditee action to repay disallowed costs,
make financial adjustments, or take
other action. If the auditee has not
completed corrective action, a timetable
for follow-up should be given. Prior to
issuing the management decision, the
Federal agency or pass-through entity
may request additional information or
documentation from the auditee,
including a request for auditor
assurance related to the documentation,
as a way of mitigating disallowed costs.
The management decision should
describe any appeal process available to
the auditee. While not required, the
Federal agency or pass-through entity
may also issue a management decision
on findings relating to the financial
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statements which are required to be
reported in accordance with GAGAS.
(b) Federal agency. As provided in
§ 75.513(a)(3)(vii), the cognizant agency
for audit must be responsible for
coordinating a management decision for
audit findings that affect the programs
of more than one Federal agency. As
provided in § 75.513(c)(3), a Federal
awarding agency is responsible for
issuing a management decision for
findings that relate to Federal awards it
makes to non-Federal entities.
(c) Pass-through entity. As provided
in § 75.352(d), the pass-through entity
must be responsible for issuing a
management decision for audit findings
that relate to Federal awards it makes to
subrecipients.
(d) Time requirements. The HHS
awarding agency or pass-through entity
responsible for issuing a management
decision must do so within six months
of acceptance of the audit report by the
FAC. The auditee must initiate and
proceed with corrective action as
rapidly as possible and corrective action
should begin no later than upon receipt
of the audit report.
(e) Reference numbers. Management
decisions must include the reference
numbers the auditor assigned to each
audit finding in accordance with
§ 75.516(c).
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Appendix I to Part 75—Full Text of
Notice of Funding Opportunity
The full text of the notice of funding
opportunity is organized in sections. The
required format outlined in this appendix
indicates immediately following the title of
each section whether that section is required
in every announcement or is an HHS
awarding agency option. The format is
designed so that similar types of information
will appear in the same sections in
announcements of different Federal funding
opportunities. Toward that end, there is text
in each of the following sections to describe
the types of information that an HHS
awarding agency would include in that
section of an actual announcement.
An HHS awarding agency that wishes to
include information that the format does not
specifically discuss may address that subject
in whatever section(s) is most appropriate.
For example, if an HHS awarding agency
chooses to address performance goals in the
announcement, it might do so in the funding
opportunity description, the application
content, or the reporting requirements.
Similarly, when this format calls for a type
of information to be in a particular section,
an HHS awarding agency wishing to address
that subject in other sections may elect to
repeat the information in those sections or
use cross references between the sections
(there should be hyperlinks for crossreferences in any electronic versions of the
announcement). For example, an HHS
awarding agency may want to include in
Section A information about the types of
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non-Federal entities who are eligible to
apply. The format specifies a standard
location for that information in Section C.1
but that does not preclude repeating the
information in Section I or creating a cross
reference between Sections A and C.1, as
long as a potential applicant can find the
information quickly and easily from the
standard location.
The sections of the full text of the
announcement are described in the following
paragraphs.
A. Program Description—Required
This section contains the full program
description of the funding opportunity. It
may be as long as needed to adequately
communicate to potential applicants the
areas in which funding may be provided. It
describes the HHS awarding agency’s
funding priorities or the technical or focus
areas in which the HHS awarding agency
intends to provide assistance. As appropriate,
it may include any program history (e.g.,
whether this is a new program or a new or
changed area of program emphasis). This
section may communicate indicators of
successful projects (e.g., if the program
encourages collaborative efforts) and may
include examples of projects that have been
funded previously. This section also may
include other information the HHS awarding
agency deems necessary, and must at a
minimum include citations for authorizing
statutes and regulations for the funding
opportunity.
B. Federal Award Information—Required
This section provides sufficient
information to help an applicant make an
informed decision about whether to submit a
proposal. Relevant information could include
the total amount of funding that the HHS
awarding agency expects to award through
the announcement; the anticipated number of
Federal awards; the expected amounts of
individual Federal awards (which may be a
range); the amount of funding per Federal
award, on average, experienced in previous
years; and the anticipated start dates and
periods of performance for new Federal
awards. This section also should address
whether applications for renewal or
supplementation of existing projects are
eligible to compete with applications for new
Federal awards.
This section also must indicate the type(s)
of assistance instrument (e.g., grant,
cooperative agreement) that may be awarded
if applications are successful. If cooperative
agreements may be awarded, this section
either should describe the ‘‘substantial
involvement’’ that the HHS awarding agency
expects to have or should reference where
the potential applicant can find that
information (e.g., in the funding opportunity
description in section A. or Federal award
administration information in Section D. If
procurement contracts also may be awarded,
this must be stated.
C. Eligibility Information
This section addresses the considerations
or factors that determine applicant or
application eligibility. This includes the
eligibility of particular types of applicant
organizations, any factors affecting the
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eligibility of the principal investigator or
project director, and any criteria that make
particular projects ineligible. HHS agencies
should make clear whether an applicant’s
failure to meet an eligibility criterion by the
time of an application deadline will result in
the HHS awarding agency returning the
application without review or, even though
an application may be reviewed, will
preclude the HHS awarding agency from
making a Federal award. Key elements to be
addressed are:
1. Eligible Applicants—Required.
Announcements must clearly identify the
types of entities that are eligible to apply. If
there are no restrictions on eligibility, this
section may simply indicate that all potential
applicants are eligible. If there are
restrictions on eligibility, it is important to be
clear about the specific types of entities that
are eligible, not just the types that are
ineligible. For example, if the program is
limited to nonprofit organizations subject to
26 U.S.C. 501(c)(3) of the tax code (26 U.S.C.
501(c)(3)), the announcement should say so.
Similarly, it is better to state explicitly that
Native American tribal organizations are
eligible than to assume that they can
unambiguously infer that from a statement
that nonprofit organizations may apply.
Eligibility also can be expressed by
exception, (e.g., open to all types of domestic
applicants other than individuals). This
section should refer to any portion of Section
D. specifying documentation that must be
submitted to support an eligibility
determination (e.g., proof of 501(c)(3) status
as determined by the Internal Revenue
Service or an authorizing tribal resolution).
To the extent that any funding restriction in
Section D.6 could affect the eligibility of an
applicant or project, the announcement must
either restate that restriction in this section
or provide a cross-reference to its description
in Section D.6.
2. Cost Sharing or Matching—Required.
Announcements must state whether there is
required cost sharing, matching, or cost
participation without which an application
would be ineligible (if cost sharing is not
required, the announcement must explicitly
say so). Required cost sharing may be a
certain percentage or amount, or may be in
the form of contributions of specified items
or activities (e.g., provision of equipment). It
is important that the announcement be clear
about any restrictions on the types of cost
(e.g., in-kind contributions) that are
acceptable as cost sharing. Cost sharing as an
eligibility criterion includes requirements
based in statute or regulation, as described in
§ 75.306. This section should refer to the
appropriate portion(s) of section D. stating
any pre-award requirements for submission
of letters or other documentation to verify
commitments to meet cost-sharing
requirements if a Federal award is made.
3. Other—Required, if applicable. If there
are other eligibility criteria (i.e., criteria that
have the effect of making an application or
project ineligible for Federal awards, whether
referred to as ‘‘responsiveness’’ criteria, ‘‘gono go’’ criteria, ‘‘threshold’’ criteria, or in
other ways), must be clearly stated and must
include a reference to the regulation of
requirement that describes the restriction, as
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applicable. For example, if entities that have
been found to be in violation of a particular
Federal statute are ineligible, it is important
to say so. This section must also state any
limit on the number of applications an
applicant may submit under the
announcement and make clear whether the
limitation is on the submitting organization,
individual investigator/program director, or
both. This section should also address any
eligibility criteria for beneficiaries or for
program participants other than Federal
award recipients.
D. Application and Submission Information
1. Address to Request Application
Package—Required. Potential applicants
must be told how to get application forms,
kits, or other materials needed to apply (if
this announcement contains everything
needed, this section need only say so). An
Internet address where the materials can be
accessed is acceptable. However, since highspeed Internet access is not yet universally
available for downloading documents, and
applicants may have additional accessibility
requirements, there also should be a way for
potential applicants to request paper copies
of materials, such as a U.S. Postal Service
mailing address, telephone or FAX number,
Telephone Device for the Deaf (TDD), Text
Telephone (TTY) number, and/or Federal
Information Relay Service (FIRS) number.
2. Content and Form of Application
Submission—Required. This section must
identify the required content of an
application and the forms or formats that an
applicant must use to submit it. If any
requirements are stated elsewhere because
they are general requirements that apply to
multiple programs or funding opportunities,
this section should refer to where those
requirements may be found. This section also
should include required forms or formats as
part of the announcement or state where the
applicant may obtain them.
This section should specifically address
content and form or format requirements for:
i. Pre-applications, letters of intent, or
white papers required or encouraged (see
Section D.4), including any limitations on the
number of pages or other formatting
requirements similar to those for full
applications.
ii. The application as a whole. For all
submissions, this would include any
limitations on the number of pages, font size
and typeface, margins, paper size, number of
copies, and sequence or assembly
requirements. If electronic submission is
permitted or required, this could include
special requirements for formatting or
signatures.
iii. Component pieces of the application
(e.g., if all copies of the application must bear
original signatures on the face page or the
program narrative may not exceed 10 pages).
This includes any pieces that may be
submitted separately by third parties (e.g.,
references or letters confirming commitments
from third parties that will be contributing a
portion of any required cost sharing).
iv. Information that successful applicants
must submit after notification of intent to
make a Federal award, but prior to a Federal
award. This could include evidence of
compliance with requirements relating to
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human subjects or information needed to
comply with the National Environmental
Policy Act (NEPA) (42 U.S.C. 4321–4370h).
3. Unique Entity Identifier and System for
Award Management (SAM)—Required.
This paragraph must state clearly that each
applicant (unless the applicant is an
individual or Federal awarding agency that is
excepted from those requirements under 2
CFR 25.110(b) or (c), or has an exception
approved by the Federal awarding agency
under 2 CFR 25.110(d)) is required to:
(i) Be registered in SAM before submitting
its application;
(ii) provide a valid unique entity identifier
in its application; and
(iii) continue to maintain an active SAM
registration with current information at all
times during which it has an active Federal
award or an application or plan under
consideration by a Federal awarding agency.
It also must state that the Federal awarding
agency may not make a Federal award to an
applicant until the applicant has complied
with all applicable unique entity identifier
and SAM requirements and, if an applicant
has not fully complied with the requirements
by the time the Federal awarding agency is
ready to make a Federal award, the Federal
awarding agency may determine that the
applicant is not qualified to receive a Federal
award and use that determination as a basis
for making a Federal award to another
applicant.
4. Submission Dates and Times—Required.
Announcements must identify due dates and
times for all submissions. This includes not
only the full applications but also any
preliminary submissions (e.g., letters of
intent, white papers, or pre-applications). It
also includes any other submissions of
information before Federal award that are
separate from the full application. If the
funding opportunity is a general
announcement that is open for a period of
time with no specific due dates for
applications, this section should say so. Note
that the information on dates that is included
in this section also must appear with other
overview information in a location preceding
the full text of the announcement (see
§ 75.203).
Each type of submission should be
designated as encouraged or required and, if
required, any deadline date (or dates, if the
Federal awarding agency plans more than
one cycle of application submission, review,
and Federal award under the announcement)
should be specified. The announcement must
state (or provide a reference to another
document that states):
i. Any deadline in terms of a date and local
time. If the due date falls on a Saturday,
Sunday, or Federal holiday, the reporting
package is due the next business day.
ii. What the deadline means (e.g., whether
it is the date and time by which the Federal
awarding agency must receive the
application, the date by which the
application must be postmarked, or
something else) and how that depends, if at
all, on the submission method (e.g., mail,
electronic, or personal/courier delivery).
iii. The effect of missing a deadline (e.g.,
whether late applications are neither
reviewed nor considered or are reviewed and
considered under some circumstances).
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iv. How the receiving Federal office
determines whether an application or preapplication has been submitted before the
deadline. This includes the form of
acceptable proof of mailing or systemgenerated documentation of receipt date and
time.
This section also may indicate whether,
when, and in what form the applicant will
receive an acknowledgement of receipt. This
information should be displayed in ways that
will be easy to understand and use. It can be
difficult to extract all needed information
from narrative paragraphs, even when they
are well written. A tabular form for providing
a summary of the information may help
applicants for some programs and give them
what effectively could be a checklist to verify
the completeness of their application package
before submission.
5. Intergovernmental Review—Required, if
applicable. If the funding opportunity is
subject to Executive Order 12372,
‘‘Intergovernmental Review of Federal
Programs,’’ the notice must say so. In alerting
applicants that they must contact their state’s
Single Point of Contact (SPOC) to find out
about and comply with the state’s process
under Executive Order 12372, it may be
useful to inform potential applicants that the
names and addresses of the SPOCs are listed
in the Office of Management and Budget’s
Web site. www.whitehouse.gov/omb/grants/
spoc.html.
6. Funding Restrictions—Required. Notices
must include information on funding
restrictions in order to allow an applicant to
develop an application and budget consistent
with program requirements. Examples are
whether construction is an allowable activity,
if there are any limitations on direct costs
such as foreign travel or equipment
purchases, and if there are any limits on
indirect costs (or facilities and administrative
costs). Applicants must be advised if Federal
awards will not allow reimbursement of preFederal award costs.
7. Other Submission Requirements—
Required. This section must address any
other submission requirements not included
in the other paragraphs of this section. This
might include the format of submission, i.e.,
paper or electronic, for each type of required
submission. Applicants should not be
required to submit in more than one format
and this section should indicate whether
they may choose whether to submit
applications in hard copy or electronically,
may submit only in hard copy, or may submit
only electronically.
This section also must indicate where
applications (and any pre-applications) must
be submitted if sent by postal mail, electronic
means, or hand-delivery. For postal mail
submission, this must include the name of an
office, official, individual or function (e.g.,
application receipt center) and a complete
mailing address. For electronic submission,
this must include the URL or email address;
whether a password(s) is required; whether
particular software or other electronic
capabilities are required; what to do in the
event of system problems and a point of
contact who will be available in the event the
applicant experiences technical difficulties.1
1With respect to electronic methods for
providing information about funding
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opportunities or accepting applicants’
submissions of information, each HHS
awarding agency is responsible for
compliance with Section 508 of the
Rehabilitation Act of 1973 (29 U.S.C. 794d).
E. Application Review Information
1. Criteria—Required. This section must
address the criteria that the Federal awarding
agency will use to evaluate applications. This
includes the merit and other review criteria
that evaluators will use to judge applications,
including any statutory, regulatory, or other
preferences (e.g., minority status or Native
American tribal preferences) that will be
applied in the review process. These criteria
are distinct from eligibility criteria that are
addressed before an application is accepted
for review and any program policy or other
factors that are applied during the selection
process, after the review process is
completed. The intent is to make the
application process transparent so applicants
can make informed decisions when preparing
their applications to maximize fairness of the
process. The announcement should clearly
describe all criteria, including any subcriteria. If criteria vary in importance, the
announcement should specify the relative
percentages, weights, or other means used to
distinguish among them. For statutory,
regulatory, or other preferences, the
announcement should provide a detailed
explanation of those preferences with an
explicit indication of their effect (e.g.,
whether they result in additional points
being assigned).
If an applicant’s proposed cost sharing will
be considered in the review process (as
opposed to being an eligibility criterion
described in Section C.2), the announcement
must specifically address how it will be
considered (e.g., to assign a certain number
of additional points to applicants who offer
cost sharing, or to break ties among
applications with equivalent scores after
evaluation against all other factors). If cost
sharing will not be considered in the
evaluation, the announcement should say so,
so that there is no ambiguity for potential
applicants. Vague statements that cost
sharing is encouraged, without clarification
as to what that means, are unhelpful to
applicants. It also is important that the
announcement be clear about any restrictions
on the types of cost (e.g., in-kind
contributions) that are acceptable as cost
sharing.
2. Review and Selection Process—
Required. This section may vary in the level
of detail provided. The announcement must
list any program policy or other factors or
elements, other than merit criteria, that the
selecting official may use in selecting
applications for Federal award (e.g.,
geographical dispersion, program balance, or
diversity). The HHS awarding agency may
also include other appropriate details. For
example, this section may indicate who is
responsible for evaluation against the merit
criteria (e.g., peers external to the HHS
awarding agency or HHS awarding agency
personnel) and/or who makes the final
selections for Federal awards. If there is a
multi-phase review process (e.g., an external
panel advising internal HHS awarding
agency personnel who make final
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recommendations to the deciding official),
the announcement may describe the phases.
It also may include: the number of people on
an evaluation panel and how it operates, the
way reviewers are selected, reviewer
qualifications, and the way that conflicts of
interest are avoided. With respect to
electronic methods for providing information
about funding opportunities or accepting
applicants’ submissions of information, each
HHS awarding agency is responsible for
compliance with Section 508 of the
Rehabilitation Act of 1973 (29 U.S.C. 794d).
In addition, if the HHS awarding agency
permits applicants to nominate suggested
reviewers of their applications or suggest
those they feel may be inappropriate due to
a conflict of interest, that information should
be included in this section.
3. Anticipated Announcement and Federal
Award Dates—Optional. This section is
intended to provide applicants with
information they can use for planning
purposes. If there is a single application
deadline followed by the simultaneous
review of all applications, the HHS awarding
agency can include in this section
information about the anticipated dates for
announcing or notifying successful and
unsuccessful applicants and for having
Federal awards in place. If applications are
received and evaluated on a ‘‘rolling’’ basis
at different times during an extended period,
it may be appropriate to give applicants an
estimate of the time needed to process an
application and notify the applicant of the
Federal awarding agency’s decision.
F. Federal Award Administration
Information
1. Federal Award Notices—Required. This
section must address what a successful
applicant can expect to receive following
selection. If the HHS awarding agency’s
practice is to provide a separate notice stating
that an application has been selected before
it actually makes the Federal award, this
section would be the place to indicate that
the letter is not an authorization to begin
performance (to the extent that it allows
charging to Federal awards of pre-award
costs at the non-Federal entity’s own risk).
This section should indicate that the notice
of Federal award signed by the grants officer
(or equivalent) is the authorizing document,
and whether it is provided through postal
mail or by electronic means and to whom. It
also may address the timing, form, and
content of notifications to unsuccessful
applicants. See also § 75.210.
2. Administrative and National Policy
Requirements—Required. This section must
identify the usual administrative and
national policy requirements the HHS
awarding agency’s Federal awards may
include. Providing this information lets a
potential applicant identify any requirements
with which it would have difficulty
complying if its application is successful. In
those cases, early notification about the
requirements allows the potential applicant
to decide not to apply or to take needed
actions before receiving the Federal award.
The announcement need not include all of
the terms and conditions of the Federalaward, but may refer to a document (with
information about how to obtain it) or
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Internet site where applicants can see the
terms and conditions. If this funding
opportunity will lead to Federal awards with
some specific terms and conditions that
differ from the HHS awarding agency’s usual
(sometimes called ‘‘general’’) terms and
conditions, this section should highlight
those specific terms and conditions. Doing so
will alert applicants that have received
Federal awards from the HHS awarding
agency previously and might not otherwise
expect different terms and conditions. For
the same reason, the announcement should
inform potential applicants about special
requirements that could apply to particular
Federal awards after the review of
applications and other information, based on
the particular circumstances of the effort to
be supported (e.g., if human subjects were to
be involved or if some situations may justify
special terms on intellectual property, data
sharing or security requirements).
3. Reporting—Required. This section must
include general information about the type
(e.g., financial or performance), frequency,
and means of submission (paper or
electronic) of post-Federal award reporting
requirements. Highlight any special reporting
requirements for Federal awards under this
funding opportunity that differ (e.g., by
report type, frequency, form/format, or
circumstances for use) from what the HHS
awarding agency’s Federal awards usually
require.
G. HHS Awarding Agency Contact(s)—
Required
The announcement must give potential
applicants a point(s) of contact for answering
questions or helping with problems while the
funding opportunity is open. The intent of
this requirement is to be as helpful as
possible to potential applicants, so the HHS
awarding agency should consider approaches
such as giving:
1. Points of contact who may be reached
in multiple ways (e.g., by telephone, FAX,
and/or email, as well as regular mail).
2. A fax or email address that multiple
people access, so that someone will respond
even if others are unexpectedly absent during
critical periods.
3. Different contacts for distinct kinds of
help (e.g., one for questions of programmatic
content and a second for administrative
questions).
H. Other Information—Optional
This section may include any additional
information that will assist a potential
applicant. For example, the section might:
1. Indicate whether this is a new program
or a one-time initiative.
2. Mention related programs or other
upcoming or ongoing HHS awarding agency
funding opportunities for similar activities.
3. Include current Internet addresses for
the HHS awarding agency Web sites that may
be useful to an applicant in understanding
the program.
4. Alert applicants to the need to identify
proprietary information and inform them
about the way the HHS awarding agency will
handle it.
5. Include certain routine notices to
applicants (e.g., that the Federal Government
is not obligated to make any Federal award
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as a result of the announcement or that only
grants officers can bind the Federal
Government to the expenditure of funds).
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Appendix II to Part 75—Contract
Provisions for Non-Federal Entity
Contracts Under Federal Awards
In addition to other provisions required by
the HHS agency or non-Federal entity, all
contracts made by the non-Federal entity
under the Federal award must contain
provisions covering the following, as
applicable.
A. Contracts for more than the simplified
acquisition threshold currently set at
$150,000, which is the inflation adjusted
amount determined by the Civilian Agency
Acquisition Council and the Defense
Acquisition Regulations Council (Councils)
as authorized by 41 U.S.C. 1908, must
address administrative, contractual, or legal
remedies in instances where contractors
violate or breach contract terms, and provide
for such sanctions and penalties as
appropriate.
B. All contracts in excess of $10,000 must
address termination for cause and for
convenience by the non-Federal entity
including the manner by which it will be
effected and the basis for settlement.
C. Equal Employment Opportunity. Except
as otherwise provided under 41 CFR part 60,
all contracts that meet the definition of
‘‘federally assisted construction contract’’ in
41 CFR part 60–1.3 must include the equal
opportunity clause provided under 41 CFR
60–1.4(b), in accordance with Executive
Order 11246, as amended by Executive Order
11375, and implementing regulations at 41
CFR part 60.
D. Davis-Bacon Act, as amended (40 U.S.C.
3141–3148). When required by Federal
program legislation, all prime construction
contracts in excess of $2,000 awarded by
non-Federal entities must include a provision
for compliance with the Davis-Bacon Act (40
U.S.C. 3141–3144, and 3146–3148) as
supplemented by Department of Labor
regulations (29 CFR part 5). In accordance
with the statute, contractors must be required
to pay wages to laborers and mechanics at a
rate not less than the prevailing wages
specified in a wage determination made by
the Secretary of Labor. In addition,
contractors must be required to pay wages
not less than once a week. The non-Federal
entity must place a copy of the current
prevailing wage determination issued by the
Department of Labor in each solicitation. The
decision to award a contract or subcontract
must be conditioned upon the acceptance of
the wage determination. The non-Federal
entity must report all suspected or reported
violations to the Federal awarding agency.
The contracts must also include a provision
for compliance with the Copeland ‘‘AntiKickback’’ Act (40 U.S.C. 3145), as
supplemented by Department of Labor
regulations (29 CFR part 3). The Act provides
that each contractor or subrecipient must be
prohibited from inducing, by any means, any
person employed in the construction,
completion, or repair of public work, to give
up any part of the compensation to which he
or she is otherwise entitled. The non-Federal
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entity must report all suspected or reported
violations to the Federal awarding agency.
E. Contract Work Hours and Safety
Standards Act (40 U.S.C. 3701–3708). Where
applicable, all contracts awarded by the nonFederal entity in excess of $100,000 that
involve the employment of mechanics or
laborers must include a provision for
compliance with 40 U.S.C. 3702 and 3704, as
supplemented by Department of Labor
regulations (29 CFR part 5). Under 40 U.S.C.
3702 of the Act, each contractor must 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 one
and a half times the basic rate of pay for all
hours worked in excess of 40 hours in the
work week. The requirements of 40 U.S.C.
3704 are applicable to construction work and
provide that no laborer or mechanic must 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.
F. Rights to Inventions Made Under a
Contract or Agreement. If the Federal award
meets the definition of ‘‘funding agreement’’
under 37 CFR 401.2 (a) and the recipient or
subrecipient wishes to enter into a contract
with a small business firm or nonprofit
organization regarding the substitution of
parties, assignment or performance of
experimental, developmental, or research
work under that ‘‘funding agreement,’’ the
recipient or subrecipient must comply with
the requirements of 37 CFR part 401 and any
implementing regulations issued by the
awarding agency.
G. Clean Air Act (42 U.S.C. 7401–7671q.)
and the Federal Water Pollution Control Act
(33 U.S.C. 1251–1387), as amended—
Contracts and subgrants of amounts in excess
of $150,000 must contain a provision that
requires the non-Federal award to agree to
comply with all applicable standards, orders
or regulations issued pursuant to the Clean
Air Act (42 U.S.C. 7401–7671q) and the
Federal Water Pollution Control Act as
amended (33 U.S.C. 1251–1387). Violations
must be reported to the Federal awarding
agency and the Regional Office of the
Environmental Protection Agency (EPA).
H. Debarment and Suspension (Executive
Orders 12549 and 12689)—A contract award
(see 2 CFR 180.220) must not be made to
parties listed on the government-wide
exclusions in the System for Award
Management (SAM), in accordance with the
OMB guidelines at 2 CFR part 180 that
implement Executive Orders 12549 (3 CFR
part 1986 Comp., p. 189) and 12689 (3 CFR
part 1989 Comp., p. 235), ‘‘Debarment and
Suspension.’’ SAM Exclusions 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 Executive
Order 12549.
I. Byrd Anti-Lobbying Amendment (31
U.S.C. 1352)—Contractors that apply or bid
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for an award exceeding $100,000 must file
the required certification. Each tier certifies
to the tier above that it will not and has not
used Federal appropriated funds to pay any
person or organization for influencing or
attempting to influence an officer or
employee of any agency, a member of
Congress, officer or employee of Congress, or
an employee of a member of Congress in
connection with obtaining any Federal
contract, grant or any other award covered by
31 U.S.C. 1352. Each tier must also disclose
any lobbying with non-Federal funds that
takes place in connection with obtaining any
Federal award. Such disclosures are
forwarded from tier to tier up to the nonFederal award.
J. See § 75.331 Procurement of recovered
materials.
Appendix III to Part 75—Indirect (F&A)
Costs Identification and Assignment,
and Rate Determination for Institutions
of Higher Education
A. General
This appendix provides criteria for
identifying and computing indirect (or
indirect (F&A)) rates at IHEs (institutions).
Indirect (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 subsection B.1, for
a discussion of the components of indirect
(F&A) costs.
1. Major Functions of an Institution
Refers to instruction, organized research,
other sponsored activities and other
institutional activities as defined in this
section:
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 noncredit 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:
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(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, must be
combined with sponsored research under the
function of organized research.
(3) Only mandatory cost sharing or cost
sharing specifically committed in the project
budget must be included in the organized
research base for computing the indirect
(F&A) cost rate or reflected in any allocation
of indirect costs. Salary costs above statutory
limits are not considered cost sharing.
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 for
instruction, departmental research, organized
research, and other sponsored activities, as
defined in this section; indirect (F&A) cost
activities identified in this Appendix
paragraph B, Identification and assignment of
indirect (F&A) costs; and specialized services
facilities described in § 75.468 of this part.
Examples of 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 Federal awards, unless otherwise
indicated in an award.
2. Criteria for Distribution
a. Base period. A base period for
distribution of indirect (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 indirect (F&A) cost allocation
process is to distribute the indirect (F&A)
costs described in Section B, Identification
and assignment of indirect (F&A) costs, 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
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for selective distribution by establishing
separate groupings of cost within one or more
of the indirect (F&A) cost categories referred
to in subsection B.1. 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 c of this
section. 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 light of the guidelines set forth in
subsection d of this section.
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 indirect
(F&A) cost category include but are not
limited to the following:
(1) If certain items or categories of expense
relate solely to one of the major functions of
the institution or to less than all 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) If any types of expense ordinarily
treated as general administration or
departmental administration are charged to
Federal awards 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
indirect (F&A) costs allocable to those
Federal awards and included in the direct
cost of other activities for cost allocation
purposes.
(3) If 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) If 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 indirect (F&A) costs (such as for
overall management) which are properly
allocable to such activities.
(5) If the institution elects to treat fringe
benefits as indirect (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
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75957
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; with a traceable cause-and-effect
relationship; or with logic and reason, where
neither benefit nor a cause-and-effect
relationship is determinable.
(2) If a cost grouping can be identified
directly with the cost objective benefitted, it
should be assigned to that cost objective.
(3) If 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 (a) be
appropriately documented in sufficient detail
for subsequent review by the cognizant
agency for indirect costs, (b) distribute the
costs to the related cost objectives in
accordance with the relative benefits derived,
(c) be statistically sound, (d) be performed
specifically at the institution at which the
results are to be used, and (e) be reviewed
periodically, but not less frequently than rate
negotiations, 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 must be made in accordance
with the appropriate base cited in Section B,
unless one of the following conditions is met:
(a) 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 Federal awards,
or
(b) The institution qualifies for, and elects
to use, the simplified method for computing
indirect (F&A) cost rates described in Section
D.
(5) Notwithstanding subsection (3),
effective July 1, 1998, a cost analysis or base
other than that in Section B must not be used
to distribute utility or student services costs.
Instead, subsections B.4.c may be used in the
recovery of utility costs.
e. Order of distribution.
(1) Indirect (F&A) costs are the broad
categories of costs discussed in Section B.1.
(2) Depreciation, interest expenses,
operation and maintenance expenses, and
general administrative and general expenses
should be allocated in that order to the
remaining indirect (F&A) cost categories as
well as to the major functions and
specialized service facilities of the
institution. Other cost categories may be
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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 indirect (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 indirect (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
indirect (F&A) cost categories described in
Section B is required.
B. Identification and Assignment of Indirect
(F&A) Costs
1. Definition of Facilities and Administration
See § 75.414 which provides the basis for
these indirect cost requirements.
2. Depreciation
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 § 75.436.
b. In the absence of the alternatives
provided for in Section A.2.d, the expenses
included in this category must be allocated
in the following manner:
(1) Depreciation on buildings used
exclusively in the conduct of a single
function, and on capital improvements and
equipment used in such buildings, must be
assigned to that function.
(2) Depreciation on buildings used for
more than one function, and on capital
improvements and equipment used in such
buildings, must 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 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) must
be treated as follows. The cost of each jointly
used unit of space must be allocated to
benefitting functions on the basis of:
(a) The employee full-time equivalents
(FTEs) or salaries and wages of those
individual functions benefitting from the use
of that space; or
(b) Institution-wide employee FTEs or
salaries and wages applicable to the
benefitting major functions (see Section A.1)
of the institution.
(4) Depreciation on certain capital
improvements to land, such as paved parking
areas, fences, sidewalks, and the like, not
included in the cost of buildings, must be
allocated to user categories of students and
employees on a full-time equivalent basis.
The amount allocated to the student category
must be assigned to the instruction function
of the institution. The amount allocated to
the employee category must be further
allocated to the major functions of the
institution in proportion to the salaries and
wages of all employees applicable to those
functions.
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3. Interest
Interest on debt associated with certain
buildings, equipment and capital
improvements, as defined in § 75.449, must
be classified as an expenditure under the
category Facilities. These costs must be
allocated in the same manner as the
depreciation on the buildings, equipment
and capital improvements to which the
interest relates.
4. Operation and Maintenance Expenses
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 interest costs.
b. In the absence of the alternatives
provided for in Section A.2.d, the expenses
included in this category must be allocated
in the same manner as described in
subsection 2.b for depreciation.
c. A utility cost adjustment of up to 1.3
percentage points may be included in the
negotiated indirect cost rate of the IHE for
organized research, per the computation
alternatives in paragraphs (c)(1) and (2) of
this section:
(1) Where space is devoted to a single
function and metering allows unambiguous
measurement of usage related to that space,
costs must be assigned to the function
located in that space.
(2) Where space is allocated to different
functions and metering does not allow
unambiguous measurement of usage by
function, costs must be allocated as follows:
(i) Utilities costs should be apportioned to
functions in the same manner as
depreciation, based on the calculated
difference between the site or building actual
square footage for monitored research
laboratory space (site, building, floor, or
room), and a separate calculation prepared by
the IHE using the ‘‘effective square footage’’
described in subsection (c)(2)(ii) of this
section.
(ii) ‘‘Effective square footage’’ allocated to
research laboratory space must be calculated
as the actual square footage times the relative
energy utilization index (REUI) posted on the
OMB Web site at the time of a rate
determination.
A. This index is the ratio of a laboratory
energy use index (lab EUI) to the
corresponding index for overall average
college or university space (college EUI).
B. In July 2012, values for these two
indices (taken respectively from the
Lawrence Berkeley Laboratory ‘‘Labs for the
21st Century’’ benchmarking tool https://
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CompareData.php and the US Department of
Energy ‘‘Buildings Energy Databook’’ and
https://buildingsdatabook.eren.doe.gov/
CBECS.aspx) were 310 kBtu/sq ft-yr. and 155
kBtu/sq ft-yr., so that the adjustment ratio is
2.0 by this methodology. To retain currency,
OMB will adjust the EUI numbers from time
to time (no more often than annually nor less
often than every 5 years), using reliable and
publicly disclosed data. Current values of
both the EUIs and the REUI will be posted
on the OMB Web site.
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 expenses
of a general character which do not relate
solely to any major function of the
institution; i.e., solely to (1) instruction, (2)
organized research, (3) other sponsored
activities, or (4) 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 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 must not include
expenses incurred within non-universitywide deans’ offices, academic departments,
organized research units, or similar
organizational units. (See subsection 6.)
b. In the absence of the alternatives
provided for in Section A.2.d, the expenses
included in this category must 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 must then be allocated to
serviced or benefitted functions on the
modified total cost basis. Modified total costs
consist of the same elements as those in
Section C.2. When an activity included in
this indirect (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
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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, must 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 must be added to the
computation of the indirect (F&A) cost rate
for major functions in Section C; the
expenses covered by the allowance must be
excluded from the departmental
administration cost pool. No documentation
is required to support this allowance.
(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 (1) and (2) are allowable, as well
as an appropriate share of general
administration and general expenses,
operation and maintenance expenses, and
depreciation.
(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 indirect (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
indirect (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 must be
treated as direct costs wherever identifiable
to a particular cost objective. Direct charging
of these costs may be accomplished through
specific identification of individual costs to
benefitting cost objectives, or through
recharge centers or specialized service
facilities, as appropriate under the
circumstances. See §§ 75.413(c) and 75.468.
(2) Items such as office supplies, postage,
local telephone costs, and memberships must
normally be treated as indirect (F&A) costs.
c. In the absence of the alternatives
provided for in Section A.2.d, the expenses
included in this category must be allocated
as follows:
(1) The administrative expenses of the
dean’s office of each college and school must
be allocated to the academic departments
within that college or school on the modified
total cost basis.
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(2) The administrative expenses of each
academic department, and the department’s
share of the expenses allocated in subsection
(1) must 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, print shops, and the like. This
category also includes an allocable share of
fringe benefit costs, general administration
and general expenses, operation and
maintenance expenses, and depreciation.
Appropriate adjustments will be made for
services provided to other functions or
organizations.
b. In the absence of the alternatives
provided for in Section A.2.d, the expenses
included in this category must 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 must be
made to eliminate any duplicate charges to
Federal awards when this category includes
similar or identical activities as those
included in the general administration and
general expense category or other indirect
(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 § 75.406.
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.
Costs incurred in the purchases of rare books
(museum-type books) with no value to
Federal awards should not be allocated to
them.
b. In the absence of the alternatives
provided for in Section A.2.d, the expenses
included in this category must be allocated
first on the basis of primary categories of
users, including students, professional
employees, and other users.
(1) The student category must 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
must consist of all faculty members and other
professional employees of the institution, on
a full-time equivalent basis. This category
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may also include post-doctorate fellows and
graduate students.
(3) The other users category must consist
of a reasonable factor as determined by
institutional records to account for all other
users of library facilities.
c. Amount allocated in paragraph b of this
section must be assigned further as follows:
(1) The amount in the student category
must be assigned to the instruction function
of the institution.
(2) The amount in the professional
employee category must 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
must 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 Subpart E of this part. 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, interest expense,
and depreciation.
b. In the absence of the alternatives
provided for in Section A.2.d, the expenses
in this category must be allocated to the
instruction function, and subsequently to
Federal awards in that function.
10. Offset for Indirect (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
which 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 2 through
9.
b. The items in this group must be treated
as a credit to the affected individual indirect
(F&A) cost category before that category is
allocated to benefitting functions.
C. Determination and Application of Indirect
(F&A) Cost Rate or Rates
1. Indirect (F&A) Cost Pools
a. (1) Subject to subsection b, the separate
categories of indirect (F&A) costs allocated to
each major function of the institution as
prescribed in Section B of this paragraph
C.1-, must be aggregated and treated as a
common pool for that function. The amount
in each pool must be divided by the
distribution base described in subsection 2 to
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arrive at a single indirect (F&A) cost rate for
each function.
(2) The rate for each function is used to
distribute indirect (F&A) costs to individual
Federal awards of that function. Since a
common pool is established for each major
function of the institution, a separate indirect
(F&A) cost rate would be established for each
of the major functions described in Section
A.1 under which Federal awards are carried
out.
(3) Each institution’s indirect (F&A) cost
rate process must be appropriately designed
to ensure that Federal sponsors do not in any
way subsidize the indirect (F&A) costs of
other sponsors, specifically activities
sponsored by industry and foreign
governments. Accordingly, each allocation
method used to identify and allocate the
indirect (F&A) cost pools, as described in
Sections A.2, and B.2 through B.9, 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 2)
for each major function (organized research,
instruction, etc., as described in Section A.1)
must contain all the programs or activities
which utilize the indirect (F&A) costs
allocated to that major function. At the time
an indirect (F&A) cost proposal is submitted
to a cognizant agency for indirect costs, 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
indirect (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 Federal awards performed in a
common environment. The environmental
factors are not limited to the physical
location of the work. Other important factors
are the 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. If a particular segment
of a sponsored agreement is performed
within an environment which appears to
generate a significantly different level of
indirect (F&A) costs, provisions should be
made for a separate indirect (F&A) cost pool
applicable to such work. The separate
indirect (F&A) cost pool should be developed
during the regular course of the rate
determination process and the separate
indirect (F&A) cost rate resulting therefrom
should be utilized; provided it is determined
that (1) such indirect (F&A) cost rate differs
significantly from that which would have
been obtained under subsection a, and (2) the
volume of work to which such rate would
apply is material in relation to other Federal
awards at the institution.
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2. The Distribution Basis
Indirect (F&A) costs must be distributed to
applicable Federal awards and other
benefitting activities within each major
function (see section A.1, Major functions of
an institution) on the basis of modified total
direct costs (MTDC), consisting of all salaries
and wages, fringe benefits, materials and
supplies, services, travel, and up to the first
$25,000 of each subaward (regardless of the
period covered by the subaward). MTDC is
defined in § 75.2. For this purpose, an
indirect (F&A) cost rate should be
determined for each of the separate indirect
(F&A) cost pools developed pursuant to
subsection 1. The rate in each case should be
stated as the percentage which the amount of
the particular indirect (F&A) cost pool is of
the modified total direct costs identified with
such pool.
3. Negotiated Lump Sum for Indirect (F&A)
Costs
A negotiated fixed amount in lieu of
indirect (F&A) costs may be appropriate for
self-contained, off-campus, or primarily
subcontracted activities where the benefits
derived from an institution’s indirect (F&A)
services cannot be readily determined. Such
negotiated indirect (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 Indirect (F&A)
Costs
Public Law 87–638 (76 Stat. 437) as
amended (41 U.S.C. 4708) authorizes the use
of predetermined rates in determining the
‘‘indirect costs’’ (indirect (F&A) costs)
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 indirect (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 indirect (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 indirect
(F&A) cost for the next rate negotiation.
When the rate is negotiated before the carryforward adjustment is determined, the carryforward 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
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indirect (F&A) costs allocable to Federal
awards for the forecast period plus or minus
the carry-forward adjustment (over- or underrecovery) from the prior period, to the
forecast distribution base. Unrecovered
amounts under lump-sum agreements or
cost-sharing provisions of prior years must
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 agency for indirect costs 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 agency for indirect costs. 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
post-determined rates. Where multiple rates
are used, the same procedure will be
applicable for determining each rate.
6. Provisional and Final Rates for Indirect
(F&A) Costs
Where the cognizant agency for indirect
costs 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 must
be established. To prevent substantial
overpayment or underpayment, the
provisional rate may be adjusted by the
cognizant agency for indirect costs 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. Except as provided in paragraph (c)(1) of
§ 75.414 Federal agencies must use the
negotiated rates for indirect (F&A) costs in
effect at the time of the initial award
throughout the life of the Federal award.
Award levels for Federal awards may not be
adjusted in future years as a result of changes
in negotiated rates. ‘‘Negotiated rates’’ per the
rate agreement include final, fixed, and
predetermined rates and exclude provisional
rates. ‘‘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
awarding agency at the time of the Federal
award. If negotiated rate agreements do not
extend through the life of the Federal award
at the time of the initial award, then the
negotiated rate for the last year of the Federal
award must be extended through the end of
the life of the Federal award.
b. Except as provided in § 75.414, when an
educational institution does not have a
negotiated rate with the Federal Government
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at the time of an award (because the
educational institution is a new recipient or
the parties cannot reach agreement on a rate),
the provisional rate used at the time of the
award must be adjusted once a rate is
negotiated and approved by the cognizant
agency for indirect costs.
8. Limitation on Reimbursement of
Administrative Costs
a. Notwithstanding the provisions of
subsection C.1.a, the administrative costs
charged to Federal awards 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, must be limited to
26% of modified total direct costs (as defined
in subsection 2) 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, interest costs,
operation and maintenance expenses, and
fringe benefits costs, as provided by Section
B, Identification and assignment of indirect
(F&A) costs, and all other types of
expenditures not listed specifically under
one of the subcategories of facilities in
Section B.
b. Institutions should not change their
accounting or cost allocation methods if the
effect is to change the charging of a particular
type of cost from F&A to direct, or to
reclassify costs, or increase allocations from
the administrative pools identified in
paragraph B.1 of this Appendix to the other
F&A cost pools or fringe benefits. Cognizant
agencies for indirect cost are authorized to
allow 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 C.1.a, an institution may elect to
claim a fixed allowance for the
‘‘Administration’’ portion of indirect (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 B.1, whichever is less. Under this
alternative, no cost proposal need be
prepared for the ‘‘Administration’’ portion of
the indirect (F&A) cost rate nor is further
identification or documentation of these
costs required (see subsection c). Where a
negotiated indirect (F&A) cost agreement
includes this alternative, an institution must
make no further charges for the expenditure
categories described in Section B.5, Section
B.6, Section B.7, and Section B.9.
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.
c. If an institution elects to accept a
threshold rate as defined in subsection a of
this section, it is not required to perform a
detailed analysis of its administrative costs.
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However, in order to compute the facilities
components of its indirect (F&A) cost rate,
the institution must reconcile its indirect
(F&A) cost proposal to its financial
statements and make appropriate
adjustments and reclassifications to identify
the costs of each major function as defined
in Section A.1, 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 indirect (F&A) cost proposals to
financial statements and allocating facilities
costs.
10. Individual Rate Components
In order to provide mutually agreed-upon
information for management purposes, each
indirect (F&A) cost rate negotiation or
determination must include development of
a rate for each indirect (F&A) cost pool as
well as the overall indirect (F&A) cost rate.
11. Negotiation and Approval of Indirect
(F&A) Rate
a. Cognizant agency for indirect costs is
defined in § 75.2.
(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
must 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 for indirect costs
assignment must default to HHS.
Notwithstanding the method for cognizance
determination described in this section, 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 must be decided
based on mutual agreement between HHS
and DOD. Where a non-Federal entity only
receives funds as a subrecipient, see the
requirements of § 75.352.
(2) After cognizance is established, it must
continue for a five-year period.
b. Acceptance of rates. See § 75.414.
c. Correcting deficiencies. The cognizant
agency for indirect costs must negotiate
changes needed to correct systems
deficiencies relating to accountability for
Federal awards. Cognizant agencies for
indirect costs must address the concerns of
other affected agencies, as appropriate, and
must negotiate special rates for Federal
agencies that are required to limit recovery of
indirect costs by statute.
d. Resolving questioned costs. The
cognizant agency for indirect costs must
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 indirect costs for work
performed under this Part may be made by
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reimbursement billing under the Economy
Act, 31 U.S.C. 1535.
f. Procedure for establishing facilities and
administrative rates must be established by
one of the following methods:
(1) Formal negotiation. The cognizant
agency for indirect costs is responsible for
negotiating and approving rates for an
educational institution on behalf of all
Federal agencies. Federal awarding agencies
that do not have cognizance for indirect costs
must notify the cognizant agency for indirect
costs of specific concerns (i.e., a need to
establish special cost rates) which could
affect the negotiation process. The cognizant
agency for indirect costs must 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
for indirect costs must then arrange a
negotiation conference with the educational
institution.
(2) Other than formal negotiation. The
cognizant agency for indirect costs 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 section D of this
Appendix.
g. Formalizing determinations and
agreements. The cognizant agency for
indirect costs must formalize all
determinations or agreements reached with
an educational institution and provide copies
to other agencies having an interest.
Determinations should include a description
of any adjustments, the actual amount, both
dollar and percentage adjusted, and the
reason for making adjustments.
h. Disputes and disagreements. Where the
cognizant agency for indirect costs is unable
to reach agreement with an educational
institution with regard to rates or audit
resolution, the appeal system of the
cognizant agency for indirect costs must be
followed for resolution of the disagreement.
12. Standard Format for Submission
For facilities and administrative (indirect
(F&A)) rate proposals, educational
institutions must use the standard format,
shown in section E of this appendix, to
submit their indirect (F&A) rate proposal to
the cognizant agency for indirect costs. The
cognizant agency for indirect costs 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
for calculating indirect (F&A) rates, as
described in Section D of this Appendix.
As provided in section C.10, each F&A cost
rate negotiation or determination must
include development of a rate for each F&A
cost pool as well as the overall F&A rate.
D. Simplified Method for Small Institutions
1. General
a. Where the total direct cost of work
covered by this part 75 at an institution does
not exceed $10 million in a fiscal year, the
simplified procedure described in
subsections 2 or 3 may be used in
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determining allowable indirect (F&A) costs.
Under this simplified procedure, the
institution’s most recent annual financial
report and immediately available supporting
information must be utilized as a basis for
determining the indirect (F&A) cost rate
applicable to all Federal awards. The
institution may use either the salaries and
wages (see subsection 2) or modified total
direct costs (see subsection 3) as the
distribution basis.
b. The simplified procedure should not be
used where it produces results which appear
inequitable to the Federal Government or the
institution. In any such case, indirect (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 indirect (F&A) cost pool
consisting of the expenditures (exclusive of
capital items and other costs specifically
identified as unallowable) which 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).
(2) Operation and maintenance of physical
plant and depreciation (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.
In those cases where expenditures
classified under subsection (1) have
previously been allocated to other
institutional activities, they may be included
in the indirect (F&A) cost pool. The total
amount of salaries and wages included in the
indirect (F&A) cost pool must be separately
identified.
c. Establish a salary and wage distribution
base, determined by deducting from the total
of salaries and wages as established in
subsection a. from the amount of salaries and
wages included under subsection b.
d. Establish the indirect (F&A) cost rate,
determined by dividing the amount in the
indirect (F&A) cost pool, subsection b, by the
amount of the distribution base, subsection c.
e. Apply the indirect (F&A) cost rate to
direct salaries and wages for individual
agreements to determine the amount of
indirect (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 an indirect (F&A) cost pool
consisting of the expenditures (exclusive of
capital items and other costs specifically
identified as unallowable) which customarily
are classified under the following titles or
their equivalents:
(1) General administration and general
expenses (exclusive of costs of student
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administration and services, student
activities, student aid, and scholarships).
(2) Operation and maintenance of physical
plant and depreciation (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. In those cases where
expenditures classified under subsection (1)
have previously been allocated to other
institutional activities, they may be included
in the indirect (F&A) cost pool. The modified
total direct costs amount included in the
indirect (F&A) cost pool must be separately
identified.
c. Establish a modified total direct cost
distribution base, as defined in Section C.2,
that consists of all institution’s direct
functions.
d. Establish the indirect (F&A) cost rate,
determined by dividing the amount in the
indirect (F&A) cost pool, subsection b, by the
amount of the distribution base, subsection c.
e. Apply the indirect (F&A) cost rate to the
modified total direct costs for individual
agreements to determine the amount of
indirect (F&A) costs allocable to such
agreements.
E. Documentation Requirements
The standard format for documentation
requirements for indirect (indirect (F&A))
rate proposals for claiming costs under the
regular method is available on the OMB Web
site here: https://www.whitehouse.gov/omb/
grants_forms.
F. Certification
1. Certification of Charges
To assure that expenditures for Federal
awards 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 ‘‘By signing
this report, I certify to the best of my
knowledge and belief that the report is true,
complete, and accurate, and the
expenditures, disbursements and cash
receipts are for the purposes and intent set
forth in the award documents. I am aware
that any false, fictitious, or fraudulent
information, or the omission of any material
fact, may subject me to criminal, civil or
administrative penalties for fraud, false
statements, false claims or otherwise. (U.S.
Code, Title 18, Section 1001 and Title 31,
Sections 3729–3733 and 3801–3812)’’.
2. Certification of Indirect (F&A) Costs
a. Policy. Cognizant agencies must not
accept a proposed indirect cost rate unless
such costs have been certified by the
educational institution using the Certificate
of indirect (F&A) Costs set forth in subsection
F.2.c
b. The certificate must be signed on behalf
of the institution by the chief financial officer
or an individual designated by an individual
at a level no lower than vice president or
chief financial officer.
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An indirect (F&A) cost rate is not binding
upon the Federal Government if the most
recent required proposal from the institution
has not been certified. Where it is necessary
to establish indirect (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 must
unilaterally establish such rates. Such rates
may be based upon audited historical data or
such other data that have been furnished to
the cognizant agency for indirect costs and
for which it can be demonstrated that all
unallowable costs have been excluded. When
indirect (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.
c. Certificate. The certificate required by
this section must be in the following form:
Certificate of Indirect (F&A) Costs
This is to certify that to the best of my
knowledge and belief:
(1) I have reviewed the indirect (F&A) cost
proposal submitted herewith;
(2) All costs included in this proposal
[identify date] to establish billing or final
indirect (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): 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.
I declare that the foregoing is true and
correct.
Institution of Higher Education:
Signature:
Name of Official:
Title:
Date of Execution:
Appendix IV to Part 75—Indirect (F&A)
Costs Identification and Assignment,
and Rate Determination for Nonprofit
Organizations
A. General
1. Indirect costs are those that have been
incurred for common or joint objectives and
cannot be readily identified with a particular
final cost objective. Direct cost of minor
amounts may be treated as indirect costs
under the conditions described in
§ 75.413(d). After direct costs have been
determined and assigned directly to awards
or other work as appropriate, indirect costs
are those remaining to be allocated to
benefitting cost objectives. A cost may not be
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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.
‘‘Major nonprofit organizations’’ are
defined in § 75.414. See indirect cost rate
reporting requirements in sections B.2.e and
B.3.g of this Appendix.
B. Allocation of Indirect Costs and
Determination of Indirect Cost Rates
1. General
a. If a nonprofit organization has only one
major function, or where all its major
functions benefit from its 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 section B.2 of
this Appendix.
b. If an organization has several major
functions which benefit from its indirect
costs in varying degrees, allocation of
indirect costs may require the accumulation
of such costs into separate cost groupings
which then are allocated individually to
benefitting 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
Federal awards and other activities included
in that function by means of an indirect cost
rate(s).
c. The determination of what constitutes an
organization’s major functions will depend
on its purpose in being; the types of services
it renders to the public, its clients, and its
members; and the amount of effort it devotes
to such activities as fundraising, public
information and membership activities.
d. 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
section B.2 through B.5 of this Appendix.
e. The base period for the allocation of
indirect costs is the period in which such
costs are incurred and accumulated for
allocation to work performed in that period.
The base period normally should coincide
with the organization’s fiscal year but, in any
event, must be so selected as to avoid
inequities in the allocation of the costs.
2. Simplified Allocation Method
a. Where an organization’s major functions
benefit from its indirect costs to
approximately the same degree, the
allocation of indirect costs may be
accomplished by (i) separating the
organization’s total costs for the base period
as either direct or indirect, and (ii) 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 an organization has only one major
function encompassing a number of
individual projects or activities, and may be
used where the level of Federal awards to an
organization is relatively small.
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b. Both the direct costs and the indirect
costs must exclude capital expenditures and
unallowable costs. However, unallowable
costs which represent activities must be
included in the direct costs under the
conditions described in § 75.413(e).
c. The distribution base may be total direct
costs (excluding capital expenditures and
other distorting items, such contracts or
subawards for $25,000 or more), direct
salaries and wages, or other base which
results in an equitable distribution. The
distribution base must exclude participant
support costs as defined in § 75.2.
d. Except where a special rate(s) is required
in accordance with section B.5 of this
Appendix, the indirect cost rate developed
under the above principles is applicable to
all Federal awards of the organization. If a
special rate(s) is required, appropriate
modifications must be made in order to
develop the special rate(s).
e. For an organization that receives more
than $10 million in Federal funding of direct
costs in a fiscal year, a breakout of the
indirect cost component into two broad
categories, Facilities and Administration as
defined in section A.3 of this Appendix, is
required. The rate in each case must be stated
as the percentage which the amount of the
particular indirect cost category (i.e.,
Facilities or Administration) is of the
distribution base identified with that
category.
3. Multiple Allocation Base Method
a. General. Where an organization’s
indirect costs benefit its major functions in
varying degrees, indirect costs must be
accumulated into separate cost groupings, as
described in subparagraph b. Each grouping
must then be allocated individually to
benefitting functions by means of a base
which best measures the relative benefits.
The default allocation bases by cost pool are
described in section B.3.c of this Appendix.
b. Identification of indirect costs. Cost
groupings must be established so as to permit
the allocation of each grouping on the basis
of benefits provided to the major functions.
Each grouping must constitute a pool of
expenses that are of like character in terms
of functions they benefit and in terms of the
allocation base which best measures the
relative benefits provided to each function.
The groupings are classified within the two
broad categories: ‘‘Facilities’’ and
‘‘Administration,’’ as described in section
A.3 of this Appendix. The indirect cost pools
are defined as follows:
(1) Depreciation. The expenses under this
heading are the portion of the costs of the
organization’s buildings, capital
improvements to land and buildings, and
equipment which are computed in
accordance with § 75.436 .
(2) Interest. Interest on debt associated
with certain buildings, equipment and
capital improvements are computed in
accordance with § 75.449.
(3) Operation and maintenance expenses.
The expenses under this heading are those
that have been incurred for the
administration, operation, maintenance,
preservation, and protection of the
organization’s physical plant. They include
expenses normally incurred for such items
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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 other insurance relating to
property; space and capital leasing; facility
planning and management; and central
receiving. The operation and maintenance
expenses category must also include its
allocable share of fringe benefit costs,
depreciation, and interest costs.
(4) General administration and general
expenses. The expenses under this heading
are those that have been incurred for the
overall general executive and administrative
offices of the organization and other expenses
of a general nature which do not relate solely
to any major function of the organization.
This category must also include its allocable
share of fringe benefit costs, operation and
maintenance expense, depreciation, and
interest costs. Examples of this category
include central offices, such as the director’s
office, the office of finance, business services,
budget and planning, personnel, safety and
risk management, general counsel,
management information systems, and
library costs.
In developing this 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 indirect costs. For example,
salaries of technical staff, project supplies,
project publication, telephone toll charges,
computer costs, travel costs, and specialized
services costs must be treated as direct costs
wherever identifiable to a particular program.
The salaries and wages of administrative and
pooled clerical staff should normally be
treated as indirect costs. Direct charging of
these costs may be appropriate as described
in § 75.413. Items such as office supplies,
postage, local telephone costs, periodicals
and memberships should normally be treated
as indirect costs.
c. Allocation bases. Actual conditions must
be taken into account in selecting the base to
be used in allocating the expenses in each
grouping to benefitting functions. The
essential consideration in selecting a method
or a base is that it is 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 the cause nor
the effect of the relationship is determinable.
When an allocation can be made by
assignment of a cost grouping directly to the
function benefitted, the allocation must be
made in that manner. When the expenses in
a cost grouping are more general in nature,
the allocation must be made through the use
of a selected base which produces results that
are equitable to both the Federal Government
and the organization. The distribution must
be made in accordance with the bases
described herein unless 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
Federal awards. The results of special cost
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studies (such as an engineering utility study)
must not be used to determine and allocate
the indirect costs to Federal awards.
(1) Depreciation. Depreciation expenses
must be allocated in the following manner:
(a) Depreciation on buildings used
exclusively in the conduct of a single
function, and on capital improvements and
equipment used in such buildings, must be
assigned to that function.
(b) Depreciation on buildings used for
more than one function, and on capital
improvements and equipment used in such
buildings, must 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 restrooms.
(c) Depreciation on buildings, capital
improvements and equipment related space
(e.g., individual rooms, and laboratories)
used jointly by more than one function (as
determined by the users of the space) must
be treated as follows. The cost of each jointly
used unit of space must be allocated to the
benefitting functions on the basis of:
(i) the employees and other users on a fulltime equivalent (FTE) basis or salaries and
wages of those individual functions
benefitting from the use of that space; or
(ii) organization-wide employee FTEs or
salaries and wages applicable to the
benefitting functions of the organization.
(d) Depreciation on certain capital
improvements to land, such as paved parking
areas, fences, sidewalks, and the like, not
included in the cost of buildings, must be
allocated to user categories on a FTE basis
and distributed to major functions in
proportion to the salaries and wages of all
employees applicable to the functions.
(2) Interest. Interest costs must be allocated
in the same manner as the depreciation on
the buildings, equipment and capital
equipment to which the interest relates.
(3) Operation and maintenance expenses.
Operation and maintenance expenses must
be allocated in the same manner as the
depreciation.
(4) General administration and general
expenses. General administration and general
expenses must be allocated to benefitting
functions based on modified total costs
(MTC). The MTC is the modified total direct
costs (MTDC), as described in § 75.2, plus the
allocated indirect cost proportion. The
expenses included in this category could be
grouped first according to major functions of
the organization to which they render
services or provide benefits. The aggregate
expenses of each group must then be
allocated to benefitting functions based on
MTC.
d. Order of distribution.
(1) Indirect cost categories consisting of
depreciation, interest, operation and
maintenance, and general administration and
general expenses must be allocated in that
order to the remaining indirect cost
categories as well as to the major functions
of the organization. Other cost categories
should be allocated in the order determined
to be most appropriate by the organization.
This order of allocation does not apply if
cross allocation of costs is made as provided
in section B.3.d.2 of this Appendix.
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(2) Normally, an indirect cost category will
be considered closed once it has been
allocated to other cost objectives, and costs
must not be subsequently allocated to it.
However, a cross allocation of costs between
two or more indirect costs categories could
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
indirect cost categories is required.
e. Application of indirect cost rate or rates.
Except where a special indirect cost rate(s) is
required in accordance with section B.5 of
this Appendix, the separate groupings of
indirect costs allocated to each major
function must be aggregated and treated as a
common pool for that function. The costs in
the common pool must then be distributed to
individual Federal awards included in that
function by use of a single indirect cost rate.
f. Distribution basis. Indirect costs must be
distributed to applicable Federal awards and
other benefitting activities within each major
function on the basis of MTDC (see definition
in § 75.2).
g. Individual Rate Components. An
indirect cost rate must be determined for
each separate indirect cost pool developed.
The rate in each case must be stated as the
percentage which the amount of the
particular indirect cost pool is of the
distribution base identified with that pool.
Each indirect cost rate negotiation or
determination agreement must include
development of the rate for each indirect cost
pool as well as the overall indirect cost rate.
The indirect cost pools must be classified
within two broad categories: ‘‘Facilities’’ and
‘‘Administration,’’ as described in section
A.3 of this Appendix.
4. Direct Allocation Method
a. Some nonprofit organizations treat all
costs as direct costs except general
administration and general expenses. These
organizations generally separate their costs
into three basic categories: (i) General
administration and general expenses, (ii)
fundraising, and (iii) other direct functions
(including projects performed under Federal
awards). Joint costs, such as depreciation,
rental costs, operation and maintenance of
facilities, telephone expenses, and the like
are prorated individually as direct costs to
each category and to each Federal award or
other activity using a base most appropriate
to the particular cost being prorated.
b. This method is acceptable, provided
each joint cost is prorated using a base which
accurately measures the benefits provided to
each Federal award or other activity. The
bases must be established in accordance with
reasonable criteria, and be supported by
current data. This method is compatible with
the Standards of Accounting and Financial
Reporting for Voluntary Health and Welfare
Organizations issued jointly by the National
Health Council, Inc., the National Assembly
of Voluntary Health and Social Welfare
Organizations, and the United Way of
America.
c. Under this method, indirect costs consist
exclusively of general administration and
general expenses. In all other respects, the
organization’s indirect cost rates must be
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computed in the same manner as that
described in section B.2 of this Appendix.
5. Special Indirect Cost Rates
In some instances, a single indirect cost
rate for all activities of an organization or for
each major function of the organization may
not be appropriate, since it would not take
into account those different factors which
may substantially affect the indirect costs
applicable to a particular segment of work.
For this purpose, a particular segment of
work may be that performed under a single
Federal award or it may consist of work
under a group of Federal awards performed
in a common environment. These 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 scientific disciplines or
technical skills involved, the organizational
arrangements used, or any combination
thereof. When a particular segment of work
is performed 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 such work. 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
it is determined that (i) the rate differs
significantly from that which would have
been obtained under sections B.2, B.3, and
B.4 of this Appendix, and (ii) the volume of
work to which the rate would apply is
material.
C. Negotiation and Approval of Indirect Cost
Rates
1. Definitions
As used in this section, the following terms
have the meanings set forth in this section:
a. Cognizant agency for indirect costs
means the Federal agency responsible for
negotiating and approving indirect cost rates
for a nonprofit organization on behalf of all
Federal agencies.
b. Predetermined rate means an indirect
cost rate, applicable to a specified current or
future period, usually the organization’s
fiscal year. The rate is based on an estimate
of the costs to be incurred during the period.
A predetermined rate is not subject to
adjustment.
c. 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
costs of the period covered by the rate is
carried forward as an adjustment to the rate
computation of a subsequent period.
d. Final rate means an indirect cost rate
applicable to a specified past period which
is based on the actual costs of the period. A
final rate is not subject to adjustment.
e. Provisional rate or billing 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 the period.
f. Indirect cost proposal means the
documentation prepared by an organization
to substantiate its claim for the
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reimbursement of indirect costs. This
proposal provides the basis for the review
and negotiation leading to the establishment
of an organization’s indirect cost rate.
g. Cost objective means a function,
organizational subdivision, contract, Federal
award, or other work unit for which cost data
are desired and for which provision is made
to accumulate and measure the cost of
processes, projects, jobs and capitalized
projects.
2. Negotiation and Approval of Rates
a. Unless different arrangements are agreed
to by the Federal agencies concerned, the
Federal agency with the largest dollar value
of Federal awards with an organization will
be designated as the cognizant agency for
indirect costs for the negotiation and
approval of the indirect cost rates and, where
necessary, other rates such as fringe benefit
and computer charge-out rates. Once an
agency is assigned cognizance for a particular
nonprofit organization, the assignment will
not be changed unless there is a shift in the
dollar volume of the Federal awards to the
organization for at least three years. All
concerned Federal agencies must be given
the opportunity to participate in the
negotiation process but, after a rate has been
agreed upon, it will be accepted by all
Federal agencies. When a Federal agency has
reason to believe that special operating
factors affecting its Federal awards
necessitate special indirect cost rates in
accordance with section B.5 of this
Appendix, it will, prior to the time the rates
are negotiated, notify the cognizant agency
for indirect costs. (See also § 75.414.) Where
a non-Federal entity only receives funds as
a subrecipient, see the requirements of
§ 75.352.
b. Except as otherwise provided in
§ 75.414(e), a nonprofit organization which
has not previously established an indirect
cost rate with a Federal agency must submit
its initial indirect cost proposal immediately
after the organization is advised that a
Federal award will be made and, in no event,
later than three months after the effective
date of the Federal award.
c. Unless approved by the cognizant
agency for indirect costs in accordance with
§ 75.414(f), organizations that have
previously established indirect cost rates
must submit a new indirect cost proposal to
the cognizant agency for indirect costs within
six months after the close of each fiscal year.
d. A predetermined rate may be negotiated
for use on Federal awards where there is
reasonable assurance, based on past
experience and reliable projection of the
organization’s costs, that the rate is not likely
to exceed a rate based on the organization’s
actual costs.
e. Fixed rates may be negotiated where
predetermined rates are not considered
appropriate. A fixed rate, however, must not
be negotiated if (i) all or a substantial portion
of the organization’s Federal awards are
expected to expire before the carry-forward
adjustment can be made; (ii) the mix of
Federal and non-Federal work at the
organization is too erratic to permit an
equitable carry-forward adjustment; or (iii)
the organization’s operations fluctuate
significantly from year to year.
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f. Provisional and final rates must be
negotiated where neither predetermined nor
fixed rates are appropriate. Predetermined or
fixed rates may replace provisional rates at
any time prior to the close of the
organization’s fiscal year. If that event does
not occur, 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.
g. The results of each negotiation must be
formalized in a written agreement between
the cognizant agency for indirect costs and
the nonprofit organization. The cognizant
agency for indirect costs must make available
copies of the agreement to all concerned
Federal agencies.
h. If a dispute arises in a negotiation of an
indirect cost rate between the cognizant
agency for indirect costs and the nonprofit
organization, the dispute must be resolved in
accordance with the appeals procedures of
the cognizant agency for indirect costs.
i. To the extent that problems are
encountered among the Federal agencies in
connection with the negotiation and approval
process, OMB will lend assistance as
required to resolve such problems in a timely
manner.
D. Certification of Indirect (F&A) Costs
1. Required Certification. No proposal to
establish indirect (F&A) cost rates must be
acceptable unless such costs have been
certified by the non-profit organization using
the Certificate of Indirect (F&A) Costs set
forth in subsection b., below. The certificate
must be signed on behalf of the organization
by an individual at a level no lower than vice
president or chief financial officer for the
organization.
2. Certificate. Each indirect cost rate
proposal must be accompanied by a
certification in the following form:
Certificate of Indirect (F&A) Costs
This is to certify that to the best of my
knowledge and belief:
(1) I have reviewed the indirect (F&A) cost
proposal submitted herewith;
(2) All costs included in this proposal
[identify date] to establish billing or final
indirect (F&A) costs rate for [identify period
covered by rate] are allowable in accordance
with the requirements of the Federal awards
to which they apply and with Subpart E of
part 75.
(3) This proposal does not include any
costs which are unallowable under Subpart
E of part 75 such as (without limitation):
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 awards on the
basis of a beneficial or causal relationship
between the expenses incurred and the
Federal awards to which they are allocated
in accordance with applicable requirements.
I declare that the foregoing is true and
correct.
Nonprofit Organization:
Signature:
Name of Official:
Title:
Date of Execution:
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Appendix V to Part 75—State/Local
Governmentwide 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
Health and Human Services entitled ‘‘A
Guide for State, Local and Indian Tribal
Governments: Cost Principles and Procedures
for Developing Cost Allocation Plans and
Indirect Cost Rates for Agreements with the
Federal Government.’’ A copy of this
brochure may be obtained from the HHS’
Cost Allocation Services at https://
rates.psc.gov.
B. Definitions
1. Agency or operating agency means an
organizational unit or sub-division within a
governmental unit that is responsible for the
performance or administration of Federal
awards or activities of the governmental unit.
2. Allocated central services means central
services that benefit operating agencies but
are not billed to the agencies on a fee-forservice 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. Billed central services means central
services that are billed to benefitted agencies
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.
4. Cognizant agency for indirect costs is
defined in § 75.2. The determination of
cognizant agency for indirect costs for states
and local governments is described in section
F.1.
5. Major local government means local
government that receives more than $100
million in direct Federal awards subject to
this part.
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.
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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) 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 (b) 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 major local government is also
required to submit a plan to its cognizant
agency for indirect costs annually.
3. All other local governments claiming
central service costs must develop a plan in
accordance with the requirements described
in this Part 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 for indirect costs. Where a
local government only receives funds as a
subrecipient, the pass-through entity will be
responsible for monitoring the subrecipient’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 for indirect
costs 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 for indirect costs 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 benefitting 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 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.
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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. must also
be included.
3. Billed Services
a. General. The information described in
this section must be provided for all billed
central 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 must 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
Part, with an explanation of how variances
will be handled.
(2) Revenues must 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 must be
provided. Expenses must be broken out by
object cost categories (e.g., salaries, supplies,
etc.).
c. Self-insurance funds. For each selfinsurance fund, the plan must 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
(1) submitted and adjudicated but not paid,
(2) submitted but not adjudicated, and (3)
incurred but not submitted must be
identified and explained.
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d. Fringe benefits. For fringe benefit costs,
the plan must 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 must be provided: the
governmental unit’s funding policies, e.g.,
legislative bills, trust agreements, or statemandated 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 this Part 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
Federal 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.
Governmental Unit:
Signature:
Name of Official:
Title:
Date of Execution:
F. Negotiation and Approval of Central
Service Plans
1. Federal Cognizant Agency for Indirect
Costs Assignments for Cost Negotiation
In general, unless different arrangements
are agreed to by the concerned Federal
agencies, for central service cost allocation
plans, the cognizant agency responsible for
review and approval is the Federal agency
with the largest dollar value of total Federal
awards with a governmental unit. For
indirect cost rates and departmental indirect
cost allocation plans, the cognizant agency is
the Federal agency with the largest dollar
value of direct Federal awards with a
governmental unit or component, as
appropriate. Once designated as the
cognizant agency for indirect costs, the
Federal agency must remain so for a period
of five years. In addition, the following
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Federal agencies continue to be responsible
for the indicated governmental entities:
Department of Health and Human
Services—Public assistance and state-wide
cost allocation plans for all states (including
the District of Columbia and Puerto Rico),
state and local hospitals, libraries and health
districts.
Department of the Interior—Indian tribal
governments, territorial governments, and
state and local park and recreational districts.
Department of Labor—State and local labor
departments.
Department of Education—School districts
and state and local education agencies.
Department of Agriculture—State and local
agriculture departments.
Department of Transportation—State and
local airport and port authorities and transit
districts.
Department of Commerce—State and local
economic development districts.
Department of Housing and Urban
Development—State and local housing and
development districts.
Environmental Protection Agency—State
and local water and sewer districts.
2. Review
All proposed central service cost allocation
plans that are required to be submitted will
be reviewed, negotiated, and approved by the
cognizant agency for indirect costs on a
timely basis. The cognizant agency for
indirect costs 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 awarding agency has reason
to believe that special operating factors
affecting its Federal awards necessitate
special consideration, the funding agency
will, prior to the time the plans are
negotiated, notify the cognizant agency for
indirect costs.
3. Agreement
The results of each negotiation must be
formalized in a written agreement between
the cognizant agency for indirect costs 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 must be made available to all
Federal agencies for their use.
4. Adjustments
Negotiated cost allocation plans based on
a proposal later found to have included costs
that: (a) Are unallowable (i) as specified by
law or regulation, (ii) as identified in subpart
F, General Provisions for selected Items of
Cost of this Part, or (iii) by the terms and
conditions of Federal awards, or (b) are
unallowable because they are clearly not
allocable to Federal awards, must be
adjusted, or a refund must be made at the
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option of the cognizant agency for indirect
costs, including earned or imputed interest
from the date of transfer and debt interest, if
applicable, chargeable in accordance with
applicable Federal cognizant agency for
indirect costs regulations. Adjustments or
cash refunds may include, at the option of
the cognizant agency for indirect costs,
earned or imputed interest from the date of
expenditure and delinquent debt interest, if
applicable, chargeable in accordance with
applicable cognizant agency claims
collection regulations. 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 calendar days cash expenses for
normal operating purposes is considered
reasonable. A working capital reserve
exceeding 60 calendar days may be approved
by the cognizant agency for indirect costs 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 ‘‘carryforward’’ 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
must 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
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following adjustment methods: (a) A cash
refund including earned or imputed interest
from the date of transfer and debt interest, if
applicable, chargeable in accordance with
applicable Federal cognizant agency for
indirect costs regulations to the Federal
Government for the Federal share of the
adjustment, (b) credits to the amounts
charged to the individual programs, (c)
adjustments to future billing rates, or (d)
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. Adjustment methods may
include, at the option of the cognizant
agency, earned or imputed interest from the
date of expenditure and delinquent debt
interest, if applicable, chargeable in
accordance with applicable cognizant agency
claims collection regulations.
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
Subpart D of part 75.
6. Appeals
If a dispute arises in the negotiation of a
plan between the cognizant agency for
indirect costs and the governmental unit, the
dispute must be resolved in accordance with
the appeals procedures of the cognizant
agency for indirect costs.
7. OMB Assistance
To the extent that problems are
encountered among the Federal agencies 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 VI to Part 75—Public
Assistance Cost Allocation Plans
A. General
Federally-financed programs administered
by state public assistance agencies are funded
predominately by the Department of Health
and Human Services (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 awarding
agencies whose programs are administered
by a state public assistance agency. Major
federally-financed programs typically
administered by state public assistance
agencies include: Temporary Aid for 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
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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
contractor 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 section E, Review of Implementation of
Approved Plans, 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 calendar quarter following the event
that required the amendment, unless another
date is specifically approved by HHS. HHS,
as the cognizant agency for indirect costs
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 Federal
awarding agencies, single audits, or audits
conducted by the cognizant agency for
indirect costs.
2. Where inappropriate charges affecting
more than one Federal awarding 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.
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3. If a dispute arises in the negotiation of
a plan or from a disallowance involving two
or more Federal awarding agencies, the
dispute must be resolved in accordance with
the appeals procedures set out in 45 CFR part
16. Disputes involving only one Federal
awarding agency will be resolved in
accordance with the Federal awarding
agency’s appeal process.
4. To the extent that problems are
encountered among the Federal awarding
agencies 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 this Part. 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)
A cash refund, (b) offset to a subsequent
claim, or (c) credits to the amounts charged
to individual Federal awards. Cash refunds,
offsets, and credits may include at the option
of the cognizant agency for indirect cost,
earned or imputed interest from the date of
expenditure and delinquent debt interest, if
applicable, chargeable in accordance with
applicable cognizant agency for indirect cost
claims collection regulations.
Appendix VII to Part 75—States and
Local Government and Indian Tribe
Indirect Cost Proposals
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 (a) the indirect
costs originating in each department or
agency of the governmental unit carrying out
Federal awards and (b) the costs of central
governmental services distributed through
the central service cost allocation plan (as
described in Appendix V to 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 States and Local
Government Agencies: Cost Principles and
Procedures for Establishing Cost Allocation
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Plans and Indirect Cost Rates for Grants and
Contracts with the Federal Government.’’ A
copy of this brochure may be obtained from
the HHS’ Cost Allocation Services at
https://rates.psc.gov.
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 non-Federal
entity accounting and personnel services
performed within the non-Federal entity,
depreciation on buildings and equipment,
the costs of operating and maintaining
facilities.
5. This Appendix does not apply to state
public assistance agencies. These agencies
should refer instead to Appendix VI to part
75.
B. Definitions
1. 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 Federal award bearing
a fair share of the indirect costs in reasonable
relation to the benefits received from the
costs.
2. 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, must be so selected as to avoid
inequities in the allocation of costs.
3. Cognizant agency for indirect costs
means the Federal agency responsible for
reviewing and approving the governmental
unit’s indirect cost rate(s) on the behalf of the
Federal Government. The cognizant agency
for indirect costs assignment is described in
Appendix V, section F.
4. 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.
5. 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
rate is carried forward as an adjustment to
the rate computation of a subsequent period.
6. Indirect cost pool is the accumulated
costs that jointly benefit two or more
programs or other cost objectives.
7. 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.
8. 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.
9. Predetermined rate means an indirect
cost rate, applicable to a specified current or
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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 for indirect costs. 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.
10. 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.
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.
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 Federal 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.
2. Simplified Method
a. Where a non-Federal entity’s major
functions benefit from its indirect costs to
approximately the same degree, the
allocation of indirect costs may be
accomplished by (1) classifying the nonFederal entity’s total costs for the base period
as either direct or indirect, and (2) 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
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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 must 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 (1) total
direct costs (excluding capital expenditures
and other distorting items, such as passthrough funds, subawards in excess of
$25,000, participant support costs, etc.), (2)
direct salaries and wages, or (3) another base
which results in an equitable distribution.
3. Multiple Allocation Base Method
a. Where a non-Federal entity’s indirect
costs benefit its major functions in varying
degrees, such costs must be accumulated into
separate cost groupings. Each grouping must
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 must 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: (1) 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 (2) 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
paragraph (C)(4) of this Appendix, the
separate groupings of indirect costs allocated
to each major function must be aggregated
and treated as a common pool for that
function. The costs in the common pool must
then be distributed to individual Federal
awards included in that function by use of
a single indirect cost rate.
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e. The distribution base used in computing
the indirect cost rate for each function may
be (1) total direct costs (excluding capital
expenditures and other distorting items such
as pass-through funds, subawards in excess
of $25,000, participant support costs, etc.),
(2) direct salaries and wages, or (3) 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 non-Federal entity
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
Federal 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 Federal
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: (1) The rate differs
significantly from the rate which would have
been developed under paragraphs (C)(2) and
(C)(3) of this Appendix, and (2) the Federal
award to which the rate would apply is
material in amount.
b. Where Federal statutes restrict the
reimbursement of certain indirect costs, it
may be necessary to develop a special rate for
the affected Federal award. Where a
‘‘restricted rate’’ is required, the same
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
§ 75.361.
b. A governmental department or agency
unit that receives more than $35 million in
direct Federal funding must submit its
indirect cost rate proposal to its cognizant
agency for indirect costs. Other governmental
department or agency must develop an
indirect cost proposal in accordance with the
requirements of this Part and maintain the
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proposal and related supporting
documentation for audit. These governmental
departments or agencies are not required to
submit their proposals unless they are
specifically requested to do so by the
cognizant agency for indirect costs. Where a
non-Federal entity only receives funds as a
subrecipient, the pass-through entity will be
responsible for negotiating and/or monitoring
the subrecipient’s indirect costs.
c. Each Indian tribal government desiring
reimbursement of indirect costs must submit
its indirect cost proposal to the Department
of the Interior (its cognizant agency for
indirect costs).
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
agency for indirect costs. 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 federallyapproved 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 must 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. 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 for indirect costs and is
available to the funding agency.
b. A copy of the financial data (financial
statements, comprehensive annual financial
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
for indirect costs 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 must 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
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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 the provisions of
this 45 CFR part 75. Unallowable costs have
been adjusted for in allocating costs as
indicated in the indirect cost proposal.
(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.
Governmental Unit:
Signature:
Name of Official:
Title:
Date of Execution:
E. Negotiation and Approval of Rates
1. Indirect cost rates will be reviewed,
negotiated, and approved by the cognizant
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 awarding agency has reason to
believe that special operating factors affecting
its Federal awards necessitate special
indirect cost rates, the funding agency will,
prior to the time the rates are negotiated,
notify the cognizant agency for indirect costs.
2. The use of predetermined rates, if
allowed, is encouraged where the cognizant
agency for indirect costs has reasonable
assurance based on past experience and
reliable projection of the non-Federal entity’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 must be
formalized in a written agreement between
the cognizant agency for indirect costs 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 must be made available to all Federal
agencies for their use.
4. Refunds must be made if proposals are
later found to have included costs that (a) are
unallowable (i) as specified by law or
regulation, (ii) as identified in § 75.420 of this
part, or (iii) by the terms and conditions of
Federal awards, or (b) 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).
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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 recipient 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 recipient agency level (i.e., the
agency specifically identifies fringe benefit
costs to individual employees), the
governmental unit should so advise the
cognizant agency for indirect costs.
2. Billed Services Provided by the Recipient
Agency
In some cases, governmental departments
or agencies (components of the governmental
unit) provide and bill for services similar to
those covered by central service cost
allocation plans (e.g., computer centers).
Where this occurs, the governmental
departments or agencies (components of the
governmental unit) should be guided by the
requirements in Appendix V relating to the
development of billing rates and
documentation requirements, and should
advise the cognizant agency for indirect costs
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.
3. Indirect Cost Allocations Not Using Rates
In certain situations, governmental
departments or agencies (components of the
governmental unit), because of the nature of
their Federal 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
indirect costs 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 for indirect costs and the
governmental unit, the dispute must be
resolved in accordance with the appeals
procedures of the cognizant agency for
indirect costs.
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 cognizant agency for
indirect costs regulations).
6. OMB Assistance
To the extent that problems are
encountered among the Federal agencies 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.
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Appendix VIII to Part 75—Nonprofit
Organizations Exempted from Subpart
E of Part 75
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Advance Technology Institute (ATI),
Charleston, South Carolina
Aerospace Corporation, El Segundo,
California
American Institutes of Research (AIR),
Washington, DC
Argonne National Laboratory, Chicago,
Illinois
Atomic Casualty Commission, Washington,
DC
Battelle Memorial Institute, Headquartered in
Columbus, Ohio
Brookhaven National Laboratory, Upton,
New York
Charles Stark Draper Laboratory,
Incorporated, Cambridge, Massachusetts
CNA Corporation (CNAC), Alexandria,
Virginia
Environmental Institute of Michigan, Ann
Arbor, Michigan
Georgia Institute of Technology/Georgia Tech
Applied Research Corporation/Georgia
Tech Research Institute, Atlanta, Georgia
Hanford Environmental Health Foundation,
Richland, Washington
IIT Research Institute, Chicago, Illinois
Institute of Gas Technology, Chicago, Illinois
Institute for Defense Analysis, Alexandria,
Virginia
LMI, McLean, Virginia
Mitre Corporation, Bedford, Massachusetts
Noblis, Inc., Falls Church, Virginia
National Radiological Astronomy
Observatory, Green Bank, West Virginia
National Renewable Energy Laboratory,
Golden, Colorado
Oak Ridge Associated Universities, Oak
Ridge, Tennessee
Rand Corporation, Santa Monica, California
Research Triangle Institute, Research
Triangle Park, North Carolina
Riverside Research Institute, New York, New
York
South Carolina Research Authority (SCRA),
Charleston, South Carolina
Southern Research Institute, Birmingham,
Alabama
Southwest Research Institute, San Antonio,
Texas
SRI International, Menlo Park, California
Syracuse Research Corporation, Syracuse,
New York
Universities Research Association,
Incorporated (National Acceleration Lab),
Argonne, Illinois
Urban Institute, Washington DC
Non-profit insurance companies, such as
Blue Cross and Blue Shield Organizations
Other non-profit organizations as negotiated
with Federal awarding agencies
Appendix IX to Part 75—Principles for
Determining Costs Applicable to
Research and Development Under
Grants and Contracts with Hospitals
A. Purpose and Scope
1. Objectives
This appendix provides principles for
determining the costs applicable to research
and development work performed by
hospitals under grants and contracts with the
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Department of Health and Human Services.
These principles are confined to the subject
of cost determination and make no attempt
to identify the circumstances or dictate the
extent of hospital participation in the
financing of a particular research or
development project. The principles are
designed to provide recognition of the full
allocated costs of such research work under
generally accepted accounting principles.
These principles will be applicable to both
proprietary and non-profit hospitals. No
provision for profit or other increment above
cost is provided for in these principles.
However, this is not to be interpreted as
precluding a negotiated fee between
contracting parties when a fee is appropriate.
2. Policy Guides
The successful application of these
principles requires development of mutual
understanding between representatives of
hospitals and of the Department of Health
and Human Services as to their scope,
applicability and interpretation. It is
recognized that:
a. The arrangements for hospital
participation in the financing of a research
and development project are properly subject
to negotiation between the agency and the
hospital concerned in accordance with such
Government-wide criteria as may be
applicable.
b. Each hospital, possessing its own unique
combination of staff, facilities and
experience, should be encouraged to conduct
research in a manner consonant with its own
institutional philosophies and objectives.
c. Each hospital in the fulfillment of its
contractual obligations should be expected to
employ sound management practices.
d. The application of the principles
established herein shall be in conformance
with the generally accepted accounting
practices of hospitals.
e. Hospitals receive reimbursements from
the Federal Government for differing types of
services under various programs such as
support of Research and Development
(including discrete clinical centers) Health
Services Projects, Medicare, etc. It is essential
that consistent procedures for determining
reimbursable costs for similar services be
employed without regard to program
differences. Therefore, both the direct and
indirect costs of research programs must be
identified as a cost center(s) for the cost
finding and step-down requirements of the
Medicare program, or in its absence the
Medicaid program.
3. Application
All operating agencies within the
Department of Health and Human Services
that sponsor research and development work
in hospitals will apply these principles and
related policy guides in determining the costs
incurred for such work under grants and
cost-reimbursement type contracts and
subcontracts. These principles will also be
used as a guide in the pricing of fixed-price
contracts and subcontracts.
B. Definition of Terms
1. Organized research means all research
activities of a hospital that may be identified
whether the support for such research is from
a federal, non-federal or internal source.
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2. Departmental research means research
activities that are not separately budgeted
and accounted for. Such work, which
includes all research activities not
encompassed under the term organized
research, is regarded for purposes of this
document as a part of the patient care
activities of the hospital.
3. Research agreement means any valid
arrangement to perform federally-sponsored
research or development including grants,
cost-reimbursement type contracts, costreimbursement type subcontracts, and fixedprice contracts and subcontracts.
4. Instruction and training means the
formal or informal programs of educating and
training technical and professional health
services personnel, primarily medical and
nursing training. This activity, if separately
budgeted or identifiable with specific costs,
should be considered as a cost objective for
purposes of indirect cost allocations and the
development of patient care costs.
5. Other hospital activities means all
organized activities of a hospital not
immediately related to the patient care,
research, and instructional and training
functions which produce identifiable
revenue from the performance of these
activities. If a non-related activity does not
produce identifiable revenue, it may be
necessary to allocate this expense using an
appropriate basis. In such a case, the activity
may be included as an allocable cost (See
paragraph C.4 below.) Also included under
this definition is any category of cost treated
as ‘‘Unallowable,’’ provided such category of
cost identifies a function or activity to which
a portion of the institution’s indirect cost (as
defined in paragraph E.1.) are properly
allocable.
6. Patient care means those departments or
cost centers which render routine or ancillary
services to in-patients and/or out-patients. As
used in paragraph I.2.w, it means the cost of
these services applicable to patients involved
in research programs.
7. Allocation means the process by which
the indirect costs are assigned as between:
a. Organized research,
b. Patient care including departmental
research.
c. Instruction and training, and
d. Other hospital activities.
8. Cost center means an identifiable
department or area (including research)
within the hospital which has been assigned
an account number in the hospital
accounting system for the purpose of
accumulating expense by department or area.
9. Cost finding is the process of recasting
the data derived from the accounts ordinarily
kept by a hospital to ascertain costs of the
various types of services rendered. It is the
determination of direct costs by specific
identification and the proration of indirect
costs by allocation.
10. Step down is a cost finding method that
recognizes that services rendered by certain
nonrevenue-producing departments or
centers are utilized by certain other
nonrevenue producing centers as well as by
the revenue-producing centers. All costs of
nonrevenue-producing centers are allocated
to all centers which they serve, regardless of
whether or not these centers produce
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revenue. Following the apportionment of the
cost of the nonrevenue-producing center, that
center will be considered closed and no
further costs are apportioned to that center.
11. Scatter bed is a bed assigned to a
research patient based on availability.
Research patients occupying these beds are
not physically segregated from nonresearch
patients occupying beds. Scatter beds are
geographically dispersed among all the beds
available for use in the hospital. There are no
special features attendant to a scatter bed that
distinguishes it from others that could just as
well have been occupied.
12. Discrete bed is a bed or beds that have
been set aside for occupancy by research
patients and are physically segregated from
other hospital beds in an environment that
permits an easily ascertainable allocation of
costs associated with the space they occupy
and the services they generate.
C. Basic Considerations
1. Composition of Total Costs
The cost of a research agreement is
comprised of the allowable direct costs
incident to its performance plus the allocable
portion of the allowable indirect costs of the
hospital less applicable credits. (See
paragraph C.5.)
2. Factors Affecting Allowability of Costs
The tests of allowability of costs under
these principles are:
a. They must be reasonable.
b. They must be assigned to research
agreements under the standards and methods
provided herein.
c. They must be accorded consistent
treatment through application of those
generally accepted accounting principles
appropriate to the circumstances (See
paragraph A.2.e.) and
d. They must conform to any limitations or
exclusions set forth in these principles or in
the research 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 therefor
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:
a. Whether or not the cost is of a type
generally recognized as necessary for the
operation of the hospital or the performance
of the research agreement,
b. The restraints or requirements imposed
by such factors as arm’s length bargaining,
federal and state laws and regulations, and
research agreement terms and conditions,
c. Whether or not the individuals
concerned acted with due prudence in the
circumstances, considering their
responsibilities to the hospital, its patients,
its employees, its students, the Government,
and the public at large, and
d. The extent to which the actions taken
with respect to the incurrence of the cost are
consistent with established hospital policies
and practices applicable to the work of the
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hospital generally, including Government
research.
4. Allocable Costs
a. A cost is allocable to a particular cost
center (i.e., a specific function, project,
research agreement, department, or the like)
if the goods or services involved are
chargeable or assignable to such cost center
in accordance with relative benefits received
or other equitable relationship. Subject to the
foregoing, a cost is allocable to a research
agreement if it is incurred solely to advance
the work under the research agreement; or it
benefits both the research agreement and
other work of the hospital in proportions that
can be approximated through use of
reasonable methods; or it is necessary to the
overall operation of the hospital and, in light
of the standards provided in this chapter, is
deemed to be assignable in part to organized
research. Where the purchase of equipment
or other capital items are specifically
authorized under a research agreement, the
amounts thus authorized for such purchases
are allocable to the research 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
research agreement under the standards
provided in these principles may not be
shifted to other research agreements in order
to meet deficiencies caused by overruns or
other fund considerations, to avoid
restrictions imposed by law or by terms of
the research agreement, or for other reasons
of convenience.
5. Applicable Credits
a. The term applicable credits refers to
those receipts or negative expenditure types
of transactions which operate to offset or
reduce expense items that are allocable to
research agreements as direct or indirect
costs as outlined in paragraph E.1. Typical
examples of such transactions are: Purchase
discounts, rebates, or allowances; recoveries
or indemnities on losses; sales of scrap or
incidental services; tuition; adjustments of
overpayments or erroneous charges; and
services rendered to patients admitted to
federally funded clinical research centers,
primarily for care though also participating
in research protocols.
b. In some instances, the amounts received
from the Federal Government to finance
hospital 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 hospital in
determining the rates or amounts to be
charged to government research 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. Thus, where such
items are provided for or benefit a particular
hospital activity, i.e., patient care, research,
instruction and training, or other, they
should be treated as an offset to the indirect
costs apportioned to that activity. Where the
benefits are common to all hospital activities
they should be treated as a credit to the total
indirect cost pool before allocation to the
various cost objectives.
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D. Direct Costs
1. General
Direct costs are those that can be identified
specifically with a particular cost center. For
this purpose, the term cost center refers not
only to the ultimate centers against which
costs are finally lodged such as research
agreements, but also to other established cost
centers such as the individual accounts for
recording particular objects or items of
expense, and the separate account groupings
designed to record the expenses incurred by
individual organizational units, functions,
projects and the like. In general, the
administrative functions and service
activities described in paragraph VI are
identifiable as separate cost centers, and the
expenses associated with such centers
become eligible in due course for distribution
as indirect costs of research agreements and
other ultimate cost centers.
2. Application to Research Agreements
Identifiable benefit to the research work
rather than the nature of the goods and
services involved is the determining factor in
distinguishing direct from indirect costs of
research agreements. Typical of transactions
chargeable to a research agreement as direct
costs are the compensation of employees for
the time or effort devoted to the performance
of work under the research agreement,
including related staff benefit and pension
plan costs to the extent that such items are
consistently accorded to all employees and
treated by the hospital as direct rather than
indirect costs (see paragraph E.2.d(2)); the
costs of materials consumed or expended in
the performance of such work; and other
items of expense incurred for the research
agreement, such as 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 research agreements provided such
items are consistently treated by the
institution as direct rather than indirect costs
and are charged under a recognized method
of costing or pricing designed to recover only
the actual direct and indirect costs of such
material or service and conforming to
generally accepted cost accounting practices
consistently followed by the institution.
E. Indirect Costs
1. General
Indirect costs are those that have been
incurred for common or joint objectives, and
thus are not readily subject to treatment as
direct costs of research agreements or other
ultimate or revenue producing cost centers.
In hospitals such costs normally are
classified but not necessarily restricted to the
following functional categories: Depreciation;
Administrative and General (including fringe
benefits if not charged directly); Operation of
Plant; Maintenance of Plant; Laundry and
Linen Service; Housekeeping; Dietary;
Maintenance of Personnel; and Medical
Records and Library.
2. Criteria for Distribution
a. Base period.
A base period for distribution of indirect
costs is the period during which such costs
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are incurred and accumulated for
distribution to work performed within that
period. The base period normally should
coincide with the fiscal year established by
the hospital, 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 allocation
process is to distribute the indirect costs
described in paragraph F. to organized
research, patient care, instruction and
training, and other hospital activities in
reasonable proportions consistent with the
nature and extent of the use of the hospital’s
resources by research personnel, medical
staff, patients, students, and other personnel
or organizations. In order to achieve this
objective with reasonable precision, it may be
necessary to provide for selective distribution
by establishing separate groupings of cost
within one or more of the functional
categories of indirect costs referred to in
paragraph E.1. In general, the cost groupings
established within a functional category
should constitute, in each case, a pool of
those items of expense that are considered to
be of like character in terms of their relative
contribution to (or degree of remoteness
from) the particular cost centers to which
distribution is appropriate. Each such pool or
cost grouping should then be distributed
individually to the related cost centers, using
the distribution base or method most
appropriate in the light of the guides set out
in 2.c. below. While this paragraph places
primary emphasis on a step-down method of
indirect cost computation, paragraph H.
provides an alternate method which may be
used under certain conditions.
c. Selection of distribution method.
Actual conditions must be taken into
account in selecting the method or base to be
used in distributing to related cost centers
the expenses assembled under each of the
individual cost groups established as
indicated under 2.b. above. Where a
distribution can be made by assignment of a
cost grouping directly to the area benefited,
the distribution should be made in that
manner. Care should be given, however, to
eliminate similar or duplicative costs from
any other distribution made to this area.
Where the expenses under a cost grouping
are more general in nature, the distribution
to related cost centers should be made
through use of a selected base which will
produce results which are equitable to both
the Government and the hospital. In general,
any cost element or cost-related factor
associated with the hospital’s work is
potentially adaptable for use as a distribution
base provided:
(1) It can readily be expressed in terms of
dollars or other quantitative measure (total
direct expenditures, direct salaries, manhours applied, square feet utilized, hours of
usage, number of documents processed,
population served, and the like); and
(2) It is common to the related cost centers
during the base period. The essential
consideration in selection of the distribution
base in each instance is that it be the one best
suited for assigning the pool of costs to
related cost centers in accord with the
relative benefits derived; the traceable cause
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and effect relationship; or logic and reason,
where neither benefit nor cause and effect
relationship is determinable.
d. General consideration on cost groupings.
The extent to which separate cost
groupings and selective distribution would
be appropriate at a hospital 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 groups (based on account classification
or analysis) within a functional category
include but are not limited to the following:
(1) Where certain items or categories of
expense relate solely to one of the major
divisions of the hospital (patient care,
sponsored research, instruction and training,
or other hospital activities) or to any two but
not all, such expenses should be set aside as
a separate cost grouping for direct assignment
or selective distribution in accordance with
the guides provided in 2.b. and 2.c.above.
(2) Where any types of expense ordinary
treated as indirect cost as outlined in
paragraph are charged to research agreements
as direct costs, the similar type expenses
applicable to other activities of the
institution must through separate cost
grouping be excluded from the indirect costs
allocable to research agreements.
(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 and other hospital activities.
(4) Where organized activities (including
identifiable segments of organized research
as well as the activities cited inB.5.) provide
their own purchasing, personnel
administration, building maintenance, or
housekeeping or similar service, the
distribution of such elements of indirect cost
to such activities should be accomplished
through cost grouping which includes only
that portion of central indirect costs (such as
for overall management) which are properly
allocable to such activities.
(5) Where the hospital elects to treat as
indirect charges the costs of pension plans
and other staff benefits, such costs should be
set aside as a separate cost grouping for
selective distribution to related cost centers,
including organized research.
(6) Where the hospital is affiliated with a
medical school or some other institution
which performs organized research on the
hospital’s premises, every effort should be
made to establish separate cost groupings in
the Administrative and General or other
applicable category which will reasonably
reflect the use of services and facilities by
such research. (See also paragraph.)
e. Materiality.
Where it is determined that the use of
separate cost groupings and selective
distribution are necessary to produce
equitable results, the number of such
separate cost groupings within a functional
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.
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3. Administration of Limitations on
Allowances for Indirect Costs
a. Research grants may be subject to laws
and/or administrative regulations that limit
the allowance for indirect costs under each
such grant to a stated percentage of the direct
costs allowed. Agencies that sponsor such
grants will establish procedures which will
assure that:
(1) The terms and amount authorized in
each case conform with the provisions of
paragraphs C, E, and I of these principles as
they apply to matters involving the
consistent treatment and allowability of
individual items of cost; and
(2) The amount actually allowed for
indirect costs under each such research grant
does not exceed the maximum allowable
under the limitation or the amount otherwise
allowable under these principles, whichever
is the smaller.
b. Where the actual allowance for indirect
costs on any research grant must be restricted
to the smaller of the two alternative amounts
referred to in 3.a. above, such alternative
amounts should be determined in accordance
with the following guides:
(1) The maximum allowable under the
limitation should be established by applying
the stated percentage to a direct cost base
which shall include all items of expenditure
authorized by the sponsoring agency for
inclusion as part of the total cost for the
direct benefit of the work under the grant;
and
(2) The amount otherwise allowable under
these principles should be established by
applying the current institutional indirect
cost rate to those elements of direct cost
which were included in the base on which
the rate was computed.
c. When the maximum amount allowable
under a statutory limitation or the terms of
a research agreement is less than the amount
otherwise allocable as indirect costs under
these principles, the amount not recoverable
as indirect costs under the research
agreement involved may not be shifted to
other research agreements.
F. Identification and Assignment of Indirect
Costs
1. Depreciation or Use Charge
a. The expenses under this heading should
include depreciation (as defined in paragraph
I.2.i(1)) on buildings, fixed equipment, and
movable equipment, except to the extent
purchased through federal funds. Where
adequate records for the recording of
depreciation are not available, a use charge
may be substituted for depreciation (See
paragraph I.2.)
b. The expenses included in this category
should be allocated to applicable cost centers
in a manner consistent with the guides set
forth in paragraph E.2., on a basis that gives
primary emphasis to (a) space utilization
with respect to depreciation on buildings and
fixed equipment; and (b) specific
identification of assets and their use with
respect to movable equipment as it relates to
patient care, organized research, instruction
and training, and other hospital activities.
Where such records are not sufficient for the
purpose of the foregoing, reasonable
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estimates will suffice as a means for effecting
distribution of the amounts involved.
2. Administration and General Expenses
a. The expenses under this heading are
those that have been incurred for the
administrative offices of the hospital
including accounting, personnel, purchasing,
information centers, telephone expense, and
the like which do not relate solely to any
major division of the institution, i.e., solely
to patient care, organized research,
instruction and training, or other hospital
activities.
b. The expenses included in this category
may be allocated on the basis of total
expenditures exclusive of capital
expenditures, or salaries and wages in
situations where the results of the
distribution made on this basis are deemed
to be equitable both to the Government and
the hospital; otherwise the distribution of
Administration and General expenses should
be made through use of selected bases,
applied to separate cost groupings
established within this category of expenses
in accordance with the guides set out in
paragraph E.2.
3. Operation of Plant
a. The expenses under this heading are
those that have been incurred by a central
service organization or at the departmental
level for the administration, supervision, and
provision of utilities (exclusive of telephone
expense) and protective services to the
physical plant. They include expenses
incurred for such items as power plant
operations, general utility costs, elevator
operations, protection services, and general
parking lots.
b. The expenses included in this category
should be allocated to applicable cost centers
in a manner consistent with the guides
provided in paragraph E.2., on a basis that
gives primary emphasis to space utilization.
The allocations should be developed as
follows:
(1) Where actual space and related cost
records are available or can readily be
developed and maintained without
significant change in the accounting
practices, the amount distributed should be
based on such records;
(2) Where the space and related cost
records maintained are not sufficient for
purposes of the foregoing, a reasonable
estimate of the proportion of total space
assigned to the various costs centers
normally will suffice as a means for effecting
distribution of the amounts involved; or
(3) Where it can be demonstrated that an
area or volume or space basis of allocation is
impractical or inequitable, other bases may
be used provided consideration is given to
the use of facilities by research personnel and
others, including patients.
4. Maintenance of Plant
a. The expenses under this heading should
include:
(1) All salaries and wages pertaining to
ordinary repair and maintenance work
performed by employees on the payroll of the
hospital;
(2) All supplies and parts used in the
ordinary repairing and maintaining of
buildings and general equipment; and
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(3) Amounts paid to outside concerns for
the ordinary repairing and maintaining of
buildings and general equipment.
b. The expenses included in this category
should be allocated to applicable cost centers
in a manner consistent with the guides
provided in paragraph E.2. on a basis that
gives primary emphasis to space utilization.
The allocations and apportionments should
be developed as follows:
(1) Where actual space and related cost
records are available and can readily be
developed and maintained without
significant change in the accounting
practices, the amount distributed should be
based on such records;
(2) Where the space and related cost
records maintained are not sufficient for
purposes of the foregoing, a reasonable
estimate of the proportion of total space
assigned to the various cost centers normally
will suffice as a means for effecting
distribution of the amounts involved; or
(3) Where it can be demonstrated that an
area or volume of space basis of allocation is
impractical or inequitable, other basis may be
used provided consideration is given to the
use of facilities by research personnel and
others, including patients.
5. Laundry and Linen
a. The expenses under this heading should
include:
(1) Salaries and wages of laundry
department employees, seamstresses, clean
linen handlers, linen delivery men, etc.;
(2) Supplies used in connection with the
laundry operation and all linens purchased;
and
(3) Amounts paid to outside concerns for
purchased laundry and/or linen service.
b. The expense included in this category
should be allocated to related cost centers in
a manner consistent with the guides
provided in paragraph E.2. on a basis that
gives primary emphasis to actual pounds of
linen used. The allocations should be
developed as follows:
(1) Where actual poundage and related cost
records are available or can readily be
developed and maintained without
significant change in the accounting
practices, the amount distributed should be
based on such records;
(2) Where it can be demonstrated that a
poundage basis of allocation is impractical or
inequitable other bases may be used provided
consideration is given to the use of linen by
research personnel and others, including
patients.
6. Housekeeping
a. The expenses under this heading should
include:
(1) All salaries and wages of the
department head, foreman, maids, porters,
janitors, wall washers, and other
housekeeping employees;
(2) All supplies used in carrying out the
housekeeping functions; and
(3) Amounts paid to outside concerns for
purchased services such as window washing,
insect extermination, etc.
b. The expenses included in this category
should be allocated to related cost centers in
a manner consistent with the guides
provided in paragraph E.2. on a basis that
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gives primary emphasis to space actually
serviced by the housekeeping department.
The allocations and apportionments should
be developed as follows:
(1) Where actual space serviced and related
cost records are available or can readily be
developed and maintained without
significant change in the accounting
practices, the amount distributed should be
based on such records;
(2) Where the space serviced and related
cost records maintained are not sufficient for
purposes of the foregoing, a reasonable
estimate of the proportion of total space
assigned to the various cost centers normally
will suffice as a means for effecting
distribution of the amounts of housekeeping
expenses involved; or
(3) Where it can be demonstrated that the
space serviced basis of allocation is
impractical or inequitable, other bases may
be used provided consideration is given to
the use of housekeeping services by research
personnel and others, including patients.
7. Dietary
a. These expenses, as used herein, shall
mean only the subsidy provided by the
hospital to its employees including research
personnel through its cafeteria operation. The
hospital must be able to demonstrate through
the use of proper cost accounting techniques
that the cafeteria operates at a loss to the
benefit of employees.
b. The reasonable operating loss of a
subsidized cafeteria operation should be
allocated to related cost centers in a manner
consistent with the guides provided in
paragraph E.2. on a basis that gives primary
emphasis to number of employees.
8. Maintenance (Housing) of Personnel
a. The expenses under this heading should
include:
(1) The salaries and wages of matrons,
clerks, and other employees engaged in work
in nurses’ residences and other employees’
quarters;
(2) All supplies used in connection with
the operation of such dormitories; and
(3) Payments to outside agencies for the
rental of houses, apartments, or rooms used
by hospital personnel.
b. The expenses included in this category
should be allocated to related cost centers in
a manner consistent with the guides
provided in paragraph E.2. on a basis that
gives primary emphasis to employee
utilization of housing facilities. The
allocation should be developed as follows:
(1) Appropriate credit should be given for
all payments received from employees or
otherwise to reduce the expense to be
allocated;
(2) A net cost per housed employee may
then be computed; and
(3) Allocation should be made on a
departmental basis based on the number of
housed employees in each respective
department.
9. Medical Records and Library
a. The expenses under this heading should
include:
(1) The salaries and wages of the records
librarian, medical librarian, clerks,
stenographers, etc.; and
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(2) All supplies such as medical record
forms, chart covers, filing supplies,
stationery, medical library books, periodicals,
etc.
b. The expenses included in this category
should be allocated to related cost centers in
a manner consistent with the guides
provided in paragraph E.2. on a basis that
gives primary emphasis to a special time
survey of medical records personnel. If this
appears to be impractical or inequitable,
other bases may be used provided
consideration is given to the use of these
facilities by research personnel and others,
including patients.
G. Determination and Application of Indirect
Cost Rate or Rates
1. Indirect Cost Pools
a. Subject to b. below, indirect costs
allocated to organized research should be
treated as a common pool, and the costs in
such common pool should be distributed to
individual research agreements benefiting
therefrom on a single rate basis.
b. In some instances a single rate basis for
use on all government research at a hospital
may not be appropriate since it would not
take into account those different
environmental factors which may affect
substantially the indirect costs applicable to
a particular segment of government research
at the institution. For this purpose, a
particular segment of government research
may be that performed under a single
research agreement or it may consist of
research under a group of research
agreements performed in a common
environment. The environmental factors are
not limited to the physical location of the
work. Other important factors are the 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
government research is performed within an
environment which appears to generate a
significantly different level of indirect costs,
provision should be made for a separate
indirect cost pool applicable to such work.
An example of this differential may be in the
development of a separate indirect cost pool
for a clinical research center grant. The
separate indirect cost pool should be
developed during the course of the regular
distribution process, and the separate
indirect cost rate resulting therefrom should
be utilized provided it is determined that:
(1) Such indirect cost rate differs
significantly from that which would have
obtained under a. above; and
(2) The volume of research work to which
such rate would apply is material in relation
to other government research at the
institution.
c. It is a common practice for grants or
contracts awarded to other institutions,
typically University Schools of Medicine, to
be performed on hospital premises. In these
cases the hospital should develop a separate
indirect cost pool applicable to the work
under such grants or contracts. This pool
should be developed by a selective
distribution of only those indirect cost
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categories which benefit the work performed
by the other institution, within the practical
limits dictated by available data and the
materiality of the amounts involved. Hospital
costs determined to be allocable to grants or
contracts awarded to another institution may
not be recovered as a cost of grants or
contracts awarded directly to the hospital.
2. The Distribution Base
Preferably, indirect costs allocated to
organized research should be distributed to
applicable research agreements on the basis
of direct salaries and wages. However, where
the use of salaries and wages results in an
inequitable allocation of costs to the research
agreements, total direct costs or a variation
thereof, may be used in lieu of salaries and
wages. Regardless of the base used, an
indirect cost rate should be determined for
each of the separate indirect cost pools
developed pursuant to paragraph G.1. The
rate in each case should be stated as the
percentage which the amount of the
particular indirect cost pool is of the total
direct salaries and wages (or other base
selected) for all research agreements
identified with such a pool.
3. Negotiated Lump Sum for Overhead
A negotiated fixed amount in lieu of
indirect costs may be appropriate for selfcontained or off-campus research activities
where the benefits derived from a hospital’s
indirect services cannot be readily
determined. Such amount negotiated in lieu
of indirect costs will be treated as an offset
to the appropriate indirect cost pool after
allocation to patient care, organized research,
instruction and training, and other hospital
activities. The base on which such remaining
expenses are allocated should be
appropriately adjusted.
4. Predetermined Overhead Rates
The utilization of predetermined fixed
overhead rates may offer potential advantages
in the administration of research agreements
by facilitating the preparation of research
budgets and permitting more expeditious
close out of the agreements when the work
is completed. Therefore, to the extent
allowed by law, consideration may be given
to the negotiation of predetermined fixed
rates in those situations where the cost
experience and other pertinent factors
available are deemed sufficient to enable the
Government and the hospital to reach a
reasonable conclusion as to the probable
level of the indirect cost rate for the ensuing
accounting period.
H. Simplified Method for Small Institutions
1. General
a. Where the total direct cost of all
government-sponsored research and
development work at a hospital in a year is
minimal, the use of the abbreviated
procedure described in paragraph H.2. below
may be acceptable in the determination of
allowable indirect costs. This method may
also be used to initially determine a
provisional indirect cost rate for hospitals
that have not previously established a rate.
Under this abbreviated procedure, data taken
directly from the institution’s most recent
annual financial report and immediately
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available supporting information will be
utilized as a basis for determining the
indirect cost rate applicable to research
agreements at the institution.
b. The rigid formula approach provided
under the abbreviated procedure has
limitations which may preclude its use at
some hospitals either because the minimum
data required for this purpose are not readily
available or because the application of the
abbreviated procedure to the available data
produces results which appear inequitable to
the Government or the hospital. In any such
case, indirect costs should be determined
through use of the regular procedure rather
than the abbreviated procedure.
c. In certain instances where the total
direct cost of all government-sponsored
research and development work at the
hospital is more than minimal, the
abbreviated procedure may be used if prior
permission is obtained. This alternative will
be granted only in those cases where it can
be demonstrated that the step-down
technique cannot be followed.
2. Abbreviated Procedure
a. Total expenditures as taken from the
most recent annual financial report will be
adjusted by eliminating from further
consideration expenditures for capital items
as defined in paragraph I.2.d. and
unallowable costs as defined under various
headings in paragraph I. and paragraph C.5.
b. Total expenditures as adjusted under the
foregoing will then be distributed among (1)
expenditures applicable to administrative
and general overhead functions, (2)
expenditures applicable to all other overhead
functions, and (3) expenditures for all other
purposes. The first group shall include
amounts associated with the functional
categories, Administration and General, and
Dietary, as defined in paragraphs F.2. and 7.
The second group shall include Depreciation,
Operation of Plant, Maintenance of Plant,
and Housekeeping. The third group—
expenditures for all other purposes—shall
include the amounts applicable to all other
activities, namely, patient care, organized
research, instruction and training, and other
hospital activities as defined under
paragraph B.5. For the purposes of this
section, the functional categories of Laundry
and Linen, Maintenance of Personnel, and
Medical Records and Library as defined in
paragraph E. shall be considered as
expenditures for all other purposes.
c. The expenditures distributed to the first
two groups in paragraph H.2.b. should then
be adjusted by those receipts or negative
expenditure types of transactions which tend
to reduce expense items allocable to research
agreements as indirect costs. Examples of
such receipts or negative expenditures are
itemized in paragraph C.5.a.
d. In applying the procedures in
paragraphs H.2.a and 2.b, the cost of
unallowable activities such as Gift Shop,
Investment Property Management, Fund
Raising, and Public Relations, when they
benefit from the hospital’s indirect cost
services, should be treated as expenditures
for all other purposes. Such activities are
presumed to benefit from the hospital’s
indirect cost services when they include
salaries of personnel working in the hospital.
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When they do not include such salaries, they
should be eliminated from the indirect cost
rate computation.
e. The indirect cost rate will then be
computed in two stages. The first stage
requires the computation of an
Administrative and General rate component.
This is done by applying a ratio of research
direct costs over total direct costs to the
Administrative and General pool developed
under paragraphs H.2.b and 2.c. above. The
resultant amount—that which is allocable to
research—is divided by the direct research
cost base. The second stage requires the
computation of an All Other Indirect Cost
rate component. This is done by applying a
ratio of research direct space over total direct
space to All Other Indirect Cost pool
developed under paragraphs H.2.b. and 2.c.
above. The resultant amount—that which is
allocable to research—is divided by the
direct research cost base.
The total of the two rate components will
be the institution’s indirect cost rate. For the
purposes of this section, the research direct
cost or space and total direct cost or space
will be that cost or space identified with the
functional categories classified under
Expenditures for all other purposes under
paragraph H.2.b.
I. General Standards for Selected Items of
Cost
1. General
This section provides standards to be
applied in establishing the allowability of
certain items involved in determining cost.
These standards should apply irrespective of
whether a particular item of cost is properly
treated as direct cost or indirect cost. Failure
to mention a particular item of cost in the
standards 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 or
standards provided for similar or related
items of cost. In case of discrepancy between
the provisions of a specific research
agreement and the applicable standards
provided, the provisions of the research
agreement should govern. However, in some
cases advance understandings should be
reached on particular cost items in order that
the full costs of research be supported. The
extent of allowability of the selected items of
cost covered in this section has been stated
to apply broadly to many accounting systems
in varying environmental situations. Thus, as
to any given research agreement, the
reasonableness and allocability of certain
items of costs may be difficult to determine,
particularly in connection with hospitals
which have medical school or other
affiliations. In order to avoid possible
subsequent disallowance or dispute based on
unreasonableness or nonallocability, it is
important that prospective recipients of
federal funds, particularly those whose work
is predominantly or substantially with the
Government, seek agreement with the
Government in advance of the incurrence of
special or unusual costs in categories where
reasonableness or allocability are difficult to
determine. Such agreement may also be
initiated by the Government. Any such
agreement should be incorporated in the
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research agreement itself. However, the
absence of such an advance agreement on
any element of cost will not in itself serve to
make that element either allowable or
unallowable. Examples of costs on which
advance agreements may be particularly
important are:
a. Facilities costs, such as;
(1) Depreciation
(2) Rental
(3) Use charges for fully depreciated assets
(4) Idle facilities and idle capacity
(5) Plant reconversion
(6) Extraordinary or deferred maintenance
and repair
(7) Acquisition of automatic data
processing equipment.
b. Pre-award costs
c. Non-hospital professional activities
d. Self-insurance
e. Support services charged directly
(computer services, printing and duplicating
services, etc.)
f. Employee compensation, travel, and
other personnel costs, including:
(1) Compensation for personal service,
including wages and salaries, bonuses and
incentives, premium payments, pay for time
not worked, and supplementary
compensation and benefits, such as pension
and retirement, group insurance, severance
pay plans, and other forms of compensation;
(2) Morale, health, welfare, and food
service and dormitory costs.
(3) Training and education costs.
(4) Relocation costs, including special or
mass personnel movement.
2. Selected Items
a. Advertising costs. The term advertising
costs means the costs of advertising media
and corollary administrative costs.
Advertising media include magazines,
newspapers, radio and television programs,
direct mail, exhibits, and the like. The only
advertising costs allowable are those which
are solely for:
(1) The recruitment of persons required for
the performance by the institution of
obligations arising under the research
agreement, when considered in conjunction
with all other recruitment costs as set forth
in paragraph I.2.hh;
(2) The procurement of scarce items for the
performance of the research agreement; or
(3) The disposal of scrap or surplus
materials acquired in the performance of the
research agreement.
Costs of this nature, if incurred for more
than one research agreement or for both
research agreement work and other work of
the institution, are allowable to the extent
that the principles in paragraphs D. and E.
are observed.
b. Bad debts. Losses arising from
uncollectible accounts and other claims and
related collection and legal costs are
unallowable except that a bad debt may be
included as a direct cost of the research
agreement to the extent that it is caused by
a research patient and approved by the
awarding agency. This inclusion is only
intended to cover the situation of the patient
admitted for research purposes who
subsequently or in conjunction with the
research receives clinical care for which a
charge is made to the patient. If, after
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exhausting all means of collecting these
charges, a bad debt results, it may be
considered an appropriate charge to the
research agreement.
c. Bonding costs.
(1) Bonding costs arise when the
Government requires assurance against
financial loss to itself or others by reason of
the act or default of the hospital. They arise
also in instances where the hospital requires
similar assurance.
Included are such types as bid,
performance, payment, advance payment,
infringement, and fidelity bonds.
(2) Costs of bonding required pursuant to
the terms of the research agreement are
allowable.
(3) Costs of bonding required by the
hospital in the general conduct of its
business 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.
d. Capital expenditures. The costs of
equipment, buildings, and repairs which
materially increase the value or useful life of
buildings or equipment should be capitalized
and are unallowable except as provided for
in the research agreement.
e. Civil defense costs. Civil defense costs
are those incurred in planning for, and the
protection of life and property against the
possible effects of enemy attack. Reasonable
costs of civil defense measures (including
costs in excess of normal plant protection
costs, first-aid training and supplies, firefighting training, posting of additional exit
notices and directions, and other approved
civil defense measures) undertaken on the
institution’s premises pursuant to
suggestions or requirements of civil defense
authorities are allowable when distributed to
all activities of the institution. Capital
expenditures for civil defense purposes will
not be allowed, but a use allowance or
depreciation may be permitted in accordance
with provisions set forth elsewhere. Costs of
local civil defense projects not on the
institution’s premises are unallowable.
f. Communication costs. Costs incurred for
telephone services, local and long distance
telephone calls, telegrams, radiograms,
postage, and the like are allowable.
g. Compensation for personal services.
(1) General
Compensation for personal services covers
all remuneration paid currently or accrued to
employees of the hospital for services
rendered during the period of performance
under government research agreements. Such
remuneration includes salaries, wages, staff
benefits (see paragraph I.2.j.), and pension
plan costs (see paragraph I.2.y.). The costs of
such remuneration are allowable to the
extent that the total compensation to
individual employees is reasonable for the
services rendered and conforms to the
established policy of the institution
consistently applied, and provided that the
charges for work performed directly on
government research agreements and for
other work allocable as indirect costs to
sponsored research are determined and
supported as hereinafter provided. For nonprofit, non-proprietary institutions, where
federally supported programs constitute less
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than a preponderance of the activity at the
institution the primary test of reasonableness
will be to require that the institution’s
compensation policies be applied
consistently both to federally-sponsored and
non-sponsored activities alike. However,
where special circumstances so dictate a
contractual clause may be utilized which
calls for application of the test of
comparability in determining the
reasonableness of compensation.
(2) Payroll Distribution
Amounts charged to organized research for
personal services, regardless of whether
treated as direct costs or allocated as indirect
costs, will be based on hospital payrolls
which have been approved and documented
in accordance with generally accepted
hospital practices. In order to develop
necessary direct and indirect allocations of
cost, supplementary data on time or effort as
provided in paragraph (3) below, normally
need be required only for individuals whose
compensation is properly chargeable to two
or more research agreements or to two or
more of the following broad functional
categories: (i) Patient care; (ii) organized
research; (iii) instruction and training; (iv)
indirect activities as defined in paragraph
E.1.; or (v) other hospital activities as defined
in paragraph B.5.
(3) Reporting Time or Effort
Charges for salaries and wages of
individuals other than members of the
professional staff will be supported by daily
time and attendance and payroll distribution
records. For members of the professional
staff, current and reasonable estimates of the
percentage distribution of their total effort
may be used as support in the absence of
actual time records. The term professional
staff for purposes of this section includes
physicians, research associates, and other
personnel performing work at responsible
levels of activities. These personnel normally
fulfill duties, the competent performance of
which usually requires persons possessing
degrees from accredited institutions of higher
learning and/or state licensure. In order to
qualify as current and reasonable, estimates
must be made no later than one month
(though not necessarily a calendar month)
after the month in which the services were
performed.
(4) Preparation of Estimates of Effort
Where required under paragraph (3) above,
estimates of effort spent by a member of the
professional staff on each research agreement
should be prepared by the individual who
performed the services or by a responsible
individual such as a department head or
supervisor having first-hand knowledge of
the services performed on each research
agreement. Estimates must show the
allocation of effort between organized
research and all other hospital activities in
terms of the percentage of total effort devoted
to each of the broad functional categories
referred to in (2) above. The estimate of effort
spent on a research agreement may include
a reasonable amount of time spent in
activities contributing and intimately related
to work under the agreement, such as
preparing and delivering special lectures
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about specific aspects of the ongoing
research, writing research reports and
articles, participating in appropriate research
seminars, consulting with colleagues with
respect to related research, and attending
appropriate scientific meetings and
conferences. The term ‘‘all other hospital
activities’’ would include departmental
research, administration, committee work,
and public services undertaken on behalf of
the hospital.
(5) Application of Budget Estimates
Estimates determined before the
performance of services, such as budget
estimates on a monthly, quarterly, or yearly
basis do not qualify as estimates of effort
spent.
(6) Non-Hospital Professional Activities
A hospital must not alter or waive hospitalwide policies and practices dealing with the
permissible extent of professional services
over and above those traditionally performed
without extra hospital compensation, unless
such arrangements are specifically
authorized by the sponsoring agency. Where
hospital-wide policies do not adequately
define the permissible extent of
consultantships or other non-hospital
activities undertaken for extra pay, the
Government may require that the effort of
professional staff working under research
agreements be allocated as between (i)
hospital activities, and (ii) non-hospital
professional activities. If the sponsoring
agency should consider the extent of nonhospital professional effort excessive,
appropriate arrangements governing
compensation will be negotiated on a case by
case basis.
(7) Salary Rates for Part-Time Appointments
Charges for work performed on government
research by staff members having only parttime appointments will be determined at a
rate not in excess of that for which he is
regularly paid for his part-time staff
assignment.
h. Contingency provisions.
Contributions to a contingency reserve or
any similar provisions 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.
i. Depreciation and use allowances.
(1) Hospitals may be compensated for the
use of buildings, capital improvements and
usable equipment on hand through
depreciation or use allowances. Depreciation
is a charge to current operations which
distributes the cost of a tangible capital asset,
less estimated residual value, over the
estimated useful life of the asset in a
systematic and logical manner. It does not
involve a process of valuation. Useful life has
reference to the prospective period of
economic usefulness in the particular
hospital’s operations as distinguished from
physical life. Use allowances are the means
of allowing compensation when depreciation
or other equivalent costs are not considered.
(2) Due consideration will be given to
government-furnished research facilities
utilized by the institution when computing
use allowances and/or depreciation if the
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government-furnished research facilities are
material in amount. Computation of the use
allowance and/or depreciation will exclude
both the cost or any portion of the cost of
grounds, buildings and equipment borne by
or donated by the Federal Government,
irrespective of where title was originally
vested or where it presently resides, and
secondly, the cost of grounds. Capital
expenditures for land improvements (paved
areas, fences, streets, sidewalks, utility
conduits, and similar improvements not
already included in the cost of buildings) are
allowable provided the systematic
amortization of such capital expenditures has
been provided in the institution’s books of
accounts, based on reasonable
determinations of the probable useful lives of
the individual items involved, and the share
allocated to organized research is developed
from the amount thus amortized for the base
period involved.
(3) Normal depreciation on a hospital’s
plant, equipment, and other capital facilities,
except as excluded by (4) below, is an
allowable element of research cost provided
that the amount thereof is computed:
i. Upon the property cost basis used by the
hospital for Federal Income Tax purposes
(See section 167 of the Internal Revenue
Code of 1954); or
ii. In the case of non-profit or tax exempt
organizations, upon a property cost basis
which could have been used by the hospital
for Federal Income Tax purposes, had such
hospital been subject to the payment of
income tax; and in either case
iii. By the consistent application to the
assets concerned of any generally accepted
accounting method, and subject to the
limitations of the Internal Revenue Code of
1954 as amended, including—
(a) The straight line method;
(b) The declining balance method, using a
rate not exceeding twice the rate which
would have been used had the annual
allowance been computed under the method
described in (a) above;
(c) The sum of the years-digits method; and
(d) Any other consistent method
productive of an annual allowance which,
when added to all allowances for the period
commencing with the use of the property and
including the current year, does not during
the first two-thirds of the useful life of the
property exceed the total of such allowances
which would have been used had such
allowances been computed under the method
described in (b) above.
(4) Where the depreciation method is
followed, adequate property records must be
maintained. The period of useful service
(service life) established in each case for
usable capital assets must be determined on
a realistic basis which takes into
consideration such factors as type of
construction, nature of the equipment used,
technological developments in the particular
research area, and the renewal and
replacement policies followed for the
individual items or classes of assets involved.
Where the depreciation method is introduced
for application to assets acquired in prior
years, the annual charges therefrom must not
exceed the amounts that would have resulted
had the depreciation method been in effect
from the date of acquisition of such assets.
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(5) Depreciation on idle or excess facilities
shall not be allowed except on such facilities
as are reasonably necessary for standby
purposes.
(6) Where an institution elects to go on a
depreciation basis for a particular class of
assets, no depreciation, rental or use charge
may be allowed on any such assets that
would be viewed as fully depreciated;
provided, however, that reasonable use
charges may be negotiated for any such assets
if warranted after taking into consideration
the cost of the facility or item involved, the
estimated useful life remaining at time of
negotiation, the actual replacement policy
followed in the light of service lives used for
calculating depreciation, the effect of any
increased maintenance charges or decreased
efficiency due to age, and any other factors
pertinent to the utilization of the facility or
item for the purpose contemplated.
(7) Hospitals which choose a depreciation
allowance for assets purchased prior to 1966
based on a percentage of operating costs in
lieu of normal depreciation for purposes of
reimbursement under Pub. L. 89–97
(Medicare) shall utilize that method for
determining depreciation applicable to
organized research.
The operating costs to be used are the
lower of the hospital’s 1965 operating costs
or the hospital’s current year’s allowable
costs. The percent to be applied is 5 percent
starting with the year 1966–67, with such
percentage being uniformity reduced by onehalf percent each succeeding year. The
allowance based on operating costs is in
addition to regular depreciation on assets
acquired after 1965. However, the combined
amount of such allowance on pre-1966 assets
and the allowance for actual depreciation on
assets acquired after 1965 may not exceed 6
percent of the hospital’s allowable cost for
the current year. After total depreciation has
been computed, allocation methods are used
to determine the share attributable to
organized research.
For purposes of this section, Operating
Costs means the total costs incurred by the
hospital in operating the institution, and
includes patient care, research, and other
activities. Allowable Costs means operating
costs less unallowable costs as defined in
these principles; by the application of
allocation methods to the total amount of
such allowable costs, the share attributable to
Federally-sponsored research is determined.
A hospital which elects to use this
procedure under Pub. L. 89–97 and
subsequently changes to an actual
depreciation basis on pre-1966 assets in
accordance with the option afforded under
the Medicare program shall simultaneously
change to an actual depreciation basis for
organized research.
Where the hospital desires to change to
actual depreciation but either has no
historical cost records or has incomplete
records, the determination of historical cost
could be made through appropriate means
involving expert consultation with the
determination being subject to review and
approval by the Department of Health and
Human Services.
(8) Where the use allowance method is
followed, the use allowance for buildings and
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improvements will be computed at an annual
rate not exceeding two percent of acquisition
cost. The use allowance for equipment will
be computed at an annual rate not exceeding
six and two-thirds percent of acquisition cost
of usable equipment in those cases where the
institution maintains current records with
respect to such equipment on hand. Where
the institution’s records reflect only the cost
(actual or estimated) of the original
complement of equipment, the use allowance
will be computed at an annual rate not
exceeding ten percent of such cost. Original
complement for this purpose means the
complement of equipment initially placed in
buildings to perform the functions currently
being performed in such buildings; however,
where a permanent change in the function of
a building takes place, a redetermination of
the original complement of equipment may
be made at that time to establish a new
original complement. In those cases where no
equipment records are maintained, the
institution will justify a reasonable estimate
of the acquisition cost of usable equipment
which may be used to compute the use
allowance at an annual rate not exceeding six
and two-thirds percent of such estimate.
(9) Depreciation and/or use charges should
usually be allocated to research and other
activities as an indirect cost.
j. Employee morale, health, and welfare
costs and credits.
The costs of house publications, health or
first-aid benefits, recreational activities,
employees’ counseling services, and other
expenses incurred in accordance with the
hospital’s established practice or custom for
the improvement of working conditions,
employer-employee relations, employee
morale, and employee performance, are
allowable. Such costs will be equitably
apportioned to all activities of the hospital.
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.
k. Entertainment costs.
Except as pertains to j. above, costs
incurred for amusement, social activities,
entertainment, and any items relating thereto,
such as meals, lodging, rentals,
transportation, and gratuities are
unallowable.
l. Equipment and other facilities.
The cost of equipment or other facilities
are allowable on a direct charge basis where
such purchases are approved by the
sponsoring agency concerned or provided for
by the terms of the research agreement.
m. Fines and penalties.
Costs resulting from violations of, or failure
of the institution to comply with federal,
state and local laws and regulations are
unallowable except when incurred as a result
of compliance with specific provisions of the
research agreement, or instructions in writing
from the awarding agency.
n. Insurance and indemnification.
(1) Costs of insurance required or approved
and maintained pursuant to the research
agreement are allowable.
(2) Costs of other insurance maintained by
the hospital in connection with the general
conduct of its activities are allowable subject
to the following limitations: (i) Types and
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extent and cost of coverage must be in
accordance with sound institutional practice;
(ii) costs of insurance or of any contributions
to any reserve covering the risk of loss of or
damage to government owned property are
unallowable except to the extent that the
Government has specifically required or
approved such costs; and (iii) 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.
(3) Contributions to a reserve for an
approved 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.
Such contributions are subject to prior
approval of the Government.
(4) Actual losses which could have been
covered by permissible insurance (through an
approved self-insurance program or
otherwise) are unallowable unless expressly
provided for in the research agreement,
except that costs incurred because of losses
not covered under nominal deductible
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.
o. Interest, fund raising and investment
management costs.
(1) Costs incurred for interest on borrowed
capital or temporary use of endowment
funds, however represented, are unallowable.
(2) 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 not
allowable.
(3) Costs of investment counsel and staff
and similar expenses incurred solely to
enhance income from investments are not
allowable.
(4) Costs related to the physical custody
and control of monies and securities are
allowable.
p. Labor relations costs.
Costs incurred in maintaining satisfactory
relations between the hospital and its
employees, including costs of labor
management committees, employees’
publications, and other related activities are
allowable.
q. Losses on research agreements or
contracts.
Any excess of costs over income under any
agreement or contract of any nature is
unallowable. This includes, but is not limited
to, the hospital’s contributed portion by
reason of cost-sharing agreements, underrecoveries through negotiation of flat
amounts for overhead, or legal or
administrative limitations.
r. Maintenance and repair costs.
(1) Costs necessary for the upkeep of
property (including government 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 to be treated as
follows:
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i. Normal maintenance and repair costs are
allowable;
ii. Extraordinary maintenance and repair
costs are allowable, provided they are
allocated to the periods to which applicable
for purposes of determining research costs.
(2) Expenditures for plant and equipment,
including rehabilitation thereof, which
according to generally accepted accounting
principles as applied under the hospital’s
established policy, should be capitalized and
subjected to depreciation, are allowable only
on a depreciation basis.
s. Material costs.
Costs incurred for purchased materials,
supplies and fabricated parts directly or
indirectly related to the research agreement,
are allowable. Purchases made specifically
for the research agreement should be charged
thereto at their actual prices after deducting
all cash discounts, trade discounts, rebates,
and allowances received by the institution.
Withdrawals from general stores or
stockrooms should be charged at their cost
under any recognized method of pricing
stores withdrawals conforming to sound
accounting practices consistently followed by
the hospital. Incoming transportation charges
are a proper part of material cost. Direct
material cost should include only the
materials and supplies actually used for the
performance of the research agreement, and
due credit should be given for any excess
materials retained or returned to vendors.
Due credit should be given for all proceeds
or value received for any scrap resulting from
work under the research agreement. Where
government donated or furnished material is
used in performing the research agreement,
such material will be used without charge.
t. Memberships, subscriptions and
professional activity costs.
(1) Costs of the hospital’s membership in
civic, business, technical and professional
organizations are allowable.
(2) Costs of the hospital’s subscriptions to
civic, business, professional and technical
periodicals are allowable.
(3) Costs of meetings and conferences,
when the primary purpose is the
dissemination of technical information, are
allowable. This includes costs of meals,
transportation, rental of facilities, and other
items incidental to such meetings or
conferences.
u. Organization costs.
Expenditures such as incorporation fees,
attorneys’ fees, accountants’ fees, brokers’
fees, fees to promoters and organizers in
connection with (1) organization or
reorganization of a hospital, or (2) raising
capital, are unallowable.
v. Other business expenses.
Included in this item are such recurring
expenses as registry and transfer charges
resulting from changes in ownership of
securities issued by the hospital, cost of
shareholders meetings preparation and
publication of reports to shareholders,
preparation and submission of required
reports and forms to taxing and other
regulatory bodies, and incidental costs of
directors and committee meetings. The above
and similar costs are allowable when
allocated on an equitable basis.
w. Patient care.
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The cost of routine and ancillary or special
services to research patients is an allowable
direct cost of research agreements.
(1) Routine services shall include the costs
of the regular room, dietary and nursing
services, minor medical and surgical supplies
and the use of equipment and facilities for
which a separate charge is not customarily
made.
(2) Ancillary or special services are the
services for which charges are customarily
made in addition to routine services, such as
operating rooms, anesthesia, laboratory,
BMR–EKG, etc.
(3) Patient care, whether expressed as a
rate or an amount, shall be computed in a
manner consistent with the procedures used
to determine reimbursable costs under Pub.
L. 89–97 (Medicare Program) as defined
under the ‘‘Principles of Reimbursement For
Provider Costs’’ published by the Social
Security Administration of the Department of
Health and Human Services. The allowability
of specific categories of cost shall be in
accordance with those principles rather than
the principles for research contained herein.
In the absence of participation in the
Medicare program by a hospital, all
references to the Medicare program in these
principles shall be construed as meaning the
Medicaid program.
i. Once costs have been recognized as
allowable, the indirect costs or general
service center’s cost shall be allocated
(stepped-down) to special service centers,
and all patient and nonpatient costs centers
based upon actual services received or
benefiting these centers.
ii. After allocation, routine and ancillary
costs shall be apportioned to scatter-bed
research patients on the same basis as is used
to apportion costs to Medicare patients, i.e.
using either the departmental method or the
combination method, as those methods are
defined by the Social Security
Administration; except that final settlement
shall be on a grant-by-grant basis. However,
to the extent that the Social Security
Administration has recognized any other
method of cost apportionment, that method
generally shall also be recognized as
applicable to the determination of research
patient care costs.
iii. A cost center must be established on
Medicare reimbursement forms for each
discrete-bed unit grant award received by a
hospital. Routine costs should be steppeddown to this line item(s) in the normal
course of stepping-down costs under
Medicare/Medicaid requirements. However,
in stepping-down routine costs,
consideration must be given to preventing a
step-down of those costs to discrete-bed unit
line items that have already been paid for
directly by the grant, such as bedside nursing
costs. Ancillary costs allocable to research
discrete-bed units shall be determined and
proposed in accordance with paragraph
w.(3).ii.
(4) Where federally sponsored research
programs provide specifically for the direct
reimbursement of nursing, dietary, and other
services, appropriate adjustment must be
made to patient care costs to preclude
duplication and/or misallocation of costs.
x. Patent costs.
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Costs of preparing disclosures, reports and
other documents required by the research
agreement and of searching the art to the
extent necessary to make such invention
disclosures are allowable. In accordance with
the clauses of the research agreement relating
to patents, costs of preparing documents and
any other patent costs, in connection with
the filing of a patent application where title
is conveyed to the Government, are
allowable. (See also paragraph I.2.jj.)
y. Pension plan costs.
Costs of the hospital’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 and the methods of
cost allocation are not discriminatory, and
provided appropriate adjustments are made
for credits or gains arising out of normal and
abnormal employee turnover or any other
contingencies that can result in forfeitures by
employees which inure to the benefit of the
hospital.
z. Plan security costs.
Necessary expenses incurred to comply
with government security requirements
including wages, uniforms and equipment of
personnel engaged in plant protection are
allowable.
aa. Pre-research agreement costs.
Costs incurred prior to the effective date of
the research agreement, whether or not they
would have been allowable thereunder if
incurred after such date, are unallowable
unless specifically set forth and identified in
the research agreement.
bb. Professional services costs.
(1) Costs of professional services rendered
by the members of a particular profession
who are not employees of the hospital are
allowable subject to (2) and (3) below when
reasonable in relation to the services
rendered and when not contingent upon
recovery of the costs from the Government.
Retainer fees to be allowable must be
reasonably supported by evidence of services
rendered.
(2) Factors to be considered in determining
the allowability of costs in a particular case
include (i) the past pattern of such costs,
particularly in the years prior to the award
of government research agreements on the
institution’s total activity; (ii) the nature and
scope of managerial services expected of the
institution’s own organizations; and (iii)
whether the proportion of government work
to the hospital’s total activity 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
government research agreements.
(3) Costs of legal, accounting and
consulting services, and related costs
incurred in connection with organization and
reorganization or the prosecution of claims
against the Government are unallowable.
Costs of legal, accounting and consulting
services, and related costs incurred in
connection with patent infringement
litigation are unallowable unless otherwise
provided for in the research agreement.
cc. Profits and losses on disposition of
plant equipment, or other assets.
Profits or losses of any nature arising from
the sale or exchange of plant, equipment, or
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other capital assets, including sales or
exchange of either short- or long-term
investments, shall be excluded in computing
research agreement costs.
dd. Proposal costs.
Proposal costs are the costs of preparing
bids or proposals on potential government
and non-government research agreements or
projects, including the development of
technical data and cost 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 indirect costs and allocated
currently to all activities of the institution,
and no proposal costs of past accounting
periods will be allocable in the current
period to the government research agreement.
However, the institution’s established
practices may be to treat proposal costs by
some other recognized method. Regardless of
the methods used, the results obtained may
be accepted only if found to be reasonable
and equitable.
ee. Public information services costs.
Costs of news releases pertaining to
specific research or scientific
accomplishment are unallowable unless
specifically authorized by the sponsoring
agency.
ff. Rearrangement and alteration costs.
Costs incurred for ordinary or normal
rearrangement and alteration of facilities are
allowable. Special rearrangement and
alteration costs incurred specifically for a
project are allowable only as a direct charge
when such work has been approved in
advance by the sponsoring agency concerned.
gg. 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
government research agreement work, fair
wear and tear excepted, are allowable.
hh. Recruiting costs.
(1) Subject to (2), (3), and (4) below, 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 an institution
uses employment agencies, costs not in
excess of standard commercial rates for such
services are allowable.
(2) 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.
(3) Costs of help wanted advertising,
special emoluments; fringe benefits, and
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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.
(4) Where relocation costs incurred
incident to recruitment of a new employee
have been allowed either as an allocable
direct or indirect cost, and the newly hired
employee resigns for reasons within his
control within twelve months after hire, the
institution will be required to refund or
credit such relocations costs as were charged
to the Government.
ii. Rental costs (including sale and leaseback of facilities).
(1) Rental costs of land, building, and
equipment and other personal property are
allowable if the rates are reasonable in light
of such factors as rental costs of comparable
facilities and market conditions in the area,
the type, life expectancy, condition, and
value of the facilities leased, options
available, and other provisions of the rental
agreement. Application of these factors, in
situations where rentals are extensively used,
may involve among other considerations
comparison of rental costs with the amount
which the hospital would have received had
it owned the facilities.
(2) Charges in the nature of rent between
organizations having a legal or other
affiliation or arrangement such as hospitals,
medical schools, foundations, etc., are
allowable to the extent such charges do not
exceed the normal costs of ownership such
as depreciation, taxes, insurance, and
maintenance, provided that no part of such
costs shall duplicate any other allowed costs.
(3) Unless otherwise specifically provided
in the agreement, rental costs specified in
sale and lease-back agreements incurred by
hospitals through selling plant facilities to
investment organizations such as insurance
companies or to private investors, and
concurrently leasing back the same facilities
are allowable only to the extent that such
rentals do not exceed the amount which the
hospital would have received had it retained
legal title to the facilities.
jj. Royalties and other costs for use of
patents.
Royalties on a patent or amortization of the
cost of acquiring a patent or invention or
rights thereto necessary for the proper
performance of the research agreement and
applicable to tasks or processes thereunder
are allowable unless the Government has a
license or the right to free use of the patent,
the patent has been adjudicated to be invalid,
or has been administratively determined to
be invalid, the patent is considered to be
unenforceable, or the patent has expired.
kk. Severance pay.
(1) Severance pay is compensation in
addition to regular salaries and wages which
is paid by a hospital 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.
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(2) Severance payments that are due to
normal, recurring turnover, and which
otherwise meet the conditions of (a) above
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 Government recognizes its obligation to
participate to the extent of its fair share in
any specific payment.
ll. Specialized service facilities operated by
a hospital.
(1) The costs of institutional services
involving the use of highly complex and
specialized facilities such as electronic
computers and reactors are allowable
provided the charges therefor meet the
conditions of (2) or (3) below, and otherwise
take into account any items of income or
federal financing that qualify as applicable
credits under paragraph C.5.
(2) The costs of such hospital services
normally will be charged directly to
applicable research agreements based on
actual usage or occupancy of the facilities at
rates that (i) are designed to recover only
actual costs of providing such services, and
(ii) are applied on a nondiscriminatory basis
as between organized research and other
work of the hospital including commercial or
accommodation sales and usage by the
hospital for internal purposes. This would
include use of such facilities as radiology,
laboratories, maintenance men used for a
special purpose, medical art, photography,
etc.
(3) In the absence of an acceptable
arrangement for direct costing as provided in
(2) above, the costs incurred for such
institutional services may be assigned to
research agreements as indirect costs,
provided the methods used achieve
substantially the same results. Such
arrangements should be worked out in
coordination with all government users of the
facilities in order to assure equitable
distribution of the indirect costs.
mm. Special administrative costs.
Costs incurred for general public relations
activities, catalogs, alumni activities, and
similar services are unallowable.
nn. Staff and/or employee benefits.
(1) Staff and/or employee 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
absorbed by all hospital activities including
organized research in proportion to the
relative amount of time or effort actually
devoted to each.
(2) Staff benefits in the form of employer
contributions or expenses for Social Security
taxes, employee insurance, Workmen’s
Compensation insurance, the Pension Plan
(see paragraph I.2.y.), hospital costs or
remission of hospital charges to the extent of
costs for individual employees or their
families, and the like are allowable provided
such benefits are granted in accordance with
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established hospital policies, and provided
such contributions and other expenses
whether treated as indirect costs or an
increment of direct labor costs are distributed
to particular research agreements and other
activities in a manner consistent with the
pattern of benefits accruing to the individuals
or groups of employees whose salaries and
wages are chargeable to such research
agreements and other activities.
oo. Taxes.
(1) In general, taxes which the hospital is
required to pay and which are paid or
accrued in accordance with generally
accepted accounting principles, and
payments made to local governments in lieu
of taxes which are commensurate with the
local government services received are
allowable except for (i) taxes from which
exemptions are available to the hospital
directly or which are available to the hospital
based on an exemption afforded the
Government and in the latter case when the
sponsoring agency makes available the
necessary exemption certificates, (ii) special
assessments on land which represent capital
improvements, and (iii) Federal Income
Taxes.
(2) Any refund of taxes, interest, or
penalties, and any payment to the hospital of
interest thereon attributable to taxes, interest
or penalties, which were allowed as research
agreement costs will be credited or paid to
the Government in the manner directed by
the Government provided any interest
actually paid or credited to a hospital
incident to a refund of tax, interest, and
penalty will be paid or credited to the
Government only to the extent that such
interest accrued over the period during
which the hospital had been reimbursed by
the Government for the taxes, interest, and
penalties.
pp. Transportation costs.
Costs incurred for inbound 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
material received cannot readily be made,
inbound transportation costs may be charged
to the appropriate indirect cost accounts if
the institution follows a consistent equitable
procedure in this respect. Outbound freight,
if reimbursable under the terms of the
research agreement, should be treated as a
direct cost.
qq. Travel costs.
(1) 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
hospital. Such costs may be charged on an
actual 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 by the institution in its regular
operations.
(2) Travel costs are allowable subject to (3)
and (4) below when they are directly
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attributable to specific work under a research
agreement or when they are incurred in the
normal course of administration of the
hospital or a department or research program
thereof.
(3) The difference in cost between first
class air accommodations and less than first
class air accommodations is unallowable
except when less than first class air
accommodations are not reasonably available
to meet necessary mission requirements such
as where less than first class
accommodations would (i) require circuitous
routing, (ii) require travel during
unreasonable hours, (iii) greatly increase the
duration of the flight, (iv) result in additional
costs which would offset the transportation
savings, or (v) offer accommodations which
are not reasonably adequate for the medical
needs of the traveler.
(4) Costs of personnel movements of a
special or mass nature are allowable only
when authorized or approved in writing by
the sponsoring agency or its authorized
representative.
rr. Termination costs applicable to
contracts.
(1) Contract terminations generally give
rise to the incurrence of costs or to the need
for special treatment of costs which would
not have arisen had the contract not been
terminated. Items peculiar to termination are
set forth below. They are to be used in
conjunction with all other provisions of these
principles in the case of contract termination.
(2) The cost of common items of material
reasonably usable on the hospital’s other
work will not be allowable unless the
hospital submits evidence that it could not
retain such items at cost without sustaining
a loss. In deciding whether such items are
reasonably usable on other work of the
institution, consideration should be given to
the hospital’s plans for current scheduled
work or activities including other research
agreements. Contemporaneous purchases of
common items by the hospital will be
regarded as evidence that such items are
reasonably usable on the hospital’s other
work. Any acceptance of common items as
allowable to the terminated portion of the
contract should 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 requirement of other
work.
(3) If in a particular case, despite all
reasonable efforts by the hospital, certain
costs cannot be discontinued immediately
after the effective date of termination, such
costs are generally allowable within the
limitations set forth in these principles,
except that any such costs continuing after
termination due to the negligent or willful
failure of the hospital to discontinue such
costs will be considered unacceptable.
(4) Loss of useful value of special tooling
and special machinery and equipment is
generally allowable, provided (i) such special
tooling, machinery or equipment is not
reasonably capable of use in the other work
of the hospital; (ii) the interest of the
Government is protected by transfer of title
or by other means deemed appropriate by the
contracting officer; and (iii) the loss of useful
value as to any one terminated contract is
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75981
limited to that portion of the acquisition cost
which bears the same ratio to the total
acquisition cost as the terminated portion of
the contract bears to the entire terminated
contract and other government contracts for
which the special tooling, special machinery
or equipment was acquired.
(5) Rental costs under unexpired leases are
generally allowable where clearly shown to
have been reasonably necessary for the
performance of the terminated contract, less
the residual value of such leases, if (i) the
amount of such rental claimed does not
exceed the reasonable use value of the
property leased for the period of the contract
and such further period as may be
reasonable; and (ii) the hospital 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 contract and of reasonable
restoration required by the provisions of the
lease.
(6) Settlement expenses including the
following are generally allowable: (i)
Accounting, legal, clerical, and similar costs
reasonably necessary for the preparation and
presentation to contracting officers of
settlement claims and supporting data with
respect to the terminated portion of the
contract and the termination and settlement
of subcontracts; and (ii) reasonable costs for
the storage, transportation, protection, and
disposition of property provided by the
Government or acquired or produced by the
institution for the contract.
(7) Subcontractor claims including the
allocable portion of claims which are
common to the contract and to other work of
the contractor are generally allowable.
ss. Voluntary services.
The value of voluntary services provided
by sisters or other members of religious
orders is allowable provided that amounts do
not exceed that paid other employees for
similar work. Such amounts must be
identifiable in the records of the hospital as
a legal obligation of the hospital. This may
be reflected by an agreement between the
religious order and the hospital supported by
evidence of payments to the order.
Appendix X to Part 75—Data Collection
Form (SF–SAC)
The Data Collection Form SF–SAC is
available on the FAC Web site https://
harvester.census.gov/facweb/Default.aspx.
Appendix XI to Part 75—Compliance
Supplement
The compliance supplement is available on
the OMB Web site: (https://
www.whitehouse.gov/omb/circulars/)
PART 92 [REMOVED AND RESERVED]
■
4. Remove and reserve 45 CFR part 92.
Ellen Murray,
Assistant Secretary for Financial Resources.
Department of Agriculture
For the reasons stated in the common
preamble, under the authority of 5
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U.S.C. 301, 7 CFR 2.28(a)(13)(iii), and
the authorities listed below, USDA adds
Parts 400, 415, 416, 418 and 422 to Title
2 of the CFR and removes Parts 3015,
3016, 3018, 3019, 3022 and 3052 from
Title 7 of the CFR as follows:
TITLE 2—GRANTS AND
AGREEMENTS
CHAPTER IV—DEPARTMENT OF
AGRICULTURE
1. Title 2 of the Code of Federal
Regulations is amended by adding Part
400 to read as follows:
■
PART 400—UNIFORM
ADMINISTRATIVE REQUIREMENTS,
COST PRINCIPLES, AND AUDIT
REQUIREMENTS FOR FEDERAL
AWARDS
400.1
400.2
What does this part do?
Conflict of interest.
Authority: 31 U.S.C. 503.
PART 400—UNIFORM
ADMINISTRATIVE REQUIREMENTS,
COST PRINCIPLES, AND AUDIT
REQUIREMENTS FOR FEDERAL
AWARDS
§ 400.1
PART 415—GENERAL PROGRAM
ADMINISTRATIVE REGULATIONS
What does this part do?
This part adopts the OMB guidance in
subparts A through F of 2 CFR part 200,
as supplemented by this part, as USDA
policies and procedures for uniform
administrative requirements, cost
principles, and audit requirements for
Federal awards. It thereby gives
regulatory effect for the USDA to the
OMB guidance, as supplemented by this
part.
tkelley on DSK3SPTVN1PROD with RULES2
§ 400.2
Conflict of interest.
(a) Each USDA awarding agency must
establish conflict of interest policies for
its Federal awards.
(b) Non-Federal entities must disclose
in writing any potential conflicts of
interest to the USDA awarding agency
or pass-through entity.
(1) The non-Federal entity must
maintain written standards of conduct
covering conflicts of interest and
governing the performance of its
employees in the selection, award and
administration of Federal awards. No
employee, officer or agent may
participate in the selection, award, or
administration of a Federal award if he
or she has a real or apparent conflict of
interest. Such a conflict of interest
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 or a tangible personal benefit
from a non-Federal entity considered for
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a Federal award. The non-Federal entity
may set standards for situations in
which the financial interest is not
substantial or the gift is an unsolicited
item of nominal value. The standards of
conduct must provide for disciplinary
actions to be applied for violations of
such standards by officers, employees,
or agents of the non-Federal entity.
(2) If the non-Federal entity has a
parent, affiliate, or subsidiary
organization that is not a state, local
government, or Indian tribe, the nonFederal entity must also maintain
written standards of conduct covering
organizational conflicts of interest.
Organizational conflicts of interest
means that because of the relationships
with a parent company, affiliate, or
subsidiary organization, is unable or
appears to be unable to be impartial in
conducting a Federal award action
involving a related organization.
■ 2. Title 2 of the Code of Federal
Regulations is amended by adding Part
415 to read as follows:
Subpart A—Application for Federal
Assistance
Sec.
415.1 Competition in the awarding of
discretionary grants and cooperative
agreements.
Subpart B—Miscellaneous
415.2 Acknowledgement of Support on
Publications and Audiovisuals.
Subpart C—Intergovernmental Review of
Department of Agriculture Programs and
Activities
415.3
415.4
415.5
Purpose.
Definitions.
Applicability.
415.6
Secretary’s general responsibilities.
415.7 Federal interagency coordination.
415.8 State selection of programs and
activities.
415.9 Communication with State and local
elected officials.
415.10 State comments on proposed
Federal financial assistance and direct
Federal development.
415.11 Processing comments.
415.12 Accommodation of
intergovernmental concerns.
415.13 Interstate situations.
415.14 Simplification, consolidation, or
substitution of State plans.
415.15 Waivers.
Authority: 5 U.S.C. 301.
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Subpart A—Application for Federal
Assistance
§ 415.1 Competition in the awarding of
discretionary grants and cooperative
agreements.
(a) Standards for competition. Except
as provided in paragraph (d) of this
section, awarding agencies shall enter
into discretionary grants and
cooperative agreements only after
competition. An awarding agency’s
competitive award process shall adhere
to the following standards:
(1) Potential applicants must be
invited to submit proposals through
publications such as the Federal
Register, OMB-designated
governmentwide Web site as described
in 2 CFR 200.203, professional trade
journals, agency or program handbooks,
the Catalog of Federal Domestic
Assistance, or any other appropriate
means of solicitation. In so doing,
awarding agencies should consider the
broadest dissemination of project
solicitations in order to reach the
highest number of potential applicants.
(2) Proposals are to be evaluated
objectively by independent reviewers in
accordance with written criteria set
forth by the awarding agency. Reviewers
should make written comments, as
appropriate, on each application.
Independent reviewers may be from the
private sector, another agency, or within
the awarding agency, as long as they do
not include anyone who has approval
authority for the applications being
reviewed or anyone who might appear
to have a conflict of interest in the role
of reviewer of applications. A conflict of
interest might arise when the reviewer
or the reviewer’s immediate family
members have been associated with the
applicant or applicant organization
within the past two years as an owner,
partner, officer, director, employee, or
consultant; has any financial interest in
the applicant or applicant organization;
or is negotiating for, or has any
arrangement, concerning prospective
employment.
(3) An unsolicited application, which
is not unique and innovative, shall be
competed under the project solicitation
it comes closest to fitting. Awarding
agency officials will determine the
solicitation under which the application
is to be evaluated. When the awarding
agency official decides that the
unsolicited application does not fall
under a recent, current, or planned
solicitation, a noncompetitive award
may be made, if appropriate to do so
under the criteria of this section.
Otherwise, the application should be
returned to the applicant.
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(b) Project solicitations. A project
solicitation by the awarding agency
shall include or reference the following,
as appropriate:
(1) A description of the eligible
activities which the awarding agency
proposes to support and the program
priorities;
(2) Eligible applicants;
(3) The dates and amounts of funds
expected to be available for awards;
(4) Evaluation criteria and weights, if
appropriate, assigned to each;
(5) Methods for evaluating and
ranking applications;
(6) Name and address where
proposals should be mailed or emailed
and submission deadline(s);
(7) Any required forms and how to
obtain them;
(8) Applicable cost principles and
administrative requirements;
(9) Type of funding instrument
intended to be used (grant or
cooperative agreement); and
(10) The Catalog of Federal Domestic
Assistance number and title.
(c) Approval of applications. The final
decision to award is at the discretion of
the awarding/approving official in each
agency. The awarding/approving official
shall consider the ranking, comments,
and recommendations from the
independent review group, and any
other pertinent information before
deciding which applications to approve
and their order of approval. Any appeals
by applicants regarding the award
decision shall be handled by the
awarding agency using existing agency
appeal procedures or good
administrative practice and sound
business judgment.
(d) Exceptions. The awarding/
approving official may make a
determination in writing that
competition is not deemed appropriate
for a particular transaction. Such
determination shall be limited to
transactions where it can be adequately
justified that a noncompetitive award is
in the best interest of the Government
and necessary to the accomplishment of
the goals of the program. Reasons for
considering noncompetitive awards may
include, but are not necessarily limited
to, the following:
(1) Nonmonetary awards of property
or services;
(2) Awards of less than $75,000;
(3) Awards to fund continuing work
already started under a previous award;
(4) Awards which cannot be delayed
due to an emergency or a substantial
danger to health or safety;
(5) Awards when it is impracticable to
secure competition; or
(6) Awards to fund unique and
innovative unsolicited applications.
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Subpart B—Miscellaneous
§ 415.2 Acknowledgement of USDA
Support on Publications and Audiovisuals.
(a) Definitions.
(1) ‘‘Audiovisual’’ means a product
containing visual imagery or sound or
both. Examples of audiovisuals are
motion pictures, live or prerecorded
radio or television programs, slide
shows, filmstrips, audio recordings, and
multimedia presentations.
(2) ‘‘Production of an audiovisual’’
means any of the steps that lead to a
finished audiovisual, including design,
layout, script-writing, filming, editing,
fabrication, sound recording or taping.
The term does not include the placing
of captions for the hearing impaired on
films or videotapes not originally
produced for use with the hearing
impaired.
(3) ‘‘Publication’’ means a published
book, periodical, pamphlet, brochure,
flier, or similar item. It does not include
any audiovisuals.
(b) Publications. Recipients shall have
an acknowledgement of USDA awarding
agency support placed on any
publications written or published with
grant support and, if feasible, on any
publication reporting the results of, or
describing, a grant-supported activity.
(c) Audiovisuals. Recipients shall
have an acknowledgement of USDA
awarding agency support placed on any
audiovisual which is produced with
grant support and which has a direct
production cost to the recipient of over
$5,000. Unless the other provisions of
the grant award make it apply, this
requirement does not apply to:
(1) Audiovisuals produced as research
instruments or for documenting
experimentation or findings and not
intended for presentation or distribution
to the general public.
(2) [Reserved]
(d) Waivers. USDA awarding agencies
may waive any requirement of this
section.
Subpart C—Intergovernmental Review
of Department of Agriculture Programs
and Activities
§ 415.3
Purpose.
(a) The regulations in this part
implement Executive Order 12372,
‘‘Intergovernmental Review of Federal
Programs’’, issued July 14, 1982, and
amended on April 8, 1983. These
regulations also implement applicable
provisions of section 401 of the
Intergovernmental Cooperation Act of
1968 and section 204 of the
Demonstration Cities and Metropolitan
Development Act of 1966.
(b) These regulations are intended to
foster an intergovernmental partnership
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and a strengthened Federalism by
relying on State processes and on State,
areawide, regional and local
coordination for review of proposed
Federal financial assistance and direct
Federal development.
(c) The regulations are intended to aid
the internal management of the
Department, and are not intended to
create any right or benefit enforceable at
law by a party against the Department
or its officers.
§ 415.4
Definitions.
As used in this part, the following
definitions apply:
Department means the U.S.
Department of Agriculture.
Order means Executive Order 12372,
issued July 14, 1982, and amended
April 8, 1983, and titled
Intergovernmental Review of Federal
Programs.
Secretary means the Secretary of the
U.S. Department of Agriculture or an
official or employee of the Department
acting for the Secretary under a
delegation of authority.
State means any of the 50 states, the
District of Columbia, the
Commonwealth of Puerto Rico, the
Commonwealth of the Northern Mariana
Islands, Guam, American Samoa, and
the U.S. Virgin Islands.
§ 415.5
Applicability.
The Secretary publishes in the
Federal Register a list of the
Department’s programs and activities
that are subject to these regulations and
identifies which of these are subject to
the requirements of section 204 of the
Demonstration Cities and Metropolitan
Development Act.
§ 415.6 Secretary’s general
responsibilities.
(a) The Secretary provides
opportunities for consultation by
elected officials of those State and local
governments that would provide the
non-Federal funds for, or that would be
directly affected by, proposed Federal
financial assistance from, or direct
Federal development by, the
Department.
(b) If a State adopts a process under
the Order to review and coordinate
proposed Federal financial assistance
and direct Federal development, the
Secretary, to the extent permitted by
law:
(1) Uses the State process to
determine official views of State and
local elected officials;
(2) Communicates with State and
local elected officials as early in a
program planning cycle as is reasonably
feasible to explain specific plans and
actions;
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(3) Makes efforts to accommodate
State and local elected officials’
concerns with proposed Federal
financial assistance and direct Federal
development that are communicated
through the State process;
(4) Allows the States to simplify and
consolidate existing Federally required
State plan submissions;
(5) Where State planning and
budgeting systems are sufficient and
where permitted by law, encourages the
substitution of State plans for Federally
required State plans;
(6) Seeks the coordination of views of
affected State and local elected officials
in one State with those of another State
when proposed Federal financial
assistance or direct Federal
development has an impact on interstate
metropolitan urban centers or other
interstate areas; and
(7) Supports State and local
governments by discouraging the
reauthorization or creation of any
planning organization which is
Federally-funded, which has a limited
purpose, and which is not adequately
representative of, or accountable to,
State or local elected officials.
§ 415.7
Federal interagency coordination.
The Secretary, to the extent
practicable, consults with and seeks
advice from all other substantially
affected Federal departments and
agencies in an effort to assure full
coordination between such agencies and
the Department regarding programs and
activities covered under these
regulations.
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§ 415.8 State selection of programs and
activities.
(a) A State may select any program or
activity published in the Federal
Register in accordance with § 415.5 for
intergovernmental review under these
regulations. Each State, before selecting
programs and activities, shall consult
with local elected officials.
(b) Each State that adopts a process
shall notify the secretary of the
Department’s programs and activities
selected for that process.
(c) A State may notify the Secretary of
changes in its selections at any time. For
each change, the State shall submit to
the Secretary an assurance that the State
has consulted with elected local
officials regarding the change. The
Department may establish deadlines by
which States are required to inform the
Secretary of changes in their program
selections.
(d) The Secretary uses a State’s
process as soon as feasible, depending
on individual programs and activities,
after the Secretary is notified of its
selections.
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§ 415.9 Communication with State and
local elected officials.
(a) The Secretary provides notice to
directly affected State, areawide,
regional, and local entities in a State of
proposed Federal financial assistance or
direct Federal development if:
(1) The State has not adopted a
process under the Order; or
(2) The assistance or development
involves a program or an activity that is
not covered under the State process.
(b) This notice may be made by
publication in the Federal Register or
other appropriate means, which the
Department in its discretion deems
appropriate.
(c) In order to facilitate
communication with State and local
officials the Secretary has established an
office within the Department to receive
all communications pertinent to this
Order. All communications should be
sent to the Office of the Chief Financial
Officer, Room 143–W, 1400
Independence Avenue SW.,
Washington, DC 20250, Attention: E.O.
12372.
§ 415.10 State comments on proposed
Federal financial assistance and direct
Federal development.
(a) Except in unusual circumstances,
the Secretary gives State processes or
directly affected State, areawide,
regional, and local officials and entities:
(1) At least 30 days from the date
established by the Secretary to comment
on proposed Federal financial assistance
in the form of noncompeting
continuation awards; and
(2) At least 60 days from the date
established by the Secretary to comment
on proposed direct Federal development
or Federal financial assistance other
than noncompeting continuation
awards.
(b) This section also applies to
comments in cases in which the review,
coordination and communication with
the Department have been delegated.
(c) Applicants for programs and
activities subject to section 204 of the
Demonstration Cities and Metropolitan
Development Act shall allow areawide
agencies a 60-day opportunity for
review and comment.
§ 415.11
Processing comments.
(a) The Secretary follows the
procedures in § 415.12 if:
(1) A State office or official is
designated to act as a single point of
contact between a State process and all
Federal agencies; and
(2) That office or official transmits a
State process recommendation for a
program selected under § 415.8.
(b)(1) The single point of contact is
not obligated to transmit comments
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from State, areawide, regional or local
officials and entities where there is no
State process recommendation.
(2) If a State process recommendation
is transmitted by a single point of
contact, all comments from State,
areawide, regional and local officials
and entities that differ from it must also
be transmitted.
(c) If a State has not established a
process, or is unable to submit a State
process recommendation, State,
areawide, regional and local officials
and entities may submit comments
either to the applicant or to the
Department.
(d) If a program or activity is not
selected by a State process, State,
areawide, regional and local officials
and entities may submit comments
either to the applicant or to the
Department. In addition, if a State
process recommendation for a nonselected program or activity is
transmitted to the Department by the
single point of contact, the Secretary
follows the procedures of § 415.12.
(e) The Secretary considers comments
which do not constitute a State process
recommendation submitted under these
regulations and for which the Secretary
is not required to apply the procedures
of § 415.12, when such comments are
provided by a single point of contact by
the applicant, or directly to the
Department by a commenting party.
§ 415.12 Accommodation of
intergovernmental concerns.
(a) If a State process provides a State
process recommendation to the
Department through its single point of
contact, the Secretary either—
(1) Accepts the recommendations;
(2) Reaches a mutually agreeable
solution with the State process; or
(3) Provides the single point of
contact with a written explanation of
the decision, as the Secretary in his or
her discretion deems appropriate. The
Secretary may also supplement the
written explanation by also providing
the explanation to the single point of
contact by telephone, other
telecommunication, or other means.
(b) In any explanation under
paragraph (a)(3) of this section, the
Secretary informs the single point of
contact that:
(1) The Department will not
implement its decision for at least ten
days after the single point of contact
receives the explanation; or
(2) The Secretary has reviewed the
decision and determined that, because
of unusual circumstances, the waiting
period of at least ten days is not feasible.
(c) For purposes of computing the
waiting period under paragraph (b)(1) of
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this section, a single point of contact is
presumed to have received written
notification five days after the date of
mailing of such notification.
§ 415.13
Interstate situations.
(a) The Secretary is responsible for:
(1) Identifying proposed Federal
financial assistance and direct Federal
development that have an impact on
interstate areas;
(2) Notifying appropriate officials in
States which have adopted a process
and which selected the Department’s
program or activity;
(3) Making efforts to identify and
notify the affected State, areawide,
regional and local officials and entities
in those States that have not adopted a
process under the Order or do not select
the Department’s program or activity;
and
(4) Responding, pursuant to § 415.12,
if the Secretary receives a
recommendation from a designated
areawide agency transmitted by a single
point of contact, in cases in which the
review, coordination, and
communication with the Department
have been delegated.
(b) The Secretary uses the procedures
in § 415.12 if a State process provides a
State process recommendation to the
Department through a single point of
contact.
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§ 415.14 Simplification, consolidation, or
substitution of State plans.
(a) As used in this section:
(1) Simplify means that a State may
develop its own format, choose its own
submission date, and select the
planning period for a State plan.
(2) Consolidate means that a State
may meet statutory and regulatory
requirements by combining two or more
plans into one document and that the
State can select the format, submission
date, and the planning period for the
consolidated plan.
(3) Substitute means that a State may
use a plan or other document that it has
developed for its own purposes to meet
Federal requirements.
(b) If not inconsistent with law, a
State may decide to try to simplify,
consolidate, or substitute Federally
required State plans without prior
approval by the Secretary.
(c) The Secretary reviews each State
plan a State has simplified, consolidated
or substituted and accepts the plan only
if its contents meet Federal
requirements.
§ 415.15
Waivers.
In an emergency, the Secretary may
waive any provision in Subpart C—
Intergovernmental Review of
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Department of Agriculture Programs and
Activities, 2 CFR 415.3 to 415.14.
■ 3. Title 2 of the Code of Federal
Regulations is amended by adding Part
416 to read as follows:
PART 416—GENERAL PROGRAM
ADMINISTRATIVE REGULATIONS FOR
GRANTS AND COOPERATIVE
AGREEMENTS TO STATE AND LOCAL
GOVERNMENTS
Authority: 5 U.S.C. 301.
§ 416.1
Special Procurement Provisions.
(a) In order to ensure objective
contractor performance and eliminate
unfair competitive advantage, a
prospective contractor that develops or
drafts specifications, requirements,
statements of work, invitations for bids,
request for proposals, contract term and
conditions or other documents for use
by a State in conducting a procurement
under the USDA entitlement programs
specified in 2 CFR 200.101(e)(4) through
(6) shall be excluded from competing for
such procurements. Such prospective
contractors are ineligible for contract
awards resulting from such
procurements regardless of the
procurement method used. However,
prospective contractors may provide
States with specification information
related to a State procurement under the
USDA entitlement programs specified in
2 CFR 200.101(e)(4) through (6) and still
compete for the procurement if the
State, and not the prospective
contractor, develops or drafts the
specifications, requirements, statements
of work, invitations for bid, and/or
requests for proposals used to conduct
the procurement.
(b) Procurements by States under
USDA entitlement programs specified in
2 CFR 200.101(e)(4) through (6) shall be
conducted in a manner that prohibits
the use of statutorily or administratively
imposed in-State or local geographic
preferences except as provided for in 2
CFR 200.319(b).
■ 4. Title 2 of the Code of Federal
Regulations is amended by adding part
418 to read as follows:
PART 418—NEW RESTRICTIONS ON
LOBBYING
Sec.
Subpart A—General
418.100 Conditions on use of funds.
418.105 Definitions.
418.110 Certification and disclosure.
Subpart B—Activities by Own Employees
418.200 Agency and legislative liaison.
418.205 Professional and technical services.
418.210 Reporting.
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Subpart C—Activities by Other Than Own
Employees
418.300 Professional and technical services.
Subpart D—Penalties and Enforcement
418.400 Penalties.
418.405 Penalty procedures.
418.410 Enforcement.
Subpart E—Exemptions
418.500 Secretary of Defense.
Subpart F—Agency Reports
418.600 Semi-annual compilation.
418.605 Inspector General report.
APPENDIX A TO PART 418—CERTIFICATION
REGARDING LOBBYING
APPENDIX B TO PART 418—DISCLOSURE FORM TO
REPORT LOBBYING
Authority: 31 U.S.C. 1352; 5 U.S.C. 301.
Subpart A—General
§ 418.100
Conditions on use of funds.
(a) No appropriated funds may be
expended by the recipient of a Federal
contract, grant, loan, or cooperative
agreement to pay any person for
influencing or attempting to influence
an officer or employee of any agency, a
Member of Congress, an officer or
employee of Congress, or an employee
of a Member of Congress in connection
with any of the following covered
Federal actions: the awarding of any
Federal contract, the making of any
Federal grant, the making of any Federal
loan, the entering into of any
cooperative agreement, and the
extension, continuation, renewal,
amendment, or modification of any
Federal contract, grant, loan, or
cooperative agreement.
(b) Each person who requests or
receives from an agency a Federal
contract, grant, loan, or cooperative
agreement shall file with that agency a
certification, set forth in Appendix A,
that the person has not made, and will
not make, any payment prohibited by
paragraph (a) of this section.
(c) Each person who requests or
receives from an agency a Federal
contract, grant, loan, or a cooperative
agreement shall file with that agency a
disclosure form, set forth in Appendix
B, if such person has made or has agreed
to make any payment using
nonappropriated funds (to include
profits from any covered Federal
action), which would be prohibited
under paragraph (a) of this section if
paid for with appropriated funds.
(d) Each person who requests or
receives from an agency a commitment
providing for the United States to insure
or guarantee a loan shall file with that
agency a statement, set forth in
Appendix A, whether that person has
made or has agreed to make any
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payment to influence or attempt to
influence an officer or employee of any
agency, a Member of Congress, an
officer or employee of Congress, or an
employee of a Member of Congress in
connection with that loan insurance or
guarantee.
(e) Each person who requests or
receives from an agency a commitment
providing for the United States to insure
or guarantee a loan shall file with that
agency a disclosure form, set forth in
Appendix B, if that person has made or
has agreed to make any payment to
influence or attempt to influence an
officer or employee of any agency, a
Member of Congress, an officer or
employee of Congress, or an employee
of a Member of Congress in connection
with that loan insurance or guarantee.
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§ 418.105
Definitions.
For purposes of this part:
(a) Agency, as defined in 5 U.S.C.
552(f), includes Federal executive
departments and agencies as well as
independent regulatory commissions
and Government corporations, as
defined in 31 U.S.C. 9101(1).
(b) Covered Federal action. (1)
Covered Federal action means any of the
following Federal actions:
(i) The awarding of any Federal
contract;
(ii) The making of any Federal grant;
(iii) The making of any Federal loan;
(iv) The entering into of any
cooperative agreement; and,
(v) The extension, continuation,
renewal, amendment, or modification of
any Federal contract, grant, loan, or
cooperative agreement.
(2) Covered Federal action does not
include receiving from an agency a
commitment providing for the United
States to insure or guarantee a loan.
Loan guarantees and loan insurance are
addressed independently within this
part.
(c) Federal contract means an
acquisition contract awarded by an
agency, including those subject to the
Federal Acquisition Regulation (FAR),
and any other acquisition contract for
real or personal property or services not
subject to the FAR.
(d) Federal cooperative agreement
means a cooperative agreement entered
into by an agency.
(e) Federal grant means an award of
financial assistance in the form of
money, or property in lieu of money, by
the Federal Government or a direct
appropriation made by law to any
person. The term does not include
technical assistance which provides
services instead of money, or other
assistance in the form of revenue
sharing, loans, loan guarantees, loan
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insurance, interest subsidies, insurance,
or direct United States cash assistance
to an individual.
(f) Federal loan means a loan made by
an agency. The term does not include
loan guarantee or loan insurance.
(g) Indian tribe and tribal organization
have the meaning provided in section 4
of the Indian Self-Determination and
Education Assistance Act (25 U.S.C.
450B). Alaskan Natives are included
under the definitions of Indian tribes in
that Act.
(h) Influencing or attempting to
influence means making, with the intent
to influence, any communication to or
appearance before an officer or
employee or any agency, a Member of
Congress, an officer or employee of
Congress, or an employee of a Member
of Congress in connection with any
covered Federal action.
(i) Loan guarantee and loan insurance
means an agency’s guarantee or
insurance of a loan made by a person.
(j) Local government means a unit of
government in a State and, if chartered,
established, or otherwise recognized by
a State for the performance of a
governmental duty, including a local
public authority, a special district, an
intrastate district, a council of
governments, a sponsor group
representative organization, and any
other instrumentality of a local
government.
(k) Officer or employee of an agency
includes the following individuals who
are employed by an agency:
(1) An individual who is appointed to
a position in the Government under title
5, U.S. Code, including a position under
a temporary appointment;
(2) A member of the uniformed
services as defined in section 101(3),
title 37, U.S. Code;
(3) A special Government employee as
defined in section 202, title 18, U.S.
Code; and,
(4) An individual who is a member of
a Federal advisory committee, as
defined by the Federal Advisory
Committee Act, title 5, U.S. Code
appendix 2.
(l) Person means an individual,
corporation, company, association,
authority, firm, partnership, society,
State, and local government, regardless
of whether such entity is operated for
profit or not for profit. This term
excludes an Indian tribe, tribal
organization, or any other Indian
organization with respect to
expenditures specifically permitted by
other Federal law.
(m) Reasonable compensation means,
with respect to a regularly employed
officer or employee of any person,
compensation that is consistent with the
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normal compensation for such officer or
employee for work that is not furnished
to, not funded by, or not furnished in
cooperation with the Federal
Government.
(n) Reasonable payment means, with
respect to professional and other
technical services, a payment in an
amount that is consistent with the
amount normally paid for such services
in the private sector.
(o) Recipient includes all contractors,
subcontractors at any tier, and
subgrantees at any tier of the recipient
of funds received in connection with a
Federal contract, grant, loan, or
cooperative agreement. The term
excludes an Indian tribe, tribal
organization, or any other Indian
organization with respect to
expenditures specifically permitted by
other Federal law.
(p) Regularly employed means, with
respect to an officer or employee of a
person requesting or receiving a Federal
contract, grant, loan, or cooperative
agreement or a commitment providing
for the United States to insure or
guarantee a loan, an officer or employee
who is employed by such person for at
least 130 working days within one year
immediately preceding the date of the
submission that initiates agency
consideration of such person for receipt
of such contract, grant, loan, cooperative
agreement, loan insurance commitment,
or loan guarantee commitment. An
officer or employee who is employed by
such person for less than 130 working
days within one year immediately
preceding the date of the submission
that initiates agency consideration of
such person shall be considered to be
regularly employed as soon as he or she
is employed by such person for 130
working days.
(q) State means a State of the United
States, the District of Columbia, the
Commonwealth of Puerto Rico, a
territory or possession of the United
States, an agency or instrumentality of
a State, and a multi-State, regional, or
interstate entity having governmental
duties and powers.
§ 418.110
Certification and disclosure.
(a) Each person shall file a
certification, and a disclosure form, if
required, with each submission that
initiates agency consideration of such
person for:
(1) Award of a Federal contract, grant,
or cooperative agreement exceeding
$100,000; or
(2) An award of a Federal loan or a
commitment providing for the United
States to insure or guarantee a loan
exceeding $150,000.
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(b)(1) Each person shall file a
certification, and a disclosure form, if
required, upon receipt by such person
of:
(i) A Federal contract, grant, or
cooperative agreement exceeding
$100,000; or
(ii) A Federal loan or a commitment
providing for the United States to insure
or guarantee a loan exceeding $150,000,
(2) Unless such person previously
filed a certification, and a disclosure
form, if required, under paragraph (a) of
this section.
(c) Each person shall file a disclosure
form at the end of each calendar quarter
in which there occurs any event that
requires disclosure or that materially
affects the accuracy of the information
contained in any disclosure form
previously filed by such person under
paragraphs (a) or (b) of this section. An
event that materially affects the
accuracy of the information reported
includes:
(1) A cumulative increase of $25,000
or more in the amount paid or expected
to be paid for influencing or attempting
to influence a covered Federal action; or
(2) A change in the person(s) or
individual(s) influencing or attempting
to influence a covered Federal action;
or,
(3) A change in the officer(s),
employee(s), or Member(s) contacted to
influence or attempt to influence a
covered Federal action.
(d) Any person shall file a
certification, and a disclosure form, if
required, to the next tier above who
requests or receives from a person
referred to in paragraphs (a) or (b) of this
section:
(1) A subcontract exceeding $100,000
at any tier under a Federal contract;
(2) A subgrant, contract, or
subcontract exceeding $100,000 at any
tier under a Federal grant;
(3) A contract or subcontract
exceeding $100,000 at any tier under a
Federal loan exceeding $150,000; or,
(4) A contract or subcontract
exceeding $100,000 at any tier under a
Federal cooperative agreement.
(e) All disclosure forms, but not
certifications, shall be forwarded from
tier to tier until received by the person
referred to in paragraphs (a) or (b) of this
section. That person shall forward all
disclosure forms to the agency.
(f) Any certification or disclosure
form filed under paragraph (e) of this
section shall be treated as a material
representation of fact upon which all
receiving tiers shall rely. All liability
arising from an erroneous representation
shall be borne solely by the tier filing
that representation and shall not be
shared by any tier to which the
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erroneous representation is forwarded.
Submitting an erroneous certification or
disclosure constitutes a failure to file
the required certification or disclosure,
respectively. If a person fails to file a
required certification or disclosure, the
United States may pursue all available
remedies, including those authorized by
section 1352, title 31, U.S. Code.
(g) For awards and commitments in
process prior to December 23, 1989, but
not made before that date, certifications
shall be required at award or
commitment, covering activities
occurring between December 23, 1989,
and the date of award or commitment.
However, for awards and commitments
in process prior to the December 23,
1989 effective date of these provisions,
but not made before December 23, 1989,
disclosure forms shall not be required at
time of award or commitment but shall
be filed within 30 days.
(h) No reporting is required for an
activity paid for with appropriated
funds if that activity is allowable under
either Subpart B or C of this part.
Subpart B—Activities by Own
Employees
§ 418.200
Agency and legislative liaison.
(a) The prohibition on the use of
appropriated funds, in § 418.100 (a),
does not apply in the case of a payment
of reasonable compensation made to an
officer or employee of a person
requesting or receiving a Federal
contract, grant, loan, or cooperative
agreement if the payment is for agency
and legislative liaison activities not
directly related to a covered Federal
action.
(b) For purposes of paragraph (a) of
this section, providing any information
specifically requested by an agency or
Congress is allowable at any time.
(c) For purposes of paragraph (a) of
this section, the following agency and
legislative liaison activities are
allowable at any time only where they
are not related to a specific solicitation
for any covered Federal action:
(1) Discussing with an agency
(including individual demonstrations)
the qualities and characteristics of the
person’s products or services,
conditions or terms of sale, and service
capabilities; and,
(2) Technical discussions and other
activities regarding the application or
adaptation of the person’s products or
services for an agency’s use.
(d) For purposes of paragraph (a) of
this section, the following agencies and
legislative liaison activities are
allowable only where they are prior to
formal solicitation of any covered
Federal action:
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(1) Providing any information not
specifically requested but necessary for
an agency to make an informed decision
about initiation of a covered Federal
action;
(2) Technical discussions regarding
the preparation of an unsolicited
proposal prior to its official submission;
and,
(3) Capability presentations by
persons seeking awards from an agency
pursuant to the provisions of the Small
Business Act, as amended by Public
Law 95–507 and other subsequent
amendments.
(e) Only those activities expressly
authorized by this section are allowable
under this section.
§ 418.205
services.
Professional and technical
(a) The prohibition on the use of
appropriated funds, in § 418.100 (a),
does not apply in the case of a payment
of reasonable compensation made to an
officer or employee of a person
requesting or receiving a Federal
contract, grant, loan, or cooperative
agreement or an extension,
continuation, renewal, amendment, or
modification of a Federal contract,
grant, loan, or cooperative agreement if
payment is for professional or technical
services rendered directly in the
preparation, submission, or negotiation
of any bid, proposal, or application for
that Federal contract, grant, loan, or
cooperative agreement or for meeting
requirements imposed by or pursuant to
law as a condition for receiving that
Federal contract, grant, loan, or
cooperative agreement.
(b) For purposes of paragraph (a) of
this section, ‘‘professional and technical
services’’ shall be limited to advice and
analysis directly applying any
professional or technical discipline. For
example, drafting of a legal document
accompanying a bid or proposal by a
lawyer is allowable. Similarly, technical
advice provided by an engineer on the
performance or operational capability of
a piece of equipment rendered directly
in the negotiation of a contract is
allowable. However, communications
with the intent to influence made by a
professional (such as a licensed lawyer)
or a technical person (such as a licensed
accountant) are not allowable under this
section unless they provide advice and
analysis directly applying their
professional or technical expertise and
unless the advice or analysis is rendered
directly and solely in the preparation,
submission or negotiation of a covered
Federal action. Thus, for example,
communications with the intent to
influence made by a lawyer that do not
provide legal advice or analysis directly
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and solely related to the legal aspects of
his or her client’s proposal, but
generally advocate one proposal over
another are not allowable under this
section because the lawyer is not
providing professional legal services.
Similarly, communications with the
intent to influence made by an engineer
providing an engineering analysis prior
to the preparation or submission of a bid
or proposal are not allowable under this
section since the engineer is providing
technical services but not directly in the
preparation, submission or negotiation
of a covered Federal action.
(c) Requirements imposed by or
pursuant to law as a condition for
receiving a covered Federal award
include those required by law or
regulation, or reasonably expected to be
required by law or regulation, and any
other requirements in the actual award
documents.
(d) Only those services expressly
authorized by this section are allowable
under this section.
§ 418.210
Reporting.
No reporting is required with respect
to payments of reasonable compensation
made to regularly employed officers or
employees of a person.
Subpart C—Activities by Other Than
Own Employees
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§ 418.300
services.
Professional and technical
(a) The prohibition on the use of
appropriated funds, in § 418.100 (a),
does not apply in the case of any
reasonable payment to a person, other
than an officer or employee of a person
requesting or receiving a covered
Federal action, if the payment is for
professional or technical services
rendered directly in the preparation,
submission, or negotiation of any bid,
proposal, or application for that Federal
contract, grant, loan, or cooperative
agreement or for meeting requirements
imposed by or pursuant to law as a
condition for receiving that Federal
contract, grant, loan, or cooperative
agreement.
(b) The reporting requirements in
§ 418.110 (a) and (b) regarding filing a
disclosure form by each person, if
required, shall not apply with respect to
professional or technical services
rendered directly in the preparation,
submission, or negotiation of any
commitment providing for the United
States to insure or guarantee a loan.
(c) For purposes of paragraph (a) of
this section, ‘‘professional and technical
services’’ shall be limited to advice and
analysis directly applying any
professional or technical discipline. For
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example, drafting of a legal document
accompanying a bid or proposal by a
lawyer is allowable. Similarly, technical
advice provided by an engineer on the
performance or operational capability of
a piece of equipment rendered directly
in the negotiation of a contract is
allowable. However, communications
with the intent to influence made by a
professional (such as a licensed lawyer)
or a technical person (such as a licensed
accountant) are not allowable under this
section unless they provide advice and
analysis directly applying their
professional or technical expertise and
unless the advice or analysis is rendered
directly and solely in the preparation,
submission or negotiation of a covered
Federal action. Thus, for example,
communications with the intent to
influence made by a lawyer that do not
provide legal advice or analysis directly
and solely related to the legal aspects of
his or her client’s proposal, but
generally advocate one proposal over
another are not allowable under this
section because the lawyer is not
providing professional legal services.
Similarly, communications with the
intent to influence made by an engineer
providing an engineering analysis prior
to the preparation or submission of a bid
or proposal are not allowable under this
section since the engineer is providing
technical services but not directly in the
preparation, submission or negotiation
of a covered Federal action.
(d) Requirements imposed by or
pursuant to law as a condition for
receiving a covered Federal award
include those required by law or
regulation, or reasonably expected to be
required by law or regulation, and any
other requirements in the actual award
documents.
(e) Persons other than officers or
employees of a person requesting or
receiving a covered Federal action
include consultants and trade
associations.
(f) Only those services expressly
authorized by this section are allowable
under this section.
(c) A filing or amended filing on or
after the date on which an
administrative action for the imposition
of a civil penalty is commenced does
not prevent the imposition of such civil
penalty for a failure occurring before
that date. An administrative action is
commenced with respect to a failure
when an investigating official
determines in writing to commence an
investigation of an allegation of such
failure.
(d) In determining whether to impose
a civil penalty, and the amount of any
such penalty, by reason of a violation by
any person, the agency shall consider
the nature, circumstances, extent, and
gravity of the violation, the effect on the
ability of such person to continue in
business, any prior violations by such
person, the degree of culpability of such
person, the ability of the person to pay
the penalty, and such other matters as
may be appropriate.
(e) First offenders under paragraphs
(a) or (b) of this section shall be subject
to a civil penalty of $10,000, absent
aggravating circumstances. Second and
subsequent offenses by persons shall be
subject to an appropriate civil penalty
between $10,000 and $100,000, as
determined by the agency head or his or
her designee.
(f) An imposition of a civil penalty
under this section does not prevent the
United States from seeking any other
remedy that may apply to the same
conduct that is the basis for the
imposition of such civil penalty.
§ 418.405
Penalty procedures.
Agencies shall impose and collect
civil penalties pursuant to the
provisions of the Program Fraud and
Civil Remedies Act, 31 U.S.C.s 3803
(except subsection (c)), 3804, 3805,
3806, 3807, 3808, and 3812, insofar as
these provisions are not inconsistent
with the requirements herein.
§ 418.410
Enforcement.
Subpart D—Penalties and Enforcement
The head of each agency shall take
such actions as are necessary to ensure
that the provisions herein are vigorously
implemented and enforced in that
agency.’
§ 418.400
Subpart E—Exemptions
Penalties.
(a) Any person who makes an
expenditure prohibited herein shall be
subject to a civil penalty of not less than
$10,000 and not more than $100,000 for
each such expenditure.
(b) Any person who fails to file or
amend the disclosure form (see
Appendix B) to be filed or amended if
required herein, shall be subject to a
civil penalty of not less than $10,000
and not more than $100,000 for each
such failure.
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§ 418.500
Secretary of Defense.
(a) The Secretary of Defense may
exempt, on a case-by-case basis, a
covered Federal action from the
prohibition whenever the Secretary
determines, in writing, that such an
exemption is in the national interest.
The Secretary shall transmit a copy of
each such written exemption to
Congress immediately after making such
a determination.
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(b) The Department of Defense may
issue supplemental regulations to
implement paragraph (a) of this section.
Subpart F—Agency Reports
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§ 418.600
Semi-annual compilation.
(a) The head of each agency shall
collect and compile the disclosure
reports (see appendix B) and, on May 31
and November 30 of each year, submit
to the Secretary of the Senate and the
Clerk of the House of Representatives a
report containing a compilation of the
information contained in the disclosure
reports received during the six-month
period ending on March 31 or
September 30, respectively, of that year.
(b) The report, including the
compilation, shall be available for
public inspection 30 days after receipt
of the report by the Secretary and the
Clerk.
(c) Information that involves
intelligence matters shall be reported
only to the Select Committee on
Intelligence of the Senate, the
Permanent Select Committee on
Intelligence of the House of
Representatives, and the Committees on
Appropriations of the Senate and the
House of Representatives in accordance
with procedures agreed to by such
committees. Such information shall not
be available for public inspection.
(d) Information that is classified
under Executive Order 12356 or any
successor order shall be reported only to
the Committee on Foreign Relations of
the Senate and the Committee on
Foreign Affairs of the House of
Representatives or the Committees on
Armed Services of the Senate and the
House of Representatives (whichever
such committees have jurisdiction of
matters involving such information) and
to the Committees on Appropriations of
the Senate and the House of
Representatives in accordance with
procedures agreed to by such
committees. Such information shall not
be available for public inspection.
(e) The first semi-annual compilation
shall be submitted on May 31, 1990, and
shall contain a compilation of the
disclosure reports received from
December 23, 1989 to March 31, 1990.
(f) Major agencies, designated by the
Office of Management and Budget
(OMB), are required to provide
machine-readable compilations to the
Secretary of the Senate and the Clerk of
the House of Representatives no later
than with the compilations due on May
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31, 1991. OMB shall provide detailed
specifications in a memorandum to
these agencies.
(g) Non-major agencies are requested
to provide machine-readable
compilations to the Secretary of the
Senate and the Clerk of the House of
Representatives.
(h) Agencies shall keep the originals
of all disclosure reports in the official
files of the agency.
§ 418.605
Inspector General report.
(a) The Inspector General, or other
official as specified in paragraph (b) of
this section, of each agency shall
prepare and submit to Congress each
year, commencing with submission of
the President’s Budget in 1991, an
evaluation of the compliance of that
agency with, and the effectiveness of,
the requirements herein. The evaluation
may include any recommended changes
that may be necessary to strengthen or
improve the requirements.
(b) In the case of an agency that does
not have an Inspector General, the
agency official comparable to an
Inspector General shall prepare and
submit the annual report, or, if there is
no such comparable official, the head of
the agency shall prepare and submit the
annual report.
(c) The annual report shall be
submitted at the same time the agency
submits its annual budget justifications
to Congress.
(d) The annual report shall include
the following: All alleged violations
relating to the agency’s covered Federal
actions during the year covered by the
report, the actions taken by the head of
the agency in the year covered by the
report with respect to those alleged
violations and alleged violations in
previous years, and the amounts of civil
penalties imposed by the agency in the
year covered by the report.
Appendix A to Part 418—Certification
Regarding Lobbying
Certification for Contracts, Grants, Loans,
and Cooperative Agreements
The undersigned certifies, to the best of his
or her knowledge and belief, that:
(1) No Federal appropriated funds have
been paid or will be paid, by or on behalf of
the undersigned, to any person for
influencing or attempting to influence an
officer or employee of an agency, a Member
of Congress, an officer or employee of
Congress, or an employee of a Member of
Congress in connection with the awarding of
any Federal contract, the making of any
Federal grant, the making of any Federal
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75989
loan, the entering into of any cooperative
agreement, and the extension, continuation,
renewal, amendment, or modification of any
Federal contract, grant, loan, or cooperative
agreement.
(2) If any funds other than Federal
appropriated funds have been paid or will be
paid to any person for influencing or
attempting to influence an officer or
employee of any agency, a Member of
Congress, an officer or employee of Congress,
or an employee of a Member of Congress in
connection with this Federal contract, grant,
loan, or cooperative agreement, the
undersigned shall complete and submit
Standard Form-LLL, ‘‘Disclosure Form to
Report Lobbying,’’ in accordance with its
instructions.
(3) The undersigned shall require that the
language of this certification be included in
the award documents for all subawards at all
tiers (including subcontracts, subgrants, and
contracts under grants, loans, and
cooperative agreements) and that all
subrecipients shall certify and disclose
accordingly.
This certification is a material
representation of fact upon which reliance
was placed when this transaction was made
or entered into. Submission of this
certification is a prerequisite for making or
entering into this transaction imposed by
section 1352, title 31, U.S. Code. Any person
who fails to file the required certification
shall be subject to a civil penalty of not less
than $10,000 and not more than $100,000 for
each such failure.
Statement for Loan Guarantees and Loan
Insurance
The undersigned states, to the best of his
or her knowledge and belief, that:
If any funds have been paid or will be paid
to any person for influencing or attempting
to influence an officer or employee of any
agency, a Member of Congress, an officer or
employee of Congress, or an employee of a
Member of Congress in connection with this
commitment providing for the United States
to insure or guarantee a loan, the
undersigned shall complete and submit
Standard Form-LLL, ‘‘Disclosure Form to
Report Lobbying,’’ in accordance with its
instructions.
Submission of this statement is a
prerequisite for making or entering into this
transaction imposed by section 1352, title 31,
U.S. Code. Any person who fails to file the
required statement shall be subject to a civil
penalty of not less than $10,000 and not more
than $100,000 for each such failure.
Appendix B to Part 418—Disclosure
Form To Report Lobbying
BILLING CODE 6050–28–4210–67–4910–9X–3280–F5–
4410–18–4710–24–3510–17–9110–9J–9111–23–6450–01–
7537–01–6560–50–6560–58–7036–01–7515–01–7536–01–
6116–01–4334–12–8320–01–4150–24–7555–01–5001–06–
7510–13–8025–01–4191–02–4810–25–3410–KS–3410–22–
3410–15–3410–05–4000–01–4510–FM–3110–01–P
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DISClOSURE OF LOBBYING ACTIVITIES
Appmvt-:uj by, ()f,1B
Complete this fr;rm to ctlsciose lobbying actlvi!ies pursuant to 31 U.S.C 1352
0Frime
0
0348·0046
and Address of Prim&:
SubawardCify: - - - - - - · - - - - - -
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or
employee(s), or Member(s) contacted, for Payment Indicated inltem 11:
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75991
INSTRUCTIONS FORCOMPLETION OF SF-LLL, DISCLOSURE OF LOBBYING ACTIVITIES
This disclosure form shaH be completed by the !GPorting entlly, whether svbawal'lleeor prime Federal nsciplent, at the initiation or nscefpl of a covered Federal
aclion, or a metertalchange to a pnsviovsfiling, pursuant to title 31 U.S.C. section 1352. The filing of e form Is requinsd Tor each payment or agnsementto mains
paymentto any lobbying entity for influencing. or attempting to lnlluence an oflicer or emptoyeeof any agency, a Member of Congnsss, an oflicer or employee of
Coognsss, or an emptoyeeo! a Member of Congress In connection with a covensdFedenslacHon. U118the SF-LLLA ConHnuationSheetfof additiOnalinTormalion if
the space on the form Is inadequate. Complete all items that apply for both the Jnitia filing and metertal change nsport. Rater to the implementing guidance
published by the Offica of Management and BudlJel for additional information.
1. Identify the type of covensd Faders! aCtiOn for Which lobbying aCtivity Is and/or has been secuf8G to lntluenca lha wtooma o! a covensd Fllderst action.
i!. Identify the Slaws o! the covensd Federal aclion.
3. Identify the appropriataclall$illealion of this report. If this is a foHowup report cavslld by a meterial change to the information previovslynsportlld, enter
the year and quarter in which the chang&oc:cw-red. Enter the dele of the last previouslysubmitted report by this reporting entity for this covensd Flldersl
aclion.
4. Entsr the fUll nama, address, cily, Stele and zip code of the reportingentity.lnclude CongreSsiona!Districf. if known. Check the appropriilleclassilk:alion
of the reportingenlily that designetes if it is, or expecls to be, a prime or SUba'NIII'd recipient. Identify the tier of the SUbawardee; e.g., the first subawel'llee
of the priri'l& is the 1st tier. Suba'NIII'ds include but are not limited to suil<:onli'acts, subgiants and. contrsct awards under grsnts.
5. If the organization filing the report in item 4 checks "Subawardee,•thBn enter the full name, addnsss, City,
recipient. Include Congressional DiStriCt, if known.
State and zip code of the prime Fedeml
6. Enter the name of the Federslagencymakingthe award or loan commitment. Include atleast oneorganizatlonallevalbelowagency name. if known. For
example, Department of Trsnsportetlon, United Sillies Coast Guard.
1. Enter the Fedeml progrsm name or description for the covered Federsl action (item 1). If known, enter the full Catalog of Federal Domestic Assistance
(CFDA) number for grsnts, cooperative llgreements, loans, and loan commitments.
8. &Iter the most appropriate Fellers! idenllfying m.lmber availl!blel'or the Federal aclion identified in itern 1 (e.g~ ReqiJesl for Proposal (RFP) number;
lnvllellon for Bid (IFB) number; gmnt announcement number; the contract, grant, or loan award number; the appllcatior!lproposel control number
-igned by the federal agency). l!lclude pnsfixes, e.g., "RFP.Oe.9Q.001.'
9. For a covered federal aclion Where there hes: been an award or loail commitment by the Federal agency, enter the Federal amount o! the award/loan
coinmilment for the prime entity Identified In Item 4 or 5.
10. (a) Enter the full name, addnsss, clfy, Slate and zip code of the lobbying entity engaged by the reporting entity ldenlilled in item 4 to inluenoe ihe covensd
Fedensl action.
(b) Enter the fUll names of the inlli\fidual(s} perforn\ing Services, and Include fuR address if diflerent from 10 (a). Enter Last Name, First Name, and
Middle Initial (MI).
11. Enter the amount of compensation paid or reesonablyexpacladto be paid by the nsportlngentity(item4) to the lObbyingenlity(itern 10). Indicate Whether
the payment has been made (actual) or will be made (planned). Check all boxes that apply. If this Is a material change report, enter the cumulative
amount of payment made or planned to be made.
12. Check the appropriSlabox(es). Check all boXeS that apply.lf paymentiS made through an in-kind contribution, specify thenaue and value of the in-kind
payment.
13. Check the apprOpriate box(es). Cheek all boXeS that apply. If other, speclfy nature.
14. Provideiupecilic and detailed description o! the setvices that the lobbyist hes performed, orwiH be exp6¢tad to perform, and the date(II} o! any ilervices
rendered. Include all preparstory and related aCtivity, not just time spent In actual contact with Federal ofliciets. Identify the Federal oflicial(s) or
empioyee(s) contacted or the olficer(s), employell(s), or Mambe!(s) of Congnsss that were contaclad.
15. Check whether or not a Sf-LLLA Continuation Sheel(s) is attached.
16. The certifYing oflicial shall sign and dale the forrn, print his/her nema, tllla. and telephone number.
According to the Paperwork Reduction Act. as aml!nded, no parsons are required to rsspond to a collection of information unless it displays a valid OMB Contro
Number. The valid OMB control number for this illformalicn collection Is OMS No. 0348-0046. Public nsporting bvrden for this collection of Information is
estimated to aversge3D minutes par response, including lime for reviewing instruCtions, searching existing data sources, gathering and maintaining the data
needed, and completing and reviewing the colleCtion of informe\lon, Send comments nsgarding the burden estlmeta or any o!har aspect of this collection 01
information, including suggestions for nsduc:ing this. burden, to the Office of Managementand Budget, Paperwcrk Reduction Project (0348-0046), Washington,
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DC20503.
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BILLING CODE 6050–28–4210–67–4910–9X–3280–F5–
4410–18–4710–24–3510–17–9110–9J–9111–23–6450–01–
7537–01–6560–50–6560–58–7036–01–7515–01–7536–01–
6116–01–4334–12–8320–01–4150–24–7555–01–5001–06–
7510–13–8025–01–4191–02–4810–25–3410–KS–3410–22–
3410–15–3410–05–4000–01–4510–FM–3110–01–C
5. Title 2 of the Code of Federal
Regulations is amended by adding part
422 to read as follows:
■
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CHAPTER IV
PART 422—RESEARCH INSTITUTIONS
CONDUCTING USDA-FUNDED
EXTRAMURAL RESEARCH;
RESEARCH MISCONDUCTS
Sec.
422.1 Definitions.
422.2 Procedures.
422.3 Inquiry, investigation, and
adjudication.
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422.4 USDA Panel to determine
appropriateness of research misconduct
policy.
422.5 Reservation of right to conduct
subsequent inquiry, investigation, and
adjudication.
422.6 Notification of USDA of allegations of
research misconduct.
422.7 Notification of ARIO during an
inquiry of investigation.
422.8 Communication of research
misconduct policies and procedures.
422.9 Documents required.
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422.10
422.11
422.12
422.13
422.14
Reporting to USDA.
Research records and evidence.
Remedies for noncompliance.
Appeals.
Relationship to other requirements.
Authority: 5 U.S.C. 301; Office of Science
and Technology Policy (65 FR 76260); USDA
Secretary’s Memorandum (SM) 2400–007;
and USDA OIG, 7 CFR 2610.1(c)(4)(ix).
PART 422—RESEARCH INSTITUTIONS
CONDUCTING USDA FUNDED
EXTRAMURAL RESEARCH;
RESEARCH MISCONDUCT
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§ 422.1
Definitions.
The following definitions apply to
this part:
Adjudication. The stage in response to
an allegation of research misconduct
when the outcome of the investigation
is reviewed, and appropriate corrective
actions, if any, are determined.
Corrective actions generally will be
administrative in nature, such as
termination of an award, debarment,
award restrictions, recovery of funds, or
correction of the research record.
However, if there is an indication of
violation of civil or criminal statutes,
civil or criminal sanctions may be
pursued.
Agency Research Integrity Officer
(ARIO). The individual appointed by a
USDA agency that conducts research
and who is responsible for:
(1) Receiving and processing
allegations of research misconduct as
assigned by the USDA RIO;
(2) Informing OIG and the USDA RIO
and the research institution associated
with the alleged research misconduct, of
allegations of research misconduct in
the event it is reported to the USDA
agency;
(3) Ensuring that any records,
documents and other materials relating
to a research misconduct allegation are
provided to OIG when requested;
(4) Coordinating actions taken to
address allegations of research
misconduct with respect to extramural
research with the research institution(s)
at which time the research misconduct
is alleged to have occurred, and with the
USDA RIO;
(5) Overseeing proceedings to address
allegations of extramurally funded
research misconduct at intramural
research institutions and research
institutions where extramural research
occurs;
(6) Ensuring that agency action to
address allegations of research
misconduct at USDA agencies
performing extramurally funded
research is performed at an
organizational level that allows an
independent, unbiased, and equitable
process;
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(7) Immediately notifying OIG, the
USDA RIO, and the applicable research
institution if:
(i) Public health or safety is at risk;
(ii) USDA’s resources, reputation, or
other interests need protecting;
(iii) Research activities should be
suspended;
(iv) Federal action may be needed to
protect the interest of a subject of the
investigation or of others potentially
affected;
(v) A premature public disclosure of
the inquiry into or investigation of the
allegation may compromise the process;
(vi) The scientific community or the
public should be informed; or
(vii) Behavior that is or may be
criminal in nature is discovered at any
point during the inquiry, investigation,
or adjudication phases of the research
misconduct proceedings;
(8) Documenting the dismissal of the
allegation, and ensuring that the name
of the accused individual and/or
institution is cleared if an allegation of
research misconduct is dismissed at any
point during the inquiry or investigation
phase of the proceedings;
(9) Other duties relating to research
misconduct proceedings as assigned.
Allegation. A disclosure of possible
research misconduct through any means
of communication. The disclosure may
be by written or oral statement, or by
other means of communication to an
institutional or USDA official.
Applied research. Systematic study to
gain knowledge or understanding
necessary to determine the means by
which a recognized and specific need
may be met.
Assistant Inspector General for
Investigations. The individual in OIG
who is responsible for OIG’s domestic
and foreign investigative operations
through a headquarters office and the
six regional offices.
Basic research. Systematic study
directed toward fuller knowledge or
understanding of the fundamental
aspects of phenomena and of observable
facts without specific applications
towards processes or products in mind.
Extramural research. Research
conducted by any research institution
other than the Federal agency to which
the funds supporting the research were
appropriated. Research institutions
conducting extramural research may
include Federal research facilities.
Fabrication. Making up data or results
and recording or reporting them.
Falsification. Manipulating research
materials, equipment, or processes, or
changing or omitting data or results
such that the research is not accurately
represented in the research record.
Finding of research misconduct. The
conclusion, proven by a preponderance
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75993
of the evidence, that research
misconduct occurred, that such research
misconduct represented a significant
departure from accepted practices of the
relevant research community, and that
such research misconduct was
committed intentionally, knowingly, or
recklessly.
Inquiry. The stage in the response to
an allegation of research misconduct
when an assessment is made to
determine whether the allegation has
substance and whether an investigation
is warranted.
Intramural research. Research
conducted by a Federal Agency, to
which funds were appropriated for the
purpose of conducting research.
Investigation. The stage in the
response to an allegation of research
misconduct when the factual record is
formally developed and examined to
determine whether to dismiss the case,
recommend a finding of research
misconduct, and/or take other
appropriate remedies.
Office of Inspector General (OIG). The
Office of Inspector General of the United
States Department of Agriculture.
Office of Science and Technology
Policy (OSTP). The Office of Science
and Technology Policy of the Executive
Office of the President.
Plagiarism. The appropriation of
another person’s ideas, processes,
results, or words without giving
appropriate credit.
Preponderance of the evidence. Proof
by information that, compared with that
opposing it, leads to the conclusion that
the fact at issue is more probably true
than not.
Research. All basic, applied, and
demonstration research in all fields of
science, engineering, and mathematics.
This includes, but is not limited to,
research in economics, education,
linguistics, medicine, psychology, social
sciences, statistics, and research
involving human subjects or animals
regardless of the funding mechanism
used to support it.
Research institution. All organizations
using Federal funds for research,
including, for example, colleges and
universities, Federally funded research
and development centers, national user
facilities, industrial laboratories, or
other research institutes.
Research misconduct. Fabrication,
falsification, or plagiarism in proposing,
performing, or reviewing research, or in
reporting research results. Research
misconduct does not include honest
error or differences of opinion.
Research record. The record of data or
results that embody the facts resulting
from scientific inquiry, and includes,
but is not limited to, research proposals,
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research records (including data, notes,
journals, laboratory records (both
physical and electronic)), progress
reports, abstracts, theses, oral
presentations, internal reports, and
journal articles.
USDA. United States Department of
Agriculture.
USDA Research Integrity Officer
(USDA RIO). The individual designated
by the Office of the Under Secretary for
Research, Education, and Economics
(REE) who is responsible for:
(1) Overseeing USDA agency
responses to allegations of research
misconduct;
(2) Ensuring that agency research
misconduct procedures are consistent
with this part;
(3) Receiving and assigning
allegations of research misconduct
reported by the public;
(4) Developing Memoranda of
Understanding with agencies that elect
not to develop their own research
misconduct procedures;
(5) Monitoring the progress of all
research misconduct cases; and
(6) Serving as liaison with OIG to
receive allegations of research
misconduct when they are received via
the OIG Hotline.
§ 422.2
Procedures.
Research institutions that conduct
extramural research funded by USDA
must foster an atmosphere conducive to
research integrity. They must develop or
have procedures in place to respond to
allegations of research misconduct that
ensure:
(a) Appropriate separations of
responsibility for inquiry, investigation,
and adjudication;
(b) Objectivity;
(c) Due process;
(d) Whistleblower protection;
(e) Confidentiality. To the extent
possible and consistent with a fair and
thorough investigation and as allowed
by law, knowledge about the identity of
subjects and informants is limited to
those who need to know; and
(f) Timely resolution.
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§ 422.3 Inquiry, investigation, and
adjudication.
A research institution that conducts
extramural research funded by USDA
bears primary responsibility for
prevention and detection of research
misconduct and for the inquiry,
investigation, and adjudication of
research misconduct allegations
reported directly to it. The research
institution must perform an inquiry in
response to an allegation, and must
follow the inquiry with an investigation
if the inquiry determines that the
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allegation or apparent instance of
research misconduct has substance. The
responsibilities for adjudication must be
separate from those for inquiry and
investigation. In most instances, USDA
will rely on a research institution
conducting extramural research to
promptly:
(a) Initiate an inquiry into any
suspected or alleged research
misconduct;
(b) Conduct a subsequent
investigation, if warranted;
(c) Acquire, prepare, and maintain
appropriate records of allegations of
extramural research misconduct and all
related inquiries, investigations, and
findings; and
(d) Take action to ensure the
following:
(1) The integrity of research;
(2) The rights and interests of the
subject of the investigation and the
public are protected;
(3) The observance of legal
requirements or responsibilities
including cooperation with criminal
investigations; and
(4) Appropriate safeguards for
subjects of allegations, as well as
informants (see § 422.6). These
safeguards should include timely
written notification of subjects regarding
substantive allegations made against
them; a description of all such
allegations; reasonable access to the data
and other evidence supporting the
allegations; and the opportunity to
respond to allegations, the supporting
evidence and the proposed findings of
research misconduct, if any.
§ 422.4 USDA Panel to determine
appropriateness of research misconduct
policy.
Before USDA will rely on a research
institution to conduct an inquiry,
investigation, and adjudication of an
allegation in accordance with this part,
the research institution where the
research misconduct is alleged must
provide the ARIO its policies and
procedures related to research
misconduct at the institution. The
research institution has the option of
providing either a written copy of such
policies and procedures or a Web site
address where such policies and
procedures can be accessed. The ARIO
to whom the policies and procedures
were made available shall convene a
panel comprised of the USDA RIO and
ARIOs from the Forest Service, the
Agricultural Research Service, and the
National Institute of Food and
Agriculture. The Panel will review the
research institution’s policies and
procedures for compliance with the
OSTP Policy and render a decision
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regarding the research institution’s
ability to adequately resolve research
misconduct allegations. The ARIO will
inform the research institution of the
Panel’s determination that its inquiry,
investigation, and adjudication
procedures are sufficient. If the Panel
determines that the research institution
does not have sufficient policies and
procedures in place to conduct inquiry,
investigation, and adjudication
proceedings, or that the research
institution is in any way unfit or
unprepared to handle the inquiry,
investigation, and adjudication in a
prompt, unbiased, fair, and independent
manner, the ARIO will inform the
research institution in writing of the
Panel’s decision. An appropriate USDA
agency, as determined by the Panel, will
then conduct the inquiry, investigation,
and adjudication of research
misconduct in accordance with this
part. If an allegation of research
misconduct is made regarding
extramural research conducted at a
Federal research institution (whether
USDA or not), it is presumed that the
Federal research institution has research
misconduct procedures consistent with
the OSTP Policy. USDA reserves the
right to convene the Panel to assess the
sufficiency of a Federal agency’s
research misconduct procedures, should
there be any question whether the
agency’s procedures will ensure a fair,
unbiased, equitable, and independent
inquiry, investigation, and adjudication
process.
§ 422.5 Reservation of right to conduct
subsequent inquiry, investigation, and
adjudication.
(a) USDA reserves the right to conduct
its own inquiry, investigation, and
adjudication into allegations of research
misconduct at a research institution
conducting extramural research
subsequent to the proceedings of the
research institution related to the same
allegation. This may be necessary if the
USDA RIO or ARIO believes, in his or
her sound discretion, that despite the
Panel’s finding that the research
institution in question had appropriate
and OSTP-compliant research
misconduct procedures in place, the
research institution conducting the
extramural research at issue:
(1) Did not adhere to its own research
misconduct procedures;
(2) Did not conduct research
misconduct proceedings in a fair,
unbiased, or independent manner; or
(3) Has not completed research
misconduct inquiry, investigation, or
adjudication in a timely manner.
(b) Additionally, USDA reserves the
right to conduct its own inquiry,
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investigation, and adjudication into
allegations of research misconduct at a
research institution conducting
extramural research subsequent to the
proceedings of the research institution
related to the same allegation for any
other reason that the USDA RIO or
ARIO considers it appropriate to
conduct research misconduct
proceedings in lieu of the research
institution’s conducting the extramural
research at issue. This right is subject to
paragraph (c) of this section.
(c) In cases where the USDA RIO or
ARIO believes it is necessary for USDA
to conduct its own inquiry,
investigation, and adjudication
subsequent to the proceedings of the
research institution related to the same
allegation, the USDA RIO or ARIO shall
reconvene the Panel, which will
determine whether it is appropriate for
the relevant USDA agency to conduct
the research misconduct proceedings
related to the allegation(s) of research
misconduct. If the Panel determines that
it is appropriate for a USDA agency to
conduct the proceedings, the ARIO will
immediately notify the research
institution in question. The research
institution must then promptly provide
the relevant USDA agency with
documentation of the research
misconduct proceedings the research
institution has conducted to that point,
and the USDA agency will conduct
research misconduct proceedings in
accordance with the Agency research
misconduct procedures.
tkelley on DSK3SPTVN1PROD with RULES2
§ 422.6 Notification of USDA of allegations
of research misconduct.
(a) Research institutions that conduct
USDA-funded extramural research must
promptly notify OIG and the USDA RIO
of all allegations of research misconduct
involving USDA funds when the
institution inquiry into the allegation
warrants the institution moving on to an
investigation.
(b) Individuals at research institutions
who suspect research misconduct at the
institution should report allegations in
accordance with the institution’s
research misconduct policies and
procedures. Anyone else who suspects
that researchers or research institutions
performing Federally-funded research
may have engaged in research
misconduct is encouraged to make a
formal allegation of research
misconduct to OIG.
(1) OIG may be notified using any of
the following methods:
(i) Via the OIG Hotline: Telephone:
(202) 690–1622, (800) 424–9121, (202)
690–1202 (TDD).
(ii) Email: usda_hotline@oig.usda.gov.
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20:19 Dec 18, 2014
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(iii) U.S. Mail: United States
Department of Agriculture, Office of
Inspector General, P.O. Box 23399,
Washington, DC 20026–3399.
(2) The USDA RIO may be reached at:
USDA Research Integrity Officer, 214W
Whitten Building, Washington, DC
20250; telephone: 202–720–5923; Email:
researchintegrity@usda.gov.
(c) To the extent known, the following
details should be included in any formal
allegation:
(1) The name of the research projects
involved, the nature of the alleged
misconduct, and the names of the
individual or individuals alleged to be
involved in the misconduct;
(2) The source or sources of funding
for the research project or research
projects involved in the alleged
misconduct;
(3) Important dates;
(4) Any documentation that bears
upon the allegation; and
(5) Any other potentially relevant
information.
(d) Safeguards for informants give
individuals the confidence that they can
bring allegations of research misconduct
made in good faith to the attention of
appropriate authorities or serve as
informants to an inquiry or an
investigation without suffering
retribution. Safeguards include
protection against retaliation for
informants who make good faith
allegations, fair and objective
procedures for the examination and
resolution of allegations of research
misconduct, and diligence in protecting
the positions and reputations of those
persons who make allegations of
research misconduct in good faith. The
identity of informants who wish to
remain anonymous will be kept
confidential to the extent permitted by
law or regulation.
§ 422.7 Notification of ARIO during an
inquiry or investigation.
(a) Research institutions that conduct
USDA-funded extramural research must
promptly notify the ARIO should the
institution become aware during an
inquiry or investigation that:
(1) Public health or safety is at risk;
(2) The resources, reputation, or other
interests of USDA are in need of
protection;
(3) Research activities should be
suspended;
(4) Federal action may be needed to
protect the interest of a subject of the
investigation or of others potentially
affected;
(5) A premature public disclosure of
the inquiry into or investigation of the
allegation may compromise the process;
(6) The scientific community or the
public should be informed; or
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(7) There is reasonable indication of
possible violations of civil or criminal
law.
(b) If research misconduct
proceedings reveal behavior that may be
criminal in nature at any point during
the proceedings, the institution must
promptly notify the ARIO.
§ 422.8 Communication of research
misconduct policies and procedures.
Institutions that conduct USDAfunded extramural research are to
maintain and effectively communicate
to their staffs policies and procedures
relating to research misconduct,
including the guidelines in this part.
The institution is to inform their
researchers and staff members who
conduct USDA-funded extramural
research when and under what
circumstances USDA is to be notified of
allegations of research misconduct, and
when and under what circumstances
USDA is to be updated on research
misconduct proceedings.
§ 422.9
Documents required.
(a) A research institution that
conducts USDA-funded extramural
research must maintain the following
documents related to an allegation of
research misconduct at the research
institution:
(1) A written statement describing the
original allegation;
(2) A copy of the formal notification
presented to the subject of the
allegation;
(3) A written report describing the
inquiry stage and its outcome including
copies of all supporting documentation;
(4) A description of the methods and
procedures used to gather and evaluate
information pertinent to the alleged
misconduct during inquiry and
investigation stages;
(5) A written report of the
investigation, including the evidentiary
record and supporting documentation;
(6) A written statement of the
findings; and
(7) If applicable, a statement of
recommended corrective actions, and
any response to such a statement by the
subject of the original allegation, and/or
other interested parties, including any
corrective action plan.
(b) The research institution must
retain the documents specified in
paragraph (a) of this section for at least
3 years following the final adjudication
of the alleged research misconduct.
§ 422.10
Reporting to USDA.
Following completion of an
investigation into allegations of research
misconduct, the institution conducting
extramural research must provide to the
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ARIO a copy of the evidentiary record,
the report of the investigation,
recommendations made to the
institution’s adjudicating official, the
adjudicating official’s determination,
the institution’s corrective action taken
or planned, and the written response of
the individual who is the subject of the
allegation to any recommendations.
§ 422.11
Research records and evidence.
(a) A research institution that
conducts extramural research supported
by USDA funds, as the responsible legal
entity for the USDA-supported research,
has a continuing obligation to create and
maintain adequate records (including
documents and other evidentiary
matter) as may be required by any
subsequent inquiry, investigation,
finding, adjudication, or other
proceeding.
(b) Whenever an investigation is
initiated, the research institution must
promptly take all reasonable and
practical steps to obtain custody of all
relevant research records and evidence
as may be necessary to conduct the
research misconduct proceedings. This
must be accomplished before the
research institution notifies the
researcher/respondent of the allegation,
or immediately thereafter.
(c) The original research records and
evidence taken into custody by the
research institution shall be inventoried
and stored in a secure place and
manner. Research records involving raw
data shall include the devices or
instruments on which they reside.
However, if deemed appropriate by the
research institution or investigator,
research data or records that reside on
or in instruments or devices may be
copied and removed from those
instruments or devices as long as the
copies are complete, accurate, and have
substantially equivalent evidentiary
value as the data or records have when
the data or records reside on the
instruments or devices. Such copies of
data or records shall be made by a
disinterested, qualified technician and
not by the subject of the original
allegation or other interested parties.
When the relevant data or records have
been removed from the devices or
instruments, the instruments or devices
need not be maintained as evidence.
tkelley on DSK3SPTVN1PROD with RULES2
§ 422.12
Remedies for noncompliance.
USDA agencies’ implementation
procedures identify the administrative
actions available to remedy a finding of
research misconduct. Such actions may
include the recovery of funds,
correction of the research record,
debarment of the researcher(s) that
engaged in the research misconduct,
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20:19 Dec 18, 2014
Jkt 235001
proper attribution, or any other action
deemed appropriate to remedy the
instance(s) of research misconduct. The
agency should consider the seriousness
of the misconduct, including, but not
limited to, the degree to which the
misconduct was knowingly conducted,
intentional, or reckless; was an isolated
event or part of a pattern; or had
significant impact on the research
record, research subjects, other
researchers, institutions, or the public
welfare. In determining the appropriate
administrative action, the appropriate
agency must impose a remedy that is
commensurate with the infraction as
described in the finding of research
misconduct.
§ 422.13
§ 422.14 Relationship to other
requirements.
Some of the research covered by this
part also may be subject to regulations
of other governmental agencies (e.g., a
university that receives funding from a
USDA agency and also under a grant
from another Federal agency). If more
than one agency of the Federal
Government has jurisdiction, USDA will
cooperate with the other agency(ies) in
designating a lead agency. When USDA
is not the lead agency, it will rely on the
lead agency following its policies and
procedures in determining whether
there is a finding of research
misconduct. Further, USDA may, in
consultation with the lead agency, take
action to protect the health and safety of
the public, to promote the integrity of
the USDA-supported research and
research process, or to conserve public
funds. When appropriate, USDA will
seek to resolve allegations jointly with
the other agency or agencies.
TITLE 7—Agriculture
CHAPTER XXX—OFFICE OF THE CHIEF
FINANCIAL OFFICER, DEPARTMENT OF
AGRICULTURE
PARTS 3015, 3016, 3018, 3019, 3022,
and 3052—[REMOVED]
6. Remove 7 CFR parts 3015, 3016,
3018, 3019, 3022, and 3052.
■
Farm Service Agency
For the reasons discussed above in the
common preamble, FSA amends 7 CFR
Frm 00130
Fmt 4701
CHAPTER VII—FARM SERVICE AGENCY,
DEPARTMENT OF AGRICULTURE
PART 761—GENERAL PROGRAM
ADMINISTRATION
1. The authority citation for 7 CFR 761
continues to read as follows:
■
Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.
§ 761.5
[Amended]
2. Amend 761.5 by removing the
reference to ‘‘7 CFR part 3018’’ and
adding the reference to ‘‘2 CFR part
418’’ in its place.
■
PART 785—CERTIFIED STATE
MEDIATION PROGRAM
Appeals.
(a) If USDA relied on an institution to
conduct an inquiry, investigation, and
adjudication, the alleged person(s)
should first follow the institution’s
appeal policy and procedures.
(b) USDA agencies’ implementation
procedures identify the appeal process
when a finding of research misconduct
is elevated to the agency.
PO 00000
chapter VII and CCC amends 7 CFR
chapter XIV as follows:
Sfmt 4700
3. The authority citation for 7 CFR 785
continues to read as follows:
■
Authority: 5 U.S.C. 301; 7 as follows:
U.S.C. 1989; and 7 U.S.C. 5104.
§ 785.4
[Amended]
4. Amend § 785.4 as follows:
■ a. In paragraph (c)(1), remove ‘‘as set
forth or referenced in § 3016.22 of this
title’’ and add ‘‘in 2 CFR part 200,
subpart E’’ in its place, and
■ b. In paragraph (c)(2)(iii), remove
‘‘OMB Cost Principles found in part
3015, subpart T, of this title and OMB
Circular No. A–87’’ and add ‘‘2 CFR part
200, subpart E’’ in its place.
■ 5. Revise § 785.8(b) to read
■
§ 785.8 Reports by qualifying States
receiving mediation grants.
*
*
*
*
*
(b) Audits. Any qualifying State
receiving a grant under this part is
required to submit an audit report in
compliance with 2 CFR part 200,
subpart F.
■ 6. In § 785.9, revise the introductory
text to read as follows:
§ 785.9
Access to program records.
The regulations in 2 CFR 200.333
through 200.337 provide general record
retention and access requirements for
records pertaining to grants. In addition,
the State must maintain and provide the
Government access to pertinent records
regarding services delivered by the
certified State mediation program for
purposes of evaluation, audit and
monitoring of the certified State
mediation program as follows:
*
*
*
*
*
§ 785.11
[Amended]
7. Amend § 785.11(b) by removing
‘‘part 3017 of this title’’ and adding ‘‘2
CFR parts 180 and 417’’ in its place.
■
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CHAPTER XIV—COMMODITY CREDIT
CORPORATION, DEPARTMENT OF
AGRICULTURE
§ 1485.22
8. The authority citation for 7 CFR
1407 continues to read as follows:
■
§ 1485.23
Authority: 15 U.S.C. 714b.
9. Amend § 1407.2(a) by removing ‘‘7
CFR part 3017’’ and adding ‘‘2 CFR
parts 180 and 417’’ in its place.
10. The authority citation for 7 CFR
1485 continues to read as follows:
§ 1485.28
Authority: 7 U.S.C. 5623, 5662–5664 and
sec. 1302, Pub. L. 103–66, 107 Stat. 330.
11. Amend § 1485.10 as follows:
a. Revise paragraph (b)(1)(iv);
b. Remove paragraphs (b)(1)(v) and
(vii) through (x);
■ c. Redesignate paragraph (b)(1)(vi) and
(xi) as (b)(1)(v) and (viii) respectively;
and
■ d. Add paragraphs (b)(1)(vi) and (vii).
The revision and additions read as
follows:
■
■
■
General purpose and scope.
*
*
*
*
*
(b)(1) * * *
(iv) 2 CFR part 200—Uniform
Administrative Requirements, Cost
Principles, and Audit Requirements for
Federal Awards
*
*
*
*
*
(vi) 2 CFR part 418—New Restrictions
on Lobbying
(vii) 2 CFR part 421—Requirements
for Drug-Free Workplace (Financial
Assistance)
*
*
*
*
*
[Amended]
12. Amend § 1485.19 as follows:
a. In paragraph (b), first sentence, by
removing ‘‘set forth in the applicable
parts of this title (e.g., 7 CFR parts 3015,
3016, and 3019)’’ and adding ‘‘in 2 CFR
part 200’’ in their place.
■ b. In paragraph (c), second sentence,
by removing ‘‘in the applicable parts of
this title apply (e.g., 7 CFR parts 3015,
3016, and 3019)’’ and adding ‘‘in 2 CFR
part 200’’ in their place.
tkelley on DSK3SPTVN1PROD with RULES2
■
■
13. Amend § 1485.21(a) by removing
‘‘set forth in the applicable parts of this
title (e.g., 7 CFR parts 3015, 3016, and
3019)’’ and adding ‘‘in 2 CFR part 200’’
in its place.
■
20:19 Dec 18, 2014
[Amended]
17. Amend § 1485.28(a), third
sentence, by removing ‘‘in the
applicable parts of this title (e.g., 7 CFR
parts 1485, 3015, 3016, 3018, 3021,
3019, and 3052)’’ and adding ‘‘in 2 CFR
parts 200 and 421 and this part’’ in its
place.
■
§ 1485.29
[Amended]
18. Amend § 1485.29 as follows:
a. In paragraph (b), first sentence,
remove ‘‘e.g., 7 CFR parts 3015, 3016,
and 3019’’ and add ‘‘for example, 2 CFR
part 200’’ in its place, and in the second
sentence, remove ‘‘7 CFR part 3019’’
and add ‘‘2 CFR part 200’’ in its place,
and
b. In paragraph (d), seventh sentence,
remove ‘‘set forth in the applicable parts
of this title (e.g., 7 CFR parts 3015, 306,
3019)’’ and add ‘‘in 2 CFR part 200’’ in
its place.
■
■
§ 1485.34
[Amended]
19. Amend § 1485.34, first sentence by
removing ‘‘set forth in the applicable
parts of this title (e.g., 7 CFR parts 3015,
3016, and 3019)’’ and adding ‘‘in 2 CFR
part 200’’ in their place.
■ 20. Revise § 1485.35 to read as
follows:
■
§ 1485.35 Suspension, termination, and
closeout of agreements.
A program agreement may be
suspended or terminated in accordance
with the suspension and termination
procedures in 2 CFR part 200. If an
agreement is terminated, the applicable
regulations in 2 CFR part 200 will apply
to the closeout of the agreement.
Department of Agriculture
[Amended]
VerDate Sep<11>2014
[Amended]
16. Amend § 1485.27(b) by removing
‘‘in the applicable parts of this title (e.g.,
7 CFR parts 3015, 3016, and 3019)’’ and
adding ‘‘in 2 CFR part 200’’ in its place.
■
■
§ 1485.21
15. Amend § 1485.23(d), introductory
text, fifth sentence, by removing ‘‘e.g., 7
CFR parts 3015, 3016, and 3019’’ and
adding ‘‘for example, 2 CFR part 200’’
in its place.
§ 1485.27
PART 1485—GRANT AGREEMENTS
FOR THE DEVELOPMENT OF
FOREIGN MARKETS FOR U.S.
AGRICULTURAL COMMODITIES
§ 1485.19
[Amended]
CHAPTER XXXIV—NATIONAL INSTITUTE
OF FOOD AND AGRICULTURE
PART 3400—SPECIAL RESEARCH
GRANTS PROGRAM
1. The authority for part 3400
continues to read as follows:
■
■
[Amended]
■
§ 1485.10
TITLE 7—AGRICULTURE
14. Amend § 1485.22(e), first
sentence, by removing ‘‘OMB Circular
A–133 audit in accordance with 7 CFR
part 3052’’ and adding ‘‘audit in
accordance with 2 CFR part 200’’ in its
place.
■
PART 1407—DEBARMENT AND
SUSPENSION
§ 1407.2
[Amended]
Jkt 235001
National Institute of Food and
Agriculture (NIFA)
For the reasons stated in the
preamble, NIFA amends 7 CFR Part
Chapter XXXIV as follows:
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Frm 00131
Fmt 4701
75997
Sfmt 4700
Authority: 7 U.S.C. 450i(c).
§ 3400.6
[Amended]
2. In § 3400.6(a) remove the words
‘‘the Department’s Uniform Federal
Assistance Regulations’’ and add in
their place ‘‘2 CFR part 200.’’
■ 3. Revise § 3400.8 to read as follows:
■
§ 3400.8 Other Federal statutes and
regulations that apply.
(a) The Office of Management and
Budget (‘‘OMB’’) issued guidance on
Uniform Administrative Requirements,
Cost Principles, and Audit
Requirements for Federal Awards at 2
CFR part 200 on December 26, 2013. In
2 CFR 400.1, the Department adopted
OMB’s guidance in subparts A through
F of 2 CFR part 200, as supplemented
by 2 CFR part 400, as the Department’s
policies and procedures for uniform
administrative requirements, cost
principles, and audit requirements for
federal awards. As a result, this
regulation contains references to 2 CFR
part 200 as it has regulatory effect for
the Department’s programs and
activities.’’
(b) Several other Federal statutes and/
or regulations apply to grant proposals
considered for review or to research
project grants awarded under this part.
These include but are not limited to:
2 CFR part 200—Uniform
Administrative Requirements, Cost
Principles, and Audit Requirements for
Federal Awards.
2 CFR part 180 and Part 417—OMB
Guidelines to Agencies on GovernmentWide Debarment and Suspension
(Nonprocurement) and USDA
Nonprocurement Debarment and
Suspension.
7 CFR part 1c—USDA
Implementation of the Federal Policy for
the Protection of Human Subjects.
7 CFR 1.1—USDA Implementation of
Freedom of Information Act.
7 CFR part 3—USDA Implementation
of OMB Circular A–129 Regarding Debt
Collection.
7 CFR part 15, subpart A—USDA
Implementation of Title VI of the Civil
Rights Act of 1964.
7 CFR part 3407—NIFA procedures to
implement the National Environmental
Policy Act.
29 U.S.C. 794, section 504—
Rehabilitation Act of 1973, and 7 CFR
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part 15B (USDA implementation of
statute), prohibiting discrimination
based upon physical or mental handicap
in Federally assisted programs.
35 U.S.C. 200 et seq.—Bayh-Dole Act,
controlling allocation of rights to
inventions made by employees of small
business firms and domestic nonprofit
organizations, including universities, in
Federally assisted programs
(implementing regulations are contained
in 37 CFR part 401).
PART 3401—RANGELAND RESEARCH
GRANTS PROGRAM
4. The authority citation for part 3401
continues to read as follows:
■
Authority: Section 1470 of the National
Agricultural Research, Extension and
Teaching Policy Act of 1977 (7 U.S.C. 3316).
§ 3401.8
[Amended]
5. In the last sentence of § 3401.8(a)
remove the words ‘‘the Department’s
Uniform Federal Assistance
Regulations’’ and add in their place ‘‘2
CFR part 200.’’
■ 6. Revise § 3401.10 to read as follows:
■
tkelley on DSK3SPTVN1PROD with RULES2
§ 3401.10 Other Federal Statutes and
Regulations that Apply.
(a) The Office of Management and
Budget (‘‘OMB’’) issued guidance on
Uniform Administrative Requirements,
Cost Principles, and Audit
Requirements for Federal Awards at 2
CFR part 200 on December 26, 2013. In
2 CFR 400.1, the Department adopted
OMB’s guidance in subparts A through
F of 2 CFR part 200, as supplemented
by 2 CFR part 400, as the Department’s
policies and procedures for uniform
administrative requirements, cost
principles, and audit requirements for
federal awards. As a result, this
regulation contains references to 2 CFR
part 200 as it has regulatory effect for
the Department’s programs and
activities.’’
(b) Several other Federal statutes and/
or regulations apply to grant proposals
considered for review or to research
project grants awarded under this part.
These include but are not limited to:
2 CFR part 200—Uniform
Administrative Requirements, Cost
Principles, And Audit Requirements For
Federal Awards.
2 CFR part 180 and Part 417—OMB
Guidelines To Agencies On
Government-Wide Debarment And
Suspension (Nonprocurement) And
USDA Nonprocurement Debarment And
Suspension
7 CFR part 1c—USDA
implementation of the Federal Policy for
the Protection of Human Subjects.
7 CFR 1.1—USDA implementation of
Freedom of Information Act.
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20:19 Dec 18, 2014
Jkt 235001
7 CFR part 3—USDA implementation
of OMB Circular A–129 regarding debt
collection.
7 CFR part 15, subpart A—USDA
implementation of Title VI of the Civil
Rights Act of 1964.
7 CFR part 3407—NIFA procedures to
implement the National Environmental
Policy Act;
29 U.S.C. 794 (section 504,
Rehabilitation Act of 1973) and 7 CFR
part 15B (USDA implementation of
statute)—prohibiting discrimination
based upon physical or mental handicap
in Federally assisted programs; and
35 U.S.C. 200 et seq.—Bayh-Dole Act,
controlling allocation of rights to
inventions made by employees of small
business firms and domestic nonprofit
organizations, including universities, in
Federally assisted programs
(implementing regulations are contained
in 37 CFR part 401).
■ 7. In § 3401.14, add a sentence at the
end of the section to read as follows:
§ 3401.14
Conflicts of interest.
* * * Administration of the peer
review group must be in accordance
with the Department’s conflict of
interest policy, 2 CFR 400.2.
PART 3402—FOOD AND
AGRICULTURAL SCIENCES
NATIONAL NEEDS GRADUATE AND
POSTGRADUATE FELLOWSHIP
GRANTS PROGRAM
8. The authority citation for part 3402
continues to read as follows:
■
Authority: 7 U.S.C. 3316.
§ 3402.19
[Amended]
9. In the last sentence of § 3402.19,
remove the words ‘‘the Department’s
Uniform Federal assistance regulations
(parts 3015 and 3019 of 7 CFR)’’ and
add in their place ‘‘2 CFR part 200.’’
■ 10. Revise § 3402.20 to read as
follows:
■
§ 3402.20 Other Federal Statutes and
Regulations that Apply.
(a) The Office of Management and
Budget (‘‘OMB’’) issued guidance on
Uniform Administrative Requirements,
Cost Principles, and Audit
Requirements for Federal Awards at 2
CFR part 200 on December 26, 2013. In
2 CFR 400.1, the Department adopted
OMB’s guidance in subparts A through
F of 2 CFR part 200, as supplemented
by 2 CFR part 400, as the Department’s
policies and procedures for uniform
administrative requirements, cost
principles, and audit requirements for
federal awards. As a result, this
regulation contains references to 2 CFR
part 200 as it has regulatory effect for
PO 00000
Frm 00132
Fmt 4701
Sfmt 4700
the Department’s programs and
activities.
(b) Several other Federal statutes and/
or regulations apply to grant proposals
considered for review or to research
project grants awarded under this part.
These include but are not limited to:
2 CFR part 200—Uniform
Administrative Requirements, Cost
Principles, and Audit Requirements for
Federal Awards.
2 CFR part 180 and Part 417—OMB
Guidelines to Agencies on GovernmentWide Debarment And Suspension
(Nonprocurement) And USDA
Nonprocurement Debarment And
Suspension
7 CFR part 1c—USDA
Implementation of the Federal Policy for
the Protection of Human Subjects.
7 CFR 1.1—USDA Implementation of
Freedom of Information Act.
7 CFR part 3—USDA Implementation
of OMB Circular A–129 Regarding Debt
Collection.
7 CFR part 15, subpart A—USDA
Implementation of Title VI of the Civil
Rights Act of 1964.
7 CFR part 3407—NIFA procedures to
implement the National Environmental
Policy Act;
29 U.S.C. 794 (section 504,
Rehabilitation Act of 1973) and 7 CFR
part 15B (USDA implementation of
statute)—prohibiting discrimination
based upon physical or mental handicap
in Federally assisted programs; and
35 U.S.C. 200 et seq.—Bayh-Dole Act,
controlling allocation of rights to
inventions made by employees of small
business firms and domestic nonprofit
organizations, including universities, in
Federally assisted programs
(implementing regulations are contained
in 37 CFR part 401).
PART 3403—SMALL BUSINESS
INNOVATION RESEARCH GRANTS
PROGRAM
11. The authority citation for part
3403 continues to read as follows:
■
Authority: 15 U.S.C. 638.
§ 3403.1
[Amended]
12. In the last sentence of § 3403.1(a),
remove the words ‘‘the Office of
Extramural Programs,’’ before ‘‘NIFA.’’
■
§ 3403.12
[Amended]
13. In the last sentence of § 3403.12,
remove the words ‘‘the Department’s
Uniform Federal Assistance Regulations
(7 CFR part 3015)’’ and add in their
place ‘‘2 CFR part 200.’’
■ 14. Revise § 3403.15 to read as
follows:
■
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§ 3403.15 Other Federal statutes and
regulations that apply.
(a) The Office of Management and
Budget (‘‘OMB’’) issued guidance on
Uniform Administrative Requirements,
Cost Principles, and Audit
Requirements for Federal Awards at 2
CFR part 200 on December 26, 2013. In
2 CFR 400.1, the Department adopted
OMB’s guidance in subparts A through
F of 2 CFR part 200, as supplemented
by 2 CFR part 400, as the Department’s
policies and procedures for uniform
administrative requirements, cost
principles, and audit requirements for
federal awards. As a result, this
regulation contains references to 2 CFR
part 200 as it has regulatory effect for
the Department’s programs and
activities.’’
(b) Several other Federal statutes and/
or regulations apply to grant proposals
considered for review or to research
project grants awarded under this part.
These include but are not limited to:
2 CFR part 200—Uniform
Administrative Requirements, Cost
Principles, and Audit Requirements for
Federal Awards.
2 CFR part 180 and Part 417—OMB
Guidelines to Agencies on GovernmentWide Debarment and Suspension
(Nonprocurement) and USDA
Nonprocurement Debarment And
Suspension
7 CFR part 1c—USDA
Implementation of the Federal Policy for
the Protection of Human Subjects.
7 CFR 1.1—USDA Implementation of
Freedom of Information Act.
7 CFR part 3—USDA Implementation
of OMB Circular A–129 Regarding Debt
Collection.
7 CFR part 15, subpart A—USDA
Implementation of Title VI of the Civil
Rights Act of 1964.
7 CFR part 3407—NIFA Procedures to
Implement the National Environmental
Policy Act;
29 U.S.C. 794 (section 504,
Rehabilitation Act of 1973) and 7 CFR
part 15B (USDA implementation of
statute)—prohibiting discrimination
based upon physical or mental handicap
in Federally assisted programs; and
35 U.S.C. 200 et seq.—Bayh-Dole Act,
controlling allocation of rights to
inventions made by employees of small
business firms and domestic nonprofit
organizations, including universities, in
Federally assisted programs
(implementing regulations are contained
in 37 CFR part 401).
PART 3405—HIGHER EDUCATION
CHALLENGE GRANTS PROGRAM
15. The authority citation for part
3405 continues to read as follows:
■
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Authority: Sec. 1470, National Agricultural
Research, Extension, and Teaching Policy
Act of 1977, as amended (7 U.S.C. 3316).
§ 3405.9
[Amended]
16. In the second sentence of § 3405.9,
remove the words ‘‘OMB Circular No.
A–21’’ and add in their place ‘‘2 CFR
part 200.’’
■
§ 3405.11
[Amended]
17. In § 3405.11(g)(2)(v), remove the
words ‘‘OMB Circulars A–110, ‘Uniform
Administrative Requirements for Grants
and Agreements with Institutions of
Higher Education, Hospitals and Other
Non-Profit Organizations,’ and A–21
‘Cost Principles for Educational
Institutions’’’ and add in their place
‘‘2 CFR part 200 and Part 400.’’
■
§ 3405.17
[Amended]
18. In § 3405.17(a), remove the words
‘‘the Department’s Uniform
Administrative Requirements for Grants
and Agreements with Institutions of
Higher Education, Hospitals and Other
Non-Profit Organizations (7CFR part
3019)’’ and replace with ‘‘2 CFR part
200.’’
■ 19. Revise § 3405.20 to read as
follows:
■
75999
7 CFR part 1c—USDA
Implementation of the Federal Policy for
the Protection of Human Subjects.
7 CFR 1.1—USDA Implementation of
Freedom of Information Act.
7 CFR part 3—USDA Implementation
of OMB Circular A–129 Regarding Debt
Collection.
7 CFR part 15, subpart A—USDA
Implementation of Title VI of the Civil
Rights Act of 1964.
7 CFR part 3407—NIFA Procedures
To Implement The National
Environmental Policy Act;
29 U.S.C. 794 (section 504,
Rehabilitation Act of 1973) and 7 CFR
part 15B (USDA implementation of
statute)—prohibiting discrimination
based upon physical or mental handicap
in Federally assisted programs; and
35 U.S.C. 200 et seq.—Bayh-Dole Act,
controlling allocation of rights to
inventions made by employees of small
business firms and domestic nonprofit
organizations, including universities, in
Federally assisted programs
(implementing regulations are contained
in 37 CFR part 401).
PART 3406—1890 INSTITUTION
CAPACITY BUILDING GRANTS
PROGRAM
20. The authority citation for part
3406 continues to read as follows:
§ 3405.20 Other Federal statutes and
regulations that apply.
■
(a) The Office of Management and
Budget (‘‘OMB’’) issued guidance on
Uniform Administrative Requirements,
Cost Principles, and Audit
Requirements for Federal Awards at 2
CFR part 200 on December 26, 2013. In
2 CFR 400.1, the Department adopted
OMB’s guidance in subparts A through
F of 2 CFR part 200, as supplemented
by 2 CFR part 400, as the Department’s
policies and procedures for uniform
administrative requirements, cost
principles, and audit requirements for
federal awards. As a result, this
regulation contains references to 2 CFR
part 200 as it has regulatory effect for
the Department’s programs and
activities.’’
(b) Several other Federal statutes and/
or regulations apply to grant proposals
considered for review or to research
project grants awarded under this part.
These include but are not limited to:
2 CFR part 200—Uniform
Administrative Requirements, Cost
Principles, and Audit Requirements for
Federal Awards.
2 CFR part 180 and Part 417—OMB
Guidelines to Agencies on GovernmentWide Debarment and Suspension
(Nonprocurement) and USDA
Nonprocurement Debarment and
Suspension
Authority: Sec. 1470, National
Agricultural Research, Extension, and
Teaching Policy Act of 1977, as amended (7
U.S.C. 3316).
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§ 3406.10
[Amended]
21. In § 3406.10, remove the words
‘‘OMB Circular No. A–21’’ and add in
their place ‘‘2 CFR part 200’’.
■
§ 3406.24
[Amended]
22. In § 3406.24(a), remove the words
‘‘the Department’s Uniform
Administrative Requirements for Grants
and Agreements with Institutions of
Higher Education, Hospitals and Other
Non-Profit Organizations(7 CFR part
3019)’’ and add in their place ‘‘2 CFR
part 200 and Part 400.’’
■ 23. Revise § 3406.27 to read as
follows:
■
§ 3406.27 Other Federal Statutes and
Regulations that Apply.
(a) The Office of Management and
Budget (‘‘OMB’’) issued guidance on
Uniform Administrative Requirements,
Cost Principles, and Audit
Requirements for Federal Awards at 2
CFR part 200 on December 26, 2013. In
2 CFR 400.1, the Department adopted
OMB’s guidance in subparts A through
F of 2 CFR part 200, as supplemented
by 2 CFR part 400, as the Department’s
policies and procedures for uniform
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administrative requirements, cost
principles, and audit requirements for
federal awards. As a result, this
regulation contains references to 2 CFR
part 200 as it has regulatory effect for
the Department’s programs and
activities.’’
(b) Several other Federal statutes and/
or regulations apply to grant proposals
considered for review or to research
project grants awarded under this part.
These include but are not limited to:
2 CFR part 200—Uniform
Administrative Requirements, Cost
Principles, And Audit Requirements For
Federal Awards.
2 CFR part 180 and Part 417—OMB
Guidelines To Agencies On
Government-Wide Debarment And
Suspension (Nonprocurement) And
USDA Nonprocurement Debarment And
Suspension
7 CFR part 1c—USDA
implementation of the Federal Policy for
the Protection of Human Subjects.
7 CFR 1.1—USDA implementation of
Freedom of Information Act.
7 CFR part 3—USDA implementation
of OMB Circular A–129 regarding debt
collection.
7 CFR part 15, subpart A—USDA
implementation of Title VI of the Civil
Rights Act of 1964.
7 CFR part 3407—NIFA procedures to
implement the National Environmental
Policy Act;
29 U.S.C. 794 (section 504,
Rehabilitation Act of 1973) and 7 CFR
part 15B (USDA implementation of
statute)—prohibiting discrimination
based upon physical or mental handicap
in Federally assisted programs; and
35 U.S.C. 200 et seq.—Bayh-Dole Act,
controlling allocation of rights to
inventions made by employees of small
business firms and domestic nonprofit
organizations, including universities, in
Federally assisted programs
(implementing regulations are contained
in 37 CFR part 401).
PART 3407—IMPLEMENTATION OF
NATIONAL ENVIRONMENTAL POLICY
ACT
24. The authority citation for part
3407 continues to read as follows:
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■
Authority: National Environmental Policy
Act of 1969, as amended, 42 U.S.C. 4321 et
seq.; E.O. 11514, 34 FR 4247, as amended by
E.O. 11991, 42 FR 26927; E.O. 12144, 44 FR
11957; 5 U.S.C. 301; 40 CFR parts 1500–1508;
and 7 CFR part 1b.
§ 3407.4
[Amended]
25. In the introductory text of
§ 3407.4, correct the word ‘‘responsibe’’
to read ‘‘responsible’’.
■
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PART 3415—BIOTECHNOLOGY RISK
ASSESSMENT RESEARCH GRANTS
PROGRAM
26. The authority citation for part
3415 continues to read as follows:
■
Authority: 5 U.S.C. 301 and 7 U.S.C. 5921.
§ 3415.6
[Amended]
27. In § 3415.6(a), remove the words
‘‘and the Department’s assistance
regulations (part 3015 and part 3016 of
this title)’’ and add in their place ‘‘2
CFR part 200.’’
■ 28. Revise § 3415.8 to read as follows:
■
§ 3415.8 Other Federal statutes and
regulations that apply.
(a) The Office of Management and
Budget (‘‘OMB’’) issued guidance on
Uniform Administrative Requirements,
Cost Principles, and Audit
Requirements for Federal Awards at 2
CFR part 200 on December 26, 2013. In
2 CFR 400.1, the Department adopted
OMB’s guidance in subparts A through
F of 2 CFR part 200, as supplemented
by 2 CFR part 400, as the Department’s
policies and procedures for uniform
administrative requirements, cost
principles, and audit requirements for
federal awards. As a result, this
regulation contains references to 2 CFR
part 200 as it has regulatory effect for
the Department’s programs and
activities.’’
(b) Several other Federal statutes and/
or regulations apply to grant proposals
considered for review or to research
project grants awarded under this part.
These include but are not limited to:
2 CFR part 200—Uniform
Administrative Requirements, Cost
Principles, and Audit Requirements for
Federal Awards.
2 CFR part 180 and Part 417—OMB
Guidelines to Agencies on GovernmentWide Debarment And Suspension
(Nonprocurement) and USDA
Nonprocurement Debarment And
Suspension
7 CFR part 1c—USDA
Implementation of the Federal Policy for
the Protection of Human Subjects.
7 CFR 1.1—USDA Implementation of
Freedom of Information Act.
7 CFR part 3—USDA Implementation
of OMB Circular A–129 Regarding Debt
Collection.
7 CFR part 15, subpart A—USDA
Implementation of Title VI of the Civil
Rights Act of 1964.
7 CFR part 3407—NIFA Procedures
To Implement the National
Environmental Policy Act;
29 U.S.C. 794 (section 504,
Rehabilitation Act of 1973) and 7 CFR
part 15B (USDA implementation of
statute)—prohibiting discrimination
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Fmt 4701
Sfmt 4700
based upon physical or mental handicap
in Federally assisted programs; and
35 U.S.C. 200 et seq.—Bayh-Dole Act,
controlling allocation of rights to
inventions made by employees of small
business firms and domestic nonprofit
organizations, including universities, in
Federally assisted programs
(implementing regulations are contained
in 37 CFR part 401).
PART 3430—COMPETITIVE AND
NONCOMPETITIVE NON-FORMULA
FEDERAL ASSISTANCE PROGRAMS—
GENERAL AWARD ADMINISTRATIVE
PROVISIONS
29. The authority citation for part
3430 continues to read as follows:
■
Authority: 7 U.S.C. 3316; Pub. L. 106–107
(31 U.S.C. 6101 note).
§ 3430.1
[Amended]
30. In § 3430.1(a), remove the words
‘‘7 CFR parts 3016 (State, local, and
tribal governments), 3019 (institutions
of higher education, hospitals, and
nonprofits), and 3015 (all others)’’ and
add in their place ‘‘2 CFR part 200,
Uniform Administrative Requirements,
Cost Principles, and Audit
Requirements for Federal Awards.’’
■
§ 3430.2
[Amended]
31. In § 3430.2, remove the definitions
of the terms ‘‘State’’ and ‘‘Third party
in-kind contributions.’’
■ 32. Revise § 3430.4 to read as follows:
■
§ 3430.4 Other Federal statutes and
regulations that apply.
(a) The Office of Management and
Budget (‘‘OMB’’) issued guidance on
Uniform Administrative Requirements,
Cost Principles, and Audit
Requirements for Federal Awards at 2
CFR part 200 on December 26, 2013. In
2 CFR 400.1, the Department adopted
OMB’s guidance in subparts A through
F of 2 CFR part 200, as supplemented
by 2 CFR part 400, as the Department’s
policies and procedures for uniform
administrative requirements, cost
principles, and audit requirements for
federal awards. As a result, this
regulation contains references to 2 CFR
part 200 as it has regulatory effect for
the Department’s programs and
activities.’’
(b) Several other Federal statutes and/
or regulations apply to grant proposals
considered for review or to research
project grants awarded under this part.
These include but are not limited to:
2 CFR part 200—Uniform
Administrative Requirements, Cost
Principles, And Audit Requirements For
Federal Awards.
2 CFR part 180 and Part 417—OMB
Guidelines to Agencies on Government-
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Wide Debarment and Suspension
(Nonprocurement) and USDA
Nonprocurement Debarment and
Suspension
7 CFR part 1c—USDA
Implementation of the Federal Policy for
the Protection of Human Subjects.
7 CFR 1.1—USDA Implementation of
Freedom of Information Act.
7 CFR part 3—USDA Implementation
of OMB Circular A–129 Regarding Debt
Collection.
7 CFR part 15, subpart A—USDA
implementation of Title VI of the Civil
Rights Act of 1964.
7 CFR part 3407—NIFA Procedures to
Implement the National Environmental
Policy Act;
29 U.S.C. 794 (section 504,
Rehabilitation Act of 1973) and 7 CFR
part 15B (USDA implementation of
statute)—prohibiting discrimination
based upon physical or mental handicap
in Federally assisted programs; and
35 U.S.C. 200 et seq.—Bayh-Dole Act,
controlling allocation of rights to
inventions made by employees of small
business firms and domestic nonprofit
organizations, including universities, in
Federally assisted programs
(implementing regulations are contained
in 37 CFR part 401).
§ 3430.12
[Amended]
33. In § 3430.12(a), remove the words
‘‘the Office of Management and Budget
(OMB) policy directive 68 FR 37370–
37379 (June 23, 2003)’’ and replace with
‘‘Appendix I to 2 CFR part 200’’.
■
§ 3430.41
[Amended]
and add in their place ‘‘Office of Grants
and Financial Management (OGFM)
Deputy Director.’’
accordance with subpart F of 2 CFR part
200, as adopted by USDA through 2 CFR
part 400.
§ 3430.62
Subpart E—Distance Learning and
Telemedicine Grant Program
[Amended]
37. In § 3430.62(c), remove all
references to ‘‘OEP Assistant Director’’
and add in their place ‘‘Office of Grants
and Financial Management (OGFM)
Deputy Director.’’
■
PART 3431—VETERINARY MEDICINE
LOAN REPAYMENT PROGRAM
38. The authority citation for part
3431 continues to read as follows:
■
Authority: 7 U.S.C. 3151a; Pub. L. 106–
107 (31 U.S.C. 6101 note).
§ 3431.20
[Amended]
39. In § 3431.20, in the first sentence
remove the words ‘‘Office of Extramural
Programs (OEP)’’ after ‘‘NIFA,’’ and in
the second sentence remove ‘‘OEP’’ and
add in its place ‘‘NIFA.’’
■
Department of Agriculture
Rural Development
For the reasons set forth in the
common preamble, chapters XVII, XVIII,
XXXV and XLII of Subtitle B, title 7,
Code of Federal Regulations are
amended as follows:
CHAPTER XVII—RURAL UTILITIES
SERVICE, DEPARTMENT OF
AGRICULTURE
PART 1703—RURAL DEVELOPMENT
1. The authority citation for part 1703
continues to read as follows:
■
34. In § 3430.41:
a. In paragraph (a), remove the words
‘‘parts 3015, 3016, 3019 of 7 CFR’’ and
add in their place‘‘2 CFR part 200.’’
■ b. In paragraph (b) introductory text,
remove ‘‘including, at a minimum, the
following:’’ and add in its place ‘‘noted
in section 210 of 2 CFR part 200.’’
■ c. Remove paragraphs (b)(1) through
(10).
Authority: 7 U.S.C. 901 et seq. and 950aaa
et seq.
§ 3430.54
(a) For financial assistance of
$100,000 or greater, prior to the
disbursement of a grant and a loan, the
recipient, if it is not a unit of
government, will provide evidence of
fidelity bond coverage as required by 2
CFR part 200, which is adopted by
USDA through 2 CFR part 400.
*
*
*
*
*
■ 3. Amend § 1703.108 by revising
paragraph (b) to read as follows:
■
■
[Amended]
35. In § 3430.54, remove the words
‘‘the applicable assistance regulations
and cost principles’’ and add in their
place ‘‘2 CFR part 200’’.
■
§ 3430.59
[Amended]
36. Amend § 3430.59 as follows:
a. Remove all references to ‘‘the Office
of Extramural Programs’’ or ‘‘OEP’’ and
add in their place ‘‘NIFA.’’
■ b. In the last sentence of paragraph (c),
remove the words ‘‘subject to 7 CFR part
3052’’ and add in their place ‘‘2 CFR
200.521.’’
■ c. In paragraph (e), remove all
references to ‘‘OEP Assistant Director’’
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■
■
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Subpart D—Distance Learning and
Telemedicine Loan and Grant
Program—General
2. Amend § 1703.106 by revising
paragraph (a) to read as follows:
■
§ 1703.106
grants.
§ 1703.108
Disbursement of loans and
Audit requirements.
*
*
*
*
*
(b) If the recipient is a State or local
government, or non-profit organization,
the recipient shall provide an audit in
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4. Amend § 1703.125 by revising
paragraphs (i)(5), (i)(6), (i)(7) and (l) to
read as follows:
■
§ 1703.125
Completed application.
(i) * * *
(5) Drug-Free Workplace Act of 1998
(41 U.S.C. 8101 et. seq.), 2 CFR part 421;
(6) E.O.s 12549 and 12689, Debarment
and Suspension, 2 CFR part 180, which
is adopted by USDA through 2 CFR part
417;
(7) Byrd Anti-Lobbying Amendment
(31 U.S.C. 1352), 2 CFR part 418.
*
*
*
*
*
(l) Federal debt certification. The
applicant must provide a certification
that it is not delinquent on any
obligation owed to the government (31
U.S.C. 3720B).
*
*
*
*
*
■ 5. Amend § 1703.127 by revising
paragraph (g) to read as follows:
§ 1703.127 Application selection
provisions.
*
*
*
*
*
(g) Grantees shall comply with all
applicable provisions of 2 CFR part 200,
as adopted by USDA through 2 CFR part
400.
Subpart F—Distance Learning and
Telemedicine Combination Loan and
Grant Program
6. Amend § 1703.134 by revising
paragraphs (g)(5), (g)(6), (g)(7) and (j) to
read as follows:
■
§ 1703.134
Completed application.
*
*
*
*
*
(g) * * *
(5) Drug-Free Workplace Act of 1998
(41 U.S.C. 8101 et. seq.), 2 CFR part 421;
(6) E.O.s 12549 and 12689, Debarment
and Suspension, 2 CFR part 180, which
is adopted by USDA through 2 CFR part
417;
(7) Byrd Anti-Lobbying Amendment
(31 U.S.C. 1352), 2 CFR part 418.
*
*
*
*
*
(j) Federal debt certification. The
applicant must provide evidence that it
is not delinquent on any obligation
owed to the government (31 U.S.C.
3720B).
*
*
*
*
*
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7. Amend § 1703.144 by revising
paragraphs (g)(5), (g)(6), (g)(7) and (j) to
read as follows:
■
§ 1703.144
12. Amend § 1709.19 by revising
paragraph (a) through (e) and removing
paragraph (f), to read as follows:
■
Subpart G—Distance Learning and
Telemedicine Loan Program
Completed application.
*
*
*
*
*
(g) * * *
(5) Drug-Free Workplace Act of 1998
(41 U.S.C. 8101 et. seq.), 2 CFR part 421;
(6) E.O.s 12549 and 12689, Debarment
and Suspension, 2 CFR part 180, which
is adopted by USDA through 2 CFR part
417;
(7) Byrd Anti-Lobbying Amendment
(31 U.S.C. 1352), 2 CFR part 418.
*
*
*
*
*
(j) Federal debt certification. The
applicants must provide a certification
that it is not delinquent on any
obligation owed to the government (31
U.S.C. 3720B).
*
*
*
*
*
§ 1709.19
Other USDA regulations.
*
*
*
*
*
(a) Uniform Administrative
Requirements, Cost Principles, and
Audit Requirements for Federal Awards,
2 CFR part 200, as adopted by USDA
through 2 CFR part 400;
(b) Drug-Free Workplace Act of 1998
(41 U.S.C. 8101 et. seq.), 2 CFR part 421;
(c) E.O.s 12549 and 12689, Debarment
and Suspension, 2 CFR part 180, which
is adopted by USDA through 2 CFR part
417;
(d) Byrd Anti-Lobbying Amendment
(31 U.S.C. 1352), 2 CFR part 418; and
(e) Subpart F of 2 CFR 200, as adopted
by USDA through 2 CFR 400.
■ 13. Amend § 1709.21 by revising
paragraph (b) to read as follows:
§ 1709.21
Audit requirements.
*
Subpart A—General Requirements
*
*
*
*
(b) If the grantee is a State or local
government, or a non-profit corporation
(other than an RUS Electric or
Telecommunication Borrower), the
recipient shall provide an audit in
accordance with subpart F of 2 CFR part
200, as adopted by USDA through 2 CFR
part 400.
9. Amend § 1709.12 by revising the
introductory text to read as follows:
Subpart B—RUS High Cost Energy
Grant Program
§ 1709.12
■
PART 1709—ASSISTANCE TO HIGH
ENERGY COST COMMUNITIES
8. The authority citation for part 1709
continues to read as follows:
■
Authority: 5 U.S.C. 301, 7 U.S.C. 901 et
seq.
■
Reporting requirements.
To support Agency monitoring of
project performance and use of grant
funds, Grantees shall file periodic
reports, required under 2 CFR part 200,
as adopted by USDA through 2 CFR part
400, as provided in this part, and the
grant agreement as follows:
*
*
*
*
*
■ 10. Amend § 1709.13 by revising the
second sentence to read as follows:
§ 1709.13
Grant administration.
* * * Administration of RUS grants
is governed by the provisions of this
subpart and subpart B of this part, the
terms of the grant agreement and, as
applicable, the provisions of 2 CFR part
200, as adopted by USDA through 2 CFR
part 400.
■ 11. Amend § 1709.16 by revising the
second sentence to read as follows:
tkelley on DSK3SPTVN1PROD with RULES2
§ 1709.16
Performance reviews.
* * * If the grantee does not comply
with or does not meet the performance
criteria set out in the grant agreement,
the Administrator may require
amendment of the grant agreement, or
may suspend or terminate the grant
pursuant to 2 CFR part 200, as adopted
by USDA through 2 CFR part 400.
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14. Amend § 1709.102 by revising
paragraph (a) to read as follows:
§ 1709.102
Policy.
(a) All high energy cost grants will be
awarded competitively subject to the
limited exceptions in 2 CFR 415.1(d).
*
*
*
*
*
Subpart G—Recovery of Financial
Assistance Used for Unauthorized
Purposes
15. Amend § 1709.601 by revising the
last sentence to read as follows:
■
§ 1709.601
Policy.
* * * The Agency shall make full use
of available authority and procedures,
including but not limited to those
available under 2 CFR part 200, as
adopted by USDA through 2 CFR part
400.
PART 1710—GENERAL AND PRE–
LOAN POLICIES AND PROCEDURES
COMMON TO ELECTRIC LOANS AND
GUARANTEES
16. The authority citation for part
1710 continues to read as follows:
■
Authority: 7 U.S.C. 901 et seq., 1921 et
seq., 6941 et seq.
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Subpart C—Loan Purposes and Basic
Policies
17. Revise § 1710.123 to read as
follows:
■
§ 1710.123
Debarment and Suspension.
Borrowers are required to comply
with certain requirements on debarment
and suspension as set forth in 2 CFR
part 180, as adopted by USDA through
2 CFR part 417.
■ 18. Revise § 1710.125 to read as
follows:
§ 1710.125
Restrictions on lobbying.
Borrowers are required to comply
with certain requirements with respect
to restrictions on lobbying activities. See
2 CFR part 418.
■ 19. Revise § 1710.127 to read as
follows:
§ 1710.127
Drug free workplace.
Borrowers are required to comply
with the Drug Free Workplace Act of
1988 (41 U.S.C. 8101 et. seq.) and the
Act’s implementing regulations (2 CFR
part 421) when a borrower receives a
Federal grant or enters into a
procurement contract awarded pursuant
to the provisions of the Federal
Acquisition Regulation (title 48 CFR) to
sell to a Federal agency property or
services having a value of $25,000 or
more.
Subpart I—Application Requirements
and Procedures for Loans
20. Amend § 1710.501 by revising
paragraphs (a)(10) and (a)(12) to read as
follows:
■
§ 1710.501
Loan applications documents.
(a) * * *
(10) Form AD–1047, Certification
Regarding Debarment, Suspension, and
Other Responsibility Matters—Primary
Covered Transactions. This statement
certifies that the borrower will comply
with certain regulations on debarment
and suspension required by Executive
Order 12549, Debarment and
Suspension (3 CFR, 1986 Comp., p.
189). See 2 CFR 417, and § 1710.123.
*
*
*
*
*
(12) Lobbying. The following
information on lobbying is required
pursuant to 2 CFR 418, and § 1710.125.
Borrowers applying for both insured
and guaranteed financing should
consult RUS before submitting this
information.
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PART 1717—POST–LOAN POLICIES
AND PROCEDURES COMMON TO
INSURED AND GUARANTEED
ELECTRIC LOANS
CFR part 180, adopted by USDA
through 2 CFR part 417;
*
*
*
*
*
21. The authority citation for part
1717 continues to read as follows:
PART 1724—ELECTRIC
ENGINEERING, ARCHITECTURAL
SERVICES AND DESIGN POLICIES
AND PROCEDURES
■
Authority: 7 U.S.C. 901 et seq., 1921 et
seq., 6941 et seq.
Subpart R—Lien Accommodations and
Subordinations for 100 Percent Private
Financing
26. The authority citation for part
1724 continues to read as follows:
■
§ 1717.855 Application contents: Advance
approval—100 percent private financing of
distribution, sub-transmission and
headquarters facilities, and certain other
community infrastructure.
*
*
*
*
*
(k) Form AD–1047, Certification
Regarding Debarment, Suspension, and
Other Responsibility Matters—Primary
Covered Transactions, as required by 2
CFR part 180, as adopted by USDA
through 2 CFR part 417;
*
*
*
*
*
■ 23. Amend § 1717.857 by revising
paragraph (c)(7) to read as follows:
§ 1717.857 Refinancing of existing secured
debt—distribution and power supply
borrowers.
(c) * * *
(7) Form AD–1047, Certification
Regarding Debarment, Suspension, and
Other Responsibility Matters—Primary
Covered Transactions, as required by 2
CFR part 417:
*
*
*
*
*
■ 24. Amend § 1717.858 by revising
paragraph (c)(9) to read as follows:
§ 1717.858 Lien subordination for rural
development investments.
tkelley on DSK3SPTVN1PROD with RULES2
§ 1717.860 Lien accommodations and
subordinations under section 306E of the
RE Act.
(c) * * *
(2) * * *
(vi) * * *
(C) Form AD–1047, Certification
Regarding Debarment, Suspension, and
Other Responsibility Matters—Primary
Covered Transactions, as required by 2
Jkt 235001
Authority: 7 U.S.C. 901 et seq., 1921 et
seq.; Pub. L. 103–354, 108 Stat. 3178 (7
U.S.C. 6941 et seq.).
Subpart C—The Loan Application
■
§ 1737.22
■
27. Revise § 1724.7 to read as follows:
§ 1724.7
Debarment and suspension.
Borrowers shall comply with the
requirements on debarment and
suspension in connection with
procurement activities set forth in 2 CFR
part 180, as adopted by USDA through
2 CFR part 417, particularly with
respect to lower tier transactions, e.g.,
procurement contracts for goods or
services.
■ 28. Revise § 1724.8 to read as follows:
§ 1724.8
Restrictions on lobbying.
Borrowers shall comply with the
restrictions and requirements in
connection with procurement activities
as set forth in 2 CFR part 418.
PART 1726—ELECTRIC SYSTEM
CONSTRUCTION POLICIES AND
PROCEDURES
29. The authority citation for part
1726 continues to read as follows:
■
Authority: 7 U.S.C. 901 et seq., 1921 et
seq., 6941 et seq.
33. Amend § 1737.22 by revising
paragraph (b)(6) to read as follows:
Supplementary information.
*
*
*
*
*
(b) * * *
(6) Executed copy of Form AD–1047,
‘‘Certification Regarding Debarment,
Suspension, and Other Responsibility
Matters—Primary Covered
Transactions.’’
*
*
*
*
*
Subpart E—Interim Financing of
Construction of Telephone Facilities
34. Amend § 1737.41 by revising
paragraph (b)(2)(vi) to read as follows:
■
§ 1737.41 Procedure for obtaining
approval.
*
*
*
*
*
(b) * * *
(2) * * *
(vi) Executed copy of Form AD–1047,
‘‘Certification Regarding Debarment,
Suspension, and Other Responsibility
Matters—Primary Covered
Transactions.’’
*
*
*
*
*
Subpart F—Review of Application
Procedures
30. Revise § 1726.16 to read as
follows:
35. Amend § 1737.50 by revising
paragraphs (a)(2) and (b) to read as
follows:
§ 1726.16
§ 1737.50
■
(c) * * *
(9) Form AD–1047, Certification
Regarding Debarment, Suspension, and
Other Responsibility Matters—Primary
Covered Transactions, as required by 2
CFR part 180, as adopted by USDA
through 2 CFR part 417;
*
*
*
*
*
■ 25. Amend § 1717.860 by revising
paragraph (c)(2)(vi)(C) to read as
follows:
20:19 Dec 18, 2014
32. The authority citation for part
1737 continues to read as follows:
■
Authority: 7 U.S.C. 901 et seq., 1921 et
seq., 6941 et seq.
■
VerDate Sep<11>2014
PART 1737—PRE-LOAN POLICIES
AND PROCEDURES COMMON TO
INSURED AND GUARANTEED
TELECOMMUNICATIONS LOANS
Subpart A—General
22. Amend § 1717.855 by revising
paragraph (k) to read as follows:
76003
Debarment and suspension.
Borrowers are required to comply
with certain requirements on debarment
and suspension in connection with
procurement activities set forth in 2 CFR
part 180, as adopted by USDA through
2 CFR part 417, particularly with
respect to lower tier transactions, e.g.,
procurement contracts for goods or
services.
■ 31. Revise § 1726.17 to read as
follows:
§ 1726.17
Restrictions on lobbying.
Borrowers are required to comply
with certain restrictions and
requirements in connection with
procurement activities as set forth in 2
CFR part 418.
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■
Loan approval requirements.
(a) * * *
(2) A completed certification Form
AD–1047, ‘‘Certification Regarding
Debarment, Suspension, and Other
Responsibility Matters—Primary
Covered Transactions;’’
*
*
*
*
*
(b) RUS shall review the completed
loan application, particularly noting
subscriber data, grades of service,
extended area service (EAS), connecting
company commitments, commercial
facilities, system and exchange
boundaries, and proposed acquisitions.
RUS shall review the LD to determine
that the system design is acceptable to
RUS, that the design is technically
correct, that the cost estimates are
reasonable, and that the design provides
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for area coverage service. RUS shall also
review the population and
incorporation status of all communities
served or to be served by the borrower
to determine if any nonrural areas are
served and if municipal franchises are
required. Any RUS lending for nonrural
areas must be in accordance with 7 CFR
part 1735. RUS shall also check the
‘‘List of Parties Excluded from Federal
Procurement of Nonprocurement
Programs’’, compiled, maintained and
distributed by General Services
Administration, to determine whether
the borrower is debarred, suspended,
ineligible, or voluntarily excluded (see 2
CFR 180.430).
*
*
*
*
*
36. The authority citation for part
1738 continues to read as follows:
Authority: Pub. L. 107–171, 7 U.S.C. 901
et seq.
37. Amend § 1738.156 to revise
paragraphs (a)(10) and (11) to read as
follows:
■
41. The authority citation for part
1740 continues to read as follows:
■
Other Federal requirements.
*
*
*
*
*
(a) * * *
(10) The regulations implementing
E.O. 12549, Debarment and Suspension
(2 CFR part 180, which is adopted by
USDA through 2 CFR part 417,
including subpart C of 2 CFR part 417,
‘‘Responsibilities of Participants
Regarding Transactions,’’ and 2 CFR
417.332.
(11) The requirements regarding
lobbying for Contracts, Grants, Loans
and Cooperative Agreements in 31
U.S.C. 1352 (2 CFR part 418).
*
*
*
*
*
PART 1739—BROADBAND GRANT
PROGRAM
38. The authority citation for part
1739 continues to read as follows:
■
Authority: Title III, Pub. L. 108–199, 118
Stat. 3.
tkelley on DSK3SPTVN1PROD with RULES2
Subpart A—Community Connect Grant
Program
39. Amend § 1739.15 as follows:
a. Revise the first sentence of the
introductory text;
■ b. Revise paragraph (l)(2);
■ c. Revise paragraph (l)(4);
The revisions read as follows:
VerDate Sep<11>2014
20:19 Dec 18, 2014
Jkt 235001
Audit requirements.
PART 1740—PUBLIC TELEVISION
STATION DIGITAL TRANSITION
GRANT PROGRAM
Subpart D—Direct Loan Terms
■
§ 1739.20
*
*
*
*
(b) If the recipient is a Tribal, State or
local government, or non-profit
organization, the recipient shall provide
an audit in accordance with subpart F
of 2 CFR part 200, as adopted by USDA
through 2 CFR part 400.
■
■
Completed application.
Applications should be prepared in
conformance with the provisions of this
part and all applicable regulations,
including 2 CFR part 200, as adopted by
USDA through 2 CFR part 400.
*
*
*
*
*
(l) * * *
(2) 2 CFR part 200, as adopted by
USDA through 2 CFR part 400.
*
*
*
*
*
(4) 2 CFR part 418—New Restrictions
on Lobbying;
*
*
*
*
*
■ 40. Amend § 1739.20 by revising
paragraph (b) to read as follows:
*
PART 1738—RURAL BROADBAND
ACCESS LOANS AND LOAN
GUARANTEES
§ 1738.156
§ 1739.15
Authority: Consolidated Appropriations
Act, 2005; Title III: Rural Development
Programs; Rural Utilities Service; Distance
Learning, Telemedicine, and Broadband
Program; Public Law 108–447.
Subpart A—Public Television Station
Digital Transition Grant Program
42. Amend § 1740.9 by revising
paragraphs (j)(5), (j)(6), and (j)(7) to read
as follows:
■
§ 1740.9
Grant application.
*
*
*
*
*
(j) * * *
(5) Drug-Free Workplace Act of 1998
(41 U.S.C. 8101 et. seq.), 2 CFR part 421;
(6) Executive Orders 12549 and
12689, Debarment and Suspension, 2
CFR part 180, which is adopted by
USDA through 2 CFR part 417; and
(7) Byrd Anti-Lobbying Amendment
(31 U.S.C. 1352), 2 CFR part 418.
*
*
*
*
*
PART 1773—POLICY ON AUDITS OF
RUS BORROWERS
43. The authority citation for part
1773 continues to read as follows:
■
Authority: 7 U.S.C. 901 et seq., 1921 et
seq., 6941 et seq.
Subpart B—RUS Audit Requirements
44. Amend § 1773.3 by revising
paragraphs (d) and (e) to read as follows:
■
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§ 1773.3
Annual audit.
*
*
*
*
*
(d) A borrower that qualifies as a unit
of state or local government or Indian
tribe as such terms are defined in the
Single Audit Act of 1984 (31 U.S.C.
7501 et seq.), the Single Audit Act
Amendments of 1996 (31 U.S.C. 7505 et
seq.) and OMB Circular A–133, Audits
of States and Local Government, and
Non Profit Organizations (which applies
for audits of fiscal years beginning prior
to December 26, 2014) and Subpart F of
2 CFR 200, Uniform Administrative
Requirements, Cost Principles, and
Audit Requirements, as adopted by
USDA though 2 CFR 400 (which applies
for fiscal years beginning on or after
December 26, 2014) must comply with
this part as follows:
(1) A borrower that expends $500,000
under OMB Circular A–133 (for audits
of fiscal years beginning prior to
December 26, 2014) and $750,000 under
Subpart F of 2 CFR part 200, as adopted
by USDA through 2 CFR part 400 (for
audits for fiscal years beginning after
December 26, 2014) or more in a year in
Federal awards must have an audit
performed and submit an auditor’s
report meeting the requirements of the
respective Single Audit Act
requirements
(2) An entity with loans less than
$500,000 under OMB Circular A–133
(for audits of fiscal years beginning prior
to December 26, 2014) and $750,000
under Subpart F of 2 CFR part 200, as
adopted by USDA through 2 CFR part
400 (for audits for fiscal years beginning
on or after December 26, 2014) in
Federal awards during the year must
have an audit performed in accordance
with the requirements of this part.
(3) A borrower must notify RUS, in
writing, within 30 days of the as of audit
date, of the total Federal awards
expended during the year and must
state whether it will have an audit
performed in accordance with OMB
Circular A–133 (for audits of fiscal years
beginning prior to December 26, 2014)
or Subpart F of 2 CFR part 200, as
adopted by USDA through 2 CFR part
400 (for audits for fiscal years beginning
on or after December 26, 2014) or this
part.
(i) A borrower that elects to comply
with this part must select a CPA that
meets the qualifications set forth in
§ 1773.5.
(ii) If an audit is performed in
accordance with OMB Circular A–133
(for audits of fiscal years beginning prior
to December 26, 2014) or Subpart F of
2 CFR part 200, as adopted by USDA
through 2 CFR part 400 (for audits for
fiscal years beginning after December
26, 2014, an auditor’s report that meets
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the requirements of the respective single
Audit Act requirements, will be
sufficient to satisfy that borrower’s
obligations under this part.
(e) OMB Circular A–133 and Subpart
F of 2 CFR part 200, as adopted by
USDA through 2 CFR part 400 do not
apply to audits of RUS electric and
telecommunications cooperatives and
commercial telecommunications
borrowers.
adopted by USDA through 2 CFR part
400.
*
*
*
*
*
PART 1775—TECHNICAL
ASSISTANCE GRANTS
48A. The authority citation for part
1775 continues to read as follows:
■
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16
U.S.C. 1005.
Subpart A—General Provisions
PART 1774—SPECIAL EVALUATION
ASSISTANCE FOR RURAL
COMMUNITIES AND HOUSEHOLDS
PROGRAM (SEARCH)
48B. Amend § 1775.5 by revising
paragraph (h) to read as follows:
■
§ 1775.5
45. The authority citation for part
1774 continues to read as follows:
■
Authority: 7 U.S.C. 1926(a)(2)(C)
Subpart A—General Provisions
46. Amend § 1774.8 by revising
paragraphs (f) through (j) and removing
paragraphs (k) and (l) to read as follows:
■
§ 1774.8
Other Federal Statutes.
*
*
*
*
*
(f) 2 CFR part 200, as adopted by
USDA through 2 CFR part 400, Uniform
Administrative Requirements, Cost
Principles, and Audit Requirements for
Federal.
(g) 2 CFR part 180, as adopted by
USDA through 2 CFR part 417,
Nonprocurement Debarment and
Suspension, implementing Executive
Order 12549 on debarment and
suspension.
(h) 2 CFR part 418, New Restrictions
on Lobbying, prohibiting the use of
appropriated funds to influence
Congress or a Federal agency in
connection with the making of any
Federal grant and other Federal
contracting and financial transactions.
(i) 2 CFR part 421, Requirements for
Drug-Free Workplace (Financial
Assistance), implementing the DrugFree Workplace Act of 1988 (41 U.S.C
8101 et. seq.).
(j) 29 U.S.C. 794, section 504—
Rehabilitation Act of 1973, and 7 CFR
part 15B (USDA implementation of
statute), prohibiting discrimination
based upon physical or mental handicap
in Federally assisted programs.
tkelley on DSK3SPTVN1PROD with RULES2
Subpart B—Grant Application
Processing
*
*
*
*
(g) Pay for any other costs that are not
allowable under 2 CFR part 200, as
VerDate Sep<11>2014
20:19 Dec 18, 2014
Jkt 235001
§ 1775.
8 Other Federal statutes.
(f) 2 CFR part 200, as adopted by
USDA through 2 CFR part 400, Uniform
Administrative Requirements, Cost
Principles, and Audit Requirements for
Federal.
(g) [Reserved]
(h) 2 CFR part 180, as implemented by
USDA through 2 CFR part 417,
Nonprocurement Debarment and
Suspension, implementing Executive
Order 12549 on debarment and
suspension.
(i) 2 CFR part 418, New Restrictions
on Lobbying, prohibiting the use of
appropriated funds to influence
Congress or a Federal agency in
connection with the making of any
Federal grant and other Federal
contracting and financial transactions.
(j) 2 CFR 421, Requirements for DrugFree Workplace (Financial Assistance),
implementing the Drug-Free Workplace
Act of 1988 (41 U.S.C 701).
(k) [Reserved]
*
*
*
*
*
Subpart B—Grant Application
Processing
50. Amend § 1775.10 by revising
paragraph (c)(9) to read as follows:
■
Applications.
*
Limitations.
*
*
*
*
*
(h) Pay for any other costs that are not
allowable under 2 CFR part 200, as
adopted by USDA through 2 CFR part
400.
*
*
*
*
*
■ 49. Amend § 1775.8 by revising
paragraphs (f) and (h) through (j), and by
removing and reserving paragraphs (g)
and (k) to read as follows:
§ 1775.10
47. Amend § 1774.13 by revising
paragraph (g) to read as follows:
■
§ 1774.13
Limitations.
*
*
*
*
*
(c) * * *
(9) Indirect cost documentation such
as cost rate proposals, cost allocation
plans, or other election for indirect costs
and appropriate certification of indirect
costs in accordance with Cost Principles
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76005
in 2 CFR 200, subpart E, as adopted by
USDA through 2 CFR part 400.
*
*
*
*
*
■ 51. Amend § 1775.20 by revising
paragraphs (b) and (c) to read as follows:
§ 1775.20
Reporting.
*
*
*
*
*
(b) SF–425,’’ Federal Financial
Report,’’ and a project performance
activity report will be required of all
grantees on a quarterly basis, due 30
days after the end of each calendar
quarter.
(c) A final project performance report
will be required with the last SF–425
due 90 days after the end of the last
quarter in which the project is
completed. The final report may serve
as the last quarterly report.
*
*
*
*
*
■ 52. Amend § 1775.21 by revising
paragraphs (a) and (b) as follows:
§ 1775.21
Audit or financial statement.
*
*
*
*
*
(a) Grantees expending $750,000 or
more Federal funds per fiscal year will
submit an audit conducted in
accordance with Subpart F of 2 CFR part
200, as adopted by USDA through 2 CFR
part 400. The audit will be submitted
with 9 months of the grantee’s fiscal
year. Additional audits may be required
if the project period covers more than
one fiscal year.
(b) Grantees expending less than
$750,000 will provide annual financial
statement covering the grant period,
consisting of the organization’s
statement of income and expense and
balance sheet signed by an appropriate
official of the organization. Financial
statement will be submitted within 90
days after the grantees fiscal year.
PART 1776—HOUSEHOLD WATER
WELL SYSTEM GRANT PROGRAM
53. The authority citation for part
1776 continues to read as follows:
■
Authority: 7 U.S.C. 1926e.
■
54. Revise § 1776.2 to read as follows:
§ 1776.2 Uniform Federal Assistance
Provisions.
This program is subject to the general
provisions that apply to all grants made
by USDA and that are set forth in 2 CFR
part 200, Uniform Administrative
Requirements, Cost Principles, and
Audit Requirements for Federal Awards,
as adopted by USDA through 2 CFR part
400.
■ 55. Amend § 1776.13 by revising
paragraph (d) to read as follows:
§ 1776.13
Administrative expenses.
*
*
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§ 1779.69
(d) Allowability of administrative
expense costs shall be determined in
accordance with 2 CFR part 200, as
adopted by USDA through 2 CFR part
400.
*
*
*
*
(b) * * * Additionally, when
applicable, the lender will require an
audit in accordance with subpart F of 2
CFR part 200, as adopted by USDA
through 2 CFR part 400.
PART 1778—EMERGENCY AND
IMMINENT COMMUNITY WATER
ASSISTANCE GRANTS
PART 1780—WATER AND WASTE
LOANS AND GRANTS
56. The authority citation for part
1778 continues to read as follows:
■
61. The authority citation for part
1780 continues to read as follows:
■
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16
U.S.C. 1005.
57. Amend § 1778.14 by revising
paragraphs (e) and (f) to read as follows:
■
§ 1778.14
Loan servicing.
*
Other considerations.
*
*
*
*
*
(e) Governmentwide debarment and
suspension (nonprocurement) and
requirements for drug-free work place.
All projects must comply with the
requirements set forth in the U.S.
Department of Agriculture regulations 2
CFR part 417, 2 CFR part 421, and RD
Instruction 1940–M.
(f) Intergovernmental review. All
projects funded under this part are
subject to Executive Order 12372 (3
CFR, 1983 Comp., p. 197), which
requires intergovernmental consultation
with State and local officials. These
requirements are found at 2 CFR part
415, subpart C, ‘‘Intergovernmental
Review of Department of Agriculture
Programs and Activities’’ and RD
Instruction 1970–I, ‘Intergovernmental
Review,’ available in any Agency office
or on the Agency’s Web site.
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16
U.S.C. 1005.
Subpart A—General Policies and
Requirements
62. Amend § 1780.1 by adding
paragraph (l) and (m) to read as follows:
■
§ 1780.1
General.
58. The authority citation for part
1779 continues to read as follows:
*
*
*
*
(l) Applicants for grant assistance will
be required to comply with the
following requirements as applicable:
(1) 2 CFR part 200, as adopted by
USDA through 2 CFR part 400, ’’
Uniform Administrative Requirements,
Cost Principles, and Audit
Requirements for Federal Awards’’.
(2) 2 CFR part 415—General Program
Administrative Regulations.
(3) 2 CFR part 416– General Program
Administrative Regulations for Grants
and Cooperative Agreements to State
and Local Governments.
(4) 2 CFR part 417—Nonprocurement
Debarment and Suspension.
(5) 2 CFR part 418—New Restrictions
on Lobbying.
(m) Applicants for loan assistance
will be required to comply with Subpart
F of 2 CFR part 200, ‘‘Audit
Requirements.’’
■ 63. Amend § 1780.47 by revising
paragraphs (d) and (g) as follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16
U.S.C. 1005.
§ 1780.47 Borrower accounting methods,
management reporting and audits.
59. Amend § 1779.42 by revising
paragraph (e) to read as follows:
*
PART 1779—WATER AND WASTE
DISPOSAL PROGRAMS GUARANTEE
LOANS
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§ 1779.42 Design and construction
requirements.
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(e) Administrative. When the Agency
reviews the preliminary architectural
and engineering reports or plans, they
must also consider all applicable
Federal laws such as the seismic
requirements of Executive Order 12699
(55 FR 835, 3 CFR, 1990 Comp., p. 269),
the debarment requirements of 2 CFR
part 417, and the Copeland AntiKickback Act (18 U.S.C. 874).
■ 60. Amend § 1779.63 by adding a
sentence to the end of paragraph (b) to
read as follows:
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(d) Audits. All audits are to be
performed in accordance with the latest
revision of the generally accepted
government auditing standards
(GAGAS), issued by the Comptroller
General of the United States. In
addition, the audits are also to be
performed in accordance with subpart F
of 2 CFR part 200, as adopted by USDA
through 2 CFR part 400. The type of
audit each borrower is required to
submit will be designated by RUS.
Further guidance on preparing an
acceptable audit can be obtained from
RUS. It is not intended that audits
required by this part be separate and
apart from audits performed in
accordance with State and local laws.
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To the extent feasible, the audit work
should be done in conjunction with
those audits. Audits must be performed
annually except as allowed under the
provisions for biennial audits provided
in subpart F of 2 CFR part 200. Audits
are to be submitted to the processing
office as soon as possible after receipt of
the auditor’s report but no later than
nine months after the end of the audit
period
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(g) Substitute for management reports.
When RUS loans are secured by the
general obligation of the public body or
tax assessments which total 100 percent
of the debt service requirements, the
State program official may authorize an
annual audit to substitute for other
management reports if the audit is
received within nine months after the
end of the audit period.
PART 1782—SERVICING OF WATER
AND WASTE PROGRAMS
64. The authority citation for part
1782 continues to read as follows:
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Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16
U.S.C. 1005.
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65. Revise § 1782.7 to read as follows:
§ 1782.7
Grants.
Servicing actions relating to Agency
grants are governed by the provisions of
several regulations and executive
orders, including, but not limited to, 2
CFR part 200 as adopted by 2 CFR part
400, and 2 CFR parts 415, 416, 417, and
418 and Executive Order (E.O.) 12803.
Grantees remain responsible for
property acquired with grant funds in
accordance with terms of a grant
agreement and applicable regulations.
■ 66. Revise § 1782.10 to read as
follows:
§ 1782.10
Audit requirements.
Audits for loans will be required in
accordance with § 1780.47 of this
chapter. If the borrower becomes
delinquent or is experiencing problems,
the servicing official will require an
audit or other documentation deemed
necessary to resolve the delinquency.
The provisions of Subpart F of 2 CFR
part 200, as adopted by USDA through
2 CFR part 400, address audit
requirements for recipients of Federal
assistance.
PART 1783—REVOLVING FUNDS FOR
FINANCING WATER AND
WASTEWATER PROJECTS
(REVOLVING FUND PROGRAM)
67. The authority citation for part
1783 continues to read as follows:
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Authority: 7 U.S.C. 1926 (a)(2)(B).
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68. Revise § 1783.2 to read as follows:
§ 1783.2 What Uniform Federal Assistance
Provisions apply to the Revolving Fund
Program?
(a) This program is subject to the
general provisions that apply to all
grants made by USDA and that are set
forth in 2 CFR part 200, as adopted by
USDA through 2 CFR part 400.
(b) This program is subject to the
uniform administrative requirements
that apply to all grants made by USDA
to non-profit organizations and that are
set forth in 2 CFR part 415.
CHAPTER XVIII—RURAL HOUSING
SERVICE, RURAL BUSINESSCOOPERATIVES SERVICE, RURAL
UTILITIES SERVICE AND FARM SERVICE
AGENCY
PART 1942—ASSOCIATIONS
69. The authority citation for part
1942 continues to read as follows:
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Authority: 5 U.S.C. 301; 7 U.S.C. 1989.
Subpart A—Community Facility Loans
70. Amend § 1942.1 by adding
paragraph (e) to read as follows:
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§ 1942.1
General.
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(e) The Office of Management and
Budget (OMB) issued guidance on
Uniform Administrative Requirements,
Cost Principles, and Audit
Requirements for Federal Awards at 2
CFR part 200 on December 26, 2013. In
2 CFR 400.1, the Department adopted
OMB’s guidance in subparts A through
F of 2 CFR part 200 as the Department’s
policies and procedures for uniform
administrative requirements, cost
principles, and audit requirements for
federal awards. As a result, this
regulation contains references to 2 CFR
part 200 as it has regulatory effect for
the Department’s programs and
activities.
■ 71. Amend § 1942.2 by revising the
paragraph (a)(1)(iii) to read as follows:
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§ 1942.2
Processing applications.
(a) * * *
(1) * * *
(iii) State intergovernmental review
comments and recommendations
(clearinghouse comments), as outlined
in 2 CFR part 400, if applicable.
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■ 72. Amend § 1942.5 by revising
paragraph (b)(1)(ii)(B) to read as follows:
§ 1942.5
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Application review and approval.
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(b) * * *
(1) * * *
(ii) * * *
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(B) Applicable State
Intergovernmental Review comments, if
the program or activity has been
selected under the State. RD Instruction
1970–I, available in any Rural
Development office.
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■ 73. Amend § 1942.17 by revising
paragraphs (j)(3)(iii) and (n)(2)(xi);
adding paragraph (j)(3)(ii)(C); and
revising paragraph (q) to read as follows:
§ 1942.17
Community facilities.
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(j) * * *
(3) * * *
(ii) * * *
(C) Fidelity bonds must be obtained
from companies holding certificates of
authority as acceptable sureties, as
prescribed in 31 CFR part 223, ‘‘Surety
Companies doing Business with the
United States.’’
(iii) Insurance. The following types of
coverage must be maintained if
appropriate for the type of project and
entity involved. Insurance must be in
amounts acceptable to the Agency and
at least equivalent to coverage for real
property and equipment acquired
without Federal funds.
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(2) * * *
(xi)(A) To place the proceeds of the
loan on deposit in a manner approved
by the Government. Funds must be
deposited and maintained in insured
accounts whenever possible. Funds
must be maintained in interest bearing
accounts, unless the following apply:
(1) The borrower 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
$500 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; and,
(4) A foreign government or banking
system prohibits or precludes interest
bearing accounts.
(B) Interest earned on Federal
payments deposited in interest-bearing
accounts must be remitted annually to
the Department of Health and Human
Services, Payment Management System,
Rockville, MD 20852. Interest amounts
up to $500 per year may be retained by
the non-Federal entity for
administrative expense.
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(q) Borrower accounting methods,
management reporting and audits. (1)
Annual financial statements. Borrowers
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are required to provide the Agency with
annual financial statements for the life
of the loan as outlined in the Letter of
Conditions issued by the Agency. The
financial statements are the
responsibility of the borrower’s
governing body. The type of statement
required is dependent on the amount of
Federal financial assistance received
during the borrower’s fiscal year.
Federal financial assistance includes
Federal assistance that a non-Federal
entity received or administered during
the entity’s fiscal year in the form of
grants, loans, and loan guarantees. A
Federal award is Federal financial
assistance a non-Federal entity received
directly from Federal awarding agencies
or indirectly from pass-through entities.
Federal awards expended generally
pertain to events that require the nonFederal entity to comply with Federal
Statues, regulations, and terms and
conditions of federal awards, such as:
expenditure/expense transactions
associated with grants, costreimbursement contracts, cooperative
agreements, and direct appropriations;
the disbursement of funds passed
through to sub-recipients; the use of
loan proceeds under loan and loan
guarantee programs; the receipt of
property; the receipt of surplus
property; the receipt or use of program
income; the distribution or consumption
of food commodities; the disbursement
of amounts entitling the non-Federal
entity to an interest subsidy; and, the
period when insurance is in force.
(2) Method of accounting and
preparation of financial statements.
Annual organization-wide financial
statements must be prepared on the
accrual basis of accounting, in
accordance with Generally Accepted
Accounting Principles (GAAP), unless
State statute, tribal law or regulatory
agencies provide otherwise, or an
exception is granted by the Agency. An
organization may maintain its
accounting records on a basis other than
accrual accounting, and make the
necessary adjustments so that annual
financial statements are presented on
the accrual basis.
(3) Record retention. Each Applicant
will retain all records, books, and
supporting material for 3 years after the
issuance of the audit or management
reports, or for a time period required by
other agencies or common business
practice, whichever is longer. Upon
request, this material will be made
available to Rural Development, OIG,
USDA, the Comptroller General, or to
their assignees.
(4) Audits. Any applicant that
expends $750,000 or more in Federal
financial assistance during their fiscal
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year must submit an audit report
conducted in accordance with 2 CFR
part 200, subpart F, ‘‘Audit
Requirements.’’ Applicants expending
less than $750,000 in Federal financial
assistance per fiscal year are exempt
from 2 CFR part 200 audit requirements.
All audits are to be performed in
accordance with the latest revision of
the Generally Accepted Government
Accounting Standards (GAGAS),
developed by the Comptroller General
of the United States. Further guidance
on preparing an acceptable audit can be
obtained from any Agency office. It is
not intended that audits required by this
part be separate and apart from audits
performed in accordance with State and
local laws. To the extent feasible, the
audit work should be done in
conjunction with those audits. Audits
should be supplied to the Processing
Official within the timeframes stated in
paragraph (f) of this section. OMB
Circulars and Agency Compliance
Supplements are available in any
USDA/Agency office or OMB’s Web site.
Any state, local government, or Indian
tribe that is required by constitution or
state statute, in effect on January 1,
1987, to undergo its audits less
frequently than annually, is permitted to
undergo its audits biennially, pursuant
to 2 CFR 200.504(a). This requirement
must still be in effect for the biennial
period. Any nonprofit organization that
had biennial audits for all biennial
periods ending between July 1, 1992,
and January 1, 1995, is permitted to
undergo its audits biennially, pursuant
to 2 CFR 200.504(b). All biennial audits
must cover both years within the
biennial period.
(5) Exemption from audits. Except as
noted in 2 CFR 200.503, Relation to
other audit requirement, public bodies
or nonprofits expending less than
$750,000 in Federal awards during its
fiscal year, whose payments are current,
and are having no signs of operational
or financial difficulty may submit a
management report. A management
report, at a minimum, will include a
balance sheet and income and expense
statement. Financial information may be
reported on Form RD 442–2, ‘‘Statement
of Budget, Income and Equity’’ and RD
Form 442–3, ‘‘Balance Sheet’’, or
similar. The following management data
will be submitted by the borrower to the
servicing office. Records must be
available for review or audit by
appropriate officials of the Federal
agency, pass-through entity, and
Government Accountability Office
(GAO).
(i) Annual management reports.
Thirty days prior to the beginning of
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each fiscal year the following will be
submitted to the Servicing Official:
(A) One copy of the proposed annual
budget. The borrower will submit two
copies of Form RD 442–2, or equivalent,
Statement of Budget, Income and
Equity, Schedule 1, page 1; and
Schedule 2, Projected Cash Flow. The
only data required at this time is
Schedule 1, page 1, Column 3, annual
budget, and all of Schedule 2, Projected
Cash Flow.
(B) An annual audit report may be
submitted in lieu of Forms RD 442–2
and 442–3.
(ii) [Reserved]
(6) Deadlines for submitting audits
and management reports. In accordance
with 2 CFR part 200, audits must be
submitted no later than 9 months after
the end of the fiscal year or 30 days after
the borrower’s receipt of the auditor’s
reports, whichever is earlier.
Management reports must be submitted
no later than 2 months after the end of
the borrower’s fiscal year.
(7) Additional information to be
submitted with audits and management
reports. (i) Insurance. Agency borrowers
will maintain adequate insurance
coverage as required by the loan
resolution and § 1942.17(j)(3). The
servicing official is required to monitor
insurance annually after the initial
insurance verification.
(ii) Reserve account(s). Borrowers will
provide documentation that the Agency
required reserve account(s) is properly
funded;
(iii) Property tax information. If
applicable, documentation that property
taxes have been paid and are current.
(iv) A list of directors and officers.
(8) Quarterly reports. A quarterly
management report will be required for
the first full year of operations for new
borrowers, and existing borrowers
operating a new facility, starting a new
type of operation or proposing a
significant expansion of an existing
facility. Borrowers should submit the
following to the Servicing Official:
(i) One copy of Form RD 442–2, or
equivalent, Schedule 1, page 1, columns
4–6, as appropriate, and page 2. This
information should be received in the
Servicing Office 30 days after the end of
each of the first three quarters of the
fiscal year.
(ii) The Servicing Office may request
a borrower experiencing financial or
management problems to submit
quarterly copies of Form RD 442–2, or
equivalent, Schedule 1, pages 1 and 2.
■ 74A. Amend § 1942.18 by revising
paragraph (k)(1) to read as follows:
§ 1942.18 Community Facilities—Planning,
Bidding, Contracting, Constructing.
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(k) * * *
(1) Small purchase procedures. Small
purchase procedures are those relatively
simple and informal procurement
methods for securing services, supplies
or other property, costing in the
aggregate not more than the Simplified
Acquisition Threshold. If small
purchase procedures are used for a
procurement, written price or rate
quotations shall be obtained from an
adequate number of qualified sources.
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Subpart B—Housing Application
Packaging Grants
74B. Amend § 1944.66 by revising
paragraphs (b), (d), (e)(1), (e)(2), and (f)
to read as follows:
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§ 1944.66
Administrative requirements.
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(b) The policies and regulations
contained in RD Instruction 1940–Q
(available in any Agency office),
Departmental Regulation 2400–5, 2 CFR
part 200 as adopted by USDA through
2 CFR part 400 apply to grantees under
this subpart.
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(d) The grantee will retain records for
3 years from the date Standard Form
(SF)-269A, ‘‘Financial Status Report
(Short Form),’’ is submitted. These
records will be accessible to RHS and
other Federal officials in accordance
with 2 CFR part 200 as adopted by
USDA through 2 CFR part 400.
(e) * * *
(1) States, State agencies, or units of
general local government will complete
an audit in accordance with 2 CFR part
200 as adopted by USDA through 2 CFR
part 400 and OMB Circular A–128.
(2) Nonprofit organizations will
complete an audit in accordance with 2
CFR part 200 as adopted by USDA
through 2 CFR part 400.
(f) Performance reports, as required,
will be submitted in accordance with 2
CFR part 200 as adopted by USDA
through 2 CFR part 400.
Subpart G—RBEG and Television
Demonstration Grants
75. Amend § 1942.304 by adding the
definition for ‘‘Conflict of interest’’ in
alphabetical order to read as follows:
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§ 1942.304
Definitions.
Conflict of interest. A situation in
which a person or entity has competing
personal, professional, or financial
interests that make it difficult for the
person or business to act impartially.
Regarding use of both grant and
matching funds, Federal procurement
standards prohibit transactions that
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involve a real or apparent conflict of
interest for owners, employees, officers,
agents, their immediate family
members, partners, or an organization
which is about to employ any of the
parties indicated herein, having a
financial or other interest in or tangible
personal benefit from the outcome of the
project; or that restrict open and free
competition for unrestrained trade.
Specifically, project funds may not be
used for services or goods going to, or
coming from, a person or entity with a
real or apparent conflict of interest,
including, but not limited to, owner(s)
and their immediate family members.
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■ 76. Amend § 1942.310 by revising
paragraphs (d), (f), and (i) and adding
paragraphs (j) and (k) to read as follows:
§ 1942.310
Other considerations.
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(d) Project Management. Grant
recipients will be supervised as
necessary to assure that projects are
completed in accordance with approved
plans and specifications and that funds
are expended for approved purposes.
Grants made under this subpart will be
administered under and are subject to 2
CFR part 200, subpart D, as codified in
2 CFR 400.1 and established Rural
Development guidelines.
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(f) Uniform Relocation and Real
Property Acquisition Policies Act. All
projects must comply with the
requirements set forth in Title 49 CFR
part 24, which are the implementing
regulations for the Uniform Relocation
Assistance and Real Property
Acquisition Policies Act of 1970, as
amended (42 U.S.C. 4601 et seq.) and
are referenced by 7 CFR part 21.
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(i) Close Out. The award will be
closed out in accordance with 2 CFR
part 200 as codified in 2 CFR part 400.
When the project purpose is for
revolving loan funds, the grantee must
maintain the fund into perpetuity. Once
the grantee has provided loan assistance
to projects, in an amount equal to the
grant provided by Rural Development,
the Agency will no longer consider the
eligibility of new projects thereafter
financed from the revolving fund as
required by § 1942.313(b).
(j) Intergovernmental Review. RBE/
Television Demonstration grant projects
are subject to the provisions of
Executive Order 12372 and 2 CFR 415,
Subpart C, which requires
intergovernmental consultation with
State and local officials.
(k) Conflict of Interest Policy for NonFederal Entities. In accordance with 2
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CFR 400.2 (b), the non-Federal entities
(recipients) must disclose in writing any
potential conflicts of interest to the
USDA awarding agency or pass-through
entity and maintain written standards of
conduct covering conflicts of interest,
including organizational conflicts of
interest.
■ 77. Amend § 1942.311 by revising
paragraph (a)(1) to read as follows:
§ 1942.311
Application processing.
(a) * * *
(1) The application review and
approval procedures outlined in
§ 1942.2 will be followed as appropriate.
The applicant shall use Standard Form
(SF) 424, ‘‘Application for Federal
Assistance,’’ and SF 424–A, ‘‘Budget
Information for Non-Construction
Programs,’’ and SF 424–B, ‘‘Assurance
Agreement for Non-Construction
Programs,’’ or SF 424–C, ‘‘Budget
Information for Construction Programs,’’
and SF 424–D, ‘‘Assurance Agreement
for Construction Programs,’’ as
applicable, when requesting financial
assistance under this program.
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■ 78. Amend § 1942.314 by adding
paragraphs (f)(4) and (f)(5) to read as
follows:
§ 1942.314 Grants to provide financial
assistance to third parties, television
demonstration projects, and technical
assistance programs.
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(f) * * *
(4) Form RD 400–1, ‘‘Equal
Opportunity Agreement.’’
(5) Form RD 400–4, ‘‘Assurance
Agreement (Under Title VI, Civil Rights
Act of 1966).’’
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■ 79. Amend § 1942.315 by revising
paragraph (b) to read as follows:
§ 1942.315 Docket preparation and Letter
of Conditions.
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(b) The State Director or the State
Director’s designated representative will
prepare a Letter of Conditions outlining
the conditions under which the grant
will be made. It will include those
matters necessary to assure that the
proposed development is completed in
accordance with approved plans and
specifications, that grant funds are
expended for authorized purposes, and
that the terms of the Scope of Work and
requirements as prescribed in the Grant
Agreement and Departmental
Regulations, as currently codified in 2
CFR parts 400, 415, 417, 418, and 421
are complied with. The Letter of
Conditions will be addressed to the
applicant, signed by the State Director
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or other designated Rural Development
representative, and mailed or handed to
appropriate applicant officials. Each
Letter of Conditions will contain the
following paragraphs.
‘‘This letter establishes conditions
which must be understood and agreed
to by you before further consideration
may be given to the application.’’
‘‘This letter is not to be considered as
grant approval nor as a representation as
to the availability of funds. The docket
may be completed on the basis of a grant
not to exceed $_________.’’
‘‘Please complete and return the
attached Form RD 1942–46, ‘Letter of
Intent to Meet Conditions,’ if you desire
further consideration be given your
application.’’
Form RD 400–1, ‘‘Equal Opportunity
Agreement,’’ if applicable.
Form RD 400–4, ‘‘Assurance
Agreement (Under Title VI, Civil Rights
Act of 1966).’’
■ 80. Amend § 1942.316 by revising the
section heading and adding paragraph
(d) to read as follows:
§ 1942.316 Grant approval, fund
obligation, third party financial assistance
and grant servicing.
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(d) Grant servicing. Grants will be
serviced in accorda