Guidance for Grants and Agreements, 3766-3809 [2019-28524]

Download as PDF 3766 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules FOR FURTHER INFORMATION CONTACT: OFFICE OF MANAGEMENT AND BUDGET Nicole Waldeck or Gil Tran at the OMB Office of Federal Financial Management at 202–395–3993. SUPPLEMENTARY INFORMATION: 2 CFR Parts 25, 170, 183, and 200 [2019–OMB–0005] Guidance for Grants and Agreements Office of Federal Financial Management, Office of Management and Budget. ACTION: Proposed Guidance. AGENCY: The Office of Management and Budget is proposing to revise sections of Title 2 of the Code of Federal Regulations (CFR) Subtitle A–OMB Guidance for Grants and Agreements. The proposed revisions are limited in scope to support implementation of the President’s Management Agenda, Results-Oriented Accountability for Grants Cross-Agency Priority Goal (Grants CAP Goal) and other Administration priorities; implementation of statutory requirements and alignment of 2 CFR with other authoritative source requirements; and clarifications of existing requirements in particular areas within 2 CFR. These proposed revisions are intended to reduce recipient burden, provide guidance on implementing new statutory requirements, and improve Federal financial assistance management, transparency, and oversight. SUMMARY: Comments are due on or before March 23, 2020. ADDRESSES: Comments on this proposal must be submitted electronically before the comment closing date to www.regulations.gov. In submitting comments, please search for recent submissions by OMB to find docket OMB–2019–0005, which includes the full text of the proposed revisions and submit comments there. Please provide clarity as to the section of the guidance that each comment is referencing by beginning each comment with the section number in brackets. For example; if the comment is on 2 CFR 200.1 include the following before the comment [200.1]. The public comments received by OMB will be a matter of public record and will be posted at http://www.regulations.gov. Accordingly, please do not include in your comments any confidential business information or information of a personal-privacy nature. To reference the track changes of the proposed revisions please visit https:// www.performance.gov/CAP/grants/. In general, responses to the comments will be summarized and included in the preamble of the final guidance. khammond on DSKJM1Z7X2PROD with PROPOSALS2 DATES: VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 Background and Objectives In 2013, OMB partnered with the Council on Financial Assistance Reform (COFAR) to revise and streamline guidance to develop the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) located in Title 2 of the Code of Federal Regulations (2 CFR 200) (79 FR 78589; December 26, 2013). The intent of this effort was to simultaneously reduce administrative burden and the risk of waste, fraud, and abuse while delivering better performance on behalf of the American people. Implementation of the Uniform Guidance became effective on December 26, 2014 (79 FR 75867, December 19, 2014) and must be reviewed every five years in accordance with 2 CFR 200.109. Based on feedback and ongoing engagement with the grants management community, the current Administration established the ResultsOriented Accountability for Grants Cross Agency Priority Goal (Grants CAP Goal) in the President’s Management Agenda on March 20, 2018 (available at: https://www.performance.gov/CAP/ grants/). The Grants CAP Goal recognizes that grants managers report spending a disproportionate amount of time using antiquated processes to monitor compliance. Efficiencies could be gained from modernization and grants managers could instead shift their time to analyze data to improve results. To address this challenge, the Grants CAP Goal Executive Steering Committee (ESC), which reports to the Chief Financial Officer’s Council (CFOC), identified four strategies to work toward maximizing the value of grant funding by developing a risk-based, data-driven framework that balances compliance requirements with demonstrating successful results for the American taxpayer. 1. Strategy 1: Standardize the Grants Management Business Process and Data 2. Strategy 2: Build Shared IT Infrastructure 3. Strategy 3: Manage Risk 4. Strategy 4: Achieve Program Goals and Objectives To support these four strategies, various revisions are proposed for 2 CFR. In support of Strategies 1 and 2, OMB is proposing changes to terminology throughout 2 CFR. These proposed changes would help ensure PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 that there are no conflicts within 2 CFR and the Grants Management Federal Integrated Business Framework (available at: https://ussm.gsa.gov/fibf/). This effort recognizes that recipient reporting burden is reduced when the grants management business process and data elements are standardized. OMB is also proposing revisions to strengthen the governmentwide approach to performance and risk, to support efforts under Strategies 3 and 4 by encouraging agencies to measure the recipient’s performance in a way that will help Federal awarding agencies and non-Federal entities to improve program goals and objectives, share lessons learned, and spread the adoption of promising performance practices. OMB is also proposing revisions to 2 CFR to implement relevant statutory requirements. These revisions include requirements from several National Defense Authorization Acts (NDAAs) and the Federal Funding Accountability and Transparency Act (FFATA), as amended by the Digital Accountability and Transparency Act (DATA Act). Finally, OMB is proposing revisions to 2 CFR to clarify areas of misinterpretation. The proposed revisions are intended to reduce recipient burden by improving consistent interpretation. OMB proposes these revisions after consultation and in collaboration with agency representatives identified by the Grants CAP Goal ESC. In addition, OMB solicited feedback from the broader Federal financial assistance community and made changes to the proposed revisions as appropriate. In summary and as discussed further in the sections below, OMB proposes revisions to 2 CFR parts 25, 170, and 200 within the below scope. Additionally, OMB proposes adding part 183 to 2 CFR to implement Never Contract with the Enemy. I. To support implementation of the President’s Management Agenda Results-Oriented Accountability for Grants CAP Goal and other Administration priorities; II. To meet statutory requirements and to align with other authoritative source requirements; and III. To clarify existing requirements. I. Support Implementation of the President’s Management Agenda and Other Administration Priorities A. Changes to the Procurement Standards To Better Target Areas of Greater Risk and Conform to Statutory Requirements To better target 2 CFR requirements on areas of greater risk, and consistent E:\FR\FM\22JAP2.SGM 22JAP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules with the intent of the Grants CAP Goal, OMB proposes allowing all Federal recipients the flexibility provided in the NDAA for 2017 for institutions of higher education, related or affiliated nonprofit entities, nonprofit research organizations, and independent research institutes to request an increased micropurchase threshold. Procurement by micro-purchases was included in the final guidance published on December 26, 2013 (78 FR 78589) in response to comments provided to the proposed guidance published on February 1, 2013 (available at www.regulations.gov under docket number OMB–2013–0001). The intent of the procurement by micropurchase guidance was to alleviate burden associated with the Uniform Guidance procurement standards, allowing for recipients to make purchases below the micro-purchase threshold without soliciting price or rate quotations, if the non-Federal entity considers the price to be reasonable. Following the publication of the final guidance, OMB received feedback from the recipient community requesting additional time to comply with the Uniform Guidance procurement standards at 2 CFR 200.317 through 200.326. In response, OMB allowed recipients a one-year grace period provided the non-Federal entity appropriately documented delayed implementation in their policies and procedures and they continued to comply with previous OMB guidance. Towards the end of this initial grace period, OMB received requests to delay implementation of the procurement standards further, specifically citing the challenges associated with implementing procurement by micropurchase. In response, OMB allowed for an additional grace period. Following the allowance of the additional grace period, new cost-burden data was provided by the recipient community regarding the implementation of procurement by micro-purchase. This data reflected that many non-Federal entities have existing micro-purchase thresholds that are substantially higher than the micro-purchase threshold at that time of $3,500. Recipients report that to make purchases above the micropurchase threshold, they rely on individuals with specialized skills for their procurement offices and the final guidance would require non-Federal entities to hire additional staff at a substantial cost to non-Federal entities. Further, since finalization of 2 CFR 200, several statutes have been enacted that impact the procurement thresholds in VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 the current guidance as summarized below. The NDAA for Fiscal Year (FY) 2017 (NDAA 2017) increased the micropurchase threshold from $3,500 to $10,000 for institutions of higher education, or related or affiliated nonprofit entities, nonprofit research organizations or independent research institutes (41 U.S.C. 1908). The NDAA 2017 also establishes an interim uniform process by which these recipients can request, and Federal awarding agencies can approve requests to apply, a higher micro-purchase threshold. Specifically, the NDAA 2017 allows a threshold above $10,000, if approved by the head of the relevant executive agency and consistent with clean audit findings under chapter 75 of title 31, internal institutional risk assessment, or State law. The NDAA 2018 increases the micro-purchase threshold to $10,000 for all recipients and also increases the simplified acquisition threshold from $100,000 to $250,000 for all recipients. A proposal to increase the micropurchase and simplified acquisition thresholds in the Federal Acquisition Regulation (FAR) was published in the Federal Register on October 2, 2019 (84 FR 52420), FAR Case 2018–004. In addition, the American Innovation and Competitiveness Act of 2017 (AICA), section 207(b) requires that 2 CFR 200 be revised to conform with the requirements concerning the micropurchase threshold. In response to these statutory changes, OMB issued OMB Memorandum M–18– 18, Implementing Statutory Changes to the Micro-Purchase and the Simplified Acquisition Thresholds for Financial Assistance (June 20, 2018). Consistent with the requirements of NDAA 2017, this memo outlined the process for institutions of higher education, related or affiliated nonprofit entities, nonprofit research organizations, and independent research institutes to request a higher micro-purchase threshold from their cognizant Federal awarding agency for indirect cost rates. The proposed changes to 2 CFR 200.319 and 200.320 incorporates the guidance available in M–18–18 and proposes to extend the flexibility to request a higher micropurchase threshold to all non-Federal entities. Proposed changes also reflect the higher micro-purchase threshold set forth in the 2017 and the American Innovation and Competitiveness Act of 2017. The micro-purchase threshold identified in the aforementioned legislation is $10,000. PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 3767 B. Strengthening Merit Review and Notices of Funding Opportunities OMB proposes revisions to 2 CFR 200.204 Federal awarding agency review of merit proposals and 2 CFR 200.203 Notices of funding opportunities to strengthen merit review and the notices of funding opportunities. These proposed revisions require agencies to extend their merit review process for all grants and cooperative agreements to all awards in which the Federal awarding agency has the discretion to choose the recipient. Proposed changes to 2 CFR 200.204 Federal awarding agency review of merit proposals also clarify the objective of the merit review process— to select recipients most likely to be successful in delivering results based on the program objectives outlined in section 2 CFR 200.202 Program planning and design—and thus the merit review process should be designed accordingly. Further, Federal awarding agencies are required to systematically review Federal award selection criteria for effectiveness. These proposed changes support the Administration’s priority to ensure a fair and transparent process for the selection of award recipients and supports efforts under the PMA to ensure that grants and cooperative agreements are designed to achieve program goals and objectives. OMB seeks comments on the impacts this revision will have on the financial assistance community. C. Support for Domestic Preferences for Procurement As expressed in Executive Order 13788 of April 18, 2017 (Buy American and Hire American) and Executive Order 13858 of January 21, 2019 (Executive Order on Strengthening BuyAmerican Preferences for Infrastructure Projects), it is the policy of this Administration to maximize, consistent with law, the use of goods, products, and materials produced in the United States, in Federal procurements and through the terms and conditions of Federal financial assistance awards. In support of this policy, OMB proposes to add 2 CFR 200.321 (Domestic preferences for procurement), encouraging Federal award recipients, to the extent permitted by law, to maximize use of goods, products, and materials produced in the United States when procuring goods and services under Federal awards. This Part will apply to procurements under a grant or cooperative agreement. E:\FR\FM\22JAP2.SGM 22JAP2 3768 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules D. Promoting Free Speech Revisions are proposed to 2 CFR 200.300 Statutory and national policy requirements, to align with Executive Orders (E.O.) 13798 ‘‘Promoting Free Speech and Religious Liberty’’ and E.O. 13864 ‘‘Improving Free Inquiry, Transparency, and Accountability at Colleges and Universities.’’ These Executive Orders advise agencies on the requirements of religious liberty laws, including those laws that apply to grants and provided a policy for free inquiry at institutions receiving Federal grants. The revision to 2 CFR underscores the importance of compliance with the First Amendment. khammond on DSKJM1Z7X2PROD with PROPOSALS2 E. Standardization of Terminology and Implementation of Standard Data Elements OMB proposes to standardize terms across 2 CFR part 200 to support efforts under the Grants CAP Goal to standardize the grants management business process and data. Some examples of proposed revisions include terms associated with time periods (period of performance, budget period and renewal), financial obligation, and assistance listing. The current terms used to describe time periods are inconsistently used by Federal awarding agencies. OMB proposes revisions to the definition of ‘‘period of performance’’ in 2 CFR part 200 to reflect that the term is the anticipated time interval between the start and end date of an initial Federal award or subsequent renewal. The intent is to clarify that the recipient may not incur obligations during the entire period of performance in instances where a Federal awarding agency incrementally funds the Federal award and funding has not been received for a subsequent budget period within the period of performance. For example, a recipient may receive a Federal award that reflects a five-year period of performance, but only received one year worth of funding as reflected in the first year budget period. The recipient may only incur costs during the first year budget period until subsequent budget periods are funded based on the availability of appropriations, satisfactory performance, and compliance with the terms and conditions of the award. The proposed change also ensures consistent use of the term for purposes of transparency reporting as required by FFATA. Further, OMB is proposing definitions for budget period and renewal to further clarify the use of time period terms throughout 2 CFR. VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 In addition, OMB proposes to replace the term ‘‘obligation’’ to either ‘‘financial obligation’’ or ‘‘responsibility’’ within the guidance as appropriate, to ensure alignment with DATA Act definitions. OMB requests comments on the anticipated impact of replacing the term ‘‘obligation’’ from 2 CFR part 200 to ‘‘financial obligation’’; specifically, OMB asks if replacing ‘‘obligation’’ will help to align requirements set out in 2 CFR 200 and the DATA Act. OMB also proposes changes across 2 CFR to ensure consistent use of terms across parts 25, 170, 180 and 200 where possible, relying on 2 CFR part 200 as the primary source. As reflected in the proposed changes, there are instances where the terms within 2 CFR cannot be made consistent. For example, the term ‘‘non-Federal entity’’ cannot be consistently defined across 2 CFR: parts 25 and 170 apply to Federal awards to foreign organizations, foreign public entities, and for-profit organizations, while part 200 only applies to these type of non-Federal entities when a Federal awarding agency elects for part 200 to apply. For definitions that are consistent across 2 CFR parts 25, 170 and 200, revisions have been made to parts 25 and 170 to refer definitions to part 200 as the authoritative source. The definitions ‘‘Catalog for Federal Domestic Assistance (CFDA) number’’ and ‘‘CFDA program title’’ have been replaced with the terms ‘‘Assistance listing number’’ and ‘‘Assistance listing program title’’ to reflect the change in terminology. OMB proposes a number of additional revisions to definitions for clarity. For example, the term management decision is revised to emphasize that it is a written determination provided by a Federal awarding agency or passthrough entity. To promote uniform application of standard data elements in future information collection requests, OMB is also proposing revisions to 2 CFR 200.206 and 200.328 to reflect that information collection requests must adhere to the standards available from the OMB-designated standards lead. This proposed change further supports OMB Memorandum M–19–16 Centralized Mission Support Capabilities for the Federal Government, which requires that future shared service solutions must adhere to the Federal Integrated Business Framework standards (available at: https:// ussm.gsa.gov/fibf/). Further, OMB proposes updates throughout 2 CFR part 200 to replace the term ‘‘standard form’’ with ‘‘common form.’’ A common form is an PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 information collection that can be used by two or more agencies, or governmentwide, for the same purpose. A standard form is a type of common form; however, standard forms must be used by all Federal awarding agencies, which may not be appropriate for Federal financial assistance given the variety of programs. The purpose of clarifying the term ‘‘common form’’ within 2 CFR is to help encourage agencies to seek common data solutions, increase efficiency, and better account for the burden imposed on the public by Federal agencies. More information regarding common forms and flexibility under the Paperwork Reduction Act is available at: https:// www.whitehouse.gov/omb/informationregulatory-affairs/federal-collectioninformation/. Finally, OMB proposes to reformat the definitions section of 2 CFR part 200, subpart A—Acronyms and Definitions by removing the section numbers to facilitate future additions to this section. F. Improving the Governmentwide Approach to Performance and Risk The President’s Management Agenda, Results-Oriented Accountability for Grants CAP goal is working toward shifting the balance between compliance and performance while reducing burden. Agencies are encouraged to promote promising performance practices that support the achievement of program goals and objectives. Many Federal agencies are working together to innovate and develop a risk-based approach that incorporates performance to achieve results-oriented grants (where applicable). By shifting the focus to the balance between performance and compliance, agencies may have the opportunity to streamline burdensome compliance requirements for programs that demonstrate results. To support this goal, OMB proposes changes to emphasize the importance of focusing on performance to achieve program results throughout the Federal award lifecycle, starting with a proposed new section 2 CFR 200.202 Program planning and design. This new section formally requires practices that are already expected of Federal awarding agencies to develop a strong program design by establishing program goals, objectives, and indicators, to the extent permitted by law, before the applications are solicited. Proposed changes to 2 CFR 200.207 Specific conditions allow Federal awarding agencies to apply less restrictive conditions based on risk and require Federal awarding agencies to ensure that specific Federal award conditions E:\FR\FM\22JAP2.SGM 22JAP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules are consistent with the program design and include clear performance expectations of recipients. Consistent changes are proposed in 2 CFR 200.210 Information contained in a Federal award and 2 CFR 200.310 Performance measurement requiring Federal awarding agencies to provide recipients with clear performance goals, indicators, and milestones. Further, OMB proposes changes to 200.102 Exceptions section to emphasize that Federal awarding agencies are encouraged to request exceptions to certain provisions of 2 CFR 200 in support of innovative program designs that apply a risk-based, data-driven framework to alleviate select compliance requirements and hold recipients accountable for good performance. OMB recognizes that Federal financial assistance program goals and their intended results will differ by type of Federal program. For example, criminal justice grant programs may focus on specific goals such as reducing crime, basic scientific research grant programs may focus on expanding knowledge, and infrastructure projects may fund building or infrastructure projects. OMB is interested in receiving public comments on existing promising performance practices that Federal awarding agencies may be able to leverage within existing and proposed flexibilities or future exceptions, and in general on how grant makers can better hold recipients accountable for results. This is of particular interest as Federal agencies implement and carry out the requirements of the Foundations of Evidence-Based Policymaking Act of 2018, which emphasizes collaboration and coordination to advance data and evidence-building functions in the Federal government. Related to the above proposals to strengthen program planning and Federal award terms and conditions, OMB proposes changes to 200.210 Information contained in a Federal award and 200.339 Termination to strengthen the ability of the Federal awarding agency to terminate Federal awards, to the greatest extent authorized by law, when the Federal award no longer effectuates the program goals or Federal awarding agency priorities. Federal awarding agencies must clearly articulate the conditions under which a Federal award may be terminated in their applicable regulations and in the terms and conditions of Federal awards. The intent of this proposal is to ensure that Federal awarding agencies prioritize ongoing support to Federal awards that meet program goals. For VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 instance, following the issuance of a Federal award, if additional evidence reveals that a specific award objective is ineffective at achieving program goals, it may be in the government’s interest to terminate the Federal award. Further, additional evidence may cause the Federal awarding agency to significantly question the feasibility of the intended objective of the award, such that it may be in the interest of the government to terminate the Federal award. OMB also proposes the elimination of the termination for cause provision because this term is not substantially different than the provision allowing Federal awarding agencies to terminate Federal awards when the recipient fails to comply with the terms and conditions. OMB seeks feedback on the impact of these proposed changes and whether the language meets the intended outcome of these provisions. In addition, OMB proposes changes to the definition of fixed amount awards in 200.1 to allow Federal awarding agencies to apply the provision to both grant agreements and cooperative agreements. The revisions in 2 CFR 200.301 emphasize that agencies are encouraged to measure recipient performance to improve program goals and objectives, share lessons learned, and spread the adoption of promising practices. While understanding that grant program goals and their intended results will differ by type of program, the Grants CAP Goal is working to shift the culture of Federal grant making from a heavy focus on compliance to a balanced approach that includes a focus on the degree to which grant programs achieve their goals and intended results. To provide clarity and consistency among Federal awarding agencies, a revision to include program evaluation costs as an example of a direct cost under a Federal award has been included in 2 CFR 200.413 Direct costs. Please refer to OMB Circular A–11 200.22 for a definition on program evaluation. Evaluation costs are allowed as a direct cost in existing guidance. This language is intended to strengthen this intent and ensure that agencies are applying this consistently. Agencies are reminded that evaluation costs are allowable costs (either as direct or indirect), unless prohibited by statute or regulation. The work under the Grants CAP goal performance work group emphasizes evaluation as an important practice to understand the results achieved with Federal funding. OMB seeks comments on the impact of this revision within the guidance. PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 3769 G. Eliminate References to NonAuthoritative Guidance To support implementation of Executive Order 13892 of October 9, 2019 (Promoting the Rule of Law Through Transparency and Fairness in Civil Administrative Enforcement and Adjudication) and to prohibit Federal awarding agencies from including references to non-authoritative guidance in the terms and conditions of Federal awards, OMB proposes changes to 200.210 Information contained in Federal awards. These proposed changes are intended reduce recipient burden and prevent Federal awarding agencies from imposing non-binding guidance on recipients that has not gone through appropriate public notice and comment. H. Emphasis on Machine-Readable Information Format OMB proposes clarifying the methods for collection, transmission, and storage of data in 2 CFR 200.335 to further explain and promote the collection of data in machine-readable formats. A Machine-readable format is a format that can be easily processed by a computer without human intervention while ensuring no semantic meaning is lost (44 U.S.C. 3502(18)). The proposal reinforces the machine-readable requirements in the Foundations of Evidence-Based Policymaking Act of 2018 (Pub. L. 115–435) and accompanying OMB guidance, and reflects the need to continually evaluate which formats (and structures) maximize accessibility and usability for all stakeholders. Machine-readable formats will also help support the Leveraging Data as a Strategic Asset Cross-Agency Priority Goal (CAP Goal #2) and efforts under the Grants CAP Goal to Build Shared IT Infrastructure. I. Changes to Closeout Provisions To Reduce Recipient Burden and Support GONE Act Implementation Based on lessons learned from the implementation of 2 CFR part 200 and the Grants Oversight and New Efficiency Act (GONE Act), OMB proposes several changes to § 200.343 (Closeout) to support timely closeout, improve the accuracy of final closeout reports, and reduce burden. OMB proposes to increase the number of days for recipients to submit closeout reports and liquidate all financial obligations from 90 days to 120 days. This proposal takes into consideration that it is challenging for pass-through entities with a large number of subawards to reconcile subawards and submit final reports to Federal awarding E:\FR\FM\22JAP2.SGM 22JAP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 3770 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules agencies within 90 days. Recognizing the need for pass-through entities to receive timely reports from subrecipients to report back to Federal awarding agencies, OMB proposes to continue to require subrecipients to submit their reports to the pass-through entity within 90 days. The intent of this proposed change is to support financial reconciliation, help ease the burden associated with submitting reports for closeout, and promote improved accuracy. However, OMB recognizes that providing additional time may increase the likelihood that non-Federal entities will not submit their final closeout reports. To mitigate this risk, OMB is also proposing for Federal awarding agencies to report when a nonFederal entity does not submit final closeout reports as a failure to comply with the terms and conditions of the award to the OMB-designated integrity and performance system. Finally, OMB proposes the requirement of Federal awarding agencies to make every effort to close out Federal awards within one year after the end of the period of performance unless otherwise directed by authorizing statute. The proposed language is intended to promote timely closeout of awards, assist with reconciling closeout activities, and hold recipients accountable for submitting required closeout reports. OMB seeks comments on the advantages and disadvantages of changes to 2 CFR 200.343 (Closeout), including feedback on the amount of burden this may reduce as well as the potential risk to Federal awarding agencies. negotiated indirect cost rate. The use of the de minimus rate has reduced burden for both the non-Federal entities and the Federal agencies for preparing, reviewing and negotiating indirect cost rates. Since the publication of the final rule in 2013, both Federal agencies and non-Federal entities have advocated to expand the use of the de minimus rate for non-Federal entities that have negotiated an indirect cost rate previously, but for some circumstances, the negotiated rates have expired. The expiration may be due to breaks in Federal relationships and grant funding, or lack of resources for preparing an indirect cost proposal. This proposed change will further reduce the administrative burden for non-federal entities and Federal agencies and shift more resources toward accomplishing the program mission. Another proposed revision adds language to 2 CFR 200.414(f) to clarify that when a non-Federal entity is using the de minimus rate for its federal grants, it is not required to provide proof of costs that are covered under that rate. The 10% de minimus rate was designed to reduce burden for small non-federal entities and the requirement to document the actual indirect costs would eliminate the benefits of using the de minimus rate. Lastly, for transparency purposes, a proposed revision adds a new subsection to 200.414(h) to require that all grantees’ negotiated agreements for indirect cost rates are collected and displayed on public website. The agency responsible for this task and the public website will be designated by OMB. J. Changes to Performing the Governmentwide Audit Quality Project Proposed revisions to 2 CFR 200.513 include a change in the date for the requirement for a governmentwide audit data quality project that must be performed once every 6 years beginning with audits submitted in 2018. This date has been changed to 2021, given the significant changes to the 2019 Compliance Supplement in support of the Grants CAP Goal. II. Meeting Statutory Requirements and Aligning 2 CFR With Other Authoritative Source Requirements K. Expanded Use of the De Minimus Rate The first proposed revision to 2 CFR 200.414(f) allows the use of the de minimus rate of 10% of modified total direct costs (MTDC) to all non-Federal entities (except for those described in Appendix VII to Part 200—State and Local Government and Indian Tribe Indirect Cost Proposals, paragraph D.1.b). Currently, the de minimus rate can only be used for non-Federal entities that have never received a VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 A. Prohibition on Certain Telecommunication and Video Surveillance Services or Equipment OMB proposes revisions to 2 CFR to align with section 889 of the NDAA 2019. The NDAA 2019 prohibits the head of an executive agency from obligating or expending loan or grant funds to procure or obtain, extend or renew a contract to procure or obtain, or enter into a contract (or extend or renew a contract) to procure or obtain the equipment, services, or systems prohibited systems as identified in NDAA 2019. To implement this requirement, OMB proposes 2 CFR 200.216 Prohibition on certain telecommunication and video surveillance services or equipment, which prohibit Federal award recipients from using government funds to enter into contracts (or extend or renew PO 00000 Frm 00006 Fmt 4701 Sfmt 4702 contracts) with entities that use covered telecommunications equipment or services. This prohibition applies even if the contract is not intended to procure or obtain, any equipment, system, or service that uses covered telecommunications equipment or services. As described in section 889 of the NDAA of 2019, covered telecommunications equipment or services includes: D Telecommunications equipment produced by Huawei Technologies Company or ZTE Corporation (or any subsidiary or affiliate of such entities). D For the purpose of public safety, security of government facilities, physical security surveillance of critical infrastructure, and other national security purposes, video surveillance and telecommunications equipment produced by Hytera Communications Corporation, Hangzhou Hikvision Digital Technology Company, or Dahua Technology Company (or any subsidiary or affiliate of such entities). D Telecommunications or video surveillance services provided by such entities or using such equipment. D Telecommunications or video surveillance equipment or services produced or provided by an entity that the Secretary of Defense, in consultation with the Director of the National Intelligence or the Director of the Federal Bureau of Investigation, reasonably believes to be an entity owned or controlled by, or otherwise connected to, the government of a covered foreign country. OMB has limited data on the impact of this prohibition on Federal award recipients and contractors who use covered technology and seeks feedback on the feasibility, burden, programmatic impact, and cost associated with implementing this requirement. Commenters are encouraged to provide relevant data on the impacts of this proposed change and suggestions on how to support implementation of this prohibition. B. Never Contract With the Enemy To meet statutory requirements, OMB proposes adding Part 183 to 2 CFR to implement Never Contract with the Enemy, consistent with the fact that the law applies to only a small number of grants and cooperative agreements. Never Contract with the Enemy applies only to grants and cooperative agreements that exceed $50,000, are performed outside the United States, including U.S. territories, to a person or entity that is actively opposing United States or coalition forces involved in a contingency operation in which E:\FR\FM\22JAP2.SGM 22JAP2 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules khammond on DSKJM1Z7X2PROD with PROPOSALS2 members of the Armed Forces are actively engaged in hostilities. To implement Never Contract with the Enemy and to reflect current practice, OMB proposes requiring Federal awarding agencies to utilize the System for Award Management (SAM) Exclusions and Federal Awardee Performance and Integrity Information System (FAPIIS) to ensure compliance before awarding a grant or cooperative agreement. Federal awarding agencies are prohibited from making any awards to persons or entities listed in SAM Exclusions pursuant to Never Contract with the Enemy and are required to list in FAPIIS any grant or cooperative agreement terminated due to Never Contract with the Enemy as a Termination for Material Failure to Comply. The proposed revisions also require agencies to insert terms and conditions in grants and cooperative agreements regarding non-Federal entities’ responsibilities to ensure no Federal award funds are provided directly or indirectly to the enemy, to terminate subawards in violation of Never Contract with the Enemy, and to allow the Federal Government access to records to ensure that no Federal award funds are provided to the enemy. The law allows Federal awarding agencies to terminate, in whole or in part any grant, cooperative agreement, or contract that provides funds to the enemy, as defined in the NDAA for FY 2015. This statute applies to procurement as well as to grants and cooperative agreements and OMB will coordinate with the procurement community as appropriate before issuing final guidance, including the roles and responsibilities of the covered combatant command and Federal awarding agencies. With the exception of access to records, the Never Contract with Enemy provision will sunset in December 2019; however, there is a current proposal to extend these requirements. OMB anticipates that these statutory requirements may be extended, and therefore seeks comments at this time on these proposed revisions. C. Requirement for the Federal Awardee Performance and Integrity Information System (FAPIIS) To Include Information on a Non-Federal Entity’s Parent, Subsidiary, or Successor Entities To meet statutory requirements, OMB proposes revisions to 2 CFR parts 25 and 200 to implement Sec. 852 of the NDAA 2013, which requires that the Federal Awardee Performance and Integrity Information System (FAPIIS) include information on a non-Federal entity’s parent, subsidiary, or successor entities. OMB proposes to require VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 financial assistance applicants to provide information in SAM on their immediate owner and highest-level owner and subsidiaries, as well as on all predecessors that have been awarded a Federal contract, grant, or cooperative agreement within the last three years. In addition, OMB proposes to require that prior to making a grant or cooperative agreement, agencies must consider all of the information in FAPIIS with regard to an applicant’s immediate owner or highest-level owner and predecessor, or subsidiary, if applicable. These revisions are consistent with the Federal Acquisition Regulation (FAR) final rule regarding this law published at 81 FR 11988 on March 7, 2016. OMB seeks comments and data on the following: The burden on recipients regarding the implementation of the statute, the applicability of this requirement to different types of entities (i.e., states, local governments, and tribes), the alignment of these revisions with the FAR, and any deviations from the FAR change that OMB should consider. D. Increase Transparency Through FFATA, as Amended by the DATA Act OMB proposes several revisions to increase transparency regarding Federal spending as required by FFATA, as amended by the DATA Act, which mandates Federal agencies to report Federal appropriations received or expended by Federal agencies and nonFederal entities. OMB also proposes revisions to the reporting thresholds to further align financial assistance requirements with those of the Federal acquisition community. To increase transparency, OMB proposes to expand the applicability of Federal financial assistance in 2 CFR part 25 and 2 CFR part 170 beyond grants and cooperative agreements so that it includes other types of financial assistance that Federal agencies receive or administer such as loans, insurance, contributions, and direct appropriations. OMB also proposes to make changes throughout 2 CFR to make it clear that Federal agencies may receive Federal financial assistance awards. This will increase transparency for Federal awards received by Federal agencies. To further align implementation of FFATA, as amended by DATA Act, between the Federal financial assistance and acquisition communities, OMB proposes revisions to Federal awarding agency and pass-through entity reporting thresholds. For Federal awarding agencies, OMB proposes revisions to 2 CFR part 170 to require agencies to report Federal awards that equal or exceed the micro-purchase PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 3771 threshold as set by the FAR at 48 CFR subpart 2.1. Consistent with the FAR threshold for subcontract reporting, OMB is proposing to raise the reporting threshold for subawards that equal or exceed $30,000. OMB seeks comments that includes an analysis on the advantages and disadvantages of raising this threshold. OMB also proposes revisions to 2 CFR part 25 to allow agencies the flexibility to exempt a foreign entity applying for or receiving an award or subaward for a project or program performed outside the United States valued at less than $100,000. Currently, Federal awarding agencies have the flexibility to exempt this requirement for awards valued at less than $25,000. Federal awarding agencies may exempt the registration requirement up to $100,000 in cases where the agency has conducted a riskbased analysis and deems it impractical for the entity to comply with the requirements(s). OMB proposes this revision after receiving feedback from the international community that requiring certain foreign entities to register in SAM introduces substantial burden with no significant value for the Federal awarding agency. Federal awarding agencies will remain responsible for reporting these awards for transparency purposes. Recognizing the benefits of SAM registration, OMB is interested in feedback in support or against the proposal to raise the threshold. Finally, OMB proposes requiring Federal awarding agencies to associate Financial Assistance Listings with the authorizing statute to make listings more consistent. This supports implementation of the DATA Act which requires agencies to report award level Financial Assistance Listings information for display on www.usaspending.gov. OMB seeks comments on whether the proposed revisions increase transparency regarding Federal spending and support implementation of the DATA Act. E. Aligning 2 CFR With Authoritative Sources OMB proposes a revision to 2 CFR 200.431 Compensation—fringe benefits to allow states to conform with Generally Accepted Accounting Principles (GAAP), specifically Governmental Accounting Standards Board (GASB) Statement 68, and to continue to claim pension costs that are both actual and funded. OMB proposes this revision because GASB issued Statement 68, Accounting and Financial Reporting for Pensions which amends GASB Statement 27 and allows non- E:\FR\FM\22JAP2.SGM 22JAP2 3772 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules Federal entities (NFE) to claim only estimated pension costs in their financial statements. OMB’s revision will allow non-Federal entities to continue to claim pension costs that are both actual and funded. OMB also proposes a revision to the definitions of 2 CFR 200.12 Capital assets, 2 CFR 200.59 Intangible property, 2 CFR 200.449. The definition for ‘‘Improper Payment’’ has been revised to refer to the authoritative source for clarity, OMB Circular A–123—Management’s Responsibility for Internal Control in Federal Agencies, Appendix C— Requirements for Payment Integrity Improvement. In addition, both the ‘‘Improper Payment’’ and ‘‘Questioned Cost’’ definitions have been revised to clarify that questioned costs are not an improper payment until reviewed and confirmed to be improper as defined in OMB Circular A–123, Appendix C. III. Clarifying Requirements Regarding Areas of Misinterpretation Following the publication of the Uniform Guidance, OMB received a substantial amount of questions from stakeholders requesting clarifications about key aspects of the guidance. In other instances, it has come to OMB’s attention that the interpretation of certain provisions was not consistent with the intent of the Uniform Guidance. In response, OMB proposes a number of clarifications that are aimed at reducing recipient administration burden and ensuring consistent interpretation of guidance. khammond on DSKJM1Z7X2PROD with PROPOSALS2 A. Responsibilities of the Pass-Through Entity To Address Only a Subrecipient’s Audit Findings Related to Their Subaward To clarify requirements regarding responsibility for audit findings, OMB proposes a revision to 2 CFR 200.331 Requirements for pass-through entities to clarify that pass-through entities (PTE) are responsible for addressing only a subrecipient’s audit findings that are specifically related to their subaward. For example, a PTE is not required to address all of the subrecipient’s audit findings. In addition, the PTE may rely on the subrecipient’s auditors and cognizant agency’s oversight for routine audit follow-up and management decisions. These changes reduce the burden for PTEs by allowing a PTE to rely on the cognizant agency to address a subrecipient’s entity-wide issues. VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 B. Reducing Burden on Universities by Clarifying Timing of the Disclosure Statement OMB also proposes to clarify the timing of submission of the disclosure statement (DS–2), which is only required for universities that meet certain thresholds as defined in 48 CFR 9903.202–1(f). This revision reduces burden for universities while maintaining the requirement for universities to implement policies in compliance with 2 CFR. OMB seeks comments on whether the proposed revisions clarify 2 CFR requirements and reduce burden for PTEs and universities. C. Response to Frequently Asked Questions Related to the Prior Release of 2 CFR In July 2017, OMB developed and posted Frequently Asked Questions (FAQs) on the Chief Financial Officers Council website in response to stakeholder requests for clarification on the first publication of 2 CFR (https:// cfo.gov//wp-content/uploads/2017/08/ July2017-UniformGuidanceFrequently AskedQuestions.pdf). Due to the volume of questions related to these topics, OMB proposes clarifying the following: The meaning of the words ‘‘must’’ and ‘‘may’’ as they pertain to requirements; the effective date of 2 CFR; applicability and documentation requirements when a non-Federal entity elects to charge the de minimus indirect cost rate of modified total direct costs (MTDC); pass-through entity responsibilities related to indirect cost rates and audits; and applicability of 2 CFR to FAR based contracts. These proposed revisions are intended to improve clarity and reduce recipient burden by providing guidance on implementing 2 CFR. D. Applicability of Guidance to Federal Agencies OMB proposes changes to 2 CFR 200.101 (Applicability) to clarify that Federal awarding agencies may apply the requirements of 2 CFR 200 to other Federal agencies, to the extent permitted by law. This proposed change recognizes that there are instances when Federal awarding agencies or passthrough entities have the authority to issue Federal awards to Federal agencies and in these instances, the provisions of 2 CFR 200 may be applied, as appropriate. This proposed change is consistent with how for-profit entities, foreign public entities, or foreign organizations are treated in the Uniform Guidance. PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 Executive Orders 12866 and 13563 Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). The revision of 2 CFR is not a regulatory action and therefore it is not subject to the 12866 review by OIRA. Regulatory Flexibilities Act The Regulatory Flexibility Act 5 U.S.C. 601, et seq., requires that an agency 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. OMB does not expect this guidance to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act. There are some proposed revisions that may impose burden, however, there are more proposed revisions that reduce burden to small entities. When reviewing all proposed revisions, the burden that will be reduced for recipients is much greater than the burden imposed. OMB’s proposal to expand the applicability of Federal financial assistance in 2 CFR part 25 beyond grants and cooperative agreements so that it includes other types of financial assistance that Federal agencies receive or administer such as loans and insurance will impact small entities, but it will not have a significant impact on a substantial number of small entities. Currently, 2 CFR part 25 requires all non-Federal entities that apply for grants and cooperative agreements to register in the System for Award Management (SAM). OMB proposes to require all entities that apply for Federal financial assistance such as loans and insurance to register in SAM, which requires the establishment of a unique entity identifier. In practice, some Federal awarding agencies already require SAM registration for all types of Federal financial assistance and the proposed change would make this practice consistent among agencies. As noted in the Paperwork Reduction Act section, as of June 20, 2019, there were 159,477 unique Federal financial assistance registrants in the System for Awards Management (SAM). According to data accessed from www.usaspending.gov, in FY 2018, approximately 2,952 small businesses who received awards for other types of E:\FR\FM\22JAP2.SGM 22JAP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules financial assistance did not have a unique entity identifier. Assuming that non-Federal entities with a unique entity identifier reported to www.usaspending.gov are already registered in SAM, this change will impact approximately 2,952 small entities annually. SAM registration is estimated to take two and a half hours per response, which results in 7,380 burden hours annually. Individuals who receive Federal financial assistance as a natural person remain exempt from this requirement. This change is proposed to successfully implement FFATA, as amended by the DATA Act. There is no exemption from the guidance for small entities, because the law does not provide for any such exemption. Recognizing that there are limitations to relying on www.usaspending.gov data to estimate the impact of this change on small entities, OMB requests comments on how burdensome this proposed requirement may be for small entities. The proposed guidance also clarifies requirements regarding pass-through entities’ responsibility for sub-award audit findings and clarifies the timing of a disclosure statement which is only required for universities that meet certain thresholds. These proposed changes are intended to reduce burden and will not have a significant economic impact on a substantial number of small entities because they clarify existing requirements; they do not include any new requirements for non-Federal entities. OMB proposes to add a provision to 2 CFR part 200 Subpart D—Post Federal Award Requirements, 2 CFR 200.321 (Domestic preferences for procurement), encouraging Federal award recipients, to the extent permitted by law, to maximize use of goods, products, and materials produced in the United States when procuring goods and services under Federal awards. This revision was added in response to Executive Order 13788 of April 18, 2017 (Buy American and Hire American) and Executive Order 13858 of January 21, 2019 (Executive Order on Strengthening BuyAmerican Preferences for Infrastructure Projects). This may impose burden on small entities that primarily procure goods and services produced outside the U.S. The proposed guidance also provides consistency among definitions and terms and proposes several provisions to increase transparency regarding Federal spending. These proposed changes are intended to reduce recipient burden and not have a significant economic impact on a substantial number of small entities because they will affect Federal awarding agencies; VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 they do not include any new requirements for non-Federal entities. The proposed guidance introduces a new provision to align with section 889 of the NDAA 2019, Prohibition on certain telecommunication and video surveillance services or equipment. This statutory requirement may introduce burden to small entities that are prohibited from obligating or expending grant funds to procure or obtain, extend or renew a contract to procure or obtain, or enter in a contract with, as identified in the NDAA 2019. This proposed guidance implements a new statute that requires applicants of Federal assistance to provide information on their owner, predecessor and subsidiary, including the Commercial and Government Entity (CAGE) Code and name of all predecessors, if applicable. This will not have a significant economic impact on a substantial number of small entities because small entities typically do not have a complex corporate structure requiring them to report information on their owner, predecessor, and subsidiary. Further, the burden is minimal for a non-Federal entity to provide the name of its immediate owner and highest-level owner. The proposed guidance also implements a statute, Never Contract with the Enemy, which will not have a significant economic impact on a substantial number of small entities because it will affect only a small number of grants and cooperative agreements. Never Contract with the Enemy applies only to grants and cooperative agreements that exceed $50,000, are performed outside the United States, including U.S. territories, to a person or entity that is actively opposing the United States or coalition forces involved in a contingency operation in which members of the Armed Forces are actively engaged in hostilities. The NDAA for FY2018 increased the micro-purchase threshold from $3,500 to $10,000 and increased the simplified acquisition threshold from $100,000 to $250,000 for all recipients. OMB’s proposed revisions reduces burden and will not have a significant economic impact on a substantial number of small entities because it is likely to reduce burden for all non-Federal entities. Paperwork Reduction Act Consistent with the Regulatory Flexibility Act analysis discussion, the Paperwork Reduction Act (44 U.S.C. chapter 35) applies. The proposed guidance contains information collection requirements and will impact the current Information Collection PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 3773 Requests approved under OMB control number 3090–0290 managed by the General Services Administration. Accordingly, the Regulatory Secretariat Division of GSA will submit a request for approval to amend the existing Information Collection Requests for System for Award Management (SAM) registration requirements for prime Federal financial assistance recipients. Annual Reporting Burden: The estimated annual reporting burden includes all possible entities for Federal financial assistance that may be required to register in SAM. The estimated annual reporting burden also includes entities that receive Federal financial assistance reported in USASpending.gov and either may or may not be required to register in SAM. The current guidance only requires that prime applicants and recipients of Federal financial assistance in the form of grants register in SAM. Pursuant to 2 CFR Subtitle A, Chapter I, and Part 25 (75 FR 5672), prime applicants and recipients are required to maintain accurate SAM registration accounts with current information at all times during which they have an active Federal award, an application, or a plan under consideration by a Federal awarding agency. The burden estimates are approximations based on the best available data. As of July 7, 2019, there were 159,477 unique Federal financial assistance registrants in SAM. However, it is important to note that not all registrants in SAM ultimately apply for, or receive, Federal financial assistance. To develop a more accurate estimate for the total number of Federal financial assistance recipients, including loans and other types of Federal financial assistance, OMB used data from SAM combined with data from USASpending.gov on non-grant recipients of Federal financial assistance to determine the anticipated number of registrants for Federal financial assistance in SAM. The Federal Funding Accountability and Transparency Act of 2006 (Pub. L. 109–282, as amended by section 6202(a) of Pub. L. 110–252) established the requirement to create USASpending.gov. USASpending.gov is a single, searchable website, accessible by the public that hosts financial data on both Federal financial assistance and contracts. Recipients of all types of Federal financial assistance, including loans, submit their financial data to their Federal awarding agency. Federal awarding agencies are then responsible for accurately submitting recipient financial data to USASpending.gov. OMB ran reports in USASpending.gov E:\FR\FM\22JAP2.SGM 22JAP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 3774 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules to identify the number of unique Federal financial assistance recipients that receive Federal financial assistance other than grants to isolate the total number of potential registrants that may be expected to register in SAM as a result of the updates to the proposed guidance. To account for the number of loan and other types of Federal financial assistance recipients that do not also receive grants, OMB removed duplicate recipients based on recipient Data Universal Numbering System Number (DUNS) numbers, from Dun & Bradstreet (D&B). At this time all Federal financial assistance recipients are required to register for DUNS numbers; however, DUNS numbers will be phased out as the primary key to identify every entity record by 2020 in place of a nonproprietary, SAM-generated, Unique Entity ID (UEI) number. As of June 30, 2019 there were 41,795 grant, 122 loan, and 12,485 other Federal financial assistance recipients with unique DUNS numbers reported in USASpending.gov. Therefore, based on the number of entities with unique DUNS numbers that are registered in SAM (159,477), plus entities that receive loans (122) or other Federal financial assistance (12,485) reported in USASpending.gov that may not be reflected in SAM, the total number of entities that may be impacted by the proposed guidance associated Information Collection Requests under OMB control number 3090–0290 could be 172,084 registrants. Public reporting burden for Information Collection Requests under OMB control number 3090–0290 is managed by the General Services Administration and estimated to average 2.5 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. The annual reporting burden is estimated as follows: Respondents: 172,084. Responses per Respondent: 1. Total Annual Responses: 172,084. Hours per Response: 2.5. Total Response Burden Hours: 430,210. The proposed guidance also requires that registrants for Federal financial assistance provide information on their owner, predecessor, and subsidiary, including the Commercial and Government Entity (CAGE) Code and name of all predecessors, if applicable. This information is required to implement Sec. 852 of the NDAA of FY 2013, which requires that the Federal VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 Awardee Performance and Integrity Information System (FAPIIS) include information on a non-Federal entity’s parent, subsidiary, or successor entities. Non-Federal entities are already required to obtain a CAGE code for purposes of SAM registration. It is anticipated that including this information as part of SAM registration or for a renewal should not result in significant additional time. Public reporting burden for this collection of information is estimated to average .1 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Based on the burden estimates for the total number of SAM registrants indicated in the previous section, the annual reporting burden for this proposal is estimated as follows: Respondents: 172,084. Responses per respondent: 1. Total annual responses: 172,084. Preparation hours per response: .1. Total response burden hours: 17,208. The number of respondents estimated in this section is based on the best available data from SAM and USASpending.gov. It is important to note that not all registrants in SAM complete applications for Federal financial assistance. Based on the financial data from USASpending.gov, less than one third of registrants in SAM receive Federal financial assistance. Therefore, the actual number of respondents and the relative burden may be significantly lower than the estimated amounts. Request for Comments Regarding Paperwork Burden Submit comments, including suggestions for reducing this burden, not later than March 23, 2020. Submit comments identified by ‘‘Information Collection 3090–0290, System for Award Management Registration Requirements for Prime Grant Recipients’’ by any of the following methods: • Regulations.gov: http:// www.regulations.gov. Submit comments via the Federal eRulemaking portal by searching the OMB control number 3090–0290 Docket No. 2019–0005. Select the link ‘‘Comment Now’’ that corresponds with ‘‘Information Collection 3090–0290, System for Award Management Registration Requirements for Prime Grant Recipients’’. Follow the instructions provided on the screen. Please include your name, company name (if any), and ‘‘Information Collection 3090–0290, System for Award Management PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 Registration Requirements for Prime Grant Recipients’’ on your attached document. • Mail: General Services Administration, Regulatory Secretariat Division (MVCB), 1800 F Street NW, Washington, DC 20405. ATTN: Ms. Flowers/IC 3090–0290. Public comments are particularly invited on: Whether this collection of information is necessary for the proper performance of functions of the System for Award Management Registration Requirements for Prime Financial Assistance Recipients, and will have practical utility; whether our estimate of the public burden of this collection of information is accurate, and based on valid assumptions and methodology; ways to enhance the quality, utility, and clarity of the information to be collected; and ways in which we can minimize the burden of the collection of information on those who are to respond, through the use of appropriate technological collection techniques or other forms of information technology. Requester may obtain a copy of the justification from the General Services Administration, Regulatory Secretariat (MVCB), Washington, DC 20405, telephone (202) 501–4755. Please cite OMB Control Number 3090–0290, System for Award Management Registration Requirements for Prime Grant Recipients, in all correspondence. List of Subjects 2 CFR Part 25 Administrative practice and procedure; Grant programs; Grants administration; Loan programs. 2 CFR Part 170 Colleges and universities; Grant programs; Hospitals; International organizations; Loan programs; Reporting and recordkeeping requirements. 2 CFR Part 183 Foreign aid; Grants administration; Grant programs; International organizations; Reporting and recordkeeping requirements. 2 CFR Part 200 Accounting; Colleges and universities; Grants administration; Grant programs; Hospitals; Indians; Nonprofit organizations; Reporting and recordkeeping requirements; State and local governments. Timothy F. Soltis, Deputy Controller. For the reasons stated in the preamble, the Office of Management and Budget proposes to amend 2 CFR parts E:\FR\FM\22JAP2.SGM 22JAP2 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules 25, 170, 200 and add part 183 as set forth below: PART 25—UNIVERSAL IDENTIFIER AND SYSTEM FOR AWARD MANAGEMENT 1. The authority citation for part 25 continues to read as follows: ■ Authority: Pub. L. 109–282; 31 U.S.C. 6102. 2. Amend § 25.100 by revising the introductory text to read as follows: ■ § 25.100 Purposes of this part. This part provides guidance to recipients to establish: * * * * * ■ 3. Revise § 25.105 to read as follows: § 25.105 Types of awards to which this part applies. This part applies to a Federal awarding agency’s grants, cooperative agreements, loans, and other types of Federal financial assistance as defined in § 25.306. ■ 4. Revise § 25.110 to read as follows: khammond on DSKJM1Z7X2PROD with PROPOSALS2 § 25.110 Types of recipient and subrecipient entities to which this part applies. (a) General. Through a Federal awarding agency’s implementation of the guidance in this part, this part applies to all Federal agencies and nonFederal entities, other than those exempted by statute or exempted in paragraphs (b), and (c) of this section, that— (1) Apply for or receive Federal awards; or (2) Receive subawards directly from recipients of those Federal awards. (b) Exemptions for individuals. None of the requirements in this part apply to an individual who applies for or receives Federal financial assistance as a natural person (i.e., unrelated to any business or non-profit organization he or she may own or operate in his or her name). (c) Other exemptions required by law (e.g. statutory). (1) Under a condition identified in paragraph (c)(2) of this section, a Federal awarding agency may exempt a non-Federal entity or Federal agency from an applicable requirement to obtain a unique entity identifier, register in the SAM, or both. (i) In that case, the Federal awarding agency must use a generic unique entity identifier in data it reports to USASpending.gov if reporting for a prime award to the non-Federal entity or Federal agency is required by the Federal Funding Accountability and Transparency Act (Pub. L. 109–282, hereafter cited as ‘‘Transparency Act’’). VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 (ii) Federal awarding agency use of a generic unique entity identifier should be used rarely for prime award reporting because it prevents prime awardees from being able to fulfill the subaward or executive compensation reporting required by the Transparency Act. (2) The conditions under which a Federal awarding agency may exempt a non-Federal entity are— (i) For any non-Federal entity or Federal agency, if the Federal awarding agency determines that it must protect information about the entity from disclosure if it is in the national security or foreign policy interests of the United States, or to avoid jeopardizing the personal safety of the Federal agency or non-Federal entity’s staff or clients. (ii) For a foreign organization or foreign public entity applying for or receiving a Federal award or subaward for a project or program performed outside the United States valued at less than $100,000, if the Federal awarding agency deems it to be impractical for the entity to comply with the requirement(s). This exemption must be determined by the Federal awarding agency on a case-by-case basis while utilizing a risk-based approach and does not apply if subawards are anticipated. (3) Federal awarding agencies’ use of generic unique entity identifier, as described in paragraphs (c)(1) and (2) of this section, should be rare. Having a generic unique entity identifier limits a recipient’s ability to use Governmentwide systems that are needed to comply with some reporting requirements. ■ 5. Revise § 25.200 to read as follows: § 25.200 Requirements for notice of funding opportunities, regulations, and application instructions. (a) Each Federal awarding agency that awards the types of Federal financial assistance defined in § 25.306 must include the requirements described in paragraph (b) of this section in each notice of funding opportunity, regulation, or other issuance containing instructions for applicants that is issued either on or after the effective date of this part; or (b) The notice of funding opportunity, regulation, or other issuance must require each non-Federal entity and Federal agency that applies and does not have an exemption under § 25.110 to: (1) Be registered in the SAM prior to submitting an application or plan; (2) Maintain an active SAM registration with current information, including information on a recipient’s immediate and highest level owner and subsidiaries, as well as on all PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 3775 predecessors that have been awarded a Federal contract or grant within the last three years, if applicable, as defined in the FAR (52 part 204–20), at all times during which it has an active Federal award or an application or plan under consideration by a Federal awarding agency; and (3) Provide its unique entity identifier in each application or plan it submits to the Federal awarding agency. (c) For purposes of this policy: (1) The applicant is the non-Federal entity or Federal agency that meets the Federal awarding agency’s eligibility criteria and has the legal authority to apply and to receive the Federal award. For example, if a consortium applies for a Federal award to be made to the consortium as the recipient, the consortium must have a unique entity identifier. If a consortium is eligible to receive funding under a Federal awarding agency program but the Federal awarding agency’s policy is to make the Federal award to a lead entity for the consortium, the unique entity identifier of the lead non-Federal entity will be used. (2) A ‘‘notice of funding opportunity’’ is any paper or electronic issuance that an agency uses to announce a funding opportunity, whether it is called a ‘‘program announcement,’’ ‘‘notice of funding availability,’’ ‘‘broad agency announcement,’’ ‘‘research announcement,’’ ‘‘solicitation,’’ or some other term. (3) To remain registered in the SAM database after the initial registration, the applicant is required to review and update on an annual basis from the date of initial registration or subsequent updates its information in the SAM database to ensure it is current, accurate and complete. ■ 6. Revise § 25.205 to read as follows: § 25.205 Effect of noncompliance with a requirement to obtain a unique entity identifier or register in the SAM. (a) A Federal awarding agency may not make a Federal award or financial modification to an existing Federal award to a non-Federal entity or Federal agency until the non-Federal entity or Federal agency has complied with the requirements described in § 25.200 to provide a valid unique entity identifier and maintain an active SAM registration with current information (other than any requirement that is not applicable because the entity is exempted under § 25.110). (b) At the time a Federal awarding agency is ready to make a Federal award, if the intended recipient has not complied with an applicable requirement to provide a unique entity E:\FR\FM\22JAP2.SGM 22JAP2 3776 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules identifier or maintain an active SAM registration with current information, the Federal awarding agency: (1) May determine that the applicant is not qualified to receive a Federal award; and (2) May use that determination as a basis for making a Federal award to another applicant. ■ 7. Revise § 25.210 to read as follows: § 25.210 Authority to modify agency application forms or formats. To implement the policies in §§ 25.200 and 25.205, a Federal awarding agency may add a unique entity identifier field to information collections previously approved by OMB, without having to obtain further approval to add the field. ■ 8. Revise § 25.215 to read as follows: § 25.215 Requirements for agency information systems. Each Federal awarding agency that awards Federal financial assistance (as defined in § 25.306) must ensure that systems processing information related to the Federal awards, and other systems as appropriate, are able to accept and use the unique entity identifier as the universal identifier for financial assistance applicants and recipients. ■ 9. Revise § 25.220 to read as follows: § 25.220 Use of award term. (a) To accomplish the purposes described in § 25.100, a Federal agency must include in each Federal award (as defined in § 25.305) the award term in appendix A to this part. (b) A Federal awarding agency may use different letters and numbers than those in appendix A to this part to designate the paragraphs of the Federal award term, if necessary, to conform the system of paragraph designations with the one used in other terms and conditions in the Federal awarding agency’s Federal awards. ■ 10. Revise § 25.300 to read as follows: § 25.300 Federal awarding agency. Federal awarding agency has the meaning given in 2 CFR 200.1. ■ 11. Revise § 25.305 to read as follows: khammond on DSKJM1Z7X2PROD with PROPOSALS2 § 25.305 Federal award. Federal award, for the purposes of this part, means an award of Federal financial assistance that a non-Federal entity or Federal agency receives directly from a Federal awarding agency. ■ 12. Add § 25.306 to subpart C to read as follows: § 25.306 Federal financial assistance. (a) Federal financial assistance has the meaning given in 2 CFR 200.1 and VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 also includes assessed or voluntary contributions, for purposes of this part. (b) Federal financial assistance, for purposes of this part, does not include: (1) Technical assistance, which provides services in lieu of money; and (2) A transfer of title to the Federallyowned property provided in lieu of money, even if the Federal award is called a grant. ■ 13. Amend § 25.310 by revising the section heading to read as follows: § 25.310 System for Award Management. § 25.320 [Removed] ■ ■ 14. Remove § 25.320. 15. Revise § 25.330 to read as follows: § 25.330 Foreign public entity. Foreign public entity has the meaning given in 2 CFR 200.1. ■ 17. Add § 25.333 to subpart C to read as follows: § 25.333 Highest level owner. Highest level owner has the meaning given in 2 CFR 200.1. ■ 18. Revise § 25.335 to read as follows: § 25.335 Indian Tribe (or ‘‘Federally recognized Indian Tribe’’). Indian Tribe (or ‘‘Federally recognized Indian Tribe’’) has the meaning given in 2 CFR 200.1. ■ 19. Revise § 25.340 to read as follows: § 25.340 Local government. Local government has the meaning given in 2 CFR 200.1. ■ 20. Add § 25.343 to subpart C to read as follows: § 25.343 Non-Federal entity. Non-Federal Entity, as it is used in this part, has the meaning given in paragraph C.3 of the award term in Appendix A to this part. ■ 21. Revise § 25.345 to read as follows: § 25.345 Nonprofit organization. Nonprofit organization has the meaning given in § 200.1. ■ 22. Add § 25.347 to subpart C to read as follows: § 25.347 Predecessor. Predecessor means a non-Federal entity that is replaced by a successor. ■ 23. Revise § 25.350 to read as follows: § 25.350 State. State has the meaning given in 2 CFR 200.1. ■ 24. Revise § 25.355 to read as follows: PO 00000 Frm 00012 Fmt 4701 Sfmt 4702 Subaward. Subaward has the meaning given in 2 CFR 200.1. ■ 25. Add § 25.357 to subpart C to read as follows: § 25.357 Successor. Successor means a non-Federal entity that has replaced a predecessor by acquiring the assets and carrying out the affairs of the predecessor under a new name (often through acquisition or merger). The term ‘‘successor’’ does not include new offices or divisions of the same company or a company that only changes its name. ■ 26. Revise § 25.360 to read as follows: § 25.360 Foreign organization. Foreign organization has the meaning given in 2 CFR 200.1. ■ 16. Add § 25.331 to subpart C to read as follows: § 25.331 § 25.355 Subrecipient. Subrecipient has the meaning given in 2 CFR 200.1. ■ 27. Add § 25.362 to subpart C to read as follows: § 25.362 Subsidiary. Subsidiary has the meaning given in 2 CFR 200.1. ■ 28. Revise Appendix A to Part 25 to read as follows: Appendix A to Part 25—Award Term I. System for Award Management and Universal Identifier Requirements A. Requirement for System for Award Management Unless you are exempted from this requirement under 2 CFR 25.110, you as the recipient must maintain current information in the SAM. This includes information on your immediate and highest level owner and subsidiaries, as well as on all of your predecessors that have been awarded a Federal contract or grant within the last three years, if applicable as defined in the FAR (9 CFR part 104–6), until you submit the final financial report required under this Federal award or receive the final payment, whichever is later. This requires that you review and update the information at least annually after the initial registration, and more frequently if required by changes in your information or another Federal award term. B. Requirement for Unique Entity Identifier If you are authorized to make subawards under this Federal award, you: 1. Must notify potential subrecipients that no non-Federal entity (see definition in paragraph C of this award term) or Federal agency may receive a subaward from you until the non-Federal entity or Federal agency has provided its Unique Entity Identifier to you. 2. May not make a subaward to a nonFederal entity or Federal agency until the non-Federal entity or Federal agency has provided its Unique Entity Identifier to you. C. Definitions For purposes of this term: 1. System for Award Management (SAM) means the Federal repository into which a E:\FR\FM\22JAP2.SGM 22JAP2 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules non-Federal entity or Federal agency must provide information required for the conduct of business as a recipient. Additional information about registration procedures may be found at the SAM internet site (currently at https://www.sam.gov). 2. Unique Entity Identifier means the identifier required for SAM registration to uniquely identify business entities. 3. Non-Federal entity has meaning given in 2 CFR 200.1 and also includes all of the following, for purposes of this part: a. A foreign organization; b. A foreign public entity; and c. A domestic for-profit organization. 4. Subaward has the meaning given in 2 CFR 200.1. 5. Subrecipient has the meaning given in 2 CFR 200.1. PART 170—REPORTING SUBAWARD AND EXECUTIVE COMPENSATION INFORMATION 29. The authority citation for part 170 continues to read as follows: ■ Authority: Pub. L. 109–282; 31 U.S.C. 6102. 30. Revise § 170.100 to read as follows: ■ § 170.100 Purposes of this part. This part provides guidance to Federal awarding agencies on reporting Federal awards to establish requirements for recipients’ reporting of information on subawards and executive total compensation, as required by the Federal Funding Accountability and Transparency Act of 2006 (Pub. L. 109–282), as amended by section 6202 of Public Law 110–252, hereafter referred to as ‘‘the Transparency Act’’. ■ 31. Revise § 170.105 to read as follows: § 170.105 Types of awards to which this part applies. This part applies to a Federal awarding agency’s grants, cooperative agreements, loans, and other forms of Federal financial assistance subject to the Transparency Act, as defined in § 170.320. ■ 32. Revise § 170.110 by revising paragraphs (a) and (b)(1), paragraph (b)(2) introductory text, and paragraph (b)(3) to read as follows: khammond on DSKJM1Z7X2PROD with PROPOSALS2 § 170.110 Types of entities to which this part applies. (a) General. Through a Federal awarding agency’s implementation of the guidance in this part, this part applies to all non-Federal entities and Federal agencies, other than those exempted by law or excepted in paragraph (b) of this section, that— (1) Apply for or receive Federal awards; or VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 (2) Receive subawards under Federal awards. (b) * * * (1) None of the requirements in this part apply to an individual who applies for or receives a Federal award as a natural person (i.e., unrelated to any business or non-profit organization he or she may own or operate in his or her name). (2) None of the requirements regarding reporting names and total compensation of a non-Federal entity’s five most highly compensated executives apply unless in the nonFederal entity’s preceding fiscal year, it received— * * * * * (3) The public does not have access to information about the compensation of senior executives, unless otherwise publically available, through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986. ■ 33. Revise § 170.200 to read as follows: § 170.200 Federal awarding agency reporting requirements. (a) Federal awarding agencies are required to publically report Federal awards that equal or exceed the micropurchase threshold and publish the required information on a public-facing, OMB-designated, governmentwide website and follow other relevant OMB guidance to support Transparency Act implementation. (b) Federal awarding agencies that obtain post-award data on subaward obligations outside of this policy should take the necessary steps to ensure that their recipients are not required, due to the combination of agency-specific and Transparency Act reporting requirements, to submit the same or similar data multiple times during a given reporting period. ■ 34. Add § 170.210 to subpart B to read as follows: § 170.210 Requirements for notices of funding opportunities, regulations, and application instructions. (a) Each Federal awarding agency that makes awards of Federal financial assistance subject to the Transparency Act must include the requirements described in paragraph (b) of this section in each notice of funding opportunity, regulation, or other issuance containing instructions for applicants and is issued on or after the effective date of this part. (b) The notice of funding opportunity, regulation, or other issuance must require each non-Federal entity that PO 00000 Frm 00013 Fmt 4701 Sfmt 4702 3777 applies and for Federal financial assistance and that does not have an exception under § 170.110(b) to ensure they have the necessary processes and systems in place to comply with the reporting requirements should they receive funding. ■ 35. Revise § 170.220 to read as follows: § 170.220 Award term. (a) To accomplish the purposes described in § 170.100, a Federal awarding agency must include the award term in Appendix A to this part in each Federal award to a non-Federal entity and Federal agency under which the total funding is anticipated to equal or exceed $30,000 in Federal funding. (b) A Federal awarding agency, consistent with paragraph (a) of this section, is not required to include the award term in Appendix A to this part if it determines there is no possibility that the total amount of Federal funding under the Federal award will equal or exceed $30,000. However, the Federal awarding agency must subsequently modify the award to add the award term if changes in circumstances increase the total Federal funding under the award is anticipated to equal or exceed $30,000 during the period of performance. ■ 36. Revise § 170.300 to read as follows: § 170.300 Federal awarding agency. Federal awarding agency has the meaning given in 2 CFR 200.1. ■ 37. Revise § 170.305 to read as follows: § 170.305 Federal award. Federal award, for the purposes of this part, means an award of Federal financial assistance that a non-Federal entity or Federal agency receives directly from a Federal awarding agency. ■ 38. Add § 170.307 to subpart C to read as follows: § 170.307 Foreign organization. Foreign organization has the meaning given in 2 CFR 200.1. ■ 39. Add § 170.308 to subpart C to read as follows: § 170.308 Federal public entity. Foreign public entity has the meaning given in 2 CFR 200.1. ■ 40. Revise § 170.310 to read as follows: § 170.310 Non-Federal entity. Non-Federal entity has the meaning given in 2 CFR 200.1 and also includes all of the following, for purposes of this part: (a) A foreign organization; E:\FR\FM\22JAP2.SGM 22JAP2 3778 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules (b) A foreign public entity; and (c) A domestic or foreign for-profit organization. ■ 41. Revise § 170.320 to read as follows: public has access to the compensation information, see the U.S. Security and Exchange Commission total compensation filings at http://www.sec.gov/answers/ execcomp.htm.) § 170.320 Federal financial assistance subject to the Transparency Act. (c) * * * (1) Applicability and what to report. Unless you are exempt as provided in paragraph d. of this award term, for each first-tier nonFederal entity subrecipient under this award, you shall report the names and total compensation of each of the subrecipient’s five most highly compensated executives for the subrecipient’s preceding completed fiscal year, if— * Federal financial assistance subject to the Transparency Act has the meaning given in 2 CFR 200.1. Federal financial assistance, for purposes of this part, does not include— (a) Technical assistance, which provides services in lieu of money; (b) A transfer of title to Federally owned property provided in lieu of money, even if the award is called a grant; (c) Any classified award; or (d) Any award funded in whole or in part with Recovery funds, as defined in section 1512 of the American Recovery and Reinvestment Act of 2009 (Pub. L. 111–5). ■ 42. Revise § 170.325 to read as follows: § 170.325 Appendix A to Part 170—Award Term (I) * * * (a) * * * (1) Applicability. Unless you are exempt as provided in paragraph d. of this award term, you must report each action that equals or exceeds $30,000 in Federal funds that does not include Recovery funds (as defined in section 1512(a)(2) of the American Recovery and Reinvestment Act of 2009, Pub. L. 111– 5) for a subaward to a non-Federal entity or Federal agency (see definitions in paragraph e. of this award term). khammond on DSKJM1Z7X2PROD with PROPOSALS2 * * * * (b) Reporting total compensation of recipient executives for non-Federal entities. (1) * * * (i) The total Federal funding authorized to date under this Federal award that equals or exceeds $30,000 as defined in 2 CFR 170.322; (ii) In the preceding fiscal year, you received— * * * * * (iii) The public does not have access to information about the compensation of the executives through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986. (To determine if the VerDate Sep<11>2014 * * 16:56 Jan 21, 2020 Jkt 250001 * * * * * * (ii) The public does not have access to information about the compensation of the executives through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986. (To determine if the public has access to the compensation information, see the U.S. Security and Exchange Commission total compensation filings at http://www.sec.gov/answers/ execcomp.htm.) * Subaward. Subaward has the meaning given in 2 CFR 200.1. ■ 43. Amend Appendix A to part 179 by revising paragraphs (a)(1), paragraph (b) introductory text, paragraphs (b)(1)(i), paragraph (b)(1)(ii) introductory text, (b)(1)(iii), paragraph (c)(1) introductory text, paragraph (c)(1)(ii), paragraph (e)(1) introductory text, paragraph (e)(1)(iii), (e)(3)(ii), and (e)(4) and removing (e)(1)(v) to read as follows: * * * * * * (e) * * * (1) Non-Federal entity means all of the following as defined in 2 CFR part 25: * * * * * (iii) A domestic or foreign nonprofit organization; and (iv) A domestic or foreign for-profit organization * * * * * (3) * * * (ii) 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). * * * * * (4) Subrecipient means a non-Federal entity or Federal agency that: * ■ * * * * 44. Add part 183 to read as follows: PART 183—NEVER CONTRACT WITH THE ENEMY Sec. 183.5 Purpose of this part. 183.10 Applicability. 183.15 Responsibilities of Federal awarding agencies. 183.20 Reporting responsibilities of Federal Awarding Agencies. 183.25 Responsibilities of non-Federal entities. 183.30 Access to records. 183.35 Definitions. Appendix to Part 183—Clauses for Award Agreements Authority: Pub. L. 113–291. § 183.5 Purpose of this part. This part provides Office of Management and Budget (OMB) guidance for Federal awarding agencies on applying Never Contract with the PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 Enemy to grants and cooperative agreements, as required by subtitle E, title VIII of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2015 (Pub. L. 113–291). § 183.10 Applicability. (a) Part 183 applies only to grants and cooperative agreements that are expected to exceed $50,000 and that are performed outside the United States, including U.S. territories, and that are in support of a contingency operation in which members of the Armed Forces are actively engaged in hostilities. It does not apply to the authorized intelligence or law enforcement activities of the Federal Government. (b) All elements of part 183 are applicable until December 31, 2019, except for Access to Records which has no sunset date. § 183.15 Responsibilities of Federal awarding agencies. (a) Prior to making an award for a covered grant or cooperative agreement that meets the thresholds in § 183.10 for Never Contract with the Enemy, the Federal awarding agency must check the current list of prohibited or restricted persons or entities in the System Award Management (SAM) Exclusions. If a person or entity is on the current list of prohibited or restricted persons or entities in SAM Exclusions pursuant to Never Contract with the Enemy, the agency must not make an award. (b) The Federal awarding agency must include a clause in all covered grant and cooperative agreement awards in accordance with Never Contract with the Enemy (see Appendix A of this part). (c) A Federal awarding agency may become aware of a person or entity that: (1) Provides funds, including goods and services, received under a covered grant or cooperative agreement of an executive agency directly or indirectly to persons or entities that are actively opposing United States or coalition forces involved in a contingency operation in which members of the Armed Forces are actively engaged in hostilities; or (2) Fails to exercise due diligence to ensure that none of the funds, including goods and services, received under a covered grant or cooperative agreement of an executive agency are provided directly or indirectly to persons or entities that are actively opposing United States or coalition forces involved in a contingency operation in which members of the Armed Forces are actively engaged in hostilities. (d) When a Federal awarding agency becomes aware of such a person or E:\FR\FM\22JAP2.SGM 22JAP2 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules entity, it may do any of the following actions: (1) Restrict the future award of all Federal grants and cooperative agreements to the person or entity based upon concerns that Federal awards to the entity would provide grant funds directly or indirectly to a covered person or entity. (2) Terminate any grant or cooperative agreement upon becoming aware that the non-Federal recipient has failed to exercise due diligence to ensure that none of the award funds are provided directly or indirectly to a covered person or entity. (e) The Federal awarding agency must notify non-Federal entities in writing regarding its decision to restrict all future awards and/or to terminate a grant. The agency must also notify the non-Federal entity in writing about the non-Federal entity’s right to request an administrative review (using the agency’s procedures) of the restriction or termination of the grant or cooperative agreement within 30 days of receiving notification. khammond on DSKJM1Z7X2PROD with PROPOSALS2 § 183.20 Reporting responsibilities of Federal awarding agencies. (a) If a Federal awarding agency restricts all future awards to a covered person or entity in accordance with Never Contract with the Enemy, it must enter information on the ineligible person or entity into SAM Exclusions as a prohibited or restricted source pursuant to Subtitle E, Title VIII of the NDAA for FY 2015 (Pub. L. 113–291). (b) When a Federal awarding agency terminates a grant or cooperative agreement due to Never Contract with the Enemy, it must report the termination as a Termination for Material Failure to Comply in the OMBdesignated integrity and performance system accessible through SAM (currently the Federal Awardee Performance and Integrity Information System (FAPIIS)). (c) The Federal awarding agency must report in writing any action to restrict all future awards or to terminate the award. The Federal awarding agency must also report in writing any decision not to restrict all future awards or terminate an award along with the agency’s reasoning for not taking one of these actions after the agency became aware that a person or entity is a prohibited or restricted source pursuant to Subtitle E Title VIII of the NDAA for FY 2015 (Pub. L. 113–291). The Federal awarding agency shall submit these reports to the head of the executive agency concerned (or the designee of such head) and the commander of the covered combatant command concerned VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 (or specific deputies). See section 843(4) of the NDAA for FY 2015 for definition of covered combatant command: https:// www.armed-services.senate.gov/imo/ media/doc/CPRT-113-HPRT-RU00S1847.pdf. See section 841(h)(3) of the NDAA for FY 2015: https://www.armedservices.senate.gov/imo/media/doc/ CPRT-113-HPRT-RU00-S1847.pdf. (d) For each instance in which an executive agency exercised the authority to restrict all future awards or to terminate, or a grant or cooperative agreement, the agency must report in writing the following to the head of the executive agency concerned (or the designee of such head) and the commander of the covered combatant command concerned (or specific deputies). See section 841(h)(3) of the NDAA for FY 2015: https://www.armedservices.senate.gov/imo/media/doc/ CPRT-113-HPRT-RU00-S1847.pdf: (1) The executive agency taking such action. (2) An explanation of the basis for the action taken. (3) The value of the grant or cooperative agreement terminated. (4) The value of all grants and cooperative agreements of the executive agency with the person or entity concerned at the time the grant or cooperative agreement was terminated. (e) For each instance in which the Federal awarding agency did not exercise the authority to terminate or restrict a grant or cooperative agreement after becoming aware that a person or entity is a prohibited or restricted source pursuant to Subtitle E Title VIII of the NDAA for FY 2015 (Pub. L. 113– 291), the Federal awarding agency must report in writing to the head of the executive agency concerned (or the designee of such head) and the commander of the covered combatant command concerned (or specific deputies) the following. (See section 841(h)(3) of the NDAA for FY 2015: https://www.armed-services.senate.gov/ imo/media/doc/CPRT-113-HPRT-RU00S1847.pdf): (1) The executive agency concerned. (2) An explanation of the basis for not taking the action. (f) For each instance in which an executive agency exercised the additional authority to examine grantee and subaward records, the agency must report in writing to the head of the executive agency concerned (or the designee of such head) and the commander of the covered combatant command concerned (or specific deputies) the following (See section 841(h)(3) of the NDAA for FY 2015: https://www.armed-services.senate.gov/ PO 00000 Frm 00015 Fmt 4701 Sfmt 4702 3779 imo/media/doc/CPRT-113-HPRT-RU00S1847.pdf): (1) An explanation of the basis for the action taken; and (2) A summary of the results of any examination of records. § 183.25 entities. Responsibilities of non-Federal Non-Federal entities must include two clauses in all covered subawards in accordance with Never Contract with the Enemy (see appendix to this Part). § 183.30 Access to records. In addition to any other existing examination-of-records authority, the Federal Government is authorized to examine any records of the recipient and its subawards, to the extent necessary, to ensure that funds, including supplies and services, received under a covered grant or cooperative agreement (see § 183.30) are not provided directly or indirectly to a covered person or entity in accordance with Never Contract with the Enemy. The Federal awarding agency may only exercise this authority upon a written determination by the Federal awarding agency that relies on a finding by the commander of a covered combatant command that there is reason to believe that funds, including supplies and services, received under the grant or cooperative agreement may have been provided directly or indirectly to a covered person or entity. § 183.35 Definitions. Terms used in this part are defined as follows: Contingency operation, as defined in 10 U.S.C. 101a, means a military operation that— (1) Is designated by the Secretary of Defense as an operation in which members of the armed forces are or may become involved in military actions, operations, or hostilities against an enemy of the United States or against an opposing military force; or (2) Results in the call or order to, or retention on, active duty of members of the uniformed services under 10 U.S.C. 688, 12301a, 12302, 12304, 12304a, 12305, 12406 of 10 U.S.C. chapter 15, 14 U.S.C. 712 or any other provision of law during a war or during a national emergency declared by the President or Congress. Covered combatant command means the following: (1) The United States Africa Command (2) The United States Central Command (3) The United States European Command E:\FR\FM\22JAP2.SGM 22JAP2 3780 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules (4) The United States Pacific Command (5) The United States Southern Command (6) The United States Transportation Command. Covered grant, cooperative agreement means a grant or cooperative agreement, as defined in 2 CFR 200.1 with an estimated value in excess of $50,000 that is performed outside the United States, including its possessions and territories, in support of a contingency operation in which members of the Armed Forces are actively engaged in hostilities. Except for U.S. Department of Defense grants and cooperative agreements that were awarded on or before December 19, 2017 that will be performed in the United States Central Command, where the estimated value is in excess of $100,000. Covered person or entity means a person or entity that is actively opposing United States or coalition forces involved in a contingency operation in which members of the Armed Forces are actively engaged in hostilities. Appendix to Part 183—Clauses for Award Agreements khammond on DSKJM1Z7X2PROD with PROPOSALS2 Federal awarding agencies must include the following two clauses in all awards for covered grants and cooperative agreements in accordance with Never Contract with the Enemy: Clause 1: Prohibition on Providing Funds to the Enemy (a) The non-Federal Entity must— (1) Exercise due diligence to ensure that none of the funds, including supplies and services, received under this grant or cooperative agreement are provided directly or indirectly (including through subawards or contracts) to a person or entity who is actively opposing the United States or Coalition forces involved in a contingency operation in which members of the Armed Forces are actively engaged in hostilities; (2) Check the list of prohibited/restricted sources in the System for Award Management (SAM) at www.sam.gov— (i) Prior to issuing a subaward or contract; and (ii) At least on a monthly basis; and (3) Terminate in whole or in part any subaward or contract with a person or entity listed in SAM as a prohibited or restricted source pursuant to subtitle E of Title VIII of the NDAA for FY 2015, unless the Federal awarding agency provides written approval to continue the subaward or contract. (4) Include the substance of this clause, including this paragraph (a), in subawards under this grant or cooperative agreement that have an estimated value over $50,000 and will be performed outside the United States, including its outlying areas. (b) The Federal awarding agency has the authority to terminate this grant or VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 cooperative agreement, in whole or in part, if the Federal awarding agency becomes aware that the grantee failed to exercise due diligence as required by paragraph (a) of this clause or if the Federal awarding agency becomes aware that any funds received under this grant or cooperative agreement have been provided directly or indirectly to a person or entity who is actively opposing or Coalition forces involved in a contingency operation in which members of the Armed Forces are actively engaged in hostilities. (End of clause) Clause 2: Additional Access to Non-Federal Entity Records (a) In addition to any other existing examination-of-records authority, the Federal Government is authorized to examine any records of the non-Federal entity and its subawards or contracts to the extent necessary to ensure that funds, including supplies and services, available under this grant or cooperative agreement are not provided, directly or indirectly, to a person or entity that is actively opposing United States or coalition forces involved in a contingency operation in which members of the Armed Forces are actively engaged in hostilities, except for awards awarded by the Department of Defense on or before Dec 19, 2017 that will be performed in the United States Central Command (USCENTCOM) theater of operations. (b) The substance of this clause, including this paragraph (b), is required to be included in subawards or contracts under this grant or cooperative agreement that have an estimated value over $50,000 and will be performed outside the United States, including its outlying areas. PART 200—UNIFORM ADMINISTRATIVE REQUIREMENTS, COST PRINCIPLES, AND AUDIT REQUIREMENTS FOR FEDERAL AWARDS 45. The authority citation for part 200 continues to read as follows: ■ Authority: 31 U.S.C. 503. 46. Amend § 200.0 by adding in alphabetical order the acronym NFE and revising the existing acronym SAM. ■ § 200.0 Acronyms. * * * * * NFE Non-Federal Entity * * * * * SAM System for Award Management * * * * * ■ 47. Revise § 200.1 to read as follows: § 200.1 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 programs or activities. These definitions could be supplemented by additional PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 instructional information provided 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. Assistance listings refers to the publically available listing of Federal assistance programs managed and administered by the General Services Administration. Formally known as the Catalog of Federal Domestic Assistance (CFDA). Assistance listing number means a unique number assigned to identify a Federal assistance listing. Formerly known as the CFDA Number. Assistance listing program title means the title that corresponds to the Federal Assistance number. Formerly known as the CFDA program title. Audit finding means deficiencies which the auditor is required by § 200.516 Audit findings, paragraph (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 E:\FR\FM\22JAP2.SGM 22JAP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules auditor does not include internal auditors of nonprofit organizations. Budget means the financial plan for the Federal award that the Federal awarding agency or pass-through entity approves during the Federal award process or in subsequent amendments to 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. Budget period means the time interval during which recipients are authorized to expend the current funds awarded and must meet the matching or costsharing requirement, if any. 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. 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, exchange, or through a lease accounted for as financed purchase under GASB standards or a finance lease under FSAB standards; 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). For purpose of this Part, capital assets do not include intangible right-to-use assets (per GASB) and right to use operating lease assets (per FASB). For example, assets capitalized that recognize a leasse’s right to control the use of property and/ or equipment for a period of time under a lease contract. See also § 200.465. 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. Claim means, depending on the context, either: (1) A written demand or written assertion by one of the parties to a VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 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 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 § 200.343. 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 § 200.331(a). A cluster of programs must be considered as one program for determining major programs, as described in § 200.518, and, with the exception of R&D as described in § 200.501(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 § 200.513(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 can be found on the Federal Audit Clearinghouse (FAC) website. 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: PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 3781 (1) For IHEs: Appendix III to Part 200, paragraph C.11. (2) For nonprofit organizations: Appendix IV to Part 200, paragraph C.2.a. (3) For state and local governments: Appendix V to Part 200, paragraph F.1. (4) For Indian tribes: Appendix VII to Part 200, paragraph D.1. 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. Compliance supplement means an annually updated source of information for auditors to understand the Federal program’s objectives, procedures, and compliance requirements relevant to the audit, as well as audit objectives and suggested audit procedures for determining compliance with the relevant Federal program Assistance listing title and number. Contract means, for the purpose of Federal financial assistance, 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 also Subaward). Contractor means an entity that receives a contract as defined in this section. 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: E:\FR\FM\22JAP2.SGM 22JAP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 3782 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules (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 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 VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 Federal funds (unless otherwise authorized by Federal statute). See also § 200.306. 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. Discretionary award means an award in which the awarding agency, in keeping with specific statutory authority which enable the agency to exercise judgement (‘‘discretion’’) in selection the grant award recipient through a competitive process or based on merit of existing grant recipients. Some discretionary grants to organizations may be awarded on a non-competitive basis, often based on congressional direction. 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. 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 PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 (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; and (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 information required by subpart F of this part. Federal awarding agency means the Federal agency that provides a Federal award directly to a non-Federal entity. 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 § 200.101; 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 § 200.101. (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 the definition for Federal financial assistance, or the cost-reimbursement 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. (1) Federal financial assistance means assistance that non-Federal entities receive or administer in the form of: (i) Grants; (ii) Cooperative agreements; (iii) Non-cash contributions or donations of property (including donated surplus property); E:\FR\FM\22JAP2.SGM 22JAP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules (iv) Direct appropriations; (v) Food commodities; and (vi) Other financial assistance (except assistance listed in paragraph (b) of this section). (2) For § 200.203 and 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. (3) Federal financial assistance does not include amounts received as reimbursement for services rendered to individuals as described in § 200.502(h) and (i). Federal interest means, for purposes of § 200.329 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 Assistance listing number. (2) When no Assistance listing number is assigned, all Federal awards to non-Federal 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 the federal award costs that are paid using 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 the definitions for Cost objective and Intermediate cost objective in this section. Financial obligations, when used in connection with a non-Federal entity or recipient’s utilization of funds under a Federal award, means orders placed for property and services, contracts and VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 subawards made, and similar transactions that require payment. Fixed amount awards means a type of grant or cooperative agreement under which the Federal awarding agency or pass-through 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 record-keeping requirements for both the non-Federal entity and Federal awarding agency or pass-through entity. Accountability is based primarily on performance and results. See §§ 200.201, 200.332(b) and 200.102(d). 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. 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. 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, PO 00000 Frm 00019 Fmt 4701 Sfmt 4702 3783 information technology equipment and systems, air conditioning equipment, 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. Highest level owner means the entity that owns or controls an immediate owner of the offeror, or that owns or controls one or more entities that control an immediate owner of the offeror. No entity owns or exercises control of the highest-level owner as defined in the FAR (48 CFR 52 204–17). 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. See definition of improper payment in OMB Circular A– 123 Appendix C, Part I A (2) ‘‘What is an improper payment?’’ Questioned costs are not an improper payment until reviewed and confirmed to be improper as defined in OMB Circular A–123 Appendix C. E:\FR\FM\22JAP2.SGM 22JAP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 3784 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules 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. Institutions of Higher Education (IHEs) is defined at 20 U.S.C. 1001. Indirect (facilities & administrative (F&A)) costs means those 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 to Part 200 through Appendix VII to part 200, and Appendix IX to part 200. 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. 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 objectives. See also Cost objective and Final cost objective. Internal controls for non-Federal entities means processes designed and implemented by non-Federal entities to provide reasonable assurance regarding VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 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. (4) Internal controls Federal awarding agencies are required to follow are located in OMB Circular A–123. Internal control over compliance requirements for Federal awards. Federal awarding agencies are required to follow internal control compliance requirements located in OMB Circular A–123. 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 in § 200.1 Definitions. (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. (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; PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 (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 § 200.518 or a program identified as a major program by a Federal awarding agency or pass-through entity in accordance with § 200.503(e). Management decision means the Federal awarding agency’s or passthrough entity’s written determination, provided to the auditee, of the adequacy of the auditee’s proposed corrective actions to address the findings, based on its evaluation of the audit findings and proposed corrective actions. Micro-purchase means a purchase of supplies or services, the aggregate amount of which does not exceed the micro-purchase threshold. Micropurchase comprise a subset of a nonFederal entity’s small purchases as defined in § 200.319. Micro-purchase threshold means the dollar amount at or below which a non-Federal entity may purchase property or services using micro-purchase procedures (see § 200.319). Generally, the micropurchase threshold for procurement activities administered under Federal awards is not to exceed the amount set by the Federal Acquisition Regulation (FAR) at 48 CFR 2.101 (unless a higher threshold is requested by the nonFederal entity and approved by the cognizant agency). 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-discretionary award means an award made by the awarding agency as defined by statute to specific recipients, assuming recipient application meets E:\FR\FM\22JAP2.SGM 22JAP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules eligibility and compliance requirements, such that in keeping with specific statutory authority the agency has no ability to exercise judgment (‘‘discretion’’), due to ‘‘mandatory’’ award requirements, in selecting the applicant/recipient organization through a competitive process. Nondiscretionary awards can be both formula and non-formula based. Non-Federal entity (NFE) means a state, local government, Indian tribe, Institutions 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. Notice of funding opportunity means a formal announcement of the availability of Federal funding through a financial assistance program from a Federal awarding agency. The Notice of Funding Opportunity announcement provides information on the award, who is eligible to apply, the evaluation criteria for selection of an awardee, required components of an application, and how to submit the application. 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 (direct funding) to a nonFederal entity not assigned a cognizant agency for audit. When the direct funding represents less than 25 percent of the total funding received from the non-Federal entity (as prime and subawards), then the Federal agency with the predominant amount of funding is the designated oversight agency for award. 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 § 200.513(b). Pass-through entity (PTE) means a non-Federal entity that provides a subaward to a subrecipient to carry out part of a Federal program. Participant support costs means direct costs for items such as stipends or VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 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. 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 anticipated time interval between the start and end date of an initial Federal award or Renewal. See also Budget period and Renewal. Personal property means property other than real property. It may be tangible, having physical existence, or intangible. 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 websites, 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. 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(f). (See Period of performance in § 200.1) 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 PO 00000 Frm 00021 Fmt 4701 Sfmt 4702 3785 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 § 200.407 Prior written approval (prior approval). See also 35 U.S.C. 200–212 ‘‘Disposition of Rights in Educational Awards’’ applies to inventions made under Federal awards. Property means real property or personal property. See also Real property and personal property. Protected Personally Identifiable Information (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). Project cost means total allowable costs incurred under a Federal award and all required cost sharing and voluntary committed cost sharing, including third-party contributions. 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. (4) Questioned costs are not an improper payment until reviewed and confirmed to be improper as defined in OMB Circular A–123 Appendix C. (see also Improper payment) Real property means land, including land improvements, structures and appurtenances thereto, but excludes moveable machinery and equipment. Recipient means a non-Federal entity that receives a Federal award directly from a Federal awarding agency. The term recipient does not include subrecipients or an individual that is a beneficiary of the award. Renewal means a subsequent Federal award to a current Federal award; each renewal must have a distinct period of performance. E:\FR\FM\22JAP2.SGM 22JAP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 3786 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules Research and Development (R&D) means all research activities, both basic and applied, and all development activities that are performed by nonFederal entities. 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. ‘‘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. Simplified acquisition threshold means the dollar amount below which a non-Federal entity may purchase property or services using small purchase methods (see § 200.319). NonFederal entities adopt small purchase procedures in order to expedite the purchase of items at or below the simplified acquisition threshold. The simplified acquisition threshold for procurement activities administered under Federal awards is set by the Federal Acquisition Regulation at 48 CFR subpart 2.1. Thresholds differ from the FAR. The non-Federal entity is responsible for determining an appropriate simplified acquisition threshold based on internal controls, an evaluation of risk and its documented procurement procedures. States, IHEs and local governments should determine if local government laws on purchasing apply. 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, 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 U.S.C. 1070–1099d), which are administered by the U.S. Department of VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 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 an entity, usually but not limited to non-Federal entities, that receives a subaward from a passthrough entity to carry out part of a Federal award; but does not include an individual that is a beneficiary of such award. A subrecipient may also be a recipient of other Federal awards directly from a Federal awarding agency. Subsidiary means an entity in which more than 50 percent of the non-Federal entity is owned directly by a parent corporation or through another subsidiary of a parent corporation as defined in the FAR (48 CFR 52.209–10). Supplies means all tangible personal property other than those described in the definition of 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. 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. A lack of available funds is not a termination. 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. Unliquidated financial obligations means, for financial reports prepared on a cash basis, financial obligations incurred by the non-Federal entity that have not been paid (liquidated). For reports prepared on an accrual expenditure basis, these are financial obligations incurred by the non-Federal entity for which an expenditure has not been recorded. PO 00000 Frm 00022 Fmt 4701 Sfmt 4702 Unobligated balance means the amount of funds 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 financial obligations and expenditures of funds under the Federal award from the cumulative amount of the funds that the Federal awarding agency or passthrough entity authorized the nonFederal entity to obligate. Voluntary committed cost sharing means cost sharing specifically pledged on a voluntary basis in the proposal’s budget on the part of the non-Federal entity and that becomes a binding requirement of Federal award. See also § 200.306. §§ 200.2 through 200.99 [Removed] 48. Remove §§ 200.2 through 200.99 49. Amend § 200.100 by revising paragraph (a)(1) to read as follow: ■ ■ § 200.100 Purpose. (a)(1) This part establishes uniform administrative requirements, cost principles, and audit requirements for Federal awards to non-Federal entities, as described in § 200.101. Federal awarding agencies must not impose additional or inconsistent requirements, except as provided in §§ 200.102 and 200.211, or unless specifically required by Federal statute, regulation, or Executive Order. * * * * * ■ 50. Revise § 200.101 to read as follows: § 200.101 Applicability. (a) General applicability to Federal agencies. (1) The requirements established in this part apply to Federal agencies that make Federal awards to non-Federal entities. These requirements are applicable to all costs related to Federal awards. (2) Federal awarding agencies may apply subparts A through E of this part to Federal agencies, 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 responsibilities of the United States or the statutes or regulations of a foreign government. (b) Applicability to different types of Federal awards. (1) Throughout this part when the word ‘‘must’’ is used it indicates a requirement. Whereas, use of the word ‘‘should’’ or ‘‘may’’ indicates a best practice or recommended approach rather than a requirement and permits discretion. E:\FR\FM\22JAP2.SGM 22JAP2 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules (2) The following table describes what portions of this part apply to which types of Federal awards. The terms and conditions of Federal awards (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 non-Federal entity is a recipient or subrecipient of a Federal award. Pass-through entities must comply with the requirements described in Subpart D of this part, §§ 200.330 3787 through 200.332, 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. TABLE 1 TO PARAGRAPH (b) Are applicable to the following types of Federal Awards and fixed-price contracts and subcontracts (except as noted in paragraphs (d) and (e) below): The following portions of this part Subpart A—Acronyms and Definitions ............... Subpart B—General Provisions, except for §§ 200.111 English Language, 200.112 Conflict of Interest, 200.113 Mandatory Disclosures. §§ 200.111 English Language, 200.112 Conflict of Interest, 200.113 Mandatory Disclosures. —All. —All. Subparts C–D, except for §§ 200.203 Requirement to provide public notice of Federal financial assistance programs, 200.303 Internal controls, 200.330–332 Subrecipient Monitoring and Management. —Grant Agreements and cooperative agreements. § 200.203 Requirement to provide public notice of Federal financial assistance programs. —Grant Agreements and cooperative agreements. —Agreements for loans, loan guarantees, interest subsidies and insurance. —All. §§ 200.303 Internal controls, 200.330–332 Subrecipient Monitoring and Management. Subpart E—Cost Principles ................................ khammond on DSKJM1Z7X2PROD with PROPOSALS2 Subpart F—Audit Requirements ........................ (c) 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, §§ 200.330 through 200.332, subpart E of this part and subpart F of this part are incorporated by reference into the contract, but the requirements of subparts D, E, and F are supplementary to the FAR contract and only have effect to the extent that they do not conflict with the FAR and the contract. When the Cost Accounting VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 —Grant Agreements and cooperative agreements. —Grant Agreements and cooperative agreements, except those providing food commodities. —All procurement contracts under the Federal Acquisition Regulations except those that are not negotiated. —Grant Agreements and cooperative agreements. —Contracts and subcontracts, except for fixed price contacts and subcontracts, awarded under the Federal Acquisition Regulation. —Agreements for loans, loans guarantees, interest subsidies and insurance and other forms of Federal Financial Assistance as defined by the Single Audit Act Amendment of 1996. Standards (CAS) are applicable to the contract, they take precedence over the requirements of this part, including subpart F of this part, which are supplementary to the CAS requirements. 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 48 CFR subpart 31.2 and 48 CFR 31.603 are always unallowable. For requirements other than those covered in subpart D of this part, §§ 200.330 through 200.332, subpart E of this part and subpart F of PO 00000 Frm 00023 Fmt 4701 Sfmt 4702 Are NOT applicable to the following types of Federal Awards and fixed-price contracts and subcontracts: —Agreements for loans, loan guarantees, interest subsidies and insurance. —Procurement contracts awarded by Federal Agencies under the Federal Acquisition Regulation and subcontracts under those contracts. —Agreements for loans, loan guarantees, interest subsidies and insurance. —Procurement contracts awarded by Federal Agencies under the Federal Acquisition Regulation and subcontracts under those contracts. —Procurement contracts awarded by Federal Agencies under the Federal Acquisition Regulation and subcontracts under those contracts. —Grant agreements and cooperative agreements providing foods commodities. —Fixed amount awards. —Agreements for loans, loans guarantees, interest subsidies and insurance. —Federal awards to hospitals (see Appendix IX Hospital Cost Principles). —Fixed-price contracts and subcontracts awarded under the Federal Acquisition Regulation. this part, the terms of the contract and the FAR apply. Note that when a nonFederal entity is awarded a FAR contract, the FAR applies, and the terms and conditions of the contract shall prevail over the requirements of this part. (d) 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 E:\FR\FM\22JAP2.SGM 22JAP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 3788 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules 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. (e) Except for § 200.203, and §§ 200.330 through 200.332, the requirements in Subpart C, Subpart D, and Subpart 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 Subpart E—Cost Principles of this Part apply to subrecipients of Community Services Block Grant funds pursuant to 42 U.S.C. 9916(a)(1)(B); (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) (f) Except for § 200.203, the guidance in subpart C of this part does not apply to the following programs: (1) Entitlement Federal awards to carry out the following programs of the Social Security Act: (i) Temporary Assistance to 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 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). (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 VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 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), (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. ■ 51. Amend § 200.102 by revising paragraphs (a), (c), and (d) to read as follows: 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. A Federal awarding agency may apply less restrictive requirements when making 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) OMB encourages Federal awarding agencies to request exceptions in support of innovative program designs that apply a risk-based, data-driven framework to alleviate select compliance requirements and hold recipients accountable for good performance. OMB also encourages agencies to apply more restrictive terms and conditions when a risk-assessment indicates it may be merited. ■ 52. Revise § 200.110 to read as follows: § 200.102 Sec. 200.200 Purpose. 200.201 Use of grant agreements (including fixed amount awards), cooperative agreements, and contracts. 200.202 Program planning and design. 200.203 Requirement to provide public notice of Federal financial assistance programs. 200.204 Notices of funding opportunities. 200.205 Federal awarding agency review of merit of proposals. 200.206 Federal awarding agency review of risk posed by applicants. 200.207 Standard application requirements. 200.208 Specific conditions. 200.209 Certifications and representations. 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. In the interest of maximum uniformity, exceptions from the requirements of this part will be permitted only as described in paragraph (d) of this section or in unusual circumstances. * * * * * (c) The Federal awarding agency may apply more or less restrictive PO 00000 Frm 00024 Fmt 4701 Sfmt 4702 § 200.110 Effective/applicability date. (a) The standards set forth in this part that affect the 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. (b) Existing negotiated indirect cost rates will remain in place until they are re-negotiated. The effective date of changes to indirect cost rates must be based upon the date that a newly renegotiated rate goes into effect for a specific non-Federal entity’s fiscal year. Therefore, for indirect cost rates and cost allocation plans, Federal awarding and indirect cost rate negotiating agencies will use the Uniform Guidance both in generating proposals for and negotiating a new rate (when the rate is re-negotiated) for non-Federal entities. ■ 53. Revise Subpart C to read as follows: Subpart C—Pre-Federal Award Requirements and Contents of Federal Awards E:\FR\FM\22JAP2.SGM 22JAP2 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules 200.210 Pre-award costs. 200.211 Information contained in a Federal award. 200.212 Public access to Federal award information. 200.213 Reporting a determination that a non-Federal entity is not qualified for a Federal award. 200.214 Suspension and debarment. 200.215 Never contract with the enemy. 200.216 Prohibition on certain telecommunications and video surveillance services or equipment. § 200.200 Purpose. (a) Sections 200.201 through 200.209 prescribe instructions and other preaward matters to be used in the announcement and application process. (b) Use of §§ 200.204, 200.205, 200.206, and 200.208, is required only for competitive Federal awards, but may also be used by the Federal awarding agency for non-competitive awards where appropriate or where required by Federal statute. khammond on DSKJM1Z7X2PROD with PROPOSALS2 § 200.201 Use of grant agreements (including fixed amount awards), cooperative agreements, and contracts. (a) The Federal awarding agency or pass-through 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, Federal awarding agencies, or pass-through entities as permitted in § 200.332, may use fixed amount awards (see Fixed amount awards in § 200.1) to which the following conditions apply: (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 has measurable goals and objectives 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 VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 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 Federal 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 Federal awarding agency or pass-through entity. § 200.202 Program planning and design. In designing the Federal financial assistance programs, the Federal awarding agency must establish program goals, objectives, and indicators at the assistance listing (e.g., program) level, to the extent permitted by law. Program design must occur before the Federal awarding agency drafts the Notice of Funding Opportunity. The program goals and outcomes designed must be aligned with the Congressional intent of the program, agency leadership goals, as well as agency strategic plan and priority goals. Programs must be designed with clear goals and objectives to achieve intended results. Program goals, objectives and metrics for measuring performance must also be published in the assistance listing. Program design elements may include a problem or needs statement, goals and objectives, a logic model depicting the program’s structure, program activities, performance indicators to measure program accomplishments which may include independently available sources of data, learning communities which may benefit from a common understanding of promising practices, and a system to periodically review award selection criteria. Federal awarding agencies should use program design to inform the management of Federal awards at all stages of the financial assistance lifecycle. Federal awarding agencies are responsible for collecting relevant performance data to demonstrate the results of Federal PO 00000 Frm 00025 Fmt 4701 Sfmt 4702 3789 financial assistance programs. Federal awarding agencies are also responsible for ensuring taxpayer dollars are providing critical Federal services to citizens efficiently and cost-effectively while managing government programs, as described in the Program Management Improvement Accountability Act (Pub. L. 114–264), the OMB Memorandum M–18–19 (Improving the Management of Federal Programs and Projects through Implementing the Program Management Improvement Accountability Act) and OMB circular A–11 (Preparation, Submission, and Execution of the Budget). See also § 200.1 Definition for Assistance listing. § 200.203 Requirement to provide public notice of Federal financial assistance programs. (a) The Federal awarding agency must notify the public of Federal programs in the Assistance listings maintained by the General Services Administration (GSA). (1) The Assistance listings is the single, authoritative, governmentwide comprehensive source of Federal financial assistance program information produced by the executive branch of the Federal Government. (2) The information that the Federal 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 in coordination with OMB. (3) The Federal awarding agency may not award Federal financial assistance without assigning it to a program that has been included in the Assistance listings 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 Federal awarding agency must, to the extent practicable, create, updated, and manage Assistance listing entries based on the authorizing statute for the program and comply with additional guidance provided by GSA in consultation with OMB to ensure consistent, accurate information is available to prospective applicants. At a minimum, Federal awarding agencies 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, E:\FR\FM\22JAP2.SGM 22JAP2 3790 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules the Program description, purpose, goals, and measurement should align with the strategic goals and objectives within the Federal awarding agency’s performance plan as required by Part 6 of OMB Circular A–11 and should support the Federal awarding agency’s performance measurement, management, and any required reporting; (2) Identification. 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. The applicability of Single Audit Requirements as required by subpart F of this part. khammond on DSKJM1Z7X2PROD with PROPOSALS2 § 200.204 Notices of funding opportunities. For discretionary grants and cooperative agreements, the Federal awarding agency must announce specific funding opportunities by providing the following information in a public notice: (a) Summary information in notices of funding opportunities. The Federal awarding agency must display the following information posted on the OMB-designated governmentwide website for finding and applying for Federal financial assistance, in a location preceding the full text of the announcement: (1) Federal 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 Federal awarding agency has assigned or will assign a number to the funding opportunity announcement, this number must be provided; VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 (5) Assistance listing 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 Federal awarding agency. (b) Availability period. The Federal awarding agency must generally make all funding opportunities available for application for at least 60 calendar days. The Federal 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 Federal awarding agency head or delegate. (c) Full text of funding opportunities. The Federal 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 to Part 200. (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 § 200.414(c)(4)). (3) Specific eligibility information, including any factors or priorities that affect an applicant’s or its application’s eligibility for selection. (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 §§ 200.205 and 200.206. (6) Federal Award Administration Information. See also § 200.211. § 200.205 Federal awarding agency review of merit of proposals. For discretionary grants or cooperative agreements, unless prohibited by Federal statute, the Federal awarding agency must design and execute a merit review process for applications, with the objective of selecting the recipients most likely to be successful in delivering results based on the program objectives outlines in section § 200.202. This process must be described or incorporated by reference in the applicable funding opportunity (see Appendix I to this part.) See also § 200.204. The Federal awarding agency PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 must also systematically review award selection criteria for effectiveness. § 200.206 Federal awarding agency review of risk posed by applicants. (a) Review of OMB-designated repositories of governmentwide data. (1) Prior to making a Federal award, the Federal awarding agency is required by the Improper Payments Elimination and Recovery Improvement Act of 2012, 31 U.S.C. 3321, note and 41 U.S.C. 2313 note to review information available through any OMB-designated repositories of governmentwide eligibility qualification or financial integrity information as appropriate. 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. (2) In accordance 41 U.S.C. 2313, the Federal awarding agency is required to review the non-public segment of the OMB-designated integrity and performance system accessible through SAM (currently the Federal Awardee Performance and Integrity Information System (FAPIIS)) prior to making a Federal award where the Federal share is expected to exceed the simplified acquisition threshold, defined in 41 U.S.C. 134, over the period of performance. As required by Public Law 112–239 National Defense Authorization Act for Fiscal Year 2013, prior to making a Federal award, the Federal awarding agency must consider all of the information available through FAPIIS with regard to the applicant and any immediate highest level owner, predecessor (i.e., a non-Federal entity that is replaced by a successor), or subsidiary, identified for that applicant in FAPIIS, if applicable. At a minimum, the information in the system for a prior Federal award recipient must demonstrate a satisfactory record of executing programs or activities under Federal grants, cooperative agreements, or procurement awards; and integrity and business ethics. The Federal awarding agency may make a Federal award to a recipient who does not fully meet these standards, if it is determined that the information is not relevant to the current Federal award under consideration or there are specific conditions that can appropriately mitigate the effects of the non-Federal entity’s risk in accordance with § 200.208 Specific conditions. (b) Risk evaluation. (1) In addition, for competitive grants or cooperative agreements, the Federal awarding agency must have in place a framework for evaluating the risks posed by applicants before they receive Federal E:\FR\FM\22JAP2.SGM 22JAP2 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules awards. This evaluation may incorporate results of the evaluation of the applicant’s eligibility or the quality of its application. If the Federal 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 § 200.204 Notices of funding opportunities. (2) In evaluating risks posed by applicants, the Federal awarding agency may use a risk-based approach and may consider any items such as the following: (i) Financial stability; (ii) Quality of management systems and ability to meet the management standards prescribed in this part; (iii) 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; (iv) Reports and findings from audits performed under Subpart F of this part or the reports and findings of any other available audits; and (v) The applicant’s ability to effectively implement statutory, regulatory, or other requirements imposed on non-Federal entities. (c) Suspension and debarment compliance. The Federal awarding agency must comply with the guidelines on governmentwide 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. khammond on DSKJM1Z7X2PROD with PROPOSALS2 § 200.207 Standard application requirements. (a) Paperwork clearances. The Federal 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, Controlling Paperwork Burdens on the Public and in alignment with OMB-approved, governmentwide data elements available from the OMBdesignated standards lead. Consistent with these requirements, OMB will VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 authorize additional information collections only on a limited basis. (b) If applicable, the Federal awarding agency may inform applicants and recipients that they do not need to provide certain information otherwise required by the relevant information collection. § 200.208 Specific conditions. (a) Federal awarding agencies are responsible for ensuring that specific Federal award conditions are consistent with the program design reflected in § 200.202 and include clear performance expectations of recipients as required in § 200.301. (b) Risk-based specific conditions. (1) The Federal awarding agency or pass-through entity may impose more or less restrictive or additional specific Federal award conditions as needed, in accordance with paragraphs (b)(2) and (3) of this section, based on an analysis of the following factors: (i) Based on the criteria set forth in § 200.206; (ii) The an applicant or recipient’s history of compliance with the general or specific terms and conditions of a Federal award; (iii) The applicant or recipient’s ability to meet expected performance goals as described in § 200.211; or (iv) A responsibility determination of an applicant or recipient (2) Additional Federal award conditions may include items such as the following: (i) Requiring payments as reimbursements rather than advance payments; (ii) Withholding authority to proceed to the next phase until receipt of evidence of acceptable performance within a given budget period; (iii) Requiring additional, more detailed financial reports; (iv) Requiring additional project monitoring; (v) Requiring the non-Federal entity to obtain technical or management assistance; or (vi) Establishing additional prior approvals. (3) If the Federal awarding agency or pass-through entity is imposing additional requirements, they must notify the applicant or non-Federal entity as to: (i) The nature of the additional requirements; (ii) The reason why the additional requirements are being imposed; (iii) The nature of the action needed to remove the additional requirement, if applicable; (iv) The time allowed for completing the actions if applicable, and PO 00000 Frm 00027 Fmt 4701 Sfmt 4702 3791 (v) The method for requesting reconsideration of the additional requirements imposed. (c) Any additional requirements must be promptly removed once the conditions that prompted them have been satisfied. § 200.209 Certifications and representations. Unless prohibited by the U.S. Constitution, Federal statutes or regulations, each Federal 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. § 200.210 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 § 200.458. § 200.211 Information contained in a Federal award. A Federal award must include the following information: (a) Federal award performance goals. The Federal awarding agency must include in the Federal award 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. Where applicable, this should also include any performance measures or independent sources of data that may be used to measure progress. In some instances (e.g., discretionary research awards), this must be limited to the requirement to submit technical performance reports (to be evaluated in accordance with Federal 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 Federal awarding agency may include program-specific requirements, as applicable. These requirements must be aligned, to the extent permitted by law, with Federal awarding agency strategic goals, strategic objectives or performance goals that are relevant to the program. See E:\FR\FM\22JAP2.SGM 22JAP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 3792 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules also OMB Circular A–11, Preparation, Submission and Execution of the Budget Part 6 for definitions of strategic objectives and performance goals. (b) General Federal Award Information. The Federal awarding agency must include the following general Federal award information in each Federal award: (1) Recipient name (which must match the name associated with its unique entity identifier as defined at 2 CFR 25.315); (2) Recipient’s unique entity identifier; (3) Unique Federal Award Identification Number (FAIN); (4) Federal Award Date (see Federal award date in § 200.1 Definitions); (5) Period of Performance Start and End Date; (6) Budget Period Start and End Date; (7) Amount of Federal Funds Obligated by this action; (8) Total Amount of Federal Funds Obligated; (9) Total Approved Cost Sharing or Matching, where applicable; (10) Total Amount of the Federal Award including approved Cost Sharing or Matching; (11) Budget Approved by the Federal Awarding Agency; (12) Federal award description, (to comply with statutory requirements (e.g., FFATA)); (13) Name of Federal awarding agency and contact information for awarding official, (14) Assistance listing number and title; (15) Identification of whether the award is R&D; and (16) Indirect cost rate for the Federal award (including if the de minimis rate is charged per § 200.414). (17) Performance goals, indicators, targets, baseline data, and data collection plan (c) General terms and conditions. (1) Federal awarding agencies must incorporate the following general terms and conditions either in the Federal award or by reference, as applicable: (i) Administrative requirements. These are implemented by the Federal 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 § 200.300 Statutory and national policy requirements. (iii) Recipient integrity and performance matters. If the total Federal share of the Federal award may include more than $500,000 over the period of VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 performance, the Federal awarding agency must include the term and condition available in Appendix XII of this part. See also § 200.113. (iv) Future budget periods. If it is anticipated that the period of performance will include multiple budget periods, the Federal awarding agency must indicate that subsequent budget periods are subject to the availability of funds, satisfactory performance, and compliance with the terms and conditions of the Federal award. (v) Termination provisions. Recipients must be made aware of the termination provisions in § 200.339, including the applicable termination provisions in the Federal awarding agency’s regulations and in each Federal award. (2) The Federal award must include wording to incorporate, by reference, all terms and conditions of the award. Any reference within the award to general terms and conditions must be to the website at which the Federal awarding agency maintains. (3) If a non-Federal entity requests a copy of the full text of the general terms and conditions, the Federal awarding agency must provide it. (4) Wherever the general terms and conditions are publicly available, the Federal 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. (d) Federal awarding agency, program, or federal award specific terms and conditions. The Federal awarding agency must include with each Federal award any terms and conditions necessary to communicate requirements that are in addition to the requirements outlined in the Federal awarding agency’s general terms and conditions as required in § 200.208. Whenever practicable, these specific terms and conditions also should be shared on a public website and in notices of funding opportunities (as outlined in § 200.204) in addition to being included in a Federal award. See also § 200.207. (e) Prohibition of Including References to Non-Binding Guidance Documents. Federal awarding agencies are prohibited from including references to non-binding guidance in the terms and conditions of award. As described in Executive Order (E.O.) 13891, references to non-binding guidance include references to promising practices and other documents that the inclusion of by reference carries the implicit threat of enforcement action. These resources may be shared outside of the terms and conditions for reference purposes. PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 (f) Federal awarding agency requirements. Any other information required by the Federal awarding agency. § 200.212 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 Federal awarding agency must announce all Federal awards publicly and publish the required information on a publicly available OMB-designated governmentwide website. (b) All information posted in the designated integrity and performance system accessible through SAM (currently FAPIIS) on or after April 15, 2011 will be publicly available after a waiting period of 14 calendar days, except for: (1) Past performance reviews required by Federal Government contractors in accordance with the Federal Acquisition Regulation (FAR) 48 CFR subpart 42.15; (2) Information that was entered prior to April 15, 2011; or (3) Information that is withdrawn during the 14-calendar day waiting period by the Federal Government official. (c) 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. § 200.213 Reporting a determination that a non-Federal entity is not qualified for a Federal award. (a) If a Federal awarding agency does not make a Federal award to a nonFederal entity because the official determines that the non-Federal entity does not meet either or both of the minimum qualification standards as described in § 200.206(a)(2), the Federal awarding agency must report that determination to the designated integrity and performance system accessible through SAM (currently FAPIIS), only if all of the following apply: (1) The only basis for the determination described in paragraph (a) of this section is the non-Federal entity’s prior record of executing programs or activities under Federal awards or its record of integrity and business ethics, as described in § 200.206(a)(2) (i.e., the entity was determined to be qualified based on all factors other than those two standards), and E:\FR\FM\22JAP2.SGM 22JAP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules (2) The total Federal share of the Federal award that otherwise would be made to the non-Federal entity is expected to exceed the simplified acquisition threshold over the period of performance. (b) The Federal awarding agency is not required to report a determination that a non-Federal entity is not qualified for a Federal award if they make the Federal award to the non-Federal entity and includes specific award terms and conditions, as described in § 200.208. (c) If a Federal awarding agency reports a determination that a nonFederal entity is not qualified for a Federal award, as described in paragraph (a) of this section, the Federal awarding agency also must notify the non-Federal entity that— (1) The determination was made and reported to the designated integrity and performance system accessible through SAM, and include with the notification an explanation of the basis for the determination; (2) The information will be kept in the system for a period of five years from the date of the determination, as required by section 872 of Public Law 110–417, as amended (41 U.S.C. 2313), then archived; (3) Each Federal awarding agency that considers making a Federal award to the non-Federal entity during that five year period must consider that information in judging whether the non-Federal entity is qualified to receive the Federal award when the total Federal share of the Federal award is expected to include an amount of Federal funding in excess of the simplified acquisition threshold over the period of performance; (4) The non-Federal entity may go to the awardee integrity and performance portal accessible through SAM (currently the Contractor Performance Assessment Reporting System (CPARS)) and comment on any information the system contains about the non-Federal entity itself; and (5) Federal awarding agencies will consider that non-Federal entity’s comments in determining whether the non-Federal entity is qualified for a future Federal award. (d) If a Federal awarding agency enters information into the designated integrity and performance system accessible through SAM about a determination that a non-Federal entity is not qualified for a Federal award and subsequently: (1) Learns that any of that information is erroneous, the Federal awarding agency must correct the information in the system within three business days; (2) Obtains an update to that information that could be helpful to VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 other Federal awarding agencies, the Federal awarding agency is strongly encouraged to amend the information in the system to incorporate the update in a timely way. (e) Federal awarding agencies must not post any information that will be made publicly available in the nonpublic segment of designated integrity and performance system that is covered by a disclosure exemption under the Freedom of Information Act. If the recipient asserts within seven calendar days to the Federal awarding agency that posted the information that some or all of the information made publicly available is covered by a disclosure exemption under the Freedom of Information Act, the Federal awarding agency that posted the information must remove the posting within seven calendar days of receiving the assertion. Prior to reposting the releasable information, the Federal awarding agency must resolve the issue in accordance with the agency’s Freedom of Information Act procedures. § 200.214 Suspension and debarment. Non-federal entities 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. § 200.215 Never contract with the enemy. Federal awarding agencies and nonFederal entities are subject to the regulations implementing Never Contract with the Enemy in 2 CFR part 183. These regulations affect grants and cooperative agreements that are expected to exceed $50,000 within the period of performance, are performed outside the United States, including U.S. territories, and are in support of a contingency operation in which members of the Armed Forces are actively engaged in hostilities. § 200.216 Prohibition on certain telecommunications and video surveillance services or equipment. Grant, cooperative agreement, and loan recipients are prohibited from using government funds to enter into contracts (or extend or renew contracts) with entities that use covered technology. See section 889 of Public Law 115–232 (National Defense Authorization Act 2019). ■ 54. Amend § 200.300 by revising the first sentence of paragraph (a) to read as follows: PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 3793 § 200.300 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 the U.S. Constitution, Federal Law, statutory, and public policy requirements: including, but not limited to, those protecting free speech, religious liberty, public welfare, the environment, and prohibiting discrimination. * * * * * * * * ■ 55. Revise § 200.301 to read as follows: § 200.301 Performance measurement. The Federal awarding agency must measure the recipient’s performance in a way that will help the Federal awarding agencies and non-Federal entities to achieve program goals and objectives, share lessons learned, and foster adoption of promising practices. The Federal awarding agency should provide recipients with clear performance goals, indicators, and milestones as described in § 200.211. Performance reporting frequency and content should be established to not only allow the Federal awarding agency to understand the recipient’s progress but also to facilitate identification of promising practices among recipients and build evidence upon which the Federal awarding agency’s program and performance decisions are made. This provision is designed to operate in tandem with evidence-related statutes (e.g.; The Foundations for EvidenceBased Policymaking Act of 2018, which emphasizes collaboration and coordination to advance data and evidence-building functions in the Federal government) and related OMB implementation guidance (e.g.; OMB Memorandum M–19–23: Phase 1 implementation of the Foundations for Evidence-Based Policymaking Act of 2018. Learning Agendas, Personnel, and Planning Guidance). The Federal awarding agency must also require the recipient to use OMB-approved common information collections, as applicable, when providing financial and performance information. As appropriate and in accordance with above mentioned information collections, the Federal awarding agency should require the recipient to relate financial data to performance accomplishments of the Federal award. Also, in accordance with above mentioned common information collections, and when applicable, recipients should also provide cost information to demonstrate cost E:\FR\FM\22JAP2.SGM 22JAP2 3794 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules effective practices (e.g., through unit cost data). In some instances (e.g., discretionary research awards), these requirements may be limited to the submission of technical performance reports (to be evaluated in accordance with agency policy). The Federal awarding agency should also specify any requirements of award recipients’ participation in a Federally-funded evaluation, and any evaluation activities required to be conducted by the Federal award. § 200.302 [Amended] 56. Amend § 200.302 as follows: a. In paragraph (b)(1) remove the term ‘‘CFDA’’ and add, in its place, ‘‘Assistance listing’’. ■ b. In paragraph (b)(3) remove the word ‘‘obligations’’ and add, in its place, ‘‘financial obligations’’. ■ 57. Amend § 200.303 by revising paragraphs (b) and (e) to read as follows: ■ ■ § 200.303 Internal controls. * * * * * (b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the 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 responsibility over confidentiality. ■ 58. Revise § 200.305 to read as follows: khammond on DSKJM1Z7X2PROD with PROPOSALS2 § 200.305 Federal 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 § 200.302(b)(6). Except as noted elsewhere in this part, Federal agencies must require recipients to use only OMB-approved, governmentwide information collection requests to request payment. (1) The non-Federal entity must be paid in advance, provided it maintains VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 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, 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 Federal 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 this paragraph (b) cannot be met, when the Federal awarding agency sets a specific condition per § 200.208, 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 Federal awarding agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the Federal awarding agency or passthrough entity reasonably believes the request to be improper. (4) If the non-Federal entity cannot meet the criteria for advance payments and the Federal awarding agency or pass-through entity has determined that PO 00000 Frm 00030 Fmt 4701 Sfmt 4702 reimbursement is not feasible because the non-Federal entity lacks sufficient working capital, the Federal awarding agency or pass-through entity may provide cash on a working capital advance basis. Under this procedure, the Federal 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 cycle. Thereafter, the Federal 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 § 200.208, subpart D of this part, § 200.338, 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, ‘‘Policies for Federal Credit Programs and Non-Tax Receivables.’’ Under such conditions, the Federal awarding agency or pass-through entity may, upon reasonable notice, inform the nonFederal entity that payments must not be made for financial obligations incurred after a specified date until the conditions are corrected or the indebtedness to the Federal Government is liquidated. (iii) A payment withheld for failure to comply with Federal award conditions, E:\FR\FM\22JAP2.SGM 22JAP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules 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 § 200.342. (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 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 Federal 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 funds received, obligated, and expended. (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 $250,000 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 (PMS) through an electronic medium using either Automated Clearing House (ACH) network or a Fedwire Funds Service payment. (i) For returning interest on Federal awards paid through PMS, the refund should: VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 (A) Provide an explanation stating that the refund is for interest; (B) List the PMS Payee Account Number(s) (PANs); (C) List the Federal award number(s) for which the interest was earned; and (D). Make returns payable to: Department of Health and Human Services. (ii) For returning interest on Federal awards not paid through PMS, the refund should: (A) Provide an explanation stating that the refund is for interest; (B) Include the name of the awarding agency; (C) List the Federal award number(s) for which the interest was earned; and (D) Make returns payable to: Department of Health and Human Services. (10) Funds, principal, and excess cash returns must be directed to the original Federal agency payment system. The non-Federal entity should review instructions from the original Federal agency payment system. Returns should include the following information: (i) Payee Account Number (PAN), if the payment originated from PMS, or Agency information to indicate whom to credit the funding if the payment originated from ASAP, NSF, or another Federal agency payment system. (ii) PMS document number and subaccount(s), if the payment originated from PMS, or relevant account numbers if the payment originated from another Federal agency payment system. (iii) The reason for the return (e.g., excess cash, funds not spent, interest, part interest part other, etc.) (11) When returning funds or interest to PMS you must include the following as applicable: (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. 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 their 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. PO 00000 Frm 00031 Fmt 4701 Sfmt 4702 3795 Payment Details (Line 70): Agency Locator Code (ALC): 75010501. Name (abbreviated when possible) and ALC Agency POC. (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) Questions can be directed to PMS at 877–614–5533 or PMSSupport@ psc.hhs.gov. § 200.306 [Amended] 59. In § 200.306 paragraph (a) remove ‘‘200.203’’ and add, in its place, ‘‘200.204’’. ■ 60. Amend § 200.307 by revising paragraphs (d) and (g) to read as follows: ■ § 200.307 Program income. * * * * * (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, §§ 200.310, 200.312, and 200.313, or as specifically identified in Federal statutes, regulations, or the terms and 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 is not accountable 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 is applicable. ■ 61. Revise § 200.308 to read as follows: § 200.308 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 Federal share in § 200.1) or only the Federal share, depending upon Federal awarding agency requirements. The budget and program plans must include considerations for performance and program evaluation purposes whenever required in accordance with the terms and conditions of the award. E:\FR\FM\22JAP2.SGM 22JAP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 3796 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules (b) Recipients are required to report deviations from budget or project scope or objective, and request prior approvals from Federal 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 Federal awarding agencies for the following program or budget-related reasons: (1) Change in the scope or the objective of the project or program (even if there is no associated budget revision requiring prior written approval). (2) Change in a key person specified in the application or 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 Federal awarding agency, of costs that require prior approval in accordance with Subpart E of this part or 45 CFR part 75 Appendix IX, or 48 CFR part 31, as applicable. (5) The transfer of funds budgeted for 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, 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. (8) The need arises for additional Federal funds to complete the project. (d) No other prior approval requirements for specific items may be imposed unless an exception has been approved by OMB. See also §§ 200.102 and 200.407. (e) Except for requirements listed in paragraphs (c)(1) through (8) of this section, the Federal awarding agency is authorized, at its option, to waive other cost-related and administrative prior written approvals contained in Subparts D and E. Such waivers may include authorizing recipients to do any one or more of the following: (1) Incur project costs 90 calendar days before the Federal awarding agency makes the Federal award. Expenses more than 90 calendar days pre-award require prior approval of the Federal awarding agency. All costs incurred before the Federal awarding agency makes the Federal award are at the recipient’s risk (i.e., the Federal VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 awarding agency is not required to reimburse such 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 § 200.458 Pre-award costs. (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 Federal 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 must not be exercised merely for the purpose of using unobligated balances. Extensions require explicit prior Federal 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 budget periods. (4) For Federal awards that support research, unless the Federal awarding agency provides otherwise in the Federal award or in the Federal 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. (f) The Federal 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 Federal awarding agency. The Federal awarding agency cannot permit a transfer that would cause any Federal appropriation to be used for purposes other than those consistent with the appropriation. (g) All other changes to nonconstruction budgets, except for the changes described in paragraph (c) of this section, do not require prior approval (see also § 200.407). (h) For construction Federal awards, the recipient must request prior written approval promptly from the Federal awarding agency for budget revisions PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 whenever paragraph (h)(1), (2), or (3) of this section applies: (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 a Federal awarding agency makes a Federal award that provides support for construction and nonconstruction work, the Federal awarding agency may require the recipient to obtain prior approval from the Federal awarding agency before making any fund or budget transfers between the two types of work supported. (i) When requesting approval for budget revisions, the recipient must use the same format for budget information that was used in the application, unless the Federal awarding agency indicates a letter of request suffices. (j) Within 30 calendar days from the date of receipt of the request for budget revisions, the Federal 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 Federal awarding agency must inform the recipient in writing of the date when the recipient may expect the decision. § 200.309 ■ [Removed] 62. Remove § 200.309. § § 200.310 through 200.321 [Redesignated] 63. Redesignate §§ 200.310 through 200.321 to §§ 200.309 through 200.320. ■ 64. Amend newly redesignated § 200.310 to revise paragraph (a) to read as follows: ■ § 200.310 Real property. (a) Title. Subject to the requirements 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. * * * * * ■ 65. Amend newly redesignated § 200.311 by revising the first sentence of paragraph (c) to read as follows: § 200.311 property. * E:\FR\FM\22JAP2.SGM * Federally-owned and exempt * 22JAP2 * * Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules (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 responsibility to the Federal Government, based upon the explicit terms and conditions of the Federal award. * * * ■ 66. Amend newly redesignated § 200.312 by revising paragraph (a), paragraph (c) introductory, paragraph (e)(1) and the first sentence of (e)(2) to read as follows: § 200.312 Equipment. khammond on DSKJM1Z7X2PROD with PROPOSALS2 * * * * * (a) Title. Subject to the requirements 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 responsibility 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: * * * * * (c) * * * (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 Federal awarding agency. The Federal awarding agency may require the submission of the applicable common form for equipment. When no longer needed for the original program or project, the equipment may be used in other activities supported by the Federal awarding agency, in the following order of priority: * * * * * (e) * * * (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 responsibility to the Federal awarding agency. (2) Except as provided in § 200.311 Federally-owned and exempt property, paragraph (b), or if the Federal awarding agency fails to provide requested disposition instructions within 120 days, items of equipment with a current per-unit fair-market value in excess of $5,000 may be retained by the nonFederal entity or sold. * * * * * * * * VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 67. Amend newly redesignated § 200.313 by revising the last sentence of paragraph (a) to read as follows: ■ § 200.313 Supplies. * * * * * (a) * * * See § 200.312(e)(2) for the calculation methodology. ■ 68. Amend the newly redesignated § 200.314 by revising paragraph (a) to read as follows: § 200.314 Intangible property. (a) Title to intangible property (see Intangible property in § 200.1) 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 Federal awarding agency. When no longer needed for the originally authorized purpose, disposition of the intangible property must occur in accordance with the provisions in § 200.312(e). * * * * * ■ 69. Amend the newly redesignated § 200.316 by revising the last sentence to read as follows: § 200.316 Procurements by states. * * * All other non-Federal entities, including subrecipients of a state, will follow §§ 200.317 through 200.326. ■ 70. Amend the newly redesignated § 200.317 by revising the last sentence of paragraph (h) to read as follows: § 200.317 General procurement standards. * * * * * (h) * * * See also § 200.213. ■ 71. Revise the newly redesignated § 200.318 to read as follows: § 200.318 Competition. (a) All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and § 200.319, Methods of procurement to be followed. (b) 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; PO 00000 Frm 00033 Fmt 4701 Sfmt 4702 3797 (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. (c) 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, given the nature and size of the project, to compete for the contract. (d) 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. (e) The non-Federal entity must ensure that all prequalified lists of persons, firms, or products which are E:\FR\FM\22JAP2.SGM 22JAP2 3798 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules 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. (f) Noncompetitive procurements can only be awarded in accordance with § 200.319(b)(3). ■ 72. Revise the newly redesignated § 200.319 to read as follows: khammond on DSKJM1Z7X2PROD with PROPOSALS2 § 200.319 followed. Methods of procurement to be The non-Federal entity must have and use documented procurement procedures for the following methods of procurement for the acquisition of property or services required under a Federal award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold, as defined in § 200.1 Definitions, formal procurement methods are not required. The nonFederal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The following informal methods of procurement used for procurement of property or services at or below the simplified acquisition threshold include: (1) Micro-purchases. (i) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (See Micro-purchase in § 200.1 Definitions). To the maximum extent practicable, the non-Federal entity should distribute micropurchases equitably among qualified suppliers. (ii) Micro-purchases may be awarded without soliciting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable and can include the use of purchase cards if documented and approved by the nonFederal entity. (iii) Micro-purchase thresholds that differ from the FAR. The non-Federal entity is responsible for determining an appropriate micro-purchase threshold based on internal controls, an evaluation of risk and its documented procurement procedures. All nonFederal entities can establish lower thresholds. However, a non-Federal entity may request a higher micropurchase threshold in accordance to section (iv) below. When applicable, the micro-purchase threshold used by the non-Federal entity must be authorized VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 or not prohibited under State, local, or tribal laws or regulations. Requests for approval of a higher threshold must be submitted to the cognizant Federal agency for indirect cost rates (see Cognizant agency for indirect costs) for review and approval. (iv) Cognizant agency for indirect cost evaluation of higher threshold requests are performed to determine if an entity is low risk (see § 200.520 Criteria for a low-risk auditee) and must include at a minimum a review of the entity’s audit findings and any appropriate internal institutional risk assessments. Values used to set micro-purchase thresholds must also be consistent with any applicable state laws. (2) Small purchases. (i) The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. (ii) Simplified acquisition thresholds that differ from the FAR. The nonFederal entity is responsible for determining an appropriate simplified acquisition threshold based on internal controls, an evaluation of risk and its documented procurement procedures which must not exceed the threshold established in the FAR. When applicable, the simplified acquisition threshold used by the non-Federal entity must be authorized or not prohibited under State, local, or tribal laws or regulations. (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the simplified acquisition threshold (SAT) (Simplified acquisition threshold), or a threshold established by a non-federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with § 200.318 Competition. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate: (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, PO 00000 Frm 00034 Fmt 4701 Sfmt 4702 conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bids method is the preferred method for procuring construction, if the conditions in paragraph (c)(1) of this section apply. (i) In order for sealed bidding to be feasible, the following conditions should be present: (A) A complete, adequate, and realistic specification or purchase description is available; (B) Two or more responsible bidders are willing and able to compete effectively for the business; and (C) 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. (ii) If sealed bids are used, the following requirements apply: (A) 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 local, and tribal governments, the invitation for bids must be publicly advertised; (B) 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; (C) 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; (D) 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 (E) Any or all bids may be rejected if there is a sound documented reason. (2) Proposals. A procurement method in which either a fixed price or costreimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. They are awarded in accordance with the following requirements: (i) Requests for proposals must be publicized and identify all evaluation factors and their relative importance. Proposals must be solicited from an adequate number of qualified offerors. Any response to publicized requests for proposals must be considered to the maximum extent practical; E:\FR\FM\22JAP2.SGM 22JAP2 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules (ii) The non-Federal entity must have a written method for conducting technical evaluations of the proposals received and making selections; (iii) Contracts must be awarded to the responsible offeror whose proposal is most advantageous to the non-Federal entity, with price and other factors considered; and (iv) The non-Federal entity may use competitive proposal procedures for qualifications-based procurement of architectural/engineering (A/E) professional services whereby offeror’s qualifications are evaluated and the most qualified offeror 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 that are a potential source to perform the proposed effort. (3) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (i) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micropurchase threshold (see § 200.319(a)(1)); (ii) The item is available only from a single source; (iii) The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation; (iv) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (v) After solicitation of a number of sources, competition is determined inadequate. ■ 73. Add § 200.321 to read as follows: khammond on DSKJM1Z7X2PROD with PROPOSALS2 § 200.321 Domestic preferences for procurements. (a) As appropriate and to the extent consistent with law, the non-Federal entity should, to the greatest extent practicable under a Federal award, provide a preference for the purchase, acquisition, or use of goods, products, or materials produced in the United States (including but not limited to iron, aluminum, steel, cement, and other manufactured products). This term must be included in all subawards including all contracts and purchase orders for work or products under this award. (b) For purposes of this award term: (1) ‘‘Produced in the United States’’ means, for iron and steel products, that VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 all manufacturing processes, from the initial melting stage through the application of coatings, occurred in the United States. (2) ‘‘Manufactured products’’ means items and construction materials composed in whole or in part of nonferrous metals such as aluminum; plastics and polymer-based products such as polyvinyl chloride pipe; aggregates such as concrete; glass, including optical fiber; and lumber. ■ 74. Amend § 200.325 by revising paragraph (b) to read as follows: § 200.325 Bonding requirements. * * * * * (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 requirements under such contract. * * * * * ■ 75. Amend § 200.327 by revising the first sentence to read as follows: § 200.327 Financial reporting. Unless otherwise approved by OMB, the Federal awarding agency must solicit only the OMB-approved governmentwide data elements for collection of financial information (at time of publication the Federal Financial Report or such future, OMBapproved, governmentwide data elements available from the OMBdesignated standards lead. * * * ■ 76. Amend § 200.328 by revising paragraph (b) introductory text, paragraph (b)(1), and paragraph (b)(2) introductory text to read as follows: § 200.328 Monitoring and reporting program performance. * * * * * (b) Non-construction performance reports. The Federal 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 OMBapproved, governmentwide data elements available from the OMBdesignated standards lead. (1) The non-Federal entity must submit performance reports at the interval required by the Federal 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 PO 00000 Frm 00035 Fmt 4701 Sfmt 4702 3799 affect program outcomes. Annual reports must be due 120 calendar days after the reporting period; quarterly or semiannual reports must be due 30 calendar days after the reporting period. Alternatively, the Federal 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 120 calendar days after the period of performance end date. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report. (2) The non-Federal entity must submit performance reports using OMBapproved governmentwide common information collections when providing performance information. As applicable, these information collections must use OMB-approved, governmentwide data elements available from the OMBdesignated standards lead. As appropriate in accordance with above mentioned information collections, these reports will contain, for each Federal award, brief information on the following unless other collections are approved by OMB: * * * * * ■ 77. Amend § 200.330 by revising paragraphs (a) introductory text and (b) introductory text to read as follows: § 200.330 Subrecipient and contractor determinations. * * * * * (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 Subaward in § 200.1. Characteristics which support the classification of the non-Federal entity as a subrecipient include when the nonFederal 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 Contract in § 200.1. Characteristics indicative of a procurement relationship between the non-Federal entity and a contractor are when the contractor: * * * * * ■ 78. Revise § 200.331 to read as follows: § 200.331 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 E:\FR\FM\22JAP2.SGM 22JAP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 3800 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules 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 its unique entity identifier); (ii) Subrecipient’s unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date (see Federal award date in § 200.1) of award to the recipient by the Federal agency; (v) Subaward Period of Performance Start and End Date; (vi) Subaward Budget Period Start and End Date; (vii) Amount of Federal Funds Obligated by this action by the passthrough entity to the subrecipient; (viii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; (x) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; (xii) Assistance listing number and title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance listing number at time of disbursement; (xiii) Identification of whether the award is R&D; and (xiv) Indirect cost rate for the Federal award (including if the de minimis rate is charged per § 200.414). (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 Federal awarding agency including identification of any required financial and performance reports; (4) An approved federally recognized indirect cost rate negotiated between the VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 subrecipient and the Federal Government. The pass-through entity must not require use of a de minimus indirect cost rate if the subrecipient has a federally approved rate. If no federally approved rate exists, the pass-through entity must accept: (i) The negotiated indirect cost rate between the pass-through entity and the subrecipient; (ii) The negotiated indirect cost rate between a different pass-through entity and the subrecipient; or (iii) The de minimus indirect cost rate; (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—Audit Requirements of this part, 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 Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a Federal awarding agency). (c) Consider imposing specific subaward conditions upon a subrecipient if appropriate as described in § 200.208. (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 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. PO 00000 Frm 00036 Fmt 4701 Sfmt 4702 (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. Other means may include written confirmation from the subrecipient related to the Single Audit already performed and any audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. (4) The pass-through entity is only responsible for resolving audit findings specifically related to the subaward (i.e., non-systemic) and not applicable to the entire subrecipient (i.e., systemic). If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient’s auditors and cognizant agency for routine audit follow-up and management decisions. Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward issued by the pass-through entity. (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 § 200.425 Audit services. (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 § 200.501. (g) Consider whether the results of the subrecipient’s audits, on-site reviews, or other monitoring indicate conditions E:\FR\FM\22JAP2.SGM 22JAP2 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules that necessitate adjustments to the passthrough entity’s own records. (h) Consider taking enforcement action against noncompliant subrecipients as described in § 200.338 Remedies for noncompliance of this part and in program regulations. ■ 79. Revise § 200.335 to read as follows. § 200.335 Methods for collection, transmission and storage of information. The Federal 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 in accordance with applicable legislative requirements. A machinereadable format is a format in a standard computer language (not English text) that can be read automatically by a web browser or computer system. The Federal awarding agency or passthrough entity must always provide or accept paper versions of Federal awardrelated information to and from the nonFederal entity upon request. If paper copies are submitted, the Federal awarding agency or pass-through 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. § 200.337 [Amended] 80. Amend § 200.337 by removing ‘‘§ 200.315 Intangible property’’ and adding, in its place, ‘‘§ 200.314’’. ■ 81. Amend § 200.338 by revising the introductory text to read as follows: ■ khammond on DSKJM1Z7X2PROD with PROPOSALS2 § 200.338 Remedies for noncompliance. If a non-Federal entity fails to comply with the U.S. Constitution, Federal statutes, regulations or the terms and conditions of a Federal award, the Federal awarding agency or passthrough entity may impose additional conditions, as described in § 200.208 Specific conditions. If the Federal awarding agency or pass-through entity determines that noncompliance cannot be remedied by imposing additional conditions, the Federal awarding agency or pass-through entity may take one or more of the following actions, as appropriate in the circumstances: * * * * * VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 82. Revise § 200.339 to read as follows: ■ § 200.339 Termination. (a) The Federal award may be terminated in whole or in part as follows: (1) By the Federal awarding agency or pass-through entity, if a non-Federal entity fails to comply with the terms and conditions of a Federal award; (2) By the Federal awarding agency or pass-through entity, to the greatest extent authorized by law, if an award no longer effectuates the program goals or agency priorities; (3) By the Federal 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; (4) By the non-Federal entity upon sending to the Federal 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 Federal 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 Federal awarding agency or pass-through entity may terminate the Federal award in its entirety; or (5) By the Federal awarding agency or pass-through entity pursuant to termination provisions included in the Federal award. (b) A Federal awarding agency must specify applicable termination provisions in its regulations and in each Federal award, consistent with this section. (c) When a Federal awarding agency terminates a Federal award prior to the end of the period of performance due to the non-Federal entity’s material failure to comply with the Federal award terms and conditions, the Federal awarding agency must report the termination to the OMB-designated integrity and performance system accessible through SAM (currently FAPIIS). (1) The information required under paragraph (b) of this section is not to be reported to designated integrity and performance system until the nonFederal entity either— (i) Has exhausted its opportunities to object or challenge the decision, see § 200.341 Opportunities to object, hearings and appeals; or PO 00000 Frm 00037 Fmt 4701 Sfmt 4702 3801 (ii) Has not, within 30 calendar days after being notified of the termination, informed the Federal awarding agency that it intends to appeal the Federal awarding agency’s decision to terminate. (2) If a Federal awarding agency, after entering information into the designated integrity and performance system about a termination, subsequently: (i) Learns that any of that information is erroneous, the Federal awarding agency must correct the information in the system within three business days; (ii) Obtains an update to that information that could be helpful to other Federal awarding agencies, the Federal awarding agency is strongly encouraged to amend the information in the system to incorporate the update in a timely way. (3) Federal awarding agencies, must not post any information that will be made publicly available in the nonpublic segment of designated integrity and performance system that is covered by a disclosure exemption under the Freedom of Information Act. If the nonFederal entity asserts within seven calendar days to the Federal awarding agency who posted the information, that some of the information made publicly available is covered by a disclosure exemption under the Freedom of Information Act, the Federal awarding agency who posted the information must remove the posting within seven calendar days of receiving the assertion. Prior to reposting the releasable information, the Federal agency must resolve the issue in accordance with the agency’s Freedom of Information Act procedures. (d) When a Federal award is terminated or partially terminated, both the Federal awarding agency or passthrough entity and the non-Federal entity remain responsible for compliance with the requirements in §§ 200.343 and 200.344. ■ 83. Revise § 200.340 paragraph (b) introductory text to read as follows: § 200.340 Notification of termination requirement. * * * * * (b) If the Federal award is terminated for the non-Federal entity’s material failure to comply with the U.S. Constitution, Federal statutes, regulations, or terms and conditions of the Federal award, the notification must state that— * * * * * § 200.342 [Amended] 84. Amend § 200.342 by removing the term ‘‘obligations’’ wherever it appears ■ E:\FR\FM\22JAP2.SGM 22JAP2 3802 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules and adding, in its place ‘‘financial obligations’’. ■ 85. Revise § 200.343 to read as follows: khammond on DSKJM1Z7X2PROD with PROPOSALS2 § 200.343 Closeout. The Federal 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. If the non-Federal entity fails to complete the requirements, the Federal awarding agency or pass-through entity will proceed to close-out the Federal award with the information available. This section specifies the actions the non-Federal entity and Federal 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 120 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. A subrecipient must submit to the pass-through entity, 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 Federal awarding agency or pass-through entity may approve extensions when requested and justified by the non-Federal entity, as applicable. (b) Unless the Federal awarding agency or pass-through entity authorizes an extension, a non-Federal entity must liquidate all financial obligations incurred under the Federal award no later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. (c) The Federal awarding agency or pass-through entity must make prompt payments to the non-Federal entity for costs meeting the requirements in Subpart E of this part under the Federal award being closed out. (d) The non-Federal entity must promptly refund any balances of unobligated cash that the Federal 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 § 200.345, for requirements regarding unreturned amounts that become delinquent debts. (e) Consistent with the terms and conditions of the Federal award, the Federal awarding agency or passthrough entity must make a settlement VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 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 §§ 200.309 through 200.315 and 200.329. (g) When a recipient or subrecipient completes all closeout requirement, the Federal awarding agency or passthrough entity must promptly complete all closeout actions for Federal awards. The Federal awarding agency must make every effort to complete closeout actions no later than one year after the end of the period of performance unless otherwise directed by authorizing statutes. Closeout actions include Federal awarding agency actions in the grants management and payment systems. (h) If the non-Federal entity does not submit all reports in accordance with this section, and the terms and conditions of the Federal Award, the Federal awarding agency must proceed to closeout with the information available, within one year of the period of performance end date.The Federal awarding agency must report the nonFederal entity’s failure to submit required reports to the OMB-designated integrity and performance system (currently FAPIIS) as the non-Federal entity’s material failure to comply with the terms and conditions of the award. Federal awarding agencies may also pursue other enforcement actions per § 200.338. ■ 86. Revise § 200.344 to read as follows: § 200.344 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 Federal awarding agency or pass-through entity to disallow costs and recover funds on the basis of a later audit or other review. The Federal awarding agency or passthrough entity must make any cost disallowance determination and notify the non-Federal entity within the record retention period. (2) The requirement for the nonFederal entity to return any funds due as a result of later refunds, corrections, or other transactions including final indirect cost rate adjustments. (3) The ability of the Federal awarding agency to make financial adjustments to a previously closed award. (4) Audit requirements in Subpart F of this part. PO 00000 Frm 00038 Fmt 4701 Sfmt 4702 (5) Property management and disposition requirements in Subpart D of this part, §§ 200.309 through 200.315. (6) Records retention as required in Subpart D, §§ 200.333 through 200.337. (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 Federal awarding agency or pass-through entity and the nonFederal 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 nonFederal entity, as appropriate. ■ 87. Amend § 200.400 by revising the last sentence of paragraph (e) to read as follows: § 200.400 Policy guide. * * * * * (e) * * * See Indirect (facilities & administrative (F&A)) costs in § 200.1. * * * * * ■ 88. Amend § 200.401 by revising paragraph(a)(3) to read as follows: § 200.401 Application. * * * * * (3) Fixed amount awards. See also § 200.1 and 200.201. * * * * * ■ 89. Revise § 200.402 to read as follows: § 200.402 costs. Composition and timing of (a) Total cost. The total cost of a Federal award is the sum of the allowable direct and allocable indirect costs less any applicable credits. (b) Timing of costs. Costs must be charged to the approved budget period in which they were incurred except where noted in the specific cost principle. ■ 90. Amend § 200.403 by revising paragraph (g) to read as follows: § 200.403 costs. Factors affecting allowability of * * * * * (g) Be adequately documented. See also §§ 200.300 Statutory and national policy requirements through 200.308 Revision of budget and program plans of this part. ■ 91. Revise § 200.405 paragraph (d) to read as follows: § 200.405 Allocable costs. * * * * * (d) Direct cost allocation principles. If a cost benefits two or more projects or activities in proportions that can be E:\FR\FM\22JAP2.SGM 22JAP2 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules 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 §§ 200.309 through 200.315 and 200.439. * * * * * ■ 92. Amend § 200.407 by revising paragraphs (e) and (f) to read as follows: § 200.407 Prior written approval (prior approval). * * * * * (e) § 200.310 Real property; (f) § 200.312 Equipment; * * * * * ■ 93. Amend § 200.410 by revising the last sentence to read as follows: § 200.410 Collection of unallowable costs. * * * See also Subpart D of this part, §§ 200.300 through 200.308. ■ 94. Amend § 200.413 by revising paragraph (b) to read as follows: § 200.413 Direct costs. khammond on DSKJM1Z7X2PROD with PROPOSALS2 * * * * * (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 be considered direct cost, examples include extraordinary utility consumption, the cost of materials supplied from stock or services rendered by specialized facilities, program evaluation costs, or other institutional service operations. * * * * * ■ 95. Amend § 200.414 by revising paragraphs (a), (c)(4), and (f) and adding paragraph (h) to read as follows: VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 § 200.414 Indirect (F&A) costs. (a) Facilities and Administration Classification. For major Institutions of Higher Education (IHE) 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 IHEs, 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 200, and Rate Determination for Institutions of Higher Education paragraph C.11. Major nonprofit organizations are those which receive more than $10 million dollars in direct Federal funding. * * * * * (c) * * * (4) As required under § 200.204 Notices of funding opportunities, the Federal awarding agency must include in the notice of funding opportunity the policies relating to indirect cost rate reimbursement, matching, or cost share as approved under paragraph (e)(1) of this section. As appropriate, the Federal agency should incorporate discussion of these policies into Federal awarding agency outreach activities with nonFederal entities prior to the posting of a notice of funding opportunity. * * * * * (f) In addition to the procedures outlined in the appendices in paragraph (e) of this section, any non-Federal entity, except for those non-Federal entities described in Appendix VII to Part 200, 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. No documentation is required to provide proof of costs that are covered under the de minimus indirect cost rate. As described in § 200.403 Factors affecting allowability of costs, costs must be consistently charged as either indirect or direct costs, but may not be double charged or inconsistently charged as PO 00000 Frm 00039 Fmt 4701 Sfmt 4702 3803 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. * * * * * (h) All rate agreements from nonFederal entities must be available publicly on an OMB-Designated Federal website. ■ 96. Amend § 200.419 by revising paragraphs (b)(1) and (b)(2) to read as follows: § 200.419 Cost accounting standards and disclosure statement. * * * * * (b) * * * (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. The initial DS–2 and revisions to the DS–2 must be submitted in coordination with the IHE’s F&A rate proposal, unless an earlier submission is requested by the cognizant agency for indirect costs. IHEs with CAS-covered contracts or subcontracts meeting the dollar threshold in 48 CFR 9903.202– 1(f) must submit their initial DS–2 or revisions no later than prior to the award of a CAS-covered contract or subcontract. (2) An IHE must maintain an accurate DS–2 and comply with disclosed cost accounting practices. An IHE must file amendments to the DS–2 to the cognizant agency for indirect costs 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 after it has notified the Federal cognizant agency for indirect costs. If the change represents a variation from 2 CFR 200, the change may require approval by the Federal cognizant agency for indirect costs, in accordance with § 200.102(b). 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. * * * * * ■ 97. Amend § 200.430 by revising paragraph (h) introductory text and the first two sentences of paragraph (h)(3) to read as follows: § 200.430 services. Compensation—personal * * * * * (h) Institutions of Higher Education (IHEs). * * * * * E:\FR\FM\22JAP2.SGM 22JAP2 3804 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules (3) Intra-Institution of Higher Education (IHE) consulting. Intra-IHE consulting by faculty should be undertaken as an IHE responsibility requiring no compensation in addition to IBS. * * * * * * * * ■ 98. Revise § 200.431 to read as follows. khammond on DSKJM1Z7X2PROD with PROPOSALS2 § 200.431 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 § 200.447); pension plan costs (see paragraph (i) of this section); and other similar benefits VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 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 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 § 200.447(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 nonFederal 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 PO 00000 Frm 00040 Fmt 4701 Sfmt 4702 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: (1) Such policies meet the test of reasonableness. (2) The methods of cost allocation are not discriminatory. (3) 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). (4) 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. (5) 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 E:\FR\FM\22JAP2.SGM 22JAP2 khammond on DSKJM1Z7X2PROD with PROPOSALS2 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules fiscal year may be used as the nonFederal entity’s contribution in future periods. (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 nonFederal entity 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 VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 period of years in accordance with GAAP, or, if no such GAAP period 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 (i) Law; (ii) Employer-employee agreement; (iii) Established policy that constitutes, in effect, an implied agreement on the non-Federal entity’s part; or (iv) 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 responsibility 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 PO 00000 Frm 00041 Fmt 4701 Sfmt 4702 3805 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. (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 Federal 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 Federal awarding agency. (j) For IHEs only. (1) Fringe benefits in the form of undergraduate and graduate tuition or remission of tuition for individual employees are allowable, provided such benefits are granted in accordance with established nonFederal 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, provided that the benefit does not discriminate in favor of highly compensated employees. Employees can exercise these benefits at other institutions according to institutional policy. See § 200.466 Scholarships and student aid costs, 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 §§ 200.402 Composition of costs through 200.411 Adjustment of previously negotiated E:\FR\FM\22JAP2.SGM 22JAP2 3806 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules indirect (F&A) cost rates containing unallowable costs of this subpart; (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. § 200.433 [Amended] 99. In § 200.433 amend paragraph (b) by removing the words ‘‘200.309 Period of Performance’’ and adding, in its place, ‘‘200.308 Revision of budget and program plans’’. ■ § 200.434 [Amended] 100. In § 200.434 amend paragraph (g)(2) by removing the words ‘‘200.309 Period of Performance’’ wherever it appears and adding, in its place, ‘‘200.308’’. ■ 101. Amend § 200.436 by revising paragraph (c) introductory text, paragraphs (c)(3), (c)(4), and (e) and adding paragraph (c)(5) to read as follows: ■ § 200.436 Depreciation. khammond on DSKJM1Z7X2PROD with PROPOSALS2 * * * * * (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 computation of depreciation, the acquisition cost will exclude: * * * * * (3) Any portion of the cost of buildings and equipment contributed by or for the non-Federal entity that are already claimed as matching or where law or agreement prohibits recovery; (4) Any asset acquired solely for the performance of a non-Federal award; and (5) Assets that were directly paid for and expensed using Federal financial assistance. * * * * * (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 must be maintained. VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 102. Amend § 200.439 by revising paragraph (a), paragraph (b)(3), and (b)(7) to read as follows: ■ § 200.439 Equipment and other capital expenditures. (a) See the definitions for Capital expenditures, Equipment, Special purpose equipment, General purpose equipment, Acquisition cost, and Capital assets in § 200.1. (b) * * * (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 Federal awarding agency, or pass-through entity. See § 200.436 Depreciation, for rules on the allowability of depreciation on buildings, capital improvements, and equipment. See also § 200.465. * * * * * (7) Equipment and other capital expenditures are unallowable as indirect costs. See § 200.436. ■ 103. Revise § 200.433 paragraph (d) to read as follows: § 200.443 Gains and losses on disposition of depreciable assets. * * * * * (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 §§ 200.309 through 200.315. ■ 104. Revise § 200.444 paragraph (b) to read as follows: § 200.444 General costs of government. * * * * * (b) For Indian tribes and Councils of Governments (COGs) (see Local government in § 200.1), 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. ■ 105. Amend § 200.449 by revising paragraphs (b)(1) and (c)(4) to read as follows: § 200.449 * * * * (b)(1) Capital assets is defined as noted in the definition of Capital assets in § 200.1. An asset cost includes (as applicable) acquisition costs, construction costs, and other costs capitalized in accordance with GAAP. * * * * * (c) * * * (4) The non-Federal entity limits claims for Federal reimbursement of interest costs to the least expensive Frm 00042 Fmt 4701 § 200.456 Participant support costs. Participant support costs as defined in § 200.1 and are allowable with the prior approval of the Federal awarding agency. ■ 107. Amend § 200.458 by revising the last sentence to read as follows: § 200.458 Pre-award costs. * * * If charged to the award, these costs must be charged to the initial budget period of the award, unless otherwise specified by the Federal awarding agency. ■ 108. Amend § 200.461 by revising paragraph (b)(3) to read as follows: § 200.461 Publication and printing costs. * * * * * (b) * * * (3) The non-Federal entity may charge the Federal award before closeout for the costs of publication or sharing of research results if the costs are not incurred during the period of performance of the Federal award. If charged to the award, these costs must be charged to the final budget period of the award, unless otherwise specified by the Federal awarding agency. ■ 109. Amend § 200.465 by ■ a. Redesignating paragraph (c)(5) as paragraph (d). ■ b. Redesignating paragraph (c)(6) as paragraph (f); ■ c. Revising newly redesignated paragraph (d); and ■ d. Adding paragraph (e). The addition and revision to read as follows: § 200.465 Rental costs of real property and equipment. * Interest. * PO 00000 alternative. For example, a lease contract that transfers ownership by the end of the contract 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. * * * * * ■ 106. Revise § 200.456 to read as follows: Sfmt 4702 * * * * (d) Rental costs under leases which are required to be accounted for as a financed purchase under GASB standards or a finance lease under FASB standards 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. Interest costs related to these leases are allowable to the extent they meet the criteria in § 200.449 Interest. E:\FR\FM\22JAP2.SGM 22JAP2 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules 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. (e) Rental or lease payments are allowable under lease contracts where the non-Federal entity is required to recognize an intangible right-to-use lease asset (per GASB) or right of use operating lease asset (per FASB) for purposes of financial reporting in accordance to GAAP. * * * * * ■ 110. Amend § 200.509 by revising paragraph (a) to read as follows: § 200.509 Auditor selection. (a) Auditor procurement. In procuring audit services, the auditee must follow the procurement standards prescribed by the Procurement Standards in §§ 200.316 through 20.326 or the FAR (48 CFR part 42), as applicable. When procuring audit services, the objective is to obtain high-quality 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 § 200.320, or the FAR (48 CFR part 42), as applicable. * * * * * ■ 111. Amend § 200.510 by revising paragraph (b)(3) to read as follows: § 200.510 Financial statements. khammond on DSKJM1Z7X2PROD with PROPOSALS2 * * * * * (b) * * * (3) Provide total Federal awards expended for each individual Federal program and the Assistance listing number or other identifying number when the Assistance listings information is not available. For a cluster of programs also provide the total for the cluster. * * * * * ■ 112. Amend 200.513 by revising paragraphs (a)(1), (a)(3)(ii), (a)(3)(vii), paragraph (b) introductory text, paragraph (c) introductory text, and paragraph (c)(3)(iii) to read as follows: VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 § 200.513 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 funding directly (direct funding) to a non-Federal entity unless OMB designates a specific cognizant agency for audit. When the direct funding represents less than 25 percent of the total funding received by the nonFederal entity (as prime and sub awards), then the Federal agency with the predominant amount of total funding is the designated cognizant agency for audit. * * * * * (3) * * * (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 governmentwide 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. The governmentwide project can rely on the current and on-going quality control review work performed by the agency. This governmentwide audit quality project must be performed once every 6 years beginning with audits submitted in 2021 or at such other interval as determined by OMB, and the results must be public. * * * * * (vii) Coordinate a management decision for cross-cutting audit findings (as defined in Cross-cutting audit finding in § 200.1) 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. * * * * * (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 the Oversight agency for audit. A Federal agency with oversight for an auditee may reassign oversight to another Federal agency that agrees to be the PO 00000 Frm 00043 Fmt 4701 Sfmt 4702 3807 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: * * * * * (c) Federal awarding agency responsibilities. The Federal awarding agency must perform the following for the Federal awards it makes (See also the requirements of § 200.211): * * * * * (3) * * * (iii) Use cooperative audit resolution mechanisms (see Cooperative audit resolution) to improve Federal program outcomes through better audit resolution, follow-up, and corrective action; and * * * * * ■ 113. Revise § 200.515 paragraph (a) to read as follows: § 200.515 Audit reporting. * * * * * (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 (or a special purpose framework such as cash, modified cash, or regulatory) 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. * * * * * § 200.516 [Amended] 114. Amend § 200.516 by removing ‘‘CFDA’’ wherever it appears and adding, in its place, ‘‘Assistance listing’’. ■ 115. Amend Appendix I to Part 200 by revising paragraphs (A), the first paragraph of (B), paragraphs (D)(3), (D)(4), (D)(5), (E)(3), (E)(3(iii), and (F)(1) to read as follows: ■ Appendix I to Part 200—Full Text of Notice of Funding Opportunity * * * * * 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 Federal awarding agency’s funding priorities or the technical or focus areas in which the Federal 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 E:\FR\FM\22JAP2.SGM 22JAP2 3808 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules section must include program goals and objectives, a reference to the relevant assistance listing, a description of how the award will contribute to the achievement of the program’s goals and objectives, and the expected performance indicators and may include examples of successful projects that have been funded previously. This section also may include other information the Federal 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 Federal awarding agency expects to award through the announcement; the expected performance indicators, targets, baseline data, and data collection; 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. khammond on DSKJM1Z7X2PROD with PROPOSALS2 * * * * * D. * * * 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 VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 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 § 200.204). * * * * * 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 and applicants 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 website. * * * * * E. * * * 3. For any Federal award under a notice of funding opportunity, if the Federal awarding agency anticipates that the total Federal share will be greater than the simplified acquisition threshold on any Federal award under a notice of funding opportunity may include, over the period of performance, this section must also inform applicants: * * * * * * * * 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 Federal 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 § 200.211. * * * * * 116. Amend Appendix II to Part 200 revising paragraph (A) and adding paragraph (K) to read as follows: ■ PO 00000 Frm 00044 Fmt 4701 Sfmt 4702 * * * * * (A) Contracts for more than the simplified acquisition threshold, 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. * * * * * (K) See § 200.216. 117. Amend Appendix III to Part 200 by ■ a. Revising paragraphs (B)(4)(c)(2)(ii)(B) and (C)(2); ■ b. Redesignating paragraph (C)(7)(7) as paragraph (C)(7)(a); ■ c. Revising paragraph (C)(11)(a)(1); and ■ d. Revising paragraph (E). The revisions read as follows: ■ Appendix III to Part 200—Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Institutions of Higher Education (IHEs) * * iii. That the Federal awarding agency will consider any comments by the applicant, in addition to the other information in the designated integrity and performance system, in making a judgment about the applicant’s integrity, business ethics, and record of performance under Federal awards when completing the review of risk posed by applicants as described in § 200.206. * Appendix II to Part 200—Contract Provisions for Non-Federal Entity Contracts Under Federal Awards * * * * B. * * * 4. * * * c. * * * 2. * * * (ii) * * * B. In July 2012, values for these two indices (taken respectively from the Lawrence Berkeley Laboratory ‘‘Labs for the 21st Century’’ benchmarking tool and the US Department of Energy ‘‘Buildings Energy Databook’’ and 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 website. * * * * * C. * * * 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 § 200.1 Definitions. 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 E:\FR\FM\22JAP2.SGM 22JAP2 Federal Register / Vol. 85, No. 14 / Wednesday, January 22, 2020 / Proposed Rules of the modified total direct costs identified with such pool. * * * * * 11. * * * a. * * * (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 directly 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 directly 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 § 200.331 Requirements for pass-through entities. 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 website. * * * * * 118. Amend Appendix IV to Part 200 by revising paragraphs (B)(2)(c), (B)(3)(f) and (C)(2)(a) to read as follows: ■ Appendix IV to Part 200—Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Nonprofit Organizations * * * * * khammond on DSKJM1Z7X2PROD with PROPOSALS2 B. * * * VerDate Sep<11>2014 16:56 Jan 21, 2020 Jkt 250001 2. * * * c. The distribution base may be total direct costs (excluding capital expenditures and other distorting items, such as 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 § 200.1. * * * * * 3. * * * 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 § 200.1 Definitions of Part 200). * * * * * C. * * * 2. * * * a. Unless different arrangements are agreed to by the Federal agencies concerned, the Federal agency with the largest dollar value of Federal awards directly funded to 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 directly funded 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 § 200.414 Indirect (F&A) costs of Part 200.) If the nonprofit does not receive any funding from any Federal agency, the pass-through entity is responsible PO 00000 Frm 00045 Fmt 4701 Sfmt 9990 3809 for the negotiation of the indirect cost rates in accordance with section 200.331(a)(4). * * * * * 119. Amend Appendix V to Part 200 by revising the last sentence of paragraph (A)(2) and paragraph (B)(4) to read as follows: ■ Appendix V to Part 200—State/Local Governmentwide Central Service Cost Allocation Plans A. * * * 2. * * * A copy of this brochure may be obtained from the HHS Cost Allocation Services or at their website. B. * * * 4. Cognizant agency for indirect costs is defined in § 200.1. The determination of cognizant agency for indirect costs for states and local governments is described in section F.1, Negotiation and Approval of Central Service Plans. * * * * * 120. Amend Appendix VII to Part 200 by revising the last sentence of paragraph (A)(3) to read as follows: ■ Appendix VII to Part 200—States and Local Government and Indian Tribe Indirect Cost Proposals A. * * * 3. * * * A copy of this brochure may be obtained from HHS Cost Allocation Services or at their website. * * * * * 121. Revise Appendix XI to Part 200 to read as follows: ■ Appendix XI to Part 200—Compliance Supplement The compliance supplement is available on the OMB website. [FR Doc. 2019–28524 Filed 1–21–20; 8:45 am] BILLING CODE 3110–01–P E:\FR\FM\22JAP2.SGM 22JAP2

Agencies

[Federal Register Volume 85, Number 14 (Wednesday, January 22, 2020)]
[Proposed Rules]
[Pages 3766-3809]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-28524]



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Vol. 85

Wednesday,

No. 14

January 22, 2020

Part II





 Office of Management and Budget





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2 CFR Parts 25, 170, 183, and 200





Guidance for Grants and Agreements; Proposed Rule

Federal Register / Vol. 85 , No. 14 / Wednesday, January 22, 2020 / 
Proposed Rules

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OFFICE OF MANAGEMENT AND BUDGET

2 CFR Parts 25, 170, 183, and 200

[2019-OMB-0005]


Guidance for Grants and Agreements

AGENCY: Office of Federal Financial Management, Office of Management 
and Budget.

ACTION: Proposed Guidance.

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SUMMARY: The Office of Management and Budget is proposing to revise 
sections of Title 2 of the Code of Federal Regulations (CFR) Subtitle 
A-OMB Guidance for Grants and Agreements. The proposed revisions are 
limited in scope to support implementation of the President's 
Management Agenda, Results-Oriented Accountability for Grants Cross-
Agency Priority Goal (Grants CAP Goal) and other Administration 
priorities; implementation of statutory requirements and alignment of 2 
CFR with other authoritative source requirements; and clarifications of 
existing requirements in particular areas within 2 CFR. These proposed 
revisions are intended to reduce recipient burden, provide guidance on 
implementing new statutory requirements, and improve Federal financial 
assistance management, transparency, and oversight.

DATES: Comments are due on or before March 23, 2020.

ADDRESSES: Comments on this proposal must be submitted electronically 
before the comment closing date to www.regulations.gov. In submitting 
comments, please search for recent submissions by OMB to find docket 
OMB-2019-0005, which includes the full text of the proposed revisions 
and submit comments there. Please provide clarity as to the section of 
the guidance that each comment is referencing by beginning each comment 
with the section number in brackets. For example; if the comment is on 
2 CFR 200.1 include the following before the comment [200.1]. The 
public comments received by OMB will be a matter of public record and 
will be posted at http://www.regulations.gov. Accordingly, please do 
not include in your comments any confidential business information or 
information of a personal-privacy nature. To reference the track 
changes of the proposed revisions please visit https://www.performance.gov/CAP/grants/. In general, responses to the comments 
will be summarized and included in the preamble of the final guidance.

FOR FURTHER INFORMATION CONTACT: Nicole Waldeck or Gil Tran at the OMB 
Office of Federal Financial Management at 202-395-3993.

SUPPLEMENTARY INFORMATION: 

Background and Objectives

    In 2013, OMB partnered with the Council on Financial Assistance 
Reform (COFAR) to revise and streamline guidance to develop the Uniform 
Administrative Requirements, Cost Principles, and Audit Requirements 
for Federal Awards (Uniform Guidance) located in Title 2 of the Code of 
Federal Regulations (2 CFR 200) (79 FR 78589; December 26, 2013). The 
intent of this effort was to simultaneously reduce administrative 
burden and the risk of waste, fraud, and abuse while delivering better 
performance on behalf of the American people. Implementation of the 
Uniform Guidance became effective on December 26, 2014 (79 FR 75867, 
December 19, 2014) and must be reviewed every five years in accordance 
with 2 CFR 200.109. Based on feedback and ongoing engagement with the 
grants management community, the current Administration established the 
Results-Oriented Accountability for Grants Cross Agency Priority Goal 
(Grants CAP Goal) in the President's Management Agenda on March 20, 
2018 (available at: https://www.performance.gov/CAP/grants/). The 
Grants CAP Goal recognizes that grants managers report spending a 
disproportionate amount of time using antiquated processes to monitor 
compliance. Efficiencies could be gained from modernization and grants 
managers could instead shift their time to analyze data to improve 
results. To address this challenge, the Grants CAP Goal Executive 
Steering Committee (ESC), which reports to the Chief Financial 
Officer's Council (CFOC), identified four strategies to work toward 
maximizing the value of grant funding by developing a risk-based, data-
driven framework that balances compliance requirements with 
demonstrating successful results for the American taxpayer.

1. Strategy 1: Standardize the Grants Management Business Process and 
Data
2. Strategy 2: Build Shared IT Infrastructure
3. Strategy 3: Manage Risk
4. Strategy 4: Achieve Program Goals and Objectives

    To support these four strategies, various revisions are proposed 
for 2 CFR. In support of Strategies 1 and 2, OMB is proposing changes 
to terminology throughout 2 CFR. These proposed changes would help 
ensure that there are no conflicts within 2 CFR and the Grants 
Management Federal Integrated Business Framework (available at: https://ussm.gsa.gov/fibf/). This effort recognizes that recipient reporting 
burden is reduced when the grants management business process and data 
elements are standardized. OMB is also proposing revisions to 
strengthen the governmentwide approach to performance and risk, to 
support efforts under Strategies 3 and 4 by encouraging agencies to 
measure the recipient's performance in a way that will help Federal 
awarding agencies and non-Federal entities to improve program goals and 
objectives, share lessons learned, and spread the adoption of promising 
performance practices.
    OMB is also proposing revisions to 2 CFR to implement relevant 
statutory requirements. These revisions include requirements from 
several National Defense Authorization Acts (NDAAs) and the Federal 
Funding Accountability and Transparency Act (FFATA), as amended by the 
Digital Accountability and Transparency Act (DATA Act).
    Finally, OMB is proposing revisions to 2 CFR to clarify areas of 
misinterpretation. The proposed revisions are intended to reduce 
recipient burden by improving consistent interpretation.
    OMB proposes these revisions after consultation and in 
collaboration with agency representatives identified by the Grants CAP 
Goal ESC. In addition, OMB solicited feedback from the broader Federal 
financial assistance community and made changes to the proposed 
revisions as appropriate.
    In summary and as discussed further in the sections below, OMB 
proposes revisions to 2 CFR parts 25, 170, and 200 within the below 
scope. Additionally, OMB proposes adding part 183 to 2 CFR to implement 
Never Contract with the Enemy.
    I. To support implementation of the President's Management Agenda 
Results-Oriented Accountability for Grants CAP Goal and other 
Administration priorities;
    II. To meet statutory requirements and to align with other 
authoritative source requirements; and
    III. To clarify existing requirements.

I. Support Implementation of the President's Management Agenda and 
Other Administration Priorities

A. Changes to the Procurement Standards To Better Target Areas of 
Greater Risk and Conform to Statutory Requirements

    To better target 2 CFR requirements on areas of greater risk, and 
consistent

[[Page 3767]]

with the intent of the Grants CAP Goal, OMB proposes allowing all 
Federal recipients the flexibility provided in the NDAA for 2017 for 
institutions of higher education, related or affiliated nonprofit 
entities, nonprofit research organizations, and independent research 
institutes to request an increased micro-purchase threshold.
    Procurement by micro-purchases was included in the final guidance 
published on December 26, 2013 (78 FR 78589) in response to comments 
provided to the proposed guidance published on February 1, 2013 
(available at www.regulations.gov under docket number OMB-2013-0001). 
The intent of the procurement by micro-purchase guidance was to 
alleviate burden associated with the Uniform Guidance procurement 
standards, allowing for recipients to make purchases below the micro-
purchase threshold without soliciting price or rate quotations, if the 
non-Federal entity considers the price to be reasonable. Following the 
publication of the final guidance, OMB received feedback from the 
recipient community requesting additional time to comply with the 
Uniform Guidance procurement standards at 2 CFR 200.317 through 
200.326. In response, OMB allowed recipients a one-year grace period 
provided the non-Federal entity appropriately documented delayed 
implementation in their policies and procedures and they continued to 
comply with previous OMB guidance. Towards the end of this initial 
grace period, OMB received requests to delay implementation of the 
procurement standards further, specifically citing the challenges 
associated with implementing procurement by micro-purchase. In 
response, OMB allowed for an additional grace period. Following the 
allowance of the additional grace period, new cost-burden data was 
provided by the recipient community regarding the implementation of 
procurement by micro-purchase. This data reflected that many non-
Federal entities have existing micro-purchase thresholds that are 
substantially higher than the micro-purchase threshold at that time of 
$3,500. Recipients report that to make purchases above the micro-
purchase threshold, they rely on individuals with specialized skills 
for their procurement offices and the final guidance would require non-
Federal entities to hire additional staff at a substantial cost to non-
Federal entities. Further, since finalization of 2 CFR 200, several 
statutes have been enacted that impact the procurement thresholds in 
the current guidance as summarized below.
    The NDAA for Fiscal Year (FY) 2017 (NDAA 2017) increased the micro-
purchase threshold from $3,500 to $10,000 for institutions of higher 
education, or related or affiliated nonprofit entities, nonprofit 
research organizations or independent research institutes (41 U.S.C. 
1908). The NDAA 2017 also establishes an interim uniform process by 
which these recipients can request, and Federal awarding agencies can 
approve requests to apply, a higher micro-purchase threshold. 
Specifically, the NDAA 2017 allows a threshold above $10,000, if 
approved by the head of the relevant executive agency and consistent 
with clean audit findings under chapter 75 of title 31, internal 
institutional risk assessment, or State law. The NDAA 2018 increases 
the micro-purchase threshold to $10,000 for all recipients and also 
increases the simplified acquisition threshold from $100,000 to 
$250,000 for all recipients. A proposal to increase the micro-purchase 
and simplified acquisition thresholds in the Federal Acquisition 
Regulation (FAR) was published in the Federal Register on October 2, 
2019 (84 FR 52420), FAR Case 2018-004. In addition, the American 
Innovation and Competitiveness Act of 2017 (AICA), section 207(b) 
requires that 2 CFR 200 be revised to conform with the requirements 
concerning the micro-purchase threshold.
    In response to these statutory changes, OMB issued OMB Memorandum 
M-18-18, Implementing Statutory Changes to the Micro-Purchase and the 
Simplified Acquisition Thresholds for Financial Assistance (June 20, 
2018). Consistent with the requirements of NDAA 2017, this memo 
outlined the process for institutions of higher education, related or 
affiliated nonprofit entities, nonprofit research organizations, and 
independent research institutes to request a higher micro-purchase 
threshold from their cognizant Federal awarding agency for indirect 
cost rates. The proposed changes to 2 CFR 200.319 and 200.320 
incorporates the guidance available in M-18-18 and proposes to extend 
the flexibility to request a higher micro-purchase threshold to all 
non-Federal entities. Proposed changes also reflect the higher micro-
purchase threshold set forth in the 2017 and the American Innovation 
and Competitiveness Act of 2017. The micro-purchase threshold 
identified in the aforementioned legislation is $10,000.

B. Strengthening Merit Review and Notices of Funding Opportunities

    OMB proposes revisions to 2 CFR 200.204 Federal awarding agency 
review of merit proposals and 2 CFR 200.203 Notices of funding 
opportunities to strengthen merit review and the notices of funding 
opportunities. These proposed revisions require agencies to extend 
their merit review process for all grants and cooperative agreements to 
all awards in which the Federal awarding agency has the discretion to 
choose the recipient. Proposed changes to 2 CFR 200.204 Federal 
awarding agency review of merit proposals also clarify the objective of 
the merit review process--to select recipients most likely to be 
successful in delivering results based on the program objectives 
outlined in section 2 CFR 200.202 Program planning and design--and thus 
the merit review process should be designed accordingly.
    Further, Federal awarding agencies are required to systematically 
review Federal award selection criteria for effectiveness. These 
proposed changes support the Administration's priority to ensure a fair 
and transparent process for the selection of award recipients and 
supports efforts under the PMA to ensure that grants and cooperative 
agreements are designed to achieve program goals and objectives. OMB 
seeks comments on the impacts this revision will have on the financial 
assistance community.

C. Support for Domestic Preferences for Procurement

    As expressed in Executive Order 13788 of April 18, 2017 (Buy 
American and Hire American) and Executive Order 13858 of January 21, 
2019 (Executive Order on Strengthening Buy-American Preferences for 
Infrastructure Projects), it is the policy of this Administration to 
maximize, consistent with law, the use of goods, products, and 
materials produced in the United States, in Federal procurements and 
through the terms and conditions of Federal financial assistance 
awards. In support of this policy, OMB proposes to add 2 CFR 200.321 
(Domestic preferences for procurement), encouraging Federal award 
recipients, to the extent permitted by law, to maximize use of goods, 
products, and materials produced in the United States when procuring 
goods and services under Federal awards. This Part will apply to 
procurements under a grant or cooperative agreement.

[[Page 3768]]

D. Promoting Free Speech

    Revisions are proposed to 2 CFR 200.300 Statutory and national 
policy requirements, to align with Executive Orders (E.O.) 13798 
``Promoting Free Speech and Religious Liberty'' and E.O. 13864 
``Improving Free Inquiry, Transparency, and Accountability at Colleges 
and Universities.'' These Executive Orders advise agencies on the 
requirements of religious liberty laws, including those laws that apply 
to grants and provided a policy for free inquiry at institutions 
receiving Federal grants. The revision to 2 CFR underscores the 
importance of compliance with the First Amendment.

E. Standardization of Terminology and Implementation of Standard Data 
Elements

    OMB proposes to standardize terms across 2 CFR part 200 to support 
efforts under the Grants CAP Goal to standardize the grants management 
business process and data.
    Some examples of proposed revisions include terms associated with 
time periods (period of performance, budget period and renewal), 
financial obligation, and assistance listing. The current terms used to 
describe time periods are inconsistently used by Federal awarding 
agencies. OMB proposes revisions to the definition of ``period of 
performance'' in 2 CFR part 200 to reflect that the term is the 
anticipated time interval between the start and end date of an initial 
Federal award or subsequent renewal. The intent is to clarify that the 
recipient may not incur obligations during the entire period of 
performance in instances where a Federal awarding agency incrementally 
funds the Federal award and funding has not been received for a 
subsequent budget period within the period of performance. For example, 
a recipient may receive a Federal award that reflects a five-year 
period of performance, but only received one year worth of funding as 
reflected in the first year budget period. The recipient may only incur 
costs during the first year budget period until subsequent budget 
periods are funded based on the availability of appropriations, 
satisfactory performance, and compliance with the terms and conditions 
of the award. The proposed change also ensures consistent use of the 
term for purposes of transparency reporting as required by FFATA. 
Further, OMB is proposing definitions for budget period and renewal to 
further clarify the use of time period terms throughout 2 CFR.
    In addition, OMB proposes to replace the term ``obligation'' to 
either ``financial obligation'' or ``responsibility'' within the 
guidance as appropriate, to ensure alignment with DATA Act definitions. 
OMB requests comments on the anticipated impact of replacing the term 
``obligation'' from 2 CFR part 200 to ``financial obligation''; 
specifically, OMB asks if replacing ``obligation'' will help to align 
requirements set out in 2 CFR 200 and the DATA Act.
    OMB also proposes changes across 2 CFR to ensure consistent use of 
terms across parts 25, 170, 180 and 200 where possible, relying on 2 
CFR part 200 as the primary source. As reflected in the proposed 
changes, there are instances where the terms within 2 CFR cannot be 
made consistent. For example, the term ``non-Federal entity'' cannot be 
consistently defined across 2 CFR: parts 25 and 170 apply to Federal 
awards to foreign organizations, foreign public entities, and for-
profit organizations, while part 200 only applies to these type of non-
Federal entities when a Federal awarding agency elects for part 200 to 
apply. For definitions that are consistent across 2 CFR parts 25, 170 
and 200, revisions have been made to parts 25 and 170 to refer 
definitions to part 200 as the authoritative source.
    The definitions ``Catalog for Federal Domestic Assistance (CFDA) 
number'' and ``CFDA program title'' have been replaced with the terms 
``Assistance listing number'' and ``Assistance listing program title'' 
to reflect the change in terminology.
    OMB proposes a number of additional revisions to definitions for 
clarity. For example, the term management decision is revised to 
emphasize that it is a written determination provided by a Federal 
awarding agency or pass-through entity.
    To promote uniform application of standard data elements in future 
information collection requests, OMB is also proposing revisions to 2 
CFR 200.206 and 200.328 to reflect that information collection requests 
must adhere to the standards available from the OMB-designated 
standards lead. This proposed change further supports OMB Memorandum M-
19-16 Centralized Mission Support Capabilities for the Federal 
Government, which requires that future shared service solutions must 
adhere to the Federal Integrated Business Framework standards 
(available at: https://ussm.gsa.gov/fibf/).
    Further, OMB proposes updates throughout 2 CFR part 200 to replace 
the term ``standard form'' with ``common form.'' A common form is an 
information collection that can be used by two or more agencies, or 
governmentwide, for the same purpose. A standard form is a type of 
common form; however, standard forms must be used by all Federal 
awarding agencies, which may not be appropriate for Federal financial 
assistance given the variety of programs. The purpose of clarifying the 
term ``common form'' within 2 CFR is to help encourage agencies to seek 
common data solutions, increase efficiency, and better account for the 
burden imposed on the public by Federal agencies. More information 
regarding common forms and flexibility under the Paperwork Reduction 
Act is available at: https://www.whitehouse.gov/omb/information-regulatory-affairs/federal-collection-information/.
    Finally, OMB proposes to reformat the definitions section of 2 CFR 
part 200, subpart A--Acronyms and Definitions by removing the section 
numbers to facilitate future additions to this section.

F. Improving the Governmentwide Approach to Performance and Risk

    The President's Management Agenda, Results-Oriented Accountability 
for Grants CAP goal is working toward shifting the balance between 
compliance and performance while reducing burden. Agencies are 
encouraged to promote promising performance practices that support the 
achievement of program goals and objectives. Many Federal agencies are 
working together to innovate and develop a risk-based approach that 
incorporates performance to achieve results-oriented grants (where 
applicable). By shifting the focus to the balance between performance 
and compliance, agencies may have the opportunity to streamline 
burdensome compliance requirements for programs that demonstrate 
results. To support this goal, OMB proposes changes to emphasize the 
importance of focusing on performance to achieve program results 
throughout the Federal award lifecycle, starting with a proposed new 
section 2 CFR 200.202 Program planning and design. This new section 
formally requires practices that are already expected of Federal 
awarding agencies to develop a strong program design by establishing 
program goals, objectives, and indicators, to the extent permitted by 
law, before the applications are solicited. Proposed changes to 2 CFR 
200.207 Specific conditions allow Federal awarding agencies to apply 
less restrictive conditions based on risk and require Federal awarding 
agencies to ensure that specific Federal award conditions

[[Page 3769]]

are consistent with the program design and include clear performance 
expectations of recipients. Consistent changes are proposed in 2 CFR 
200.210 Information contained in a Federal award and 2 CFR 200.310 
Performance measurement requiring Federal awarding agencies to provide 
recipients with clear performance goals, indicators, and milestones. 
Further, OMB proposes changes to 200.102 Exceptions section to 
emphasize that Federal awarding agencies are encouraged to request 
exceptions to certain provisions of 2 CFR 200 in support of innovative 
program designs that apply a risk-based, data-driven framework to 
alleviate select compliance requirements and hold recipients 
accountable for good performance. OMB recognizes that Federal financial 
assistance program goals and their intended results will differ by type 
of Federal program. For example, criminal justice grant programs may 
focus on specific goals such as reducing crime, basic scientific 
research grant programs may focus on expanding knowledge, and 
infrastructure projects may fund building or infrastructure projects. 
OMB is interested in receiving public comments on existing promising 
performance practices that Federal awarding agencies may be able to 
leverage within existing and proposed flexibilities or future 
exceptions, and in general on how grant makers can better hold 
recipients accountable for results. This is of particular interest as 
Federal agencies implement and carry out the requirements of the 
Foundations of Evidence-Based Policymaking Act of 2018, which 
emphasizes collaboration and coordination to advance data and evidence-
building functions in the Federal government.
    Related to the above proposals to strengthen program planning and 
Federal award terms and conditions, OMB proposes changes to 200.210 
Information contained in a Federal award and 200.339 Termination to 
strengthen the ability of the Federal awarding agency to terminate 
Federal awards, to the greatest extent authorized by law, when the 
Federal award no longer effectuates the program goals or Federal 
awarding agency priorities. Federal awarding agencies must clearly 
articulate the conditions under which a Federal award may be terminated 
in their applicable regulations and in the terms and conditions of 
Federal awards. The intent of this proposal is to ensure that Federal 
awarding agencies prioritize ongoing support to Federal awards that 
meet program goals. For instance, following the issuance of a Federal 
award, if additional evidence reveals that a specific award objective 
is ineffective at achieving program goals, it may be in the 
government's interest to terminate the Federal award. Further, 
additional evidence may cause the Federal awarding agency to 
significantly question the feasibility of the intended objective of the 
award, such that it may be in the interest of the government to 
terminate the Federal award. OMB also proposes the elimination of the 
termination for cause provision because this term is not substantially 
different than the provision allowing Federal awarding agencies to 
terminate Federal awards when the recipient fails to comply with the 
terms and conditions. OMB seeks feedback on the impact of these 
proposed changes and whether the language meets the intended outcome of 
these provisions.
    In addition, OMB proposes changes to the definition of fixed amount 
awards in 200.1 to allow Federal awarding agencies to apply the 
provision to both grant agreements and cooperative agreements.
    The revisions in 2 CFR 200.301 emphasize that agencies are 
encouraged to measure recipient performance to improve program goals 
and objectives, share lessons learned, and spread the adoption of 
promising practices. While understanding that grant program goals and 
their intended results will differ by type of program, the Grants CAP 
Goal is working to shift the culture of Federal grant making from a 
heavy focus on compliance to a balanced approach that includes a focus 
on the degree to which grant programs achieve their goals and intended 
results.
    To provide clarity and consistency among Federal awarding agencies, 
a revision to include program evaluation costs as an example of a 
direct cost under a Federal award has been included in 2 CFR 200.413 
Direct costs. Please refer to OMB Circular A-11 200.22 for a definition 
on program evaluation. Evaluation costs are allowed as a direct cost in 
existing guidance. This language is intended to strengthen this intent 
and ensure that agencies are applying this consistently. Agencies are 
reminded that evaluation costs are allowable costs (either as direct or 
indirect), unless prohibited by statute or regulation. The work under 
the Grants CAP goal performance work group emphasizes evaluation as an 
important practice to understand the results achieved with Federal 
funding. OMB seeks comments on the impact of this revision within the 
guidance.

G. Eliminate References to Non-Authoritative Guidance

    To support implementation of Executive Order 13892 of October 9, 
2019 (Promoting the Rule of Law Through Transparency and Fairness in 
Civil Administrative Enforcement and Adjudication) and to prohibit 
Federal awarding agencies from including references to non-
authoritative guidance in the terms and conditions of Federal awards, 
OMB proposes changes to 200.210 Information contained in Federal 
awards. These proposed changes are intended reduce recipient burden and 
prevent Federal awarding agencies from imposing non-binding guidance on 
recipients that has not gone through appropriate public notice and 
comment.

H. Emphasis on Machine-Readable Information Format

    OMB proposes clarifying the methods for collection, transmission, 
and storage of data in 2 CFR 200.335 to further explain and promote the 
collection of data in machine-readable formats. A Machine-readable 
format is a format that can be easily processed by a computer without 
human intervention while ensuring no semantic meaning is lost (44 
U.S.C. 3502(18)). The proposal reinforces the machine-readable 
requirements in the Foundations of Evidence-Based Policymaking Act of 
2018 (Pub. L. 115-435) and accompanying OMB guidance, and reflects the 
need to continually evaluate which formats (and structures) maximize 
accessibility and usability for all stakeholders. Machine-readable 
formats will also help support the Leveraging Data as a Strategic Asset 
Cross-Agency Priority Goal (CAP Goal #2) and efforts under the Grants 
CAP Goal to Build Shared IT Infrastructure.

I. Changes to Closeout Provisions To Reduce Recipient Burden and 
Support GONE Act Implementation

    Based on lessons learned from the implementation of 2 CFR part 200 
and the Grants Oversight and New Efficiency Act (GONE Act), OMB 
proposes several changes to Sec.  200.343 (Closeout) to support timely 
closeout, improve the accuracy of final closeout reports, and reduce 
burden.
    OMB proposes to increase the number of days for recipients to 
submit closeout reports and liquidate all financial obligations from 90 
days to 120 days. This proposal takes into consideration that it is 
challenging for pass-through entities with a large number of subawards 
to reconcile subawards and submit final reports to Federal awarding

[[Page 3770]]

agencies within 90 days. Recognizing the need for pass-through entities 
to receive timely reports from subrecipients to report back to Federal 
awarding agencies, OMB proposes to continue to require subrecipients to 
submit their reports to the pass-through entity within 90 days. The 
intent of this proposed change is to support financial reconciliation, 
help ease the burden associated with submitting reports for closeout, 
and promote improved accuracy. However, OMB recognizes that providing 
additional time may increase the likelihood that non-Federal entities 
will not submit their final closeout reports. To mitigate this risk, 
OMB is also proposing for Federal awarding agencies to report when a 
non-Federal entity does not submit final closeout reports as a failure 
to comply with the terms and conditions of the award to the OMB-
designated integrity and performance system. Finally, OMB proposes the 
requirement of Federal awarding agencies to make every effort to close 
out Federal awards within one year after the end of the period of 
performance unless otherwise directed by authorizing statute. The 
proposed language is intended to promote timely closeout of awards, 
assist with reconciling closeout activities, and hold recipients 
accountable for submitting required closeout reports.
    OMB seeks comments on the advantages and disadvantages of changes 
to 2 CFR 200.343 (Closeout), including feedback on the amount of burden 
this may reduce as well as the potential risk to Federal awarding 
agencies.

J. Changes to Performing the Governmentwide Audit Quality Project

    Proposed revisions to 2 CFR 200.513 include a change in the date 
for the requirement for a governmentwide audit data quality project 
that must be performed once every 6 years beginning with audits 
submitted in 2018. This date has been changed to 2021, given the 
significant changes to the 2019 Compliance Supplement in support of the 
Grants CAP Goal.

K. Expanded Use of the De Minimus Rate

    The first proposed revision to 2 CFR 200.414(f) allows the use of 
the de minimus rate of 10% of modified total direct costs (MTDC) to all 
non-Federal entities (except for those described in Appendix VII to 
Part 200--State and Local Government and Indian Tribe Indirect Cost 
Proposals, paragraph D.1.b). Currently, the de minimus rate can only be 
used for non-Federal entities that have never received a negotiated 
indirect cost rate. The use of the de minimus rate has reduced burden 
for both the non-Federal entities and the Federal agencies for 
preparing, reviewing and negotiating indirect cost rates. Since the 
publication of the final rule in 2013, both Federal agencies and non-
Federal entities have advocated to expand the use of the de minimus 
rate for non-Federal entities that have negotiated an indirect cost 
rate previously, but for some circumstances, the negotiated rates have 
expired. The expiration may be due to breaks in Federal relationships 
and grant funding, or lack of resources for preparing an indirect cost 
proposal. This proposed change will further reduce the administrative 
burden for non-federal entities and Federal agencies and shift more 
resources toward accomplishing the program mission.
    Another proposed revision adds language to 2 CFR 200.414(f) to 
clarify that when a non-Federal entity is using the de minimus rate for 
its federal grants, it is not required to provide proof of costs that 
are covered under that rate. The 10% de minimus rate was designed to 
reduce burden for small non-federal entities and the requirement to 
document the actual indirect costs would eliminate the benefits of 
using the de minimus rate. Lastly, for transparency purposes, a 
proposed revision adds a new subsection to 200.414(h) to require that 
all grantees' negotiated agreements for indirect cost rates are 
collected and displayed on public website. The agency responsible for 
this task and the public website will be designated by OMB.

II. Meeting Statutory Requirements and Aligning 2 CFR With Other 
Authoritative Source Requirements

A. Prohibition on Certain Telecommunication and Video Surveillance 
Services or Equipment

    OMB proposes revisions to 2 CFR to align with section 889 of the 
NDAA 2019. The NDAA 2019 prohibits the head of an executive agency from 
obligating or expending loan or grant funds to procure or obtain, 
extend or renew a contract to procure or obtain, or enter into a 
contract (or extend or renew a contract) to procure or obtain the 
equipment, services, or systems prohibited systems as identified in 
NDAA 2019. To implement this requirement, OMB proposes 2 CFR 200.216 
Prohibition on certain telecommunication and video surveillance 
services or equipment, which prohibit Federal award recipients from 
using government funds to enter into contracts (or extend or renew 
contracts) with entities that use covered telecommunications equipment 
or services. This prohibition applies even if the contract is not 
intended to procure or obtain, any equipment, system, or service that 
uses covered telecommunications equipment or services. As described in 
section 889 of the NDAA of 2019, covered telecommunications equipment 
or services includes:
    [ssquf] Telecommunications equipment produced by Huawei 
Technologies Company or ZTE Corporation (or any subsidiary or affiliate 
of such entities).
    [ssquf] For the purpose of public safety, security of government 
facilities, physical security surveillance of critical infrastructure, 
and other national security purposes, video surveillance and 
telecommunications equipment produced by Hytera Communications 
Corporation, Hangzhou Hikvision Digital Technology Company, or Dahua 
Technology Company (or any subsidiary or affiliate of such entities).
    [ssquf] Telecommunications or video surveillance services provided 
by such entities or using such equipment.
    [ssquf] Telecommunications or video surveillance equipment or 
services produced or provided by an entity that the Secretary of 
Defense, in consultation with the Director of the National Intelligence 
or the Director of the Federal Bureau of Investigation, reasonably 
believes to be an entity owned or controlled by, or otherwise connected 
to, the government of a covered foreign country.
    OMB has limited data on the impact of this prohibition on Federal 
award recipients and contractors who use covered technology and seeks 
feedback on the feasibility, burden, programmatic impact, and cost 
associated with implementing this requirement. Commenters are 
encouraged to provide relevant data on the impacts of this proposed 
change and suggestions on how to support implementation of this 
prohibition.

B. Never Contract With the Enemy

    To meet statutory requirements, OMB proposes adding Part 183 to 2 
CFR to implement Never Contract with the Enemy, consistent with the 
fact that the law applies to only a small number of grants and 
cooperative agreements. Never Contract with the Enemy applies only to 
grants and cooperative agreements that exceed $50,000, are performed 
outside the United States, including U.S. territories, to a person or 
entity that is actively opposing United States or coalition forces 
involved in a contingency operation in which

[[Page 3771]]

members of the Armed Forces are actively engaged in hostilities.
    To implement Never Contract with the Enemy and to reflect current 
practice, OMB proposes requiring Federal awarding agencies to utilize 
the System for Award Management (SAM) Exclusions and Federal Awardee 
Performance and Integrity Information System (FAPIIS) to ensure 
compliance before awarding a grant or cooperative agreement. Federal 
awarding agencies are prohibited from making any awards to persons or 
entities listed in SAM Exclusions pursuant to Never Contract with the 
Enemy and are required to list in FAPIIS any grant or cooperative 
agreement terminated due to Never Contract with the Enemy as a 
Termination for Material Failure to Comply. The proposed revisions also 
require agencies to insert terms and conditions in grants and 
cooperative agreements regarding non-Federal entities' responsibilities 
to ensure no Federal award funds are provided directly or indirectly to 
the enemy, to terminate subawards in violation of Never Contract with 
the Enemy, and to allow the Federal Government access to records to 
ensure that no Federal award funds are provided to the enemy.
    The law allows Federal awarding agencies to terminate, in whole or 
in part any grant, cooperative agreement, or contract that provides 
funds to the enemy, as defined in the NDAA for FY 2015. This statute 
applies to procurement as well as to grants and cooperative agreements 
and OMB will coordinate with the procurement community as appropriate 
before issuing final guidance, including the roles and responsibilities 
of the covered combatant command and Federal awarding agencies. With 
the exception of access to records, the Never Contract with Enemy 
provision will sunset in December 2019; however, there is a current 
proposal to extend these requirements. OMB anticipates that these 
statutory requirements may be extended, and therefore seeks comments at 
this time on these proposed revisions.

C. Requirement for the Federal Awardee Performance and Integrity 
Information System (FAPIIS) To Include Information on a Non-Federal 
Entity's Parent, Subsidiary, or Successor Entities

    To meet statutory requirements, OMB proposes revisions to 2 CFR 
parts 25 and 200 to implement Sec. 852 of the NDAA 2013, which requires 
that the Federal Awardee Performance and Integrity Information System 
(FAPIIS) include information on a non-Federal entity's parent, 
subsidiary, or successor entities. OMB proposes to require financial 
assistance applicants to provide information in SAM on their immediate 
owner and highest-level owner and subsidiaries, as well as on all 
predecessors that have been awarded a Federal contract, grant, or 
cooperative agreement within the last three years. In addition, OMB 
proposes to require that prior to making a grant or cooperative 
agreement, agencies must consider all of the information in FAPIIS with 
regard to an applicant's immediate owner or highest-level owner and 
predecessor, or subsidiary, if applicable. These revisions are 
consistent with the Federal Acquisition Regulation (FAR) final rule 
regarding this law published at 81 FR 11988 on March 7, 2016. OMB seeks 
comments and data on the following: The burden on recipients regarding 
the implementation of the statute, the applicability of this 
requirement to different types of entities (i.e., states, local 
governments, and tribes), the alignment of these revisions with the 
FAR, and any deviations from the FAR change that OMB should consider.

D. Increase Transparency Through FFATA, as Amended by the DATA Act

    OMB proposes several revisions to increase transparency regarding 
Federal spending as required by FFATA, as amended by the DATA Act, 
which mandates Federal agencies to report Federal appropriations 
received or expended by Federal agencies and non-Federal entities. OMB 
also proposes revisions to the reporting thresholds to further align 
financial assistance requirements with those of the Federal acquisition 
community.
    To increase transparency, OMB proposes to expand the applicability 
of Federal financial assistance in 2 CFR part 25 and 2 CFR part 170 
beyond grants and cooperative agreements so that it includes other 
types of financial assistance that Federal agencies receive or 
administer such as loans, insurance, contributions, and direct 
appropriations.
    OMB also proposes to make changes throughout 2 CFR to make it clear 
that Federal agencies may receive Federal financial assistance awards. 
This will increase transparency for Federal awards received by Federal 
agencies.
    To further align implementation of FFATA, as amended by DATA Act, 
between the Federal financial assistance and acquisition communities, 
OMB proposes revisions to Federal awarding agency and pass-through 
entity reporting thresholds. For Federal awarding agencies, OMB 
proposes revisions to 2 CFR part 170 to require agencies to report 
Federal awards that equal or exceed the micro-purchase threshold as set 
by the FAR at 48 CFR subpart 2.1. Consistent with the FAR threshold for 
subcontract reporting, OMB is proposing to raise the reporting 
threshold for subawards that equal or exceed $30,000. OMB seeks 
comments that includes an analysis on the advantages and disadvantages 
of raising this threshold.
    OMB also proposes revisions to 2 CFR part 25 to allow agencies the 
flexibility to exempt a foreign entity applying for or receiving an 
award or subaward for a project or program performed outside the United 
States valued at less than $100,000. Currently, Federal awarding 
agencies have the flexibility to exempt this requirement for awards 
valued at less than $25,000. Federal awarding agencies may exempt the 
registration requirement up to $100,000 in cases where the agency has 
conducted a risk-based analysis and deems it impractical for the entity 
to comply with the requirements(s). OMB proposes this revision after 
receiving feedback from the international community that requiring 
certain foreign entities to register in SAM introduces substantial 
burden with no significant value for the Federal awarding agency. 
Federal awarding agencies will remain responsible for reporting these 
awards for transparency purposes. Recognizing the benefits of SAM 
registration, OMB is interested in feedback in support or against the 
proposal to raise the threshold.
    Finally, OMB proposes requiring Federal awarding agencies to 
associate Financial Assistance Listings with the authorizing statute to 
make listings more consistent. This supports implementation of the DATA 
Act which requires agencies to report award level Financial Assistance 
Listings information for display on www.usaspending.gov.
    OMB seeks comments on whether the proposed revisions increase 
transparency regarding Federal spending and support implementation of 
the DATA Act.

E. Aligning 2 CFR With Authoritative Sources

    OMB proposes a revision to 2 CFR 200.431 Compensation--fringe 
benefits to allow states to conform with Generally Accepted Accounting 
Principles (GAAP), specifically Governmental Accounting Standards Board 
(GASB) Statement 68, and to continue to claim pension costs that are 
both actual and funded. OMB proposes this revision because GASB issued 
Statement 68, Accounting and Financial Reporting for Pensions which 
amends GASB Statement 27 and allows non-

[[Page 3772]]

Federal entities (NFE) to claim only estimated pension costs in their 
financial statements. OMB's revision will allow non-Federal entities to 
continue to claim pension costs that are both actual and funded.
    OMB also proposes a revision to the definitions of 2 CFR 200.12 
Capital assets, 2 CFR 200.59 Intangible property, 2 CFR 200.449.
    The definition for ``Improper Payment'' has been revised to refer 
to the authoritative source for clarity, OMB Circular A-123--
Management's Responsibility for Internal Control in Federal Agencies, 
Appendix C--Requirements for Payment Integrity Improvement. In 
addition, both the ``Improper Payment'' and ``Questioned Cost'' 
definitions have been revised to clarify that questioned costs are not 
an improper payment until reviewed and confirmed to be improper as 
defined in OMB Circular A-123, Appendix C.

III. Clarifying Requirements Regarding Areas of Misinterpretation

    Following the publication of the Uniform Guidance, OMB received a 
substantial amount of questions from stakeholders requesting 
clarifications about key aspects of the guidance. In other instances, 
it has come to OMB's attention that the interpretation of certain 
provisions was not consistent with the intent of the Uniform Guidance. 
In response, OMB proposes a number of clarifications that are aimed at 
reducing recipient administration burden and ensuring consistent 
interpretation of guidance.

A. Responsibilities of the Pass-Through Entity To Address Only a 
Subrecipient's Audit Findings Related to Their Subaward

    To clarify requirements regarding responsibility for audit 
findings, OMB proposes a revision to 2 CFR 200.331 Requirements for 
pass-through entities to clarify that pass-through entities (PTE) are 
responsible for addressing only a subrecipient's audit findings that 
are specifically related to their subaward. For example, a PTE is not 
required to address all of the subrecipient's audit findings. In 
addition, the PTE may rely on the subrecipient's auditors and cognizant 
agency's oversight for routine audit follow-up and management 
decisions. These changes reduce the burden for PTEs by allowing a PTE 
to rely on the cognizant agency to address a subrecipient's entity-wide 
issues.

B. Reducing Burden on Universities by Clarifying Timing of the 
Disclosure Statement

    OMB also proposes to clarify the timing of submission of the 
disclosure statement (DS-2), which is only required for universities 
that meet certain thresholds as defined in 48 CFR 9903.202-1(f). This 
revision reduces burden for universities while maintaining the 
requirement for universities to implement policies in compliance with 2 
CFR. OMB seeks comments on whether the proposed revisions clarify 2 CFR 
requirements and reduce burden for PTEs and universities.

C. Response to Frequently Asked Questions Related to the Prior Release 
of 2 CFR

    In July 2017, OMB developed and posted Frequently Asked Questions 
(FAQs) on the Chief Financial Officers Council website in response to 
stakeholder requests for clarification on the first publication of 2 
CFR (https://cfo.gov//wp-content/uploads/2017/08/July2017-UniformGuidanceFrequentlyAskedQuestions.pdf). Due to the volume of 
questions related to these topics, OMB proposes clarifying the 
following: The meaning of the words ``must'' and ``may'' as they 
pertain to requirements; the effective date of 2 CFR; applicability and 
documentation requirements when a non-Federal entity elects to charge 
the de minimus indirect cost rate of modified total direct costs 
(MTDC); pass-through entity responsibilities related to indirect cost 
rates and audits; and applicability of 2 CFR to FAR based contracts. 
These proposed revisions are intended to improve clarity and reduce 
recipient burden by providing guidance on implementing 2 CFR.

D. Applicability of Guidance to Federal Agencies

    OMB proposes changes to 2 CFR 200.101 (Applicability) to clarify 
that Federal awarding agencies may apply the requirements of 2 CFR 200 
to other Federal agencies, to the extent permitted by law. This 
proposed change recognizes that there are instances when Federal 
awarding agencies or pass-through entities have the authority to issue 
Federal awards to Federal agencies and in these instances, the 
provisions of 2 CFR 200 may be applied, as appropriate. This proposed 
change is consistent with how for-profit entities, foreign public 
entities, or foreign organizations are treated in the Uniform Guidance.

Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). The 
revision of 2 CFR is not a regulatory action and therefore it is not 
subject to the 12866 review by OIRA.

Regulatory Flexibilities Act

    The Regulatory Flexibility Act 5 U.S.C. 601, et seq., requires that 
an agency 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. OMB does not expect this guidance 
to have a significant economic impact on a substantial number of small 
entities within the meaning of the Regulatory Flexibility Act. There 
are some proposed revisions that may impose burden, however, there are 
more proposed revisions that reduce burden to small entities. When 
reviewing all proposed revisions, the burden that will be reduced for 
recipients is much greater than the burden imposed.
    OMB's proposal to expand the applicability of Federal financial 
assistance in 2 CFR part 25 beyond grants and cooperative agreements so 
that it includes other types of financial assistance that Federal 
agencies receive or administer such as loans and insurance will impact 
small entities, but it will not have a significant impact on a 
substantial number of small entities. Currently, 2 CFR part 25 requires 
all non-Federal entities that apply for grants and cooperative 
agreements to register in the System for Award Management (SAM). OMB 
proposes to require all entities that apply for Federal financial 
assistance such as loans and insurance to register in SAM, which 
requires the establishment of a unique entity identifier. In practice, 
some Federal awarding agencies already require SAM registration for all 
types of Federal financial assistance and the proposed change would 
make this practice consistent among agencies. As noted in the Paperwork 
Reduction Act section, as of June 20, 2019, there were 159,477 unique 
Federal financial assistance registrants in the System for Awards 
Management (SAM). According to data accessed from www.usaspending.gov, 
in FY 2018, approximately 2,952 small businesses who received awards 
for other types of

[[Page 3773]]

financial assistance did not have a unique entity identifier. Assuming 
that non-Federal entities with a unique entity identifier reported to 
www.usaspending.gov are already registered in SAM, this change will 
impact approximately 2,952 small entities annually. SAM registration is 
estimated to take two and a half hours per response, which results in 
7,380 burden hours annually. Individuals who receive Federal financial 
assistance as a natural person remain exempt from this requirement. 
This change is proposed to successfully implement FFATA, as amended by 
the DATA Act. There is no exemption from the guidance for small 
entities, because the law does not provide for any such exemption. 
Recognizing that there are limitations to relying on 
www.usaspending.gov data to estimate the impact of this change on small 
entities, OMB requests comments on how burdensome this proposed 
requirement may be for small entities.
    The proposed guidance also clarifies requirements regarding pass-
through entities' responsibility for sub-award audit findings and 
clarifies the timing of a disclosure statement which is only required 
for universities that meet certain thresholds. These proposed changes 
are intended to reduce burden and will not have a significant economic 
impact on a substantial number of small entities because they clarify 
existing requirements; they do not include any new requirements for 
non-Federal entities.
    OMB proposes to add a provision to 2 CFR part 200 Subpart D--Post 
Federal Award Requirements, 2 CFR 200.321 (Domestic preferences for 
procurement), encouraging Federal award recipients, to the extent 
permitted by law, to maximize use of goods, products, and materials 
produced in the United States when procuring goods and services under 
Federal awards. This revision was added in response to Executive Order 
13788 of April 18, 2017 (Buy American and Hire American) and Executive 
Order 13858 of January 21, 2019 (Executive Order on Strengthening Buy-
American Preferences for Infrastructure Projects). This may impose 
burden on small entities that primarily procure goods and services 
produced outside the U.S.
    The proposed guidance also provides consistency among definitions 
and terms and proposes several provisions to increase transparency 
regarding Federal spending. These proposed changes are intended to 
reduce recipient burden and not have a significant economic impact on a 
substantial number of small entities because they will affect Federal 
awarding agencies; they do not include any new requirements for non-
Federal entities.
    The proposed guidance introduces a new provision to align with 
section 889 of the NDAA 2019, Prohibition on certain telecommunication 
and video surveillance services or equipment. This statutory 
requirement may introduce burden to small entities that are prohibited 
from obligating or expending grant funds to procure or obtain, extend 
or renew a contract to procure or obtain, or enter in a contract with, 
as identified in the NDAA 2019.
    This proposed guidance implements a new statute that requires 
applicants of Federal assistance to provide information on their owner, 
predecessor and subsidiary, including the Commercial and Government 
Entity (CAGE) Code and name of all predecessors, if applicable. This 
will not have a significant economic impact on a substantial number of 
small entities because small entities typically do not have a complex 
corporate structure requiring them to report information on their 
owner, predecessor, and subsidiary. Further, the burden is minimal for 
a non-Federal entity to provide the name of its immediate owner and 
highest-level owner.
    The proposed guidance also implements a statute, Never Contract 
with the Enemy, which will not have a significant economic impact on a 
substantial number of small entities because it will affect only a 
small number of grants and cooperative agreements. Never Contract with 
the Enemy applies only to grants and cooperative agreements that exceed 
$50,000, are performed outside the United States, including U.S. 
territories, to a person or entity that is actively opposing the United 
States or coalition forces involved in a contingency operation in which 
members of the Armed Forces are actively engaged in hostilities.
    The NDAA for FY2018 increased the micro-purchase threshold from 
$3,500 to $10,000 and increased the simplified acquisition threshold 
from $100,000 to $250,000 for all recipients. OMB's proposed revisions 
reduces burden and will not have a significant economic impact on a 
substantial number of small entities because it is likely to reduce 
burden for all non-Federal entities.

Paperwork Reduction Act

    Consistent with the Regulatory Flexibility Act analysis discussion, 
the Paperwork Reduction Act (44 U.S.C. chapter 35) applies. The 
proposed guidance contains information collection requirements and will 
impact the current Information Collection Requests approved under OMB 
control number 3090-0290 managed by the General Services 
Administration. Accordingly, the Regulatory Secretariat Division of GSA 
will submit a request for approval to amend the existing Information 
Collection Requests for System for Award Management (SAM) registration 
requirements for prime Federal financial assistance recipients.
    Annual Reporting Burden: The estimated annual reporting burden 
includes all possible entities for Federal financial assistance that 
may be required to register in SAM. The estimated annual reporting 
burden also includes entities that receive Federal financial assistance 
reported in USASpending.gov and either may or may not be required to 
register in SAM.
    The current guidance only requires that prime applicants and 
recipients of Federal financial assistance in the form of grants 
register in SAM. Pursuant to 2 CFR Subtitle A, Chapter I, and Part 25 
(75 FR 5672), prime applicants and recipients are required to maintain 
accurate SAM registration accounts with current information at all 
times during which they have an active Federal award, an application, 
or a plan under consideration by a Federal awarding agency.
    The burden estimates are approximations based on the best available 
data.
    As of July 7, 2019, there were 159,477 unique Federal financial 
assistance registrants in SAM. However, it is important to note that 
not all registrants in SAM ultimately apply for, or receive, Federal 
financial assistance. To develop a more accurate estimate for the total 
number of Federal financial assistance recipients, including loans and 
other types of Federal financial assistance, OMB used data from SAM 
combined with data from USASpending.gov on non-grant recipients of 
Federal financial assistance to determine the anticipated number of 
registrants for Federal financial assistance in SAM.
    The Federal Funding Accountability and Transparency Act of 2006 
(Pub. L. 109-282, as amended by section 6202(a) of Pub. L. 110-252) 
established the requirement to create USASpending.gov. USASpending.gov 
is a single, searchable website, accessible by the public that hosts 
financial data on both Federal financial assistance and contracts. 
Recipients of all types of Federal financial assistance, including 
loans, submit their financial data to their Federal awarding agency. 
Federal awarding agencies are then responsible for accurately 
submitting recipient financial data to USASpending.gov. OMB ran reports 
in USASpending.gov

[[Page 3774]]

to identify the number of unique Federal financial assistance 
recipients that receive Federal financial assistance other than grants 
to isolate the total number of potential registrants that may be 
expected to register in SAM as a result of the updates to the proposed 
guidance.
    To account for the number of loan and other types of Federal 
financial assistance recipients that do not also receive grants, OMB 
removed duplicate recipients based on recipient Data Universal 
Numbering System Number (DUNS) numbers, from Dun & Bradstreet (D&B). At 
this time all Federal financial assistance recipients are required to 
register for DUNS numbers; however, DUNS numbers will be phased out as 
the primary key to identify every entity record by 2020 in place of a 
non-proprietary, SAM-generated, Unique Entity ID (UEI) number.
    As of June 30, 2019 there were 41,795 grant, 122 loan, and 12,485 
other Federal financial assistance recipients with unique DUNS numbers 
reported in USASpending.gov. Therefore, based on the number of entities 
with unique DUNS numbers that are registered in SAM (159,477), plus 
entities that receive loans (122) or other Federal financial assistance 
(12,485) reported in USASpending.gov that may not be reflected in SAM, 
the total number of entities that may be impacted by the proposed 
guidance associated Information Collection Requests under OMB control 
number 3090-0290 could be 172,084 registrants.
    Public reporting burden for Information Collection Requests under 
OMB control number 3090-0290 is managed by the General Services 
Administration and estimated to average 2.5 hours per response, 
including the time for reviewing instructions, searching existing data 
sources, gathering and maintaining the data needed, and completing and 
reviewing the collection of information.
    The annual reporting burden is estimated as follows:
    Respondents: 172,084.
    Responses per Respondent: 1.
    Total Annual Responses: 172,084.
    Hours per Response: 2.5.
    Total Response Burden Hours: 430,210.
    The proposed guidance also requires that registrants for Federal 
financial assistance provide information on their owner, predecessor, 
and subsidiary, including the Commercial and Government Entity (CAGE) 
Code and name of all predecessors, if applicable. This information is 
required to implement Sec. 852 of the NDAA of FY 2013, which requires 
that the Federal Awardee Performance and Integrity Information System 
(FAPIIS) include information on a non-Federal entity's parent, 
subsidiary, or successor entities. Non-Federal entities are already 
required to obtain a CAGE code for purposes of SAM registration. It is 
anticipated that including this information as part of SAM registration 
or for a renewal should not result in significant additional time. 
Public reporting burden for this collection of information is estimated 
to average .1 hours per response, including the time for reviewing 
instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
collection of information. Based on the burden estimates for the total 
number of SAM registrants indicated in the previous section, the annual 
reporting burden for this proposal is estimated as follows:
    Respondents: 172,084.
    Responses per respondent: 1.
    Total annual responses: 172,084.
    Preparation hours per response: .1.
    Total response burden hours: 17,208.
    The number of respondents estimated in this section is based on the 
best available data from SAM and USASpending.gov. It is important to 
note that not all registrants in SAM complete applications for Federal 
financial assistance. Based on the financial data from USASpending.gov, 
less than one third of registrants in SAM receive Federal financial 
assistance. Therefore, the actual number of respondents and the 
relative burden may be significantly lower than the estimated amounts.

Request for Comments Regarding Paperwork Burden

    Submit comments, including suggestions for reducing this burden, 
not later than March 23, 2020.
    Submit comments identified by ``Information Collection 3090-0290, 
System for Award Management Registration Requirements for Prime Grant 
Recipients'' by any of the following methods:
     Regulations.gov: http://www.regulations.gov. Submit 
comments via the Federal eRulemaking portal by searching the OMB 
control number 3090-0290 Docket No. 2019-0005. Select the link 
``Comment Now'' that corresponds with ``Information Collection 3090-
0290, System for Award Management Registration Requirements for Prime 
Grant Recipients''. Follow the instructions provided on the screen. 
Please include your name, company name (if any), and ``Information 
Collection 3090-0290, System for Award Management Registration 
Requirements for Prime Grant Recipients'' on your attached document.
     Mail: General Services Administration, Regulatory 
Secretariat Division (MVCB), 1800 F Street NW, Washington, DC 20405. 
ATTN: Ms. Flowers/IC 3090-0290.
    Public comments are particularly invited on: Whether this 
collection of information is necessary for the proper performance of 
functions of the System for Award Management Registration Requirements 
for Prime Financial Assistance Recipients, and will have practical 
utility; whether our estimate of the public burden of this collection 
of information is accurate, and based on valid assumptions and 
methodology; ways to enhance the quality, utility, and clarity of the 
information to be collected; and ways in which we can minimize the 
burden of the collection of information on those who are to respond, 
through the use of appropriate technological collection techniques or 
other forms of information technology.
    Requester may obtain a copy of the justification from the General 
Services Administration, Regulatory Secretariat (MVCB), Washington, DC 
20405, telephone (202) 501-4755. Please cite OMB Control Number 3090-
0290, System for Award Management Registration Requirements for Prime 
Grant Recipients, in all correspondence.

List of Subjects

2 CFR Part 25

    Administrative practice and procedure; Grant programs; Grants 
administration; Loan programs.

 2 CFR Part 170

    Colleges and universities; Grant programs; Hospitals; International 
organizations; Loan programs; Reporting and recordkeeping requirements.

 2 CFR Part 183

    Foreign aid; Grants administration; Grant programs; International 
organizations; Reporting and recordkeeping requirements.

 2 CFR Part 200

    Accounting; Colleges and universities; Grants administration; Grant 
programs; Hospitals; Indians; Nonprofit organizations; Reporting and 
recordkeeping requirements; State and local governments.

Timothy F. Soltis,
Deputy Controller.

    For the reasons stated in the preamble, the Office of Management 
and Budget proposes to amend 2 CFR parts

[[Page 3775]]

25, 170, 200 and add part 183 as set forth below:

PART 25--UNIVERSAL IDENTIFIER AND SYSTEM FOR AWARD MANAGEMENT

0
1. The authority citation for part 25 continues to read as follows:

    Authority: Pub. L. 109-282; 31 U.S.C. 6102.

0
2. Amend Sec.  25.100 by revising the introductory text to read as 
follows:


Sec.  25.100  Purposes of this part.

    This part provides guidance to recipients to establish:
* * * * *
0
3. Revise Sec.  25.105 to read as follows:


Sec.  25.105  Types of awards to which this part applies.

    This part applies to a Federal awarding agency's grants, 
cooperative agreements, loans, and other types of Federal financial 
assistance as defined in Sec.  25.306.
0
4. Revise Sec.  25.110 to read as follows:


Sec.  25.110   Types of recipient and subrecipient entities to which 
this part applies.

    (a) General. Through a Federal awarding agency's implementation of 
the guidance in this part, this part applies to all Federal agencies 
and non-Federal entities, other than those exempted by statute or 
exempted in paragraphs (b), and (c) of this section, that--
    (1) Apply for or receive Federal awards; or
    (2) Receive subawards directly from recipients of those Federal 
awards.
    (b) Exemptions for individuals. None of the requirements in this 
part apply to an individual who applies for or receives Federal 
financial assistance as a natural person (i.e., unrelated to any 
business or non-profit organization he or she may own or operate in his 
or her name).
    (c) Other exemptions required by law (e.g. statutory). (1) Under a 
condition identified in paragraph (c)(2) of this section, a Federal 
awarding agency may exempt a non-Federal entity or Federal agency from 
an applicable requirement to obtain a unique entity identifier, 
register in the SAM, or both.
    (i) In that case, the Federal awarding agency must use a generic 
unique entity identifier in data it reports to USASpending.gov if 
reporting for a prime award to the non-Federal entity or Federal agency 
is required by the Federal Funding Accountability and Transparency Act 
(Pub. L. 109-282, hereafter cited as ``Transparency Act'').
    (ii) Federal awarding agency use of a generic unique entity 
identifier should be used rarely for prime award reporting because it 
prevents prime awardees from being able to fulfill the subaward or 
executive compensation reporting required by the Transparency Act.
    (2) The conditions under which a Federal awarding agency may exempt 
a non-Federal entity are--
    (i) For any non-Federal entity or Federal agency, if the Federal 
awarding agency determines that it must protect information about the 
entity from disclosure if it is in the national security or foreign 
policy interests of the United States, or to avoid jeopardizing the 
personal safety of the Federal agency or non-Federal entity's staff or 
clients.
    (ii) For a foreign organization or foreign public entity applying 
for or receiving a Federal award or subaward for a project or program 
performed outside the United States valued at less than $100,000, if 
the Federal awarding agency deems it to be impractical for the entity 
to comply with the requirement(s). This exemption must be determined by 
the Federal awarding agency on a case-by-case basis while utilizing a 
risk-based approach and does not apply if subawards are anticipated.
    (3) Federal awarding agencies' use of generic unique entity 
identifier, as described in paragraphs (c)(1) and (2) of this section, 
should be rare. Having a generic unique entity identifier limits a 
recipient's ability to use Governmentwide systems that are needed to 
comply with some reporting requirements.
0
5. Revise Sec.  25.200 to read as follows:


Sec.  25.200   Requirements for notice of funding opportunities, 
regulations, and application instructions.

    (a) Each Federal awarding agency that awards the types of Federal 
financial assistance defined in Sec.  25.306 must include the 
requirements described in paragraph (b) of this section in each notice 
of funding opportunity, regulation, or other issuance containing 
instructions for applicants that is issued either on or after the 
effective date of this part; or
    (b) The notice of funding opportunity, regulation, or other 
issuance must require each non-Federal entity and Federal agency that 
applies and does not have an exemption under Sec.  25.110 to:
    (1) Be registered in the SAM prior to submitting an application or 
plan;
    (2) Maintain an active SAM registration with current information, 
including information on a recipient's immediate and highest level 
owner and subsidiaries, as well as on all predecessors that have been 
awarded a Federal contract or grant within the last three years, if 
applicable, as defined in the FAR (52 part 204-20), at all times during 
which it has an active Federal award or an application or plan under 
consideration by a Federal awarding agency; and
    (3) Provide its unique entity identifier in each application or 
plan it submits to the Federal awarding agency.
    (c) For purposes of this policy:
    (1) The applicant is the non-Federal entity or Federal agency that 
meets the Federal awarding agency's eligibility criteria and has the 
legal authority to apply and to receive the Federal award. For example, 
if a consortium applies for a Federal award to be made to the 
consortium as the recipient, the consortium must have a unique entity 
identifier. If a consortium is eligible to receive funding under a 
Federal awarding agency program but the Federal awarding agency's 
policy is to make the Federal award to a lead entity for the 
consortium, the unique entity identifier of the lead non-Federal entity 
will be used.
    (2) A ``notice of funding opportunity'' is any paper or electronic 
issuance that an agency uses to announce a funding opportunity, whether 
it is called a ``program announcement,'' ``notice of funding 
availability,'' ``broad agency announcement,'' ``research 
announcement,'' ``solicitation,'' or some other term.
    (3) To remain registered in the SAM database after the initial 
registration, the applicant is required to review and update on an 
annual basis from the date of initial registration or subsequent 
updates its information in the SAM database to ensure it is current, 
accurate and complete.
0
6. Revise Sec.  25.205 to read as follows:


Sec.  25.205   Effect of noncompliance with a requirement to obtain a 
unique entity identifier or register in the SAM.

    (a) A Federal awarding agency may not make a Federal award or 
financial modification to an existing Federal award to a non-Federal 
entity or Federal agency until the non-Federal entity or Federal agency 
has complied with the requirements described in Sec.  25.200 to provide 
a valid unique entity identifier and maintain an active SAM 
registration with current information (other than any requirement that 
is not applicable because the entity is exempted under Sec.  25.110).
    (b) At the time a Federal awarding agency is ready to make a 
Federal award, if the intended recipient has not complied with an 
applicable requirement to provide a unique entity

[[Page 3776]]

identifier or maintain an active SAM registration with current 
information, the Federal awarding agency:
    (1) May determine that the applicant is not qualified to receive a 
Federal award; and
    (2) May use that determination as a basis for making a Federal 
award to another applicant.
0
7. Revise Sec.  25.210 to read as follows:


Sec.  25.210   Authority to modify agency application forms or formats.

    To implement the policies in Sec. Sec.  25.200 and 25.205, a 
Federal awarding agency may add a unique entity identifier field to 
information collections previously approved by OMB, without having to 
obtain further approval to add the field.
0
8. Revise Sec.  25.215 to read as follows:


Sec.  25.215   Requirements for agency information systems.

    Each Federal awarding agency that awards Federal financial 
assistance (as defined in Sec.  25.306) must ensure that systems 
processing information related to the Federal awards, and other systems 
as appropriate, are able to accept and use the unique entity identifier 
as the universal identifier for financial assistance applicants and 
recipients.
0
9. Revise Sec.  25.220 to read as follows:


Sec.  25.220   Use of award term.

    (a) To accomplish the purposes described in Sec.  25.100, a Federal 
agency must include in each Federal award (as defined in Sec.  25.305) 
the award term in appendix A to this part.
    (b) A Federal awarding agency may use different letters and numbers 
than those in appendix A to this part to designate the paragraphs of 
the Federal award term, if necessary, to conform the system of 
paragraph designations with the one used in other terms and conditions 
in the Federal awarding agency's Federal awards.
0
10. Revise Sec.  25.300 to read as follows:


Sec.  25.300   Federal awarding agency.

    Federal awarding agency has the meaning given in 2 CFR 200.1.
0
11. Revise Sec.  25.305 to read as follows:


Sec.  25.305   Federal award.

    Federal award, for the purposes of this part, means an award of 
Federal financial assistance that a non-Federal entity or Federal 
agency receives directly from a Federal awarding agency.
0
12. Add Sec.  25.306 to subpart C to read as follows:


Sec.  25.306   Federal financial assistance.

    (a) Federal financial assistance has the meaning given in 2 CFR 
200.1 and also includes assessed or voluntary contributions, for 
purposes of this part.
    (b) Federal financial assistance, for purposes of this part, does 
not include:
    (1) Technical assistance, which provides services in lieu of money; 
and
    (2) A transfer of title to the Federally-owned property provided in 
lieu of money, even if the Federal award is called a grant.
0
13. Amend Sec.  25.310 by revising the section heading to read as 
follows:


Sec.  25.310  System for Award Management.


Sec.  25.320  [Removed]

0
14. Remove Sec.  25.320.
0
15. Revise Sec.  25.330 to read as follows:


Sec.  25.330   Foreign organization.

    Foreign organization has the meaning given in 2 CFR 200.1.
0
16. Add Sec.  25.331 to subpart C to read as follows:


Sec.  25.331   Foreign public entity.

    Foreign public entity has the meaning given in 2 CFR 200.1.
0
17. Add Sec.  25.333 to subpart C to read as follows:


Sec.  25.333   Highest level owner.

    Highest level owner has the meaning given in 2 CFR 200.1.
0
18. Revise Sec.  25.335 to read as follows:


Sec.  25.335   Indian Tribe (or ``Federally recognized Indian Tribe'').

    Indian Tribe (or ``Federally recognized Indian Tribe'') has the 
meaning given in 2 CFR 200.1.
0
19. Revise Sec.  25.340 to read as follows:


Sec.  25.340   Local government.

    Local government has the meaning given in 2 CFR 200.1.
0
20. Add Sec.  25.343 to subpart C to read as follows:


Sec.  25.343   Non-Federal entity.

    Non-Federal Entity, as it is used in this part, has the meaning 
given in paragraph C.3 of the award term in Appendix A to this part.
0
21. Revise Sec.  25.345 to read as follows:


Sec.  25.345   Nonprofit organization.

    Nonprofit organization has the meaning given in Sec.  200.1.
0
22. Add Sec.  25.347 to subpart C to read as follows:


Sec.  25.347   Predecessor.

    Predecessor means a non-Federal entity that is replaced by a 
successor.
0
23. Revise Sec.  25.350 to read as follows:


Sec.  25.350   State.

    State has the meaning given in 2 CFR 200.1.
0
24. Revise Sec.  25.355 to read as follows:


Sec.  25.355   Subaward.

    Subaward has the meaning given in 2 CFR 200.1.
0
25. Add Sec.  25.357 to subpart C to read as follows:


Sec.  25.357   Successor.

    Successor means a non-Federal entity that has replaced a 
predecessor by acquiring the assets and carrying out the affairs of the 
predecessor under a new name (often through acquisition or merger). The 
term ``successor'' does not include new offices or divisions of the 
same company or a company that only changes its name.
0
26. Revise Sec.  25.360 to read as follows:


Sec.  25.360   Subrecipient.

    Subrecipient has the meaning given in 2 CFR 200.1.
0
27. Add Sec.  25.362 to subpart C to read as follows:


Sec.  25.362   Subsidiary.

    Subsidiary has the meaning given in 2 CFR 200.1.
0
28. Revise Appendix A to Part 25 to read as follows:

Appendix A to Part 25--Award Term

I. System for Award Management and Universal Identifier Requirements

A. Requirement for System for Award Management

    Unless you are exempted from this requirement under 2 CFR 
25.110, you as the recipient must maintain current information in 
the SAM. This includes information on your immediate and highest 
level owner and subsidiaries, as well as on all of your predecessors 
that have been awarded a Federal contract or grant within the last 
three years, if applicable as defined in the FAR (9 CFR part 104-6), 
until you submit the final financial report required under this 
Federal award or receive the final payment, whichever is later. This 
requires that you review and update the information at least 
annually after the initial registration, and more frequently if 
required by changes in your information or another Federal award 
term.

B. Requirement for Unique Entity Identifier

    If you are authorized to make subawards under this Federal 
award, you:
    1. Must notify potential subrecipients that no non-Federal 
entity (see definition in paragraph C of this award term) or Federal 
agency may receive a subaward from you until the non-Federal entity 
or Federal agency has provided its Unique Entity Identifier to you.
    2. May not make a subaward to a non-Federal entity or Federal 
agency until the non-Federal entity or Federal agency has provided 
its Unique Entity Identifier to you.

C. Definitions

    For purposes of this term:
    1. System for Award Management (SAM) means the Federal 
repository into which a

[[Page 3777]]

non-Federal entity or Federal agency must provide information 
required for the conduct of business as a recipient. Additional 
information about registration procedures may be found at the SAM 
internet site (currently at https://www.sam.gov).
    2. Unique Entity Identifier means the identifier required for 
SAM registration to uniquely identify business entities.
    3. Non-Federal entity has meaning given in 2 CFR 200.1 and also 
includes all of the following, for purposes of this part:
    a. A foreign organization;
    b. A foreign public entity; and
    c. A domestic for-profit organization.
    4. Subaward has the meaning given in 2 CFR 200.1.
    5. Subrecipient has the meaning given in 2 CFR 200.1.

PART 170--REPORTING SUBAWARD AND EXECUTIVE COMPENSATION INFORMATION

0
29. The authority citation for part 170 continues to read as follows:

    Authority: Pub. L. 109-282; 31 U.S.C. 6102.

0
30. Revise Sec.  170.100 to read as follows:


Sec.  170.100   Purposes of this part.

    This part provides guidance to Federal awarding agencies on 
reporting Federal awards to establish requirements for recipients' 
reporting of information on subawards and executive total compensation, 
as required by the Federal Funding Accountability and Transparency Act 
of 2006 (Pub. L. 109-282), as amended by section 6202 of Public Law 
110-252, hereafter referred to as ``the Transparency Act''.
0
31. Revise Sec.  170.105 to read as follows:


Sec.  170.105   Types of awards to which this part applies.

    This part applies to a Federal awarding agency's grants, 
cooperative agreements, loans, and other forms of Federal financial 
assistance subject to the Transparency Act, as defined in Sec.  
170.320.
0
32. Revise Sec.  170.110 by revising paragraphs (a) and (b)(1), 
paragraph (b)(2) introductory text, and paragraph (b)(3) to read as 
follows:


Sec.  170.110   Types of entities to which this part applies.

    (a) General. Through a Federal awarding agency's implementation of 
the guidance in this part, this part applies to all non-Federal 
entities and Federal agencies, other than those exempted by law or 
excepted in paragraph (b) of this section, that--
    (1) Apply for or receive Federal awards; or
    (2) Receive subawards under Federal awards.
    (b) * * * (1) None of the requirements in this part apply to an 
individual who applies for or receives a Federal award as a natural 
person (i.e., unrelated to any business or non-profit organization he 
or she may own or operate in his or her name).
    (2) None of the requirements regarding reporting names and total 
compensation of a non-Federal entity's five most highly compensated 
executives apply unless in the non-Federal entity's preceding fiscal 
year, it received--
* * * * *
    (3) The public does not have access to information about the 
compensation of senior executives, unless otherwise publically 
available, through periodic reports filed under section 13(a) or 15(d) 
of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a), 78o(d)) or 
section 6104 of the Internal Revenue Code of 1986.
0
33. Revise Sec.  170.200 to read as follows:


Sec.  170.200   Federal awarding agency reporting requirements.

    (a) Federal awarding agencies are required to publically report 
Federal awards that equal or exceed the micro-purchase threshold and 
publish the required information on a public-facing, OMB-designated, 
governmentwide website and follow other relevant OMB guidance to 
support Transparency Act implementation.
    (b) Federal awarding agencies that obtain post-award data on 
subaward obligations outside of this policy should take the necessary 
steps to ensure that their recipients are not required, due to the 
combination of agency-specific and Transparency Act reporting 
requirements, to submit the same or similar data multiple times during 
a given reporting period.
0
34. Add Sec.  170.210 to subpart B to read as follows:


Sec.  170.210   Requirements for notices of funding opportunities, 
regulations, and application instructions.

    (a) Each Federal awarding agency that makes awards of Federal 
financial assistance subject to the Transparency Act must include the 
requirements described in paragraph (b) of this section in each notice 
of funding opportunity, regulation, or other issuance containing 
instructions for applicants and is issued on or after the effective 
date of this part.
    (b) The notice of funding opportunity, regulation, or other 
issuance must require each non-Federal entity that applies and for 
Federal financial assistance and that does not have an exception under 
Sec.  170.110(b) to ensure they have the necessary processes and 
systems in place to comply with the reporting requirements should they 
receive funding.
0
35. Revise Sec.  170.220 to read as follows:


Sec.  170.220   Award term.

    (a) To accomplish the purposes described in Sec.  170.100, a 
Federal awarding agency must include the award term in Appendix A to 
this part in each Federal award to a non-Federal entity and Federal 
agency under which the total funding is anticipated to equal or exceed 
$30,000 in Federal funding.
    (b) A Federal awarding agency, consistent with paragraph (a) of 
this section, is not required to include the award term in Appendix A 
to this part if it determines there is no possibility that the total 
amount of Federal funding under the Federal award will equal or exceed 
$30,000. However, the Federal awarding agency must subsequently modify 
the award to add the award term if changes in circumstances increase 
the total Federal funding under the award is anticipated to equal or 
exceed $30,000 during the period of performance.
0
36. Revise Sec.  170.300 to read as follows:


Sec.  170.300   Federal awarding agency.

    Federal awarding agency has the meaning given in 2 CFR 200.1.
0
37. Revise Sec.  170.305 to read as follows:


Sec.  170.305   Federal award.

    Federal award, for the purposes of this part, means an award of 
Federal financial assistance that a non-Federal entity or Federal 
agency receives directly from a Federal awarding agency.
0
38. Add Sec.  170.307 to subpart C to read as follows:


Sec.  170.307  Foreign organization.

    Foreign organization has the meaning given in 2 CFR 200.1.
0
39. Add Sec.  170.308 to subpart C to read as follows:


Sec.  170.308   Federal public entity.

    Foreign public entity has the meaning given in 2 CFR 200.1.
0
40. Revise Sec.  170.310 to read as follows:


Sec.  170.310   Non-Federal entity.

    Non-Federal entity has the meaning given in 2 CFR 200.1 and also 
includes all of the following, for purposes of this part:
    (a) A foreign organization;

[[Page 3778]]

    (b) A foreign public entity; and
    (c) A domestic or foreign for-profit organization.
0
41. Revise Sec.  170.320 to read as follows:


Sec.  170.320   Federal financial assistance subject to the 
Transparency Act.

    Federal financial assistance subject to the Transparency Act has 
the meaning given in 2 CFR 200.1. Federal financial assistance, for 
purposes of this part, does not include--
    (a) Technical assistance, which provides services in lieu of money;
    (b) A transfer of title to Federally owned property provided in 
lieu of money, even if the award is called a grant;
    (c) Any classified award; or
    (d) Any award funded in whole or in part with Recovery funds, as 
defined in section 1512 of the American Recovery and Reinvestment Act 
of 2009 (Pub. L. 111-5).
0
42. Revise Sec.  170.325 to read as follows:


Sec.  170.325   Subaward.

    Subaward has the meaning given in 2 CFR 200.1.
0
 43. Amend Appendix A to part 179 by revising paragraphs (a)(1), 
paragraph (b) introductory text, paragraphs (b)(1)(i), paragraph 
(b)(1)(ii) introductory text, (b)(1)(iii), paragraph (c)(1) 
introductory text, paragraph (c)(1)(ii), paragraph (e)(1) introductory 
text, paragraph (e)(1)(iii), (e)(3)(ii), and (e)(4) and removing 
(e)(1)(v) to read as follows:

Appendix A to Part 170--Award Term

    (I) * * *
    (a) * * *
    (1) Applicability. Unless you are exempt as provided in 
paragraph d. of this award term, you must report each action that 
equals or exceeds $30,000 in Federal funds that does not include 
Recovery funds (as defined in section 1512(a)(2) of the American 
Recovery and Reinvestment Act of 2009, Pub. L. 111-5) for a subaward 
to a non-Federal entity or Federal agency (see definitions in 
paragraph e. of this award term).
* * * * *
    (b) Reporting total compensation of recipient executives for 
non-Federal entities.
    (1) * * *
    (i) The total Federal funding authorized to date under this 
Federal award that equals or exceeds $30,000 as defined in 2 CFR 
170.322;
    (ii) In the preceding fiscal year, you received--
* * * * *
    (iii) The public does not have access to information about the 
compensation of the executives through periodic reports filed under 
section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 
U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code 
of 1986. (To determine if the public has access to the compensation 
information, see the U.S. Security and Exchange Commission total 
compensation filings at http://www.sec.gov/answers/execcomp.htm.)
* * * * *
    (c) * * *
    (1) Applicability and what to report. Unless you are exempt as 
provided in paragraph d. of this award term, for each first-tier 
non-Federal entity subrecipient under this award, you shall report 
the names and total compensation of each of the subrecipient's five 
most highly compensated executives for the subrecipient's preceding 
completed fiscal year, if--
* * * * *
    (ii) The public does not have access to information about the 
compensation of the executives through periodic reports filed under 
section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 
U.S.C. 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code 
of 1986. (To determine if the public has access to the compensation 
information, see the U.S. Security and Exchange Commission total 
compensation filings at http://www.sec.gov/answers/execcomp.htm.)
* * * * *
    (e) * * *
    (1) Non-Federal entity means all of the following as defined in 
2 CFR part 25:
* * * * *
    (iii) A domestic or foreign nonprofit organization; and
    (iv) A domestic or foreign for-profit organization
* * * * *
    (3) * * *
    (ii) 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).
* * * * *
    (4) Subrecipient means a non-Federal entity or Federal agency 
that:
* * * * *
0
44. Add part 183 to read as follows:

PART 183--NEVER CONTRACT WITH THE ENEMY

Sec.
183.5 Purpose of this part.
183.10 Applicability.
183.15 Responsibilities of Federal awarding agencies.
183.20 Reporting responsibilities of Federal Awarding Agencies.
183.25 Responsibilities of non-Federal entities.
183.30 Access to records.
183.35 Definitions.
Appendix to Part 183--Clauses for Award Agreements

    Authority: Pub. L. 113-291.


Sec.  183.5  Purpose of this part.

    This part provides Office of Management and Budget (OMB) guidance 
for Federal awarding agencies on applying Never Contract with the Enemy 
to grants and cooperative agreements, as required by subtitle E, title 
VIII of the National Defense Authorization Act (NDAA) for Fiscal Year 
(FY) 2015 (Pub. L. 113-291).


Sec.  183.10  Applicability.

    (a) Part 183 applies only to grants and cooperative agreements that 
are expected to exceed $50,000 and that are performed outside the 
United States, including U.S. territories, and that are in support of a 
contingency operation in which members of the Armed Forces are actively 
engaged in hostilities. It does not apply to the authorized 
intelligence or law enforcement activities of the Federal Government.
    (b) All elements of part 183 are applicable until December 31, 
2019, except for Access to Records which has no sunset date.


Sec.  183.15  Responsibilities of Federal awarding agencies.

    (a) Prior to making an award for a covered grant or cooperative 
agreement that meets the thresholds in Sec.  183.10 for Never Contract 
with the Enemy, the Federal awarding agency must check the current list 
of prohibited or restricted persons or entities in the System Award 
Management (SAM) Exclusions. If a person or entity is on the current 
list of prohibited or restricted persons or entities in SAM Exclusions 
pursuant to Never Contract with the Enemy, the agency must not make an 
award.
    (b) The Federal awarding agency must include a clause in all 
covered grant and cooperative agreement awards in accordance with Never 
Contract with the Enemy (see Appendix A of this part).
    (c) A Federal awarding agency may become aware of a person or 
entity that:
    (1) Provides funds, including goods and services, received under a 
covered grant or cooperative agreement of an executive agency directly 
or indirectly to persons or entities that are actively opposing United 
States or coalition forces involved in a contingency operation in which 
members of the Armed Forces are actively engaged in hostilities; or
    (2) Fails to exercise due diligence to ensure that none of the 
funds, including goods and services, received under a covered grant or 
cooperative agreement of an executive agency are provided directly or 
indirectly to persons or entities that are actively opposing United 
States or coalition forces involved in a contingency operation in which 
members of the Armed Forces are actively engaged in hostilities.
    (d) When a Federal awarding agency becomes aware of such a person 
or

[[Page 3779]]

entity, it may do any of the following actions:
    (1) Restrict the future award of all Federal grants and cooperative 
agreements to the person or entity based upon concerns that Federal 
awards to the entity would provide grant funds directly or indirectly 
to a covered person or entity.
    (2) Terminate any grant or cooperative agreement upon becoming 
aware that the non-Federal recipient has failed to exercise due 
diligence to ensure that none of the award funds are provided directly 
or indirectly to a covered person or entity.
    (e) The Federal awarding agency must notify non-Federal entities in 
writing regarding its decision to restrict all future awards and/or to 
terminate a grant. The agency must also notify the non-Federal entity 
in writing about the non-Federal entity's right to request an 
administrative review (using the agency's procedures) of the 
restriction or termination of the grant or cooperative agreement within 
30 days of receiving notification.


Sec.  183.20  Reporting responsibilities of Federal awarding agencies.

    (a) If a Federal awarding agency restricts all future awards to a 
covered person or entity in accordance with Never Contract with the 
Enemy, it must enter information on the ineligible person or entity 
into SAM Exclusions as a prohibited or restricted source pursuant to 
Subtitle E, Title VIII of the NDAA for FY 2015 (Pub. L. 113-291).
    (b) When a Federal awarding agency terminates a grant or 
cooperative agreement due to Never Contract with the Enemy, it must 
report the termination as a Termination for Material Failure to Comply 
in the OMB-designated integrity and performance system accessible 
through SAM (currently the Federal Awardee Performance and Integrity 
Information System (FAPIIS)).
    (c) The Federal awarding agency must report in writing any action 
to restrict all future awards or to terminate the award. The Federal 
awarding agency must also report in writing any decision not to 
restrict all future awards or terminate an award along with the 
agency's reasoning for not taking one of these actions after the agency 
became aware that a person or entity is a prohibited or restricted 
source pursuant to Subtitle E Title VIII of the NDAA for FY 2015 (Pub. 
L. 113-291). The Federal awarding agency shall submit these reports to 
the head of the executive agency concerned (or the designee of such 
head) and the commander of the covered combatant command concerned (or 
specific deputies). See section 843(4) of the NDAA for FY 2015 for 
definition of covered combatant command: https://www.armed-services.senate.gov/imo/media/doc/CPRT-113-HPRT-RU00-S1847.pdf. See 
section 841(h)(3) of the NDAA for FY 2015: https://www.armed-services.senate.gov/imo/media/doc/CPRT-113-HPRT-RU00-S1847.pdf.
    (d) For each instance in which an executive agency exercised the 
authority to restrict all future awards or to terminate, or a grant or 
cooperative agreement, the agency must report in writing the following 
to the head of the executive agency concerned (or the designee of such 
head) and the commander of the covered combatant command concerned (or 
specific deputies). See section 841(h)(3) of the NDAA for FY 2015: 
https://www.armed-services.senate.gov/imo/media/doc/CPRT-113-HPRT-RU00-S1847.pdf:
    (1) The executive agency taking such action.
    (2) An explanation of the basis for the action taken.
    (3) The value of the grant or cooperative agreement terminated.
    (4) The value of all grants and cooperative agreements of the 
executive agency with the person or entity concerned at the time the 
grant or cooperative agreement was terminated.
    (e) For each instance in which the Federal awarding agency did not 
exercise the authority to terminate or restrict a grant or cooperative 
agreement after becoming aware that a person or entity is a prohibited 
or restricted source pursuant to Subtitle E Title VIII of the NDAA for 
FY 2015 (Pub. L. 113-291), the Federal awarding agency must report in 
writing to the head of the executive agency concerned (or the designee 
of such head) and the commander of the covered combatant command 
concerned (or specific deputies) the following. (See section 841(h)(3) 
of the NDAA for FY 2015: https://www.armed-services.senate.gov/imo/media/doc/CPRT-113-HPRT-RU00-S1847.pdf):
    (1) The executive agency concerned.
    (2) An explanation of the basis for not taking the action.
    (f) For each instance in which an executive agency exercised the 
additional authority to examine grantee and subaward records, the 
agency must report in writing to the head of the executive agency 
concerned (or the designee of such head) and the commander of the 
covered combatant command concerned (or specific deputies) the 
following (See section 841(h)(3) of the NDAA for FY 2015: https://www.armed-services.senate.gov/imo/media/doc/CPRT-113-HPRT-RU00-S1847.pdf):
    (1) An explanation of the basis for the action taken; and
    (2) A summary of the results of any examination of records.


Sec.  183.25  Responsibilities of non-Federal entities.

    Non-Federal entities must include two clauses in all covered 
subawards in accordance with Never Contract with the Enemy (see 
appendix to this Part).


Sec.  183.30  Access to records.

    In addition to any other existing examination-of-records authority, 
the Federal Government is authorized to examine any records of the 
recipient and its subawards, to the extent necessary, to ensure that 
funds, including supplies and services, received under a covered grant 
or cooperative agreement (see Sec.  183.30) are not provided directly 
or indirectly to a covered person or entity in accordance with Never 
Contract with the Enemy. The Federal awarding agency may only exercise 
this authority upon a written determination by the Federal awarding 
agency that relies on a finding by the commander of a covered combatant 
command that there is reason to believe that funds, including supplies 
and services, received under the grant or cooperative agreement may 
have been provided directly or indirectly to a covered person or 
entity.


Sec.  183.35  Definitions.

    Terms used in this part are defined as follows:
    Contingency operation, as defined in 10 U.S.C. 101a, means a 
military operation that--
    (1) Is designated by the Secretary of Defense as an operation in 
which members of the armed forces are or may become involved in 
military actions, operations, or hostilities against an enemy of the 
United States or against an opposing military force; or
    (2) Results in the call or order to, or retention on, active duty 
of members of the uniformed services under 10 U.S.C. 688, 12301a, 
12302, 12304, 12304a, 12305, 12406 of 10 U.S.C. chapter 15, 14 U.S.C. 
712 or any other provision of law during a war or during a national 
emergency declared by the President or Congress.
    Covered combatant command means the following:
    (1) The United States Africa Command
    (2) The United States Central Command
    (3) The United States European Command

[[Page 3780]]

    (4) The United States Pacific Command
    (5) The United States Southern Command
    (6) The United States Transportation Command.
    Covered grant, cooperative agreement means a grant or cooperative 
agreement, as defined in 2 CFR 200.1 with an estimated value in excess 
of $50,000 that is performed outside the United States, including its 
possessions and territories, in support of a contingency operation in 
which members of the Armed Forces are actively engaged in hostilities. 
Except for U.S. Department of Defense grants and cooperative agreements 
that were awarded on or before December 19, 2017 that will be performed 
in the United States Central Command, where the estimated value is in 
excess of $100,000.
    Covered person or entity means a person or entity that is actively 
opposing United States or coalition forces involved in a contingency 
operation in which members of the Armed Forces are actively engaged in 
hostilities.

Appendix to Part 183--Clauses for Award Agreements

    Federal awarding agencies must include the following two clauses 
in all awards for covered grants and cooperative agreements in 
accordance with Never Contract with the Enemy:

Clause 1:

Prohibition on Providing Funds to the Enemy

    (a) The non-Federal Entity must--
    (1) Exercise due diligence to ensure that none of the funds, 
including supplies and services, received under this grant or 
cooperative agreement are provided directly or indirectly (including 
through subawards or contracts) to a person or entity who is 
actively opposing the United States or Coalition forces involved in 
a contingency operation in which members of the Armed Forces are 
actively engaged in hostilities;
    (2) Check the list of prohibited/restricted sources in the 
System for Award Management (SAM) at www.sam.gov--
    (i) Prior to issuing a subaward or contract; and
    (ii) At least on a monthly basis; and
    (3) Terminate in whole or in part any subaward or contract with 
a person or entity listed in SAM as a prohibited or restricted 
source pursuant to subtitle E of Title VIII of the NDAA for FY 2015, 
unless the Federal awarding agency provides written approval to 
continue the subaward or contract.
    (4) Include the substance of this clause, including this 
paragraph (a), in subawards under this grant or cooperative 
agreement that have an estimated value over $50,000 and will be 
performed outside the United States, including its outlying areas.
    (b) The Federal awarding agency has the authority to terminate 
this grant or cooperative agreement, in whole or in part, if the 
Federal awarding agency becomes aware that the grantee failed to 
exercise due diligence as required by paragraph (a) of this clause 
or if the Federal awarding agency becomes aware that any funds 
received under this grant or cooperative agreement have been 
provided directly or indirectly to a person or entity who is 
actively opposing or Coalition forces involved in a contingency 
operation in which members of the Armed Forces are actively engaged 
in hostilities.

(End of clause)

Clause 2:

Additional Access to Non-Federal Entity Records

    (a) In addition to any other existing examination-of-records 
authority, the Federal Government is authorized to examine any 
records of the non-Federal entity and its subawards or contracts to 
the extent necessary to ensure that funds, including supplies and 
services, available under this grant or cooperative agreement are 
not provided, directly or indirectly, to a person or entity that is 
actively opposing United States or coalition forces involved in a 
contingency operation in which members of the Armed Forces are 
actively engaged in hostilities, except for awards awarded by the 
Department of Defense on or before Dec 19, 2017 that will be 
performed in the United States Central Command (USCENTCOM) theater 
of operations.
    (b) The substance of this clause, including this paragraph (b), 
is required to be included in subawards or contracts under this 
grant or cooperative agreement that have an estimated value over 
$50,000 and will be performed outside the United States, including 
its outlying areas.

PART 200--UNIFORM ADMINISTRATIVE REQUIREMENTS, COST PRINCIPLES, AND 
AUDIT REQUIREMENTS FOR FEDERAL AWARDS

0
45. The authority citation for part 200 continues to read as follows:

    Authority: 31 U.S.C. 503.

0
46. Amend Sec.  200.0 by adding in alphabetical order the acronym NFE 
and revising the existing acronym SAM.


Sec.  200.0  Acronyms.

* * * * *
NFE Non-Federal Entity
* * * * *
SAM System for Award Management
* * * * *
0
47. Revise Sec.  200.1 to read as follows:


Sec.  200.1  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 programs or activities. These 
definitions could be supplemented by additional instructional 
information provided 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 
pass-through 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.
    Assistance listings refers to the publically available listing of 
Federal assistance programs managed and administered by the General 
Services Administration. Formally known as the Catalog of Federal 
Domestic Assistance (CFDA).
    Assistance listing number means a unique number assigned to 
identify a Federal assistance listing. Formerly known as the CFDA 
Number.
    Assistance listing program title means the title that corresponds 
to the Federal Assistance number. Formerly known as the CFDA program 
title.
    Audit finding means deficiencies which the auditor is required by 
Sec.  200.516 Audit findings, paragraph (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

[[Page 3781]]

auditor does not include internal auditors of nonprofit organizations.
    Budget means the financial plan for the Federal award that the 
Federal awarding agency or pass-through entity approves during the 
Federal award process or in subsequent amendments to 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 pass-through 
entity.
    Budget period means the time interval during which recipients are 
authorized to expend the current funds awarded and must meet the 
matching or cost-sharing requirement, if any.
    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.
    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, exchange, or through a lease accounted for 
as financed purchase under GASB standards or a finance lease under FSAB 
standards; 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). For purpose of this Part, capital 
assets do not include intangible right-to-use assets (per GASB) and 
right to use operating lease assets (per FASB). For example, assets 
capitalized that recognize a leasse's right to control the use of 
property and/or equipment for a period of time under a lease contract. 
See also Sec.  200.465.
    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.
    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 non-Federal entity or group of non-Federal entities to which 
specific provisions or exceptions may apply.
    Closeout means the process by which the Federal awarding agency or 
pass-through entity determines that all applicable administrative 
actions and all required work of the Federal award have been completed 
and takes actions as described in Sec.  200.343.
    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 Sec.  200.331(a). A cluster of programs must 
be considered as one program for determining major programs, as 
described in Sec.  200.518, and, with the exception of R&D as described 
in Sec.  200.501(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 Sec.  200.513(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 can 
be found on the Federal Audit Clearinghouse (FAC) website.
    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 200, paragraph C.11.
    (2) For nonprofit organizations: Appendix IV to Part 200, paragraph 
C.2.a.
    (3) For state and local governments: Appendix V to Part 200, 
paragraph F.1.
    (4) For Indian tribes: Appendix VII to Part 200, paragraph D.1.
    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.
    Compliance supplement means an annually updated source of 
information for auditors to understand the Federal program's 
objectives, procedures, and compliance requirements relevant to the 
audit, as well as audit objectives and suggested audit procedures for 
determining compliance with the relevant Federal program Assistance 
listing title and number.
    Contract means, for the purpose of Federal financial assistance, 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 also Subaward).
    Contractor means an entity that receives a contract as defined in 
this section.
    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 pass-through 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:

[[Page 3782]]

    (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 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). 
See also Sec.  200.306.
    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 pass-through entity.
    Discretionary award means an award in which the awarding agency, in 
keeping with specific statutory authority which enable the agency to 
exercise judgement (``discretion'') in selection the grant award 
recipient through a competitive process or based on merit of existing 
grant recipients. Some discretionary grants to organizations may be 
awarded on a non-competitive basis, often based on congressional 
direction.
    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.
    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
    (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; and
    (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 information required by subpart F 
of this part.
    Federal awarding agency means the Federal agency that provides a 
Federal award directly to a non-Federal entity.
    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 Sec.  200.101; 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 Sec.  200.101.
    (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 the definition for 
Federal financial assistance, or the cost-reimbursement 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.
    (1) Federal financial assistance means assistance that non-Federal 
entities receive or administer in the form of:
    (i) Grants;
    (ii) Cooperative agreements;
    (iii) Non-cash contributions or donations of property (including 
donated surplus property);

[[Page 3783]]

    (iv) Direct appropriations;
    (v) Food commodities; and
    (vi) Other financial assistance (except assistance listed in 
paragraph (b) of this section).
    (2) For Sec.  200.203 and 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.
    (3) Federal financial assistance does not include amounts received 
as reimbursement for services rendered to individuals as described in 
Sec.  200.502(h) and (i).
    Federal interest means, for purposes of Sec.  200.329 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 Assistance 
listing number.
    (2) When no Assistance listing number is assigned, all Federal 
awards to non-Federal 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 the federal award costs that are 
paid using 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 the definitions for Cost objective and 
Intermediate cost objective in this section.
    Financial obligations, when used in connection with a non-Federal 
entity or recipient's utilization of funds under a Federal award, means 
orders placed for property and services, contracts and subawards made, 
and similar transactions that require payment.
    Fixed amount awards means a type of grant or cooperative agreement 
under which the Federal awarding agency or pass-through 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 record-keeping requirements for both the non-
Federal entity and Federal awarding agency or pass-through entity. 
Accountability is based primarily on performance and results. See 
Sec. Sec.  200.201, 200.332(b) and 200.102(d).
    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.
    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 degree-granting 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.
    General purpose equipment means equipment which is not limited to 
research, medical, scientific or other technical activities. Examples 
include office equipment and furnishings, modular offices, telephone 
networks, information technology equipment and systems, air 
conditioning equipment, reproduction and printing equipment, and motor 
vehicles. 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 pass-through 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 pass-through 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.
    Highest level owner means the entity that owns or controls an 
immediate owner of the offeror, or that owns or controls one or more 
entities that control an immediate owner of the offeror. No entity owns 
or exercises control of the highest-level owner as defined in the FAR 
(48 CFR 52 204-17).
    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. See definition of improper payment in OMB 
Circular A-123 Appendix C, Part I A (2) ``What is an improper 
payment?'' Questioned costs are not an improper payment until reviewed 
and confirmed to be improper as defined in OMB Circular A-123 Appendix 
C.

[[Page 3784]]

    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.
    Institutions of Higher Education (IHEs) is defined at 20 U.S.C. 
1001.
    Indirect (facilities & administrative (F&A)) costs means those 
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 
non-Federal entity to substantiate its request for the establishment of 
an indirect cost rate as described in Appendix III to Part 200 through 
Appendix VII to part 200, and Appendix IX to part 200.
    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.
    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 objectives. 
See also Cost objective and Final cost objective.
    Internal controls for non-Federal entities means processes designed 
and implemented by non-Federal entities 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.
    (4) Internal controls Federal awarding agencies are required to 
follow are located in OMB Circular A-123.
    Internal control over compliance requirements for Federal awards. 
Federal awarding agencies are required to follow internal control 
compliance requirements located in OMB Circular A-123.
    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 in Sec.  200.1 Definitions.
    (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.
    (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 Sec.  200.518 or a program 
identified as a major program by a Federal awarding agency or pass-
through entity in accordance with Sec.  200.503(e).
    Management decision means the Federal awarding agency's or pass-
through entity's written determination, provided to the auditee, of the 
adequacy of the auditee's proposed corrective actions to address the 
findings, based on its evaluation of the audit findings and proposed 
corrective actions.
    Micro-purchase means a purchase of supplies or services, the 
aggregate amount of which does not exceed the micro-purchase threshold. 
Micro-purchase comprise a subset of a non-Federal entity's small 
purchases as defined in Sec.  200.319. Micro-purchase threshold means 
the dollar amount at or below which a non-Federal entity may purchase 
property or services using micro-purchase procedures (see Sec.  
200.319). Generally, the micro-purchase threshold for procurement 
activities administered under Federal awards is not to exceed the 
amount set by the Federal Acquisition Regulation (FAR) at 48 CFR 2.101 
(unless a higher threshold is requested by the non-Federal entity and 
approved by the cognizant agency).
    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-discretionary award means an award made by the awarding agency 
as defined by statute to specific recipients, assuming recipient 
application meets

[[Page 3785]]

eligibility and compliance requirements, such that in keeping with 
specific statutory authority the agency has no ability to exercise 
judgment (``discretion''), due to ``mandatory'' award requirements, in 
selecting the applicant/recipient organization through a competitive 
process. Non-discretionary awards can be both formula and non-formula 
based.
    Non-Federal entity (NFE) means a state, local government, Indian 
tribe, Institutions 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.
    Notice of funding opportunity means a formal announcement of the 
availability of Federal funding through a financial assistance program 
from a Federal awarding agency. The Notice of Funding Opportunity 
announcement provides information on the award, who is eligible to 
apply, the evaluation criteria for selection of an awardee, required 
components of an application, and how to submit the application.
    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 (direct funding) to 
a non-Federal entity not assigned a cognizant agency for audit. When 
the direct funding represents less than 25 percent of the total funding 
received from the non-Federal entity (as prime and subawards), then the 
Federal agency with the predominant amount of funding is the designated 
oversight agency for award. 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 Sec.  200.513(b).
    Pass-through entity (PTE) means a non-Federal entity that provides 
a subaward to a subrecipient to carry out part of a Federal program.
    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.
    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 anticipated time interval between 
the start and end date of an initial Federal award or Renewal. See also 
Budget period and Renewal.
    Personal property means property other than real property. It may 
be tangible, having physical existence, or intangible.
    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 websites, 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-by-case 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.
    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 Sec.  200.307(f). (See Period of performance in Sec.  
200.1) 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 Sec.  200.407 Prior written approval 
(prior approval). See also 35 U.S.C. 200-212 ``Disposition of Rights in 
Educational Awards'' applies to inventions made under Federal awards.
    Property means real property or personal property. See also Real 
property and personal property.
    Protected Personally Identifiable Information (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).
    Project cost means total allowable costs incurred under a Federal 
award and all required cost sharing and voluntary committed cost 
sharing, including third-party contributions.
    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.
    (4) Questioned costs are not an improper payment until reviewed and 
confirmed to be improper as defined in OMB Circular A-123 Appendix C. 
(see also Improper payment)
    Real property means land, including land improvements, structures 
and appurtenances thereto, but excludes moveable machinery and 
equipment.
    Recipient means a non-Federal entity that receives a Federal award 
directly from a Federal awarding agency. The term recipient does not 
include subrecipients or an individual that is a beneficiary of the 
award.
    Renewal means a subsequent Federal award to a current Federal 
award; each renewal must have a distinct period of performance.

[[Page 3786]]

    Research and Development (R&D) means all research activities, both 
basic and applied, and all development activities that are performed by 
non-Federal entities. 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. ``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.
    Simplified acquisition threshold means the dollar amount below 
which a non-Federal entity may purchase property or services using 
small purchase methods (see Sec.  200.319). Non-Federal entities adopt 
small purchase procedures in order to expedite the purchase of items at 
or below the simplified acquisition threshold. The simplified 
acquisition threshold for procurement activities administered under 
Federal awards is set by the Federal Acquisition Regulation at 48 CFR 
subpart 2.1. Thresholds differ from the FAR. The non-Federal entity is 
responsible for determining an appropriate simplified acquisition 
threshold based on internal controls, an evaluation of risk and its 
documented procurement procedures. States, IHEs and local governments 
should determine if local government laws on purchasing apply.
    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, 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 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 pass-through entity 
considers a contract.
    Subrecipient means an entity, usually but not limited to non-
Federal entities, that receives a subaward from a pass-through entity 
to carry out part of a Federal award; but does not include an 
individual that is a beneficiary of such award. A subrecipient may also 
be a recipient of other Federal awards directly from a Federal awarding 
agency.
    Subsidiary means an entity in which more than 50 percent of the 
non-Federal entity is owned directly by a parent corporation or through 
another subsidiary of a parent corporation as defined in the FAR (48 
CFR 52.209-10).
    Supplies means all tangible personal property other than those 
described in the definition of 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.
    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. A 
lack of available funds is not a termination.
    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 non-Federal entity under a Federal award.
    Unliquidated financial obligations means, for financial reports 
prepared on a cash basis, financial obligations incurred by the non-
Federal entity that have not been paid (liquidated). For reports 
prepared on an accrual expenditure basis, these are financial 
obligations incurred by the non-Federal entity for which an expenditure 
has not been recorded.
    Unobligated balance means the amount of funds 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 financial 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 on the part of 
the non-Federal entity and that becomes a binding requirement of 
Federal award. See also Sec.  200.306.


Sec. Sec.  200.2 through 200.99   [Removed]

0
48. Remove Sec. Sec.  200.2 through 200.99
0
49. Amend Sec.  200.100 by revising paragraph (a)(1) to read as follow:


Sec.  200.100   Purpose.

    (a)(1) This part establishes uniform administrative requirements, 
cost principles, and audit requirements for Federal awards to non-
Federal entities, as described in Sec.  200.101. Federal awarding 
agencies must not impose additional or inconsistent requirements, 
except as provided in Sec. Sec.  200.102 and 200.211, or unless 
specifically required by Federal statute, regulation, or Executive 
Order.
* * * * *
0
50. Revise Sec.  200.101 to read as follows:


Sec.  200.101   Applicability.

    (a) General applicability to Federal agencies. (1) The requirements 
established in this part apply to Federal agencies that make Federal 
awards to non-Federal entities. These requirements are applicable to 
all costs related to Federal awards.
    (2) Federal awarding agencies may apply subparts A through E of 
this part to Federal agencies, 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 responsibilities of the United 
States or the statutes or regulations of a foreign government.
    (b) Applicability to different types of Federal awards. (1) 
Throughout this part when the word ``must'' is used it indicates a 
requirement. Whereas, use of the word ``should'' or ``may'' indicates a 
best practice or recommended approach rather than a requirement and 
permits discretion.

[[Page 3787]]

    (2) The following table describes what portions of this part apply 
to which types of Federal awards. The terms and conditions of Federal 
awards (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 non-Federal entity is a recipient or subrecipient of a 
Federal award. Pass-through entities must comply with the requirements 
described in Subpart D of this part, Sec. Sec.  200.330 through 
200.332, 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.

                        Table 1 to Paragraph (b)
------------------------------------------------------------------------
                                Are applicable to
                               the following types
                                of Federal Awards    Are NOT applicable
                                 and fixed-price      to the following
  The following portions of       contracts and       types of Federal
          this part           subcontracts (except    Awards and fixed-
                                   as noted in       price contracts and
                               paragraphs (d) and       subcontracts:
                                   (e) below):
------------------------------------------------------------------------
Subpart A--Acronyms and       --All...............
 Definitions.
Subpart B--General            --All...............
 Provisions, except for Sec.
  Sec.   200.111 English
 Language, 200.112 Conflict
 of Interest, 200.113
 Mandatory Disclosures.
Sec.  Sec.   200.111 English  --Grant Agreements    --Agreements for
 Language, 200.112 Conflict    and cooperative       loans, loan
 of Interest, 200.113          agreements.           guarantees,
 Mandatory Disclosures.                              interest subsidies
                                                     and insurance.
                                                    --Procurement
                                                     contracts awarded
                                                     by Federal Agencies
                                                     under the Federal
                                                     Acquisition
                                                     Regulation and
                                                     subcontracts under
                                                     those contracts.
Subparts C-D, except for      --Grant Agreements    --Agreements for
 Sec.  Sec.   200.203          and cooperative       loans, loan
 Requirement to provide        agreements.           guarantees,
 public notice of Federal                            interest subsidies
 financial assistance                                and insurance.
 programs, 200.303 Internal                         --Procurement
 controls, 200.330-332                               contracts awarded
 Subrecipient Monitoring and                         by Federal Agencies
 Management.                                         under the Federal
                                                     Acquisition
                                                     Regulation and
                                                     subcontracts under
                                                     those contracts.
Sec.   200.203 Requirement    --Grant Agreements    --Procurement
 to provide public notice of   and cooperative       contracts awarded
 Federal financial             agreements.           by Federal Agencies
 assistance programs.         --Agreements for       under the Federal
                               loans, loan           Acquisition
                               guarantees,           Regulation and
                               interest subsidies    subcontracts under
                               and insurance..       those contracts.
Sec.  Sec.   200.303          --All...............
 Internal controls, 200.330-
 332 Subrecipient Monitoring
 and Management.
Subpart E--Cost Principles..  --Grant Agreements    --Grant agreements
                               and cooperative       and cooperative
                               agreements, except    agreements
                               those providing       providing foods
                               food commodities.     commodities.
                              --All procurement     --Fixed amount
                               contracts under the   awards.
                               Federal Acquisition  --Agreements for
                               Regulations except    loans, loans
                               those that are not    guarantees,
                               negotiated.           interest subsidies
                                                     and insurance.
                                                    --Federal awards to
                                                     hospitals (see
                                                     Appendix IX
                                                     Hospital Cost
                                                     Principles).
Subpart F--Audit              --Grant Agreements    --Fixed-price
 Requirements.                 and cooperative       contracts and
                               agreements.           subcontracts
                              --Contracts and        awarded under the
                               subcontracts,         Federal Acquisition
                               except for fixed      Regulation.
                               price contacts and
                               subcontracts,
                               awarded under the
                               Federal Acquisition
                               Regulation..
                              --Agreements for
                               loans, loans
                               guarantees,
                               interest subsidies
                               and insurance and
                               other forms of
                               Federal Financial
                               Assistance as
                               defined by the
                               Single Audit Act
                               Amendment of 1996.
------------------------------------------------------------------------

    (c) Federal award of cost-reimbursement contract under the FAR to a 
non-Federal entity. When a non-Federal entity is awarded a cost-
reimbursement contract, only Subpart D of this part, Sec. Sec.  200.330 
through 200.332, subpart E of this part and subpart F of this part are 
incorporated by reference into the contract, but the requirements of 
subparts D, E, and F are supplementary to the FAR contract and only 
have effect to the extent that they do not conflict with the FAR and 
the contract. When the Cost Accounting Standards (CAS) are applicable 
to the contract, they take precedence over the requirements of this 
part, including subpart F of this part, which are supplementary to the 
CAS requirements. 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 48 CFR 
subpart 31.2 and 48 CFR 31.603 are always unallowable. For requirements 
other than those covered in subpart D of this part, Sec. Sec.  200.330 
through 200.332, subpart E of this part and subpart F of this part, the 
terms of the contract and the FAR apply. Note that when a non-Federal 
entity is awarded a FAR contract, the FAR applies, and the terms and 
conditions of the contract shall prevail over the requirements of this 
part.
    (d) 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

[[Page 3788]]

includes, for agreements with Indian tribes, the provisions of the 
Indian Self-Determination and Education and Assistance Act (ISDEAA), as 
amended, 25 U.S.C 450--458ddd-2.
    (e) Except for Sec.  200.203, and Sec. Sec.  200.330 through 
200.332, the requirements in Subpart C, Subpart D, and Subpart 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 Subpart E--Cost Principles of this Part apply to 
subrecipients of Community Services Block Grant funds pursuant to 42 
U.S.C. 9916(a)(1)(B);
    (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)
    (f) Except for Sec.  200.203, the guidance in subpart C of this 
part does not apply to the following programs:
    (1) Entitlement Federal awards to carry out the following programs 
of the Social Security Act:
    (i) Temporary Assistance to 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 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).
    (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),
    (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.
0
51. Amend Sec.  200.102 by revising paragraphs (a), (c), and (d) to 
read as follows:


Sec.  200.102   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. In the interest of maximum uniformity, 
exceptions from the requirements of this part will be permitted only as 
described in paragraph (d) of this section or in unusual circumstances.
* * * * *
    (c) The Federal awarding agency may apply more or less 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. A Federal 
awarding agency may apply less restrictive requirements when making 
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) OMB encourages Federal awarding agencies to request exceptions 
in support of innovative program designs that apply a risk-based, data-
driven framework to alleviate select compliance requirements and hold 
recipients accountable for good performance. OMB also encourages 
agencies to apply more restrictive terms and conditions when a risk-
assessment indicates it may be merited.
0
52. Revise Sec.  200.110 to read as follows:


Sec.  200.110   Effective/applicability date.

    (a) The standards set forth in this part that affect the 
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.
    (b) Existing negotiated indirect cost rates will remain in place 
until they are re-negotiated. The effective date of changes to indirect 
cost rates must be based upon the date that a newly re-negotiated rate 
goes into effect for a specific non-Federal entity's fiscal year. 
Therefore, for indirect cost rates and cost allocation plans, Federal 
awarding and indirect cost rate negotiating agencies will use the 
Uniform Guidance both in generating proposals for and negotiating a new 
rate (when the rate is re-negotiated) for non-Federal entities.
0
53. Revise Subpart C to read as follows:

Subpart C--Pre-Federal Award Requirements and Contents of Federal 
Awards

Sec.
200.200 Purpose.
200.201 Use of grant agreements (including fixed amount awards), 
cooperative agreements, and contracts.
200.202 Program planning and design.
200.203 Requirement to provide public notice of Federal financial 
assistance programs.
200.204 Notices of funding opportunities.
200.205 Federal awarding agency review of merit of proposals.
200.206 Federal awarding agency review of risk posed by applicants.
200.207 Standard application requirements.
200.208 Specific conditions.
200.209 Certifications and representations.

[[Page 3789]]

200.210 Pre-award costs.
200.211 Information contained in a Federal award.
200.212 Public access to Federal award information.
200.213 Reporting a determination that a non-Federal entity is not 
qualified for a Federal award.
200.214 Suspension and debarment.
200.215 Never contract with the enemy.
200.216 Prohibition on certain telecommunications and video 
surveillance services or equipment.


Sec.  200.200   Purpose.

    (a) Sections 200.201 through 200.209 prescribe instructions and 
other pre-award matters to be used in the announcement and application 
process.
    (b) Use of Sec. Sec.  200.204, 200.205, 200.206, and 200.208, is 
required only for competitive Federal awards, but may also be used by 
the Federal awarding agency for non-competitive awards where 
appropriate or where required by Federal statute.


Sec.  200.201   Use of grant agreements (including fixed amount 
awards), cooperative agreements, and contracts.

    (a) The Federal awarding agency or pass-through 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, Federal awarding agencies, or pass-
through entities as permitted in Sec.  200.332, may use fixed amount 
awards (see Fixed amount awards in Sec.  200.1) to which the following 
conditions apply:
    (1) The Federal award amount is negotiated using the cost 
principles (or other pricing information) as a guide. The Federal 
awarding agency or pass-through entity may use fixed amount awards if 
the project scope has measurable goals and objectives 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 Federal 
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 Federal awarding agency or pass-through entity.


Sec.  200.202  Program planning and design.

    In designing the Federal financial assistance programs, the Federal 
awarding agency must establish program goals, objectives, and 
indicators at the assistance listing (e.g., program) level, to the 
extent permitted by law. Program design must occur before the Federal 
awarding agency drafts the Notice of Funding Opportunity. The program 
goals and outcomes designed must be aligned with the Congressional 
intent of the program, agency leadership goals, as well as agency 
strategic plan and priority goals. Programs must be designed with clear 
goals and objectives to achieve intended results. Program goals, 
objectives and metrics for measuring performance must also be published 
in the assistance listing. Program design elements may include a 
problem or needs statement, goals and objectives, a logic model 
depicting the program's structure, program activities, performance 
indicators to measure program accomplishments which may include 
independently available sources of data, learning communities which may 
benefit from a common understanding of promising practices, and a 
system to periodically review award selection criteria. Federal 
awarding agencies should use program design to inform the management of 
Federal awards at all stages of the financial assistance lifecycle. 
Federal awarding agencies are responsible for collecting relevant 
performance data to demonstrate the results of Federal financial 
assistance programs. Federal awarding agencies are also responsible for 
ensuring taxpayer dollars are providing critical Federal services to 
citizens efficiently and cost-effectively while managing government 
programs, as described in the Program Management Improvement 
Accountability Act (Pub. L. 114-264), the OMB Memorandum M-18-19 
(Improving the Management of Federal Programs and Projects through 
Implementing the Program Management Improvement Accountability Act) and 
OMB circular A-11 (Preparation, Submission, and Execution of the 
Budget). See also Sec.  200.1 Definition for Assistance listing.


Sec.  200.203   Requirement to provide public notice of Federal 
financial assistance programs.

    (a) The Federal awarding agency must notify the public of Federal 
programs in the Assistance listings maintained by the General Services 
Administration (GSA).
    (1) The Assistance listings is the single, authoritative, 
governmentwide comprehensive source of Federal financial assistance 
program information produced by the executive branch of the Federal 
Government.
    (2) The information that the Federal 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 in coordination with OMB.
    (3) The Federal awarding agency may not award Federal financial 
assistance without assigning it to a program that has been included in 
the Assistance listings 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, non-
discretionary Federal awards, loans, insurance, or any other type of 
Federal financial assistance, the Federal awarding agency must, to the 
extent practicable, create, updated, and manage Assistance listing 
entries based on the authorizing statute for the program and comply 
with additional guidance provided by GSA in consultation with OMB to 
ensure consistent, accurate information is available to prospective 
applicants. At a minimum, Federal awarding agencies 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,

[[Page 3790]]

the Program description, purpose, goals, and measurement should align 
with the strategic goals and objectives within the Federal awarding 
agency's performance plan as required by Part 6 of OMB Circular A-11 
and should support the Federal awarding agency's performance 
measurement, management, and any required reporting;
    (2) Identification. 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. The applicability of Single Audit Requirements 
as required by subpart F of this part.


Sec.  200.204   Notices of funding opportunities.

    For discretionary grants and cooperative agreements, the Federal 
awarding agency must announce specific funding opportunities by 
providing the following information in a public notice:
    (a) Summary information in notices of funding opportunities. The 
Federal awarding agency must display the following information posted 
on the OMB-designated governmentwide website for finding and applying 
for Federal financial assistance, in a location preceding the full text 
of the announcement:
    (1) Federal 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 
Federal awarding agency has assigned or will assign a number to the 
funding opportunity announcement, this number must be provided;
    (5) Assistance listing 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 Federal awarding 
agency.
    (b) Availability period. The Federal awarding agency must generally 
make all funding opportunities available for application for at least 
60 calendar days. The Federal 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 Federal awarding 
agency head or delegate.
    (c) Full text of funding opportunities. The Federal 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 to Part 200.
    (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 Sec.  200.414(c)(4)).
    (3) Specific eligibility information, including any factors or 
priorities that affect an applicant's or its application's eligibility 
for selection.
    (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 Sec. Sec.  
200.205 and 200.206.
    (6) Federal Award Administration Information. See also Sec.  
200.211.


Sec.  200.205   Federal awarding agency review of merit of proposals.

    For discretionary grants or cooperative agreements, unless 
prohibited by Federal statute, the Federal awarding agency must design 
and execute a merit review process for applications, with the objective 
of selecting the recipients most likely to be successful in delivering 
results based on the program objectives outlines in section Sec.  
200.202. This process must be described or incorporated by reference in 
the applicable funding opportunity (see Appendix I to this part.) See 
also Sec.  200.204. The Federal awarding agency must also 
systematically review award selection criteria for effectiveness.


Sec.  200.206   Federal awarding agency review of risk posed by 
applicants.

    (a) Review of OMB-designated repositories of governmentwide data. 
(1) Prior to making a Federal award, the Federal awarding agency is 
required by the Improper Payments Elimination and Recovery Improvement 
Act of 2012, 31 U.S.C. 3321, note and 41 U.S.C. 2313 note to review 
information available through any OMB-designated repositories of 
governmentwide eligibility qualification or financial integrity 
information as appropriate. 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.
    (2) In accordance 41 U.S.C. 2313, the Federal awarding agency is 
required to review the non-public segment of the OMB-designated 
integrity and performance system accessible through SAM (currently the 
Federal Awardee Performance and Integrity Information System (FAPIIS)) 
prior to making a Federal award where the Federal share is expected to 
exceed the simplified acquisition threshold, defined in 41 U.S.C. 134, 
over the period of performance. As required by Public Law 112-239 
National Defense Authorization Act for Fiscal Year 2013, prior to 
making a Federal award, the Federal awarding agency must consider all 
of the information available through FAPIIS with regard to the 
applicant and any immediate highest level owner, predecessor (i.e., a 
non-Federal entity that is replaced by a successor), or subsidiary, 
identified for that applicant in FAPIIS, if applicable. At a minimum, 
the information in the system for a prior Federal award recipient must 
demonstrate a satisfactory record of executing programs or activities 
under Federal grants, cooperative agreements, or procurement awards; 
and integrity and business ethics. The Federal awarding agency may make 
a Federal award to a recipient who does not fully meet these standards, 
if it is determined that the information is not relevant to the current 
Federal award under consideration or there are specific conditions that 
can appropriately mitigate the effects of the non-Federal entity's risk 
in accordance with Sec.  200.208 Specific conditions.
    (b) Risk evaluation. (1) In addition, for competitive grants or 
cooperative agreements, the Federal awarding agency must have in place 
a framework for evaluating the risks posed by applicants before they 
receive Federal

[[Page 3791]]

awards. This evaluation may incorporate results of the evaluation of 
the applicant's eligibility or the quality of its application. If the 
Federal 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 Sec.  
200.204 Notices of funding opportunities.
    (2) In evaluating risks posed by applicants, the Federal awarding 
agency may use a risk-based approach and may consider any items such as 
the following:
    (i) Financial stability;
    (ii) Quality of management systems and ability to meet the 
management standards prescribed in this part;
    (iii) 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;
    (iv) Reports and findings from audits performed under Subpart F of 
this part or the reports and findings of any other available audits; 
and
    (v) The applicant's ability to effectively implement statutory, 
regulatory, or other requirements imposed on non-Federal entities.
    (c) Suspension and debarment compliance. The Federal awarding 
agency must comply with the guidelines on governmentwide 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.


Sec.  200.207   Standard application requirements.

    (a) Paperwork clearances. The Federal 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, Controlling Paperwork Burdens on the Public and in alignment with 
OMB-approved, governmentwide data elements available from the OMB-
designated standards lead. Consistent with these requirements, OMB will 
authorize additional information collections only on a limited basis.
    (b) If applicable, the Federal awarding agency may inform 
applicants and recipients that they do not need to provide certain 
information otherwise required by the relevant information collection.


Sec.  200.208   Specific conditions.

    (a) Federal awarding agencies are responsible for ensuring that 
specific Federal award conditions are consistent with the program 
design reflected in Sec.  200.202 and include clear performance 
expectations of recipients as required in Sec.  200.301.
    (b) Risk-based specific conditions.
    (1) The Federal awarding agency or pass-through entity may impose 
more or less restrictive or additional specific Federal award 
conditions as needed, in accordance with paragraphs (b)(2) and (3) of 
this section, based on an analysis of the following factors:
    (i) Based on the criteria set forth in Sec.  200.206;
    (ii) The an applicant or recipient's history of compliance with the 
general or specific terms and conditions of a Federal award;
    (iii) The applicant or recipient's ability to meet expected 
performance goals as described in Sec.  200.211; or
    (iv) A responsibility determination of an applicant or recipient
    (2) Additional Federal award conditions may include items such as 
the following:
    (i) Requiring payments as reimbursements rather than advance 
payments;
    (ii) Withholding authority to proceed to the next phase until 
receipt of evidence of acceptable performance within a given budget 
period;
    (iii) Requiring additional, more detailed financial reports;
    (iv) Requiring additional project monitoring;
    (v) Requiring the non-Federal entity to obtain technical or 
management assistance; or
    (vi) Establishing additional prior approvals.
    (3) If the Federal awarding agency or pass-through entity is 
imposing additional requirements, they must notify the applicant or 
non-Federal entity as to:
    (i) The nature of the additional requirements;
    (ii) The reason why the additional requirements are being imposed;
    (iii) The nature of the action needed to remove the additional 
requirement, if applicable;
    (iv) The time allowed for completing the actions if applicable, and
    (v) The method for requesting reconsideration of the additional 
requirements imposed.
    (c) Any additional requirements must be promptly removed once the 
conditions that prompted them have been satisfied.


Sec.  200.209   Certifications and representations.

    Unless prohibited by the U.S. Constitution, Federal statutes or 
regulations, each Federal 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.


Sec.  200.210   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 Sec.  
200.458.


Sec.  200.211   Information contained in a Federal award.

    A Federal award must include the following information:
    (a) Federal award performance goals. The Federal awarding agency 
must include in the Federal award 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. Where applicable, this should 
also include any performance measures or independent sources of data 
that may be used to measure progress. In some instances (e.g., 
discretionary research awards), this must be limited to the requirement 
to submit technical performance reports (to be evaluated in accordance 
with Federal 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 Federal awarding agency may include program-specific 
requirements, as applicable. These requirements must be aligned, to the 
extent permitted by law, with Federal awarding agency strategic goals, 
strategic objectives or performance goals that are relevant to the 
program. See

[[Page 3792]]

also OMB Circular A-11, Preparation, Submission and Execution of the 
Budget Part 6 for definitions of strategic objectives and performance 
goals.
    (b) General Federal Award Information. The Federal awarding agency 
must include the following general Federal award information in each 
Federal award:
    (1) Recipient name (which must match the name associated with its 
unique entity identifier as defined at 2 CFR 25.315);
    (2) Recipient's unique entity identifier;
    (3) Unique Federal Award Identification Number (FAIN);
    (4) Federal Award Date (see Federal award date in Sec.  200.1 
Definitions);
    (5) Period of Performance Start and End Date;
    (6) Budget Period Start and End Date;
    (7) Amount of Federal Funds Obligated by this action;
    (8) Total Amount of Federal Funds Obligated;
    (9) Total Approved Cost Sharing or Matching, where applicable;
    (10) Total Amount of the Federal Award including approved Cost 
Sharing or Matching;
    (11) Budget Approved by the Federal Awarding Agency;
    (12) Federal award description, (to comply with statutory 
requirements (e.g., FFATA));
    (13) Name of Federal awarding agency and contact information for 
awarding official,
    (14) Assistance listing number and title;
    (15) Identification of whether the award is R&D; and
    (16) Indirect cost rate for the Federal award (including if the de 
minimis rate is charged per Sec.  200.414).
    (17) Performance goals, indicators, targets, baseline data, and 
data collection plan
    (c) General terms and conditions. (1) Federal awarding agencies 
must incorporate the following general terms and conditions either in 
the Federal award or by reference, as applicable:
    (i) Administrative requirements. These are implemented by the 
Federal 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 program-
specific. See Sec.  200.300 Statutory and national policy requirements.
    (iii) Recipient integrity and performance matters. If the total 
Federal share of the Federal award may include more than $500,000 over 
the period of performance, the Federal awarding agency must include the 
term and condition available in Appendix XII of this part. See also 
Sec.  200.113.
    (iv) Future budget periods. If it is anticipated that the period of 
performance will include multiple budget periods, the Federal awarding 
agency must indicate that subsequent budget periods are subject to the 
availability of funds, satisfactory performance, and compliance with 
the terms and conditions of the Federal award.
    (v) Termination provisions. Recipients must be made aware of the 
termination provisions in Sec.  200.339, including the applicable 
termination provisions in the Federal awarding agency's regulations and 
in each Federal award.
    (2) The Federal award must include wording to incorporate, by 
reference, all terms and conditions of the award. Any reference within 
the award to general terms and conditions must be to the website at 
which the Federal awarding agency maintains.
    (3) If a non-Federal entity requests a copy of the full text of the 
general terms and conditions, the Federal awarding agency must provide 
it.
    (4) Wherever the general terms and conditions are publicly 
available, the Federal awarding agency must maintain an archive of 
previous versions of the general terms and conditions, with effective 
dates, for use by the non-Federal entity, auditors, or others.
    (d) Federal awarding agency, program, or federal award specific 
terms and conditions. The Federal awarding agency must include with 
each Federal award any terms and conditions necessary to communicate 
requirements that are in addition to the requirements outlined in the 
Federal awarding agency's general terms and conditions as required in 
Sec.  200.208. Whenever practicable, these specific terms and 
conditions also should be shared on a public website and in notices of 
funding opportunities (as outlined in Sec.  200.204) in addition to 
being included in a Federal award. See also Sec.  200.207.
    (e) Prohibition of Including References to Non-Binding Guidance 
Documents. Federal awarding agencies are prohibited from including 
references to non-binding guidance in the terms and conditions of 
award. As described in Executive Order (E.O.) 13891, references to non-
binding guidance include references to promising practices and other 
documents that the inclusion of by reference carries the implicit 
threat of enforcement action. These resources may be shared outside of 
the terms and conditions for reference purposes.
    (f) Federal awarding agency requirements. Any other information 
required by the Federal awarding agency.


Sec.  200.212   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 Federal awarding agency must announce all 
Federal awards publicly and publish the required information on a 
publicly available OMB-designated governmentwide website.
    (b) All information posted in the designated integrity and 
performance system accessible through SAM (currently FAPIIS) on or 
after April 15, 2011 will be publicly available after a waiting period 
of 14 calendar days, except for:
    (1) Past performance reviews required by Federal Government 
contractors in accordance with the Federal Acquisition Regulation (FAR) 
48 CFR subpart 42.15;
    (2) Information that was entered prior to April 15, 2011; or
    (3) Information that is withdrawn during the 14-calendar day 
waiting period by the Federal Government official.
    (c) 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.


Sec.  200.213  Reporting a determination that a non-Federal entity is 
not qualified for a Federal award.

    (a) If a Federal awarding agency does not make a Federal award to a 
non-Federal entity because the official determines that the non-Federal 
entity does not meet either or both of the minimum qualification 
standards as described in Sec.  200.206(a)(2), the Federal awarding 
agency must report that determination to the designated integrity and 
performance system accessible through SAM (currently FAPIIS), only if 
all of the following apply:
    (1) The only basis for the determination described in paragraph (a) 
of this section is the non-Federal entity's prior record of executing 
programs or activities under Federal awards or its record of integrity 
and business ethics, as described in Sec.  200.206(a)(2) (i.e., the 
entity was determined to be qualified based on all factors other than 
those two standards), and

[[Page 3793]]

    (2) The total Federal share of the Federal award that otherwise 
would be made to the non-Federal entity is expected to exceed the 
simplified acquisition threshold over the period of performance.
    (b) The Federal awarding agency is not required to report a 
determination that a non-Federal entity is not qualified for a Federal 
award if they make the Federal award to the non-Federal entity and 
includes specific award terms and conditions, as described in Sec.  
200.208.
    (c) If a Federal awarding agency reports a determination that a 
non-Federal entity is not qualified for a Federal award, as described 
in paragraph (a) of this section, the Federal awarding agency also must 
notify the non-Federal entity that--
    (1) The determination was made and reported to the designated 
integrity and performance system accessible through SAM, and include 
with the notification an explanation of the basis for the 
determination;
    (2) The information will be kept in the system for a period of five 
years from the date of the determination, as required by section 872 of 
Public Law 110-417, as amended (41 U.S.C. 2313), then archived;
    (3) Each Federal awarding agency that considers making a Federal 
award to the non-Federal entity during that five year period must 
consider that information in judging whether the non-Federal entity is 
qualified to receive the Federal award when the total Federal share of 
the Federal award is expected to include an amount of Federal funding 
in excess of the simplified acquisition threshold over the period of 
performance;
    (4) The non-Federal entity may go to the awardee integrity and 
performance portal accessible through SAM (currently the Contractor 
Performance Assessment Reporting System (CPARS)) and comment on any 
information the system contains about the non-Federal entity itself; 
and
    (5) Federal awarding agencies will consider that non-Federal 
entity's comments in determining whether the non-Federal entity is 
qualified for a future Federal award.
    (d) If a Federal awarding agency enters information into the 
designated integrity and performance system accessible through SAM 
about a determination that a non-Federal entity is not qualified for a 
Federal award and subsequently:
    (1) Learns that any of that information is erroneous, the Federal 
awarding agency must correct the information in the system within three 
business days;
    (2) Obtains an update to that information that could be helpful to 
other Federal awarding agencies, the Federal awarding agency is 
strongly encouraged to amend the information in the system to 
incorporate the update in a timely way.
    (e) Federal awarding agencies must not post any information that 
will be made publicly available in the non-public segment of designated 
integrity and performance system that is covered by a disclosure 
exemption under the Freedom of Information Act. If the recipient 
asserts within seven calendar days to the Federal awarding agency that 
posted the information that some or all of the information made 
publicly available is covered by a disclosure exemption under the 
Freedom of Information Act, the Federal awarding agency that posted the 
information must remove the posting within seven calendar days of 
receiving the assertion. Prior to reposting the releasable information, 
the Federal awarding agency must resolve the issue in accordance with 
the agency's Freedom of Information Act procedures.


Sec.  200.214  Suspension and debarment.

    Non-federal entities 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.


Sec.  200.215  Never contract with the enemy.

    Federal awarding agencies and non-Federal entities are subject to 
the regulations implementing Never Contract with the Enemy in 2 CFR 
part 183. These regulations affect grants and cooperative agreements 
that are expected to exceed $50,000 within the period of performance, 
are performed outside the United States, including U.S. territories, 
and are in support of a contingency operation in which members of the 
Armed Forces are actively engaged in hostilities.


Sec.  200.216  Prohibition on certain telecommunications and video 
surveillance services or equipment.

    Grant, cooperative agreement, and loan recipients are prohibited 
from using government funds to enter into contracts (or extend or renew 
contracts) with entities that use covered technology. See section 889 
of Public Law 115-232 (National Defense Authorization Act 2019).
0
54. Amend Sec.  200.300 by revising the first sentence of paragraph (a) 
to read as follows:


Sec.  200.300  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 the U.S. Constitution, Federal Law, statutory, and public policy 
requirements: including, but not limited to, those protecting free 
speech, religious liberty, public welfare, the environment, and 
prohibiting discrimination. * * *
* * * * *
0
55. Revise Sec.  200.301 to read as follows:


Sec.  200.301  Performance measurement.

    The Federal awarding agency must measure the recipient's 
performance in a way that will help the Federal awarding agencies and 
non-Federal entities to achieve program goals and objectives, share 
lessons learned, and foster adoption of promising practices. The 
Federal awarding agency should provide recipients with clear 
performance goals, indicators, and milestones as described in Sec.  
200.211. Performance reporting frequency and content should be 
established to not only allow the Federal awarding agency to understand 
the recipient's progress but also to facilitate identification of 
promising practices among recipients and build evidence upon which the 
Federal awarding agency's program and performance decisions are made. 
This provision is designed to operate in tandem with evidence-related 
statutes (e.g.; The Foundations for Evidence-Based Policymaking Act of 
2018, which emphasizes collaboration and coordination to advance data 
and evidence-building functions in the Federal government) and related 
OMB implementation guidance (e.g.; OMB Memorandum M-19-23: Phase 1 
implementation of the Foundations for Evidence-Based Policymaking Act 
of 2018. Learning Agendas, Personnel, and Planning Guidance). The 
Federal awarding agency must also require the recipient to use OMB-
approved common information collections, as applicable, when providing 
financial and performance information. As appropriate and in accordance 
with above mentioned information collections, the Federal awarding 
agency should require the recipient to relate financial data to 
performance accomplishments of the Federal award. Also, in accordance 
with above mentioned common information collections, and when 
applicable, recipients should also provide cost information to 
demonstrate cost

[[Page 3794]]

effective practices (e.g., through unit cost data). In some instances 
(e.g., discretionary research awards), these requirements may be 
limited to the submission of technical performance reports (to be 
evaluated in accordance with agency policy). The Federal awarding 
agency should also specify any requirements of award recipients' 
participation in a Federally-funded evaluation, and any evaluation 
activities required to be conducted by the Federal award.


Sec.  200.302  [Amended]

0
56. Amend Sec.  200.302 as follows:
0
a. In paragraph (b)(1) remove the term ``CFDA'' and add, in its place, 
``Assistance listing''.
0
b. In paragraph (b)(3) remove the word ``obligations'' and add, in its 
place, ``financial obligations''.
0
57. Amend Sec.  200.303 by revising paragraphs (b) and (e) to read as 
follows:


Sec.  200.303  Internal controls.

* * * * *
    (b) Comply with the U.S. Constitution, Federal statutes, 
regulations, and the terms and conditions of the 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 responsibility over 
confidentiality.
0
58. Revise Sec.  200.305 to read as follows:


Sec.  200.305  Federal 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 Sec.  200.302(b)(6). Except as noted 
elsewhere in this part, Federal agencies must require recipients to use 
only OMB-approved, governmentwide 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 non-
Federal entity must be limited to the minimum amounts needed and be 
timed to be in accordance with the actual, 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 Federal 
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 
this paragraph (b) cannot be met, when the Federal awarding agency sets 
a specific condition per Sec.  200.208, 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 Federal 
awarding agency or pass-through entity must make payment within 30 
calendar days after receipt of the billing, unless the Federal 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 Federal awarding agency or pass-through entity has 
determined that reimbursement is not feasible because the non-Federal 
entity lacks sufficient working capital, the Federal awarding agency or 
pass-through entity may provide cash on a working capital advance 
basis. Under this procedure, the Federal awarding agency or pass-
through 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 cycle. Thereafter, the 
Federal 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 pass-through 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 Sec.  
200.208, subpart D of this part, Sec.  200.338, 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, ``Policies for Federal Credit 
Programs and Non-Tax Receivables.'' Under such conditions, the Federal 
awarding agency or pass-through entity may, upon reasonable notice, 
inform the non-Federal entity that payments must not be made for 
financial obligations incurred after a specified date until the 
conditions are corrected or the indebtedness to the Federal Government 
is liquidated.
    (iii) A payment withheld for failure to comply with Federal award 
conditions,

[[Page 3795]]

but without suspension of the Federal award, must be released to the 
non-Federal entity upon subsequent compliance. When a Federal award is 
suspended, payment adjustments will be made in accordance with Sec.  
200.342.
    (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 non-Federal entity actually disburses the withheld funds to the 
contractors or to 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 Federal 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 
non-Federal entity must be able to account for funds received, 
obligated, and expended.
    (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 $250,000 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 (PMS) through an 
electronic medium using either Automated Clearing House (ACH) network 
or a Fedwire Funds Service payment.
    (i) For returning interest on Federal awards paid through PMS, the 
refund should:
    (A) Provide an explanation stating that the refund is for interest;
    (B) List the PMS Payee Account Number(s) (PANs);
    (C) List the Federal award number(s) for which the interest was 
earned; and
    (D). Make returns payable to: Department of Health and Human 
Services.
    (ii) For returning interest on Federal awards not paid through PMS, 
the refund should:
    (A) Provide an explanation stating that the refund is for interest;
    (B) Include the name of the awarding agency;
    (C) List the Federal award number(s) for which the interest was 
earned; and
    (D) Make returns payable to: Department of Health and Human 
Services.
    (10) Funds, principal, and excess cash returns must be directed to 
the original Federal agency payment system. The non-Federal entity 
should review instructions from the original Federal agency payment 
system. Returns should include the following information:
    (i) Payee Account Number (PAN), if the payment originated from PMS, 
or Agency information to indicate whom to credit the funding if the 
payment originated from ASAP, NSF, or another Federal agency payment 
system.
    (ii) PMS document number and subaccount(s), if the payment 
originated from PMS, or relevant account numbers if the payment 
originated from another Federal agency payment system.
    (iii) The reason for the return (e.g., excess cash, funds not 
spent, interest, part interest part other, etc.)
    (11) When returning funds or interest to PMS you must include the 
following as applicable:
    (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.
    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 their 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 Locator Code (ALC): 75010501.
    Name (abbreviated when possible) and ALC Agency POC.
    (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) Questions can be directed to PMS at 877-614-5533 or 
[email protected].


Sec.  200.306  [Amended]

0
59. In Sec.  200.306 paragraph (a) remove ``200.203'' and add, in its 
place, ``200.204''.
0
60. Amend Sec.  200.307 by revising paragraphs (d) and (g) to read as 
follows:


Sec.  200.307  Program income.

* * * * *
    (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, Sec. Sec.  
200.310, 200.312, and 200.313, or as specifically identified in Federal 
statutes, regulations, or the terms and 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 is not accountable 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 is 
applicable.
0
61. Revise Sec.  200.308 to read as follows:


Sec.  200.308  Revision of budget and program plans.

    (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 Federal share in Sec.  200.1) or only the Federal 
share, depending upon Federal awarding agency requirements. The budget 
and program plans must include considerations for performance and 
program evaluation purposes whenever required in accordance with the 
terms and conditions of the award.

[[Page 3796]]

    (b) Recipients are required to report deviations from budget or 
project scope or objective, and request prior approvals from Federal 
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 Federal awarding agencies for the following 
program or budget-related reasons:
    (1) Change in the scope or the objective of the project or program 
(even if there is no associated budget revision requiring prior written 
approval).
    (2) Change in a key person specified in the application or 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 Federal awarding agency, of 
costs that require prior approval in accordance with Subpart E of this 
part or 45 CFR part 75 Appendix IX, or 48 CFR part 31, as applicable.
    (5) The transfer of funds budgeted for 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, including fixed amount subawards as 
described in Sec.  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 cost-sharing or matching provided by 
the non-Federal entity.
    (8) The need arises for additional Federal funds to complete the 
project.
    (d) No other prior approval requirements for specific items may be 
imposed unless an exception has been approved by OMB. See also 
Sec. Sec.  200.102 and 200.407.
    (e) Except for requirements listed in paragraphs (c)(1) through (8) 
of this section, the Federal awarding agency is authorized, at its 
option, to waive other cost-related and administrative prior written 
approvals contained in Subparts D and E. Such waivers may include 
authorizing recipients to do any one or more of the following:
    (1) Incur project costs 90 calendar days before the Federal 
awarding agency makes the Federal award. Expenses more than 90 calendar 
days pre-award require prior approval of the Federal awarding agency. 
All costs incurred before the Federal awarding agency makes the Federal 
award are at the recipient's risk (i.e., the Federal awarding agency is 
not required to reimburse such 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 Sec.  200.458 
Pre-award costs.
    (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 Federal 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 must not be 
exercised merely for the purpose of using unobligated balances. 
Extensions require explicit prior Federal 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 budget 
periods.
    (4) For Federal awards that support research, unless the Federal 
awarding agency provides otherwise in the Federal award or in the 
Federal 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.
    (f) The Federal 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 Federal awarding agency. The 
Federal awarding agency cannot permit a transfer that would cause any 
Federal appropriation to be used for purposes other than those 
consistent with the appropriation.
    (g) All other changes to non-construction budgets, except for the 
changes described in paragraph (c) of this section, do not require 
prior approval (see also Sec.  200.407).
    (h) For construction Federal awards, the recipient must request 
prior written approval promptly from the Federal awarding agency for 
budget revisions whenever paragraph (h)(1), (2), or (3) of this section 
applies:
    (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 a Federal awarding agency makes a Federal award that 
provides support for construction and non-construction work, the 
Federal awarding agency may require the recipient to obtain prior 
approval from the Federal awarding agency before making any fund or 
budget transfers between the two types of work supported.
    (i) When requesting approval for budget revisions, the recipient 
must use the same format for budget information that was used in the 
application, unless the Federal awarding agency indicates a letter of 
request suffices.
    (j) Within 30 calendar days from the date of receipt of the request 
for budget revisions, the Federal 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 Federal awarding agency must inform the recipient in 
writing of the date when the recipient may expect the decision.


Sec.  200.309  [Removed]

0
62. Remove Sec.  200.309.


Sec.  Sec.  200.310 through 200.321  [Redesignated]

0
63. Redesignate Sec. Sec.  200.310 through 200.321 to Sec. Sec.  
200.309 through 200.320.
0
64. Amend newly redesignated Sec.  200.310 to revise paragraph (a) to 
read as follows:


Sec.  200.310  Real property.

    (a) Title. Subject to the requirements 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.
* * * * *
0
65. Amend newly redesignated Sec.  200.311 by revising the first 
sentence of paragraph (c) to read as follows:


Sec.  200.311  Federally-owned and exempt property.

* * * * *

[[Page 3797]]

    (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 
responsibility to the Federal Government, based upon the explicit terms 
and conditions of the Federal award. * * *
0
66. Amend newly redesignated Sec.  200.312 by revising paragraph (a), 
paragraph (c) introductory, paragraph (e)(1) and the first sentence of 
(e)(2) to read as follows:


Sec.  200.312  Equipment.

* * * * *
    (a) Title. Subject to the requirements 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 responsibility 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:
* * * * *
    (c) * * * (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 Federal awarding agency. The 
Federal awarding agency may require the submission of the applicable 
common form for equipment. When no longer needed for the original 
program or project, the equipment may be used in other activities 
supported by the Federal awarding agency, in the following order of 
priority:
* * * * *
    (e) * * *
    (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 responsibility to the Federal awarding agency.
    (2) Except as provided in Sec.  200.311 Federally-owned and exempt 
property, paragraph (b), or if the Federal awarding agency fails to 
provide requested disposition instructions within 120 days, items of 
equipment with a current per-unit fair-market value in excess of $5,000 
may be retained by the non-Federal entity or sold. * * *
* * * * *
0
67. Amend newly redesignated Sec.  200.313 by revising the last 
sentence of paragraph (a) to read as follows:


Sec.  200.313  Supplies.

* * * * *
    (a) * * * See Sec.  200.312(e)(2) for the calculation methodology.
0
68. Amend the newly redesignated Sec.  200.314 by revising paragraph 
(a) to read as follows:


Sec.  200.314  Intangible property.

    (a) Title to intangible property (see Intangible property in Sec.  
200.1) 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 Federal awarding agency. When no longer needed 
for the originally authorized purpose, disposition of the intangible 
property must occur in accordance with the provisions in Sec.  
200.312(e).
* * * * *
0
69. Amend the newly redesignated Sec.  200.316 by revising the last 
sentence to read as follows:


Sec.  200.316  Procurements by states.

    * * * All other non-Federal entities, including subrecipients of a 
state, will follow Sec. Sec.  200.317 through 200.326.
0
70. Amend the newly redesignated Sec.  200.317 by revising the last 
sentence of paragraph (h) to read as follows:


Sec.  200.317  General procurement standards.

* * * * *
    (h) * * * See also Sec.  200.213.
0
71. Revise the newly redesignated Sec.  200.318 to read as follows:


Sec.  200.318  Competition.

    (a) All procurement transactions for the acquisition of property or 
services required under a Federal award must be conducted in a manner 
providing full and open competition consistent with the standards of 
this section and Sec.  200.319, Methods of procurement to be followed.
    (b) 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.
    (c) 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, given the nature and size of the project, to 
compete for the contract.
    (d) 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.
    (e) The non-Federal entity must ensure that all prequalified lists 
of persons, firms, or products which are

[[Page 3798]]

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.
    (f) Noncompetitive procurements can only be awarded in accordance 
with Sec.  200.319(b)(3).
0
72. Revise the newly redesignated Sec.  200.319 to read as follows:


Sec.  200.319  Methods of procurement to be followed.

    The non-Federal entity must have and use documented procurement 
procedures for the following methods of procurement for the acquisition 
of property or services required under a Federal award.
    (a) Informal procurement methods. When the value of the procurement 
for property or services under a Federal award does not exceed the 
simplified acquisition threshold, as defined in Sec.  200.1 
Definitions, formal procurement methods are not required. The non-
Federal entity may use informal procurement methods to expedite the 
completion of its transactions and minimize the associated 
administrative burden and cost. The following informal methods of 
procurement used for procurement of property or services at or below 
the simplified acquisition threshold include:
    (1) Micro-purchases. (i) The acquisition of property or services, 
the aggregate dollar amount of which does not exceed the micro-purchase 
threshold (See Micro-purchase in Sec.  200.1 Definitions). To the 
maximum extent practicable, the non-Federal entity should distribute 
micro-purchases equitably among qualified suppliers.
    (ii) Micro-purchases may be awarded without soliciting competitive 
price or rate quotations if the non-Federal entity considers the price 
to be reasonable and can include the use of purchase cards if 
documented and approved by the non-Federal entity.
    (iii) Micro-purchase thresholds that differ from the FAR. The non-
Federal entity is responsible for determining an appropriate micro-
purchase threshold based on internal controls, an evaluation of risk 
and its documented procurement procedures. All non-Federal entities can 
establish lower thresholds. However, a non-Federal entity may request a 
higher micro-purchase threshold in accordance to section (iv) below. 
When applicable, the micro-purchase threshold used by the non-Federal 
entity must be authorized or not prohibited under State, local, or 
tribal laws or regulations.
    Requests for approval of a higher threshold must be submitted to 
the cognizant Federal agency for indirect cost rates (see Cognizant 
agency for indirect costs) for review and approval.
    (iv) Cognizant agency for indirect cost evaluation of higher 
threshold requests are performed to determine if an entity is low risk 
(see Sec.  200.520 Criteria for a low-risk auditee) and must include at 
a minimum a review of the entity's audit findings and any appropriate 
internal institutional risk assessments. Values used to set micro-
purchase thresholds must also be consistent with any applicable state 
laws.
    (2) Small purchases. (i) The acquisition of property or services, 
the aggregate dollar amount of which is higher than the micro-purchase 
threshold but does not exceed the simplified acquisition threshold. If 
small purchase procedures are used, price or rate quotations must be 
obtained from an adequate number of qualified sources.
    (ii) Simplified acquisition thresholds that differ from the FAR. 
The non-Federal entity is responsible for determining an appropriate 
simplified acquisition threshold based on internal controls, an 
evaluation of risk and its documented procurement procedures which must 
not exceed the threshold established in the FAR. When applicable, the 
simplified acquisition threshold used by the non-Federal entity must be 
authorized or not prohibited under State, local, or tribal laws or 
regulations.
    (b) Formal procurement methods. When the value of the procurement 
for property or services under a Federal financial assistance award 
exceeds the simplified acquisition threshold (SAT) (Simplified 
acquisition threshold), or a threshold established by a non-federal 
entity, formal procurement methods are required. Formal procurement 
methods require following documented procedures. Formal procurement 
methods also require public advertising unless a non-competitive 
procurement can be used in accordance with Sec.  200.318 Competition. 
The following formal methods of procurement are used for procurement of 
property or services above the simplified acquisition threshold or a 
value below the simplified acquisition threshold the non-Federal entity 
determines to be appropriate:
    (1) Sealed bids. A procurement method in which 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 bids method is the preferred method for procuring 
construction, if the conditions in paragraph (c)(1) of this section 
apply.
    (i) In order for sealed bidding to be feasible, the following 
conditions should be present:
    (A) A complete, adequate, and realistic specification or purchase 
description is available;
    (B) Two or more responsible bidders are willing and able to compete 
effectively for the business; and
    (C) 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.
    (ii) If sealed bids are used, the following requirements apply:
    (A) 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 local, and tribal governments, the 
invitation for bids must be publicly advertised;
    (B) 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;
    (C) 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;
    (D) 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
    (E) Any or all bids may be rejected if there is a sound documented 
reason.
    (2) Proposals. A procurement method in which either a fixed price 
or cost-reimbursement type contract is awarded. Proposals are generally 
used when conditions are not appropriate for the use of sealed bids. 
They are awarded in accordance with the following requirements:
    (i) Requests for proposals must be publicized and identify all 
evaluation factors and their relative importance. Proposals must be 
solicited from an adequate number of qualified offerors. Any response 
to publicized requests for proposals must be considered to the maximum 
extent practical;

[[Page 3799]]

    (ii) The non-Federal entity must have a written method for 
conducting technical evaluations of the proposals received and making 
selections;
    (iii) Contracts must be awarded to the responsible offeror whose 
proposal is most advantageous to the non-Federal entity, with price and 
other factors considered; and
    (iv) The non-Federal entity may use competitive proposal procedures 
for qualifications-based procurement of architectural/engineering (A/E) 
professional services whereby offeror's qualifications are evaluated 
and the most qualified offeror 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 that are a potential source to perform the 
proposed effort.
    (3) Noncompetitive procurement. There are specific circumstances in 
which noncompetitive procurement can be used. Noncompetitive 
procurement can only be awarded if one or more of the following 
circumstances apply:
    (i) The acquisition of property or services, the aggregate dollar 
amount of which does not exceed the micro-purchase threshold (see Sec.  
200.319(a)(1));
    (ii) The item is available only from a single source;
    (iii) The public exigency or emergency for the requirement will not 
permit a delay resulting from competitive solicitation;
    (iv) The Federal awarding agency or pass-through entity expressly 
authorizes a noncompetitive procurement in response to a written 
request from the non-Federal entity; or
    (v) After solicitation of a number of sources, competition is 
determined inadequate.
0
73. Add Sec.  200.321 to read as follows:


Sec.  200.321  Domestic preferences for procurements.

    (a) As appropriate and to the extent consistent with law, the non-
Federal entity should, to the greatest extent practicable under a 
Federal award, provide a preference for the purchase, acquisition, or 
use of goods, products, or materials produced in the United States 
(including but not limited to iron, aluminum, steel, cement, and other 
manufactured products). This term must be included in all subawards 
including all contracts and purchase orders for work or products under 
this award.
    (b) For purposes of this award term:
    (1) ``Produced in the United States'' means, for iron and steel 
products, that all manufacturing processes, from the initial melting 
stage through the application of coatings, occurred in the United 
States.
    (2) ``Manufactured products'' means items and construction 
materials composed in whole or in part of non-ferrous metals such as 
aluminum; plastics and polymer-based products such as polyvinyl 
chloride pipe; aggregates such as concrete; glass, including optical 
fiber; and lumber.
0
74. Amend Sec.  200.325 by revising paragraph (b) to read as follows:


Sec.  200.325  Bonding requirements.

* * * * *
    (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 requirements under such contract.
* * * * *
0
75. Amend Sec.  200.327 by revising the first sentence to read as 
follows:


Sec.  200.327  Financial reporting.

    Unless otherwise approved by OMB, the Federal awarding agency must 
solicit only the OMB-approved governmentwide data elements for 
collection of financial information (at time of publication the Federal 
Financial Report or such future, OMB-approved, governmentwide data 
elements available from the OMB-designated standards lead. * * *
0
76. Amend Sec.  200.328 by revising paragraph (b) introductory text, 
paragraph (b)(1), and paragraph (b)(2) introductory text to read as 
follows:


Sec.  200.328  Monitoring and reporting program performance.

* * * * *
    (b) Non-construction performance reports. The Federal 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 OMB-approved, 
governmentwide data elements available from the OMB-designated 
standards lead.
    (1) The non-Federal entity must submit performance reports at the 
interval required by the Federal 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 120 calendar days after the reporting period; 
quarterly or semiannual reports must be due 30 calendar days after the 
reporting period. Alternatively, the Federal 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 120 calendar days after the period of performance end date. If a 
justified request is submitted by a non-Federal entity, the Federal 
agency may extend the due date for any performance report.
    (2) The non-Federal entity must submit performance reports using 
OMB-approved governmentwide common information collections when 
providing performance information. As applicable, these information 
collections must use OMB-approved, governmentwide data elements 
available from the OMB-designated standards lead. As appropriate in 
accordance with above mentioned information collections, these reports 
will contain, for each Federal award, brief information on the 
following unless other collections are approved by OMB:
* * * * *
0
77. Amend Sec.  200.330 by revising paragraphs (a) introductory text 
and (b) introductory text to read as follows:


Sec.  200.330  Subrecipient and contractor determinations.

* * * * *
    (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 Subaward in Sec.  200.1. 
Characteristics which support the classification of the non-Federal 
entity as a subrecipient include when the non-Federal 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 Contract in Sec.  
200.1. Characteristics indicative of a procurement relationship between 
the non-Federal entity and a contractor are when the contractor:
* * * * *
0
78. Revise Sec.  200.331 to read as follows:


Sec.  200.331  Requirements for pass-through entities.

    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

[[Page 3800]]

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 
its unique entity identifier);
    (ii) Subrecipient's unique entity identifier;
    (iii) Federal Award Identification Number (FAIN);
    (iv) Federal Award Date (see Federal award date in Sec.  200.1) of 
award to the recipient by the Federal agency;
    (v) Subaward Period of Performance Start and End Date;
    (vi) Subaward Budget Period Start and End Date;
    (vii) Amount of Federal Funds Obligated by this action by the pass-
through entity to the subrecipient;
    (viii) Total Amount of Federal Funds Obligated to the subrecipient 
by the pass-through entity including the current financial obligation;
    (ix) Total Amount of the Federal Award committed to the 
subrecipient by the pass-through entity;
    (x) Federal award project description, as required to be responsive 
to the Federal Funding Accountability and Transparency Act (FFATA);
    (xi) Name of Federal awarding agency, pass-through entity, and 
contact information for awarding official of the Pass-through entity;
    (xii) Assistance listing number and title; the pass-through entity 
must identify the dollar amount made available under each Federal award 
and the Assistance listing number at time of disbursement;
    (xiii) Identification of whether the award is R&D; and
    (xiv) Indirect cost rate for the Federal award (including if the de 
minimis rate is charged per Sec.  200.414).
    (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 pass-through entity to 
meet its own responsibility to the Federal 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. The pass-through 
entity must not require use of a de minimus indirect cost rate if the 
subrecipient has a federally approved rate. If no federally approved 
rate exists, the pass-through entity must accept:
    (i) The negotiated indirect cost rate between the pass-through 
entity and the subrecipient;
    (ii) The negotiated indirect cost rate between a different pass-
through entity and the subrecipient; or
    (iii) The de minimus indirect cost rate;
    (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 pass-through 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--
Audit Requirements of this part, 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 Federal awarding agency monitoring 
(e.g., if the subrecipient also receives Federal awards directly from a 
Federal awarding agency).
    (c) Consider imposing specific subaward conditions upon a 
subrecipient if appropriate as described in Sec.  200.208.
    (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 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. Other means 
may include written confirmation from the subrecipient related to the 
Single Audit already performed and any audit findings related to the 
particular subaward.
    (3) Issuing a management decision for applicable audit findings 
pertaining only to the Federal award provided to the subrecipient from 
the pass-through entity as required by Sec.  200.521.
    (4) The pass-through entity is only responsible for resolving audit 
findings specifically related to the subaward (i.e., non-systemic) and 
not applicable to the entire subrecipient (i.e., systemic). If a 
subrecipient has a current Single Audit report posted in the Federal 
Audit Clearinghouse and has not otherwise been excluded from receipt of 
Federal funding (e.g., has been debarred or suspended), the pass-
through entity may rely on the subrecipient's auditors and cognizant 
agency for routine audit follow-up and management decisions. Such 
reliance does not eliminate the responsibility of the pass-through 
entity to issue subawards that conform to agency and award-specific 
requirements, to manage risk through ongoing subaward monitoring, and 
to monitor the status of the findings that are specifically related to 
the subaward issued by the pass-through entity.
    (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-upon-procedures engagements as described 
in Sec.  200.425 Audit services.
    (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 Sec.  200.501.
    (g) Consider whether the results of the subrecipient's audits, on-
site reviews, or other monitoring indicate conditions

[[Page 3801]]

that necessitate adjustments to the pass-through entity's own records.
    (h) Consider taking enforcement action against noncompliant 
subrecipients as described in Sec.  200.338 Remedies for noncompliance 
of this part and in program regulations.
0
79. Revise Sec.  200.335 to read as follows.


Sec.  200.335  Methods for collection, transmission and storage of 
information.

    The Federal 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 in accordance with applicable legislative 
requirements. A machine-readable format is a format in a standard 
computer language (not English text) that can be read automatically by 
a web browser or computer system. The Federal 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 Federal awarding agency or 
pass-through 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.


Sec.  200.337  [Amended]

0
80. Amend Sec.  200.337 by removing ``Sec.  200.315 Intangible 
property'' and adding, in its place, ``Sec.  200.314''.
0
81. Amend Sec.  200.338 by revising the introductory text to read as 
follows:


Sec.  200.338   Remedies for noncompliance.

    If a non-Federal entity fails to comply with the U.S. Constitution, 
Federal statutes, regulations or the terms and conditions of a Federal 
award, the Federal awarding agency or pass-through entity may impose 
additional conditions, as described in Sec.  200.208 Specific 
conditions. If the Federal awarding agency or pass-through entity 
determines that noncompliance cannot be remedied by imposing additional 
conditions, the Federal awarding agency or pass-through entity may take 
one or more of the following actions, as appropriate in the 
circumstances:
* * * * *
0
82. Revise Sec.  200.339 to read as follows:


Sec.  200.339   Termination.

    (a) The Federal award may be terminated in whole or in part as 
follows:
    (1) By the Federal awarding agency or pass-through entity, if a 
non-Federal entity fails to comply with the terms and conditions of a 
Federal award;
    (2) By the Federal awarding agency or pass-through entity, to the 
greatest extent authorized by law, if an award no longer effectuates 
the program goals or agency priorities;
    (3) By the Federal 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;
    (4) By the non-Federal entity upon sending to the Federal 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 
Federal awarding agency or pass-through 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 Federal awarding agency or pass-through 
entity may terminate the Federal award in its entirety; or
    (5) By the Federal awarding agency or pass-through entity pursuant 
to termination provisions included in the Federal award.
    (b) A Federal awarding agency must specify applicable termination 
provisions in its regulations and in each Federal award, consistent 
with this section.
    (c) When a Federal awarding agency terminates a Federal award prior 
to the end of the period of performance due to the non-Federal entity's 
material failure to comply with the Federal award terms and conditions, 
the Federal awarding agency must report the termination to the OMB-
designated integrity and performance system accessible through SAM 
(currently FAPIIS).
    (1) The information required under paragraph (b) of this section is 
not to be reported to designated integrity and performance system until 
the non-Federal entity either--
    (i) Has exhausted its opportunities to object or challenge the 
decision, see Sec.  200.341 Opportunities to object, hearings and 
appeals; or
    (ii) Has not, within 30 calendar days after being notified of the 
termination, informed the Federal awarding agency that it intends to 
appeal the Federal awarding agency's decision to terminate.
    (2) If a Federal awarding agency, after entering information into 
the designated integrity and performance system about a termination, 
subsequently:
    (i) Learns that any of that information is erroneous, the Federal 
awarding agency must correct the information in the system within three 
business days;
    (ii) Obtains an update to that information that could be helpful to 
other Federal awarding agencies, the Federal awarding agency is 
strongly encouraged to amend the information in the system to 
incorporate the update in a timely way.
    (3) Federal awarding agencies, must not post any information that 
will be made publicly available in the non-public segment of designated 
integrity and performance system that is covered by a disclosure 
exemption under the Freedom of Information Act. If the non-Federal 
entity asserts within seven calendar days to the Federal awarding 
agency who posted the information, that some of the information made 
publicly available is covered by a disclosure exemption under the 
Freedom of Information Act, the Federal awarding agency who posted the 
information must remove the posting within seven calendar days of 
receiving the assertion. Prior to reposting the releasable information, 
the Federal agency must resolve the issue in accordance with the 
agency's Freedom of Information Act procedures.
    (d) When a Federal award is terminated or partially terminated, 
both the Federal awarding agency or pass-through entity and the non-
Federal entity remain responsible for compliance with the requirements 
in Sec. Sec.  200.343 and 200.344.
0
83. Revise Sec.  200.340 paragraph (b) introductory text to read as 
follows:


Sec.  200.340   Notification of termination requirement.

* * * * *
    (b) If the Federal award is terminated for the non-Federal entity's 
material failure to comply with the U.S. Constitution, Federal 
statutes, regulations, or terms and conditions of the Federal award, 
the notification must state that--
* * * * *


Sec.  200.342  [Amended]

0
84. Amend Sec.  200.342 by removing the term ``obligations'' wherever 
it appears

[[Page 3802]]

and adding, in its place ``financial obligations''.
0
85. Revise Sec.  200.343 to read as follows:


Sec.  200.343   Closeout.

    The Federal awarding agency or pass-through 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. If the non-Federal entity fails to complete 
the requirements, the Federal awarding agency or pass-through entity 
will proceed to close-out the Federal award with the information 
available. This section specifies the actions the non-Federal entity 
and Federal 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 120 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. A subrecipient must submit to the pass-through 
entity, 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 Federal 
awarding agency or pass-through entity may approve extensions when 
requested and justified by the non-Federal entity, as applicable.
    (b) Unless the Federal awarding agency or pass-through entity 
authorizes an extension, a non-Federal entity must liquidate all 
financial obligations incurred under the Federal award no later than 
120 calendar days after the end date of the period of performance as 
specified in the terms and conditions of the Federal award.
    (c) The Federal awarding agency or pass-through entity must make 
prompt payments to the non-Federal entity for costs meeting the 
requirements in Subpart E of this part under the Federal award being 
closed out.
    (d) The non-Federal entity must promptly refund any balances of 
unobligated cash that the Federal awarding agency or pass-through 
entity paid in advance or paid and that are not authorized to be 
retained by the non-Federal entity for use in other projects. See OMB 
Circular A-129 and see Sec.  200.345, for requirements regarding 
unreturned amounts that become delinquent debts.
    (e) Consistent with the terms and conditions of the Federal award, 
the Federal 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 Sec. Sec.  200.309 through 200.315 and 
200.329.
    (g) When a recipient or subrecipient completes all closeout 
requirement, the Federal awarding agency or pass-through entity must 
promptly complete all closeout actions for Federal awards. The Federal 
awarding agency must make every effort to complete closeout actions no 
later than one year after the end of the period of performance unless 
otherwise directed by authorizing statutes. Closeout actions include 
Federal awarding agency actions in the grants management and payment 
systems.
    (h) If the non-Federal entity does not submit all reports in 
accordance with this section, and the terms and conditions of the 
Federal Award, the Federal awarding agency must proceed to closeout 
with the information available, within one year of the period of 
performance end date.The Federal awarding agency must report the non-
Federal entity's failure to submit required reports to the OMB-
designated integrity and performance system (currently FAPIIS) as the 
non-Federal entity's material failure to comply with the terms and 
conditions of the award. Federal awarding agencies may also pursue 
other enforcement actions per Sec.  200.338.
0
86. Revise Sec.  200.344 to read as follows:


Sec.  200.344   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 Federal awarding agency or pass-through entity 
to disallow costs and recover funds on the basis of a later audit or 
other review. The Federal awarding agency or pass-through entity must 
make any cost disallowance determination and notify the non-Federal 
entity within the record retention period.
    (2) The requirement for 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) The ability of the Federal awarding agency to make financial 
adjustments to a previously closed award.
    (4) Audit requirements in Subpart F of this part.
    (5) Property management and disposition requirements in Subpart D 
of this part, Sec. Sec.  200.309 through 200.315.
    (6) Records retention as required in Subpart D, Sec. Sec.  200.333 
through 200.337.
    (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 Federal 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.
0
87. Amend Sec.  200.400 by revising the last sentence of paragraph (e) 
to read as follows:


Sec.  200.400   Policy guide.

* * * * *
    (e) * * * See Indirect (facilities & administrative (F&A)) costs in 
Sec.  200.1.
* * * * *
0
88. Amend Sec.  200.401 by revising paragraph(a)(3) to read as follows:


Sec.  200.401   Application.

* * * * *
    (3) Fixed amount awards. See also Sec.  200.1 and 200.201.
* * * * *
0
89. Revise Sec.  200.402 to read as follows:


Sec.  200.402   Composition and timing of costs.

    (a) Total cost. The total cost of a Federal award is the sum of the 
allowable direct and allocable indirect costs less any applicable 
credits.
    (b) Timing of costs. Costs must be charged to the approved budget 
period in which they were incurred except where noted in the specific 
cost principle.
0
90. Amend Sec.  200.403 by revising paragraph (g) to read as follows:


Sec.  200.403   Factors affecting allowability of costs.

* * * * *
    (g) Be adequately documented. See also Sec. Sec.  200.300 Statutory 
and national policy requirements through 200.308 Revision of budget and 
program plans of this part.
0
 91. Revise Sec.  200.405 paragraph (d) to read as follows:


Sec.  200.405   Allocable costs.

* * * * *
    (d) Direct cost allocation principles. If a cost benefits two or 
more projects or activities in proportions that can be

[[Page 3803]]

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 
Sec. Sec.  200.309 through 200.315 and 200.439.
* * * * *
0
92. Amend Sec.  200.407 by revising paragraphs (e) and (f) to read as 
follows:


Sec.  200.407   Prior written approval (prior approval).

* * * * *
    (e) Sec.  200.310 Real property;
    (f) Sec.  200.312 Equipment;
* * * * *
0
93. Amend Sec.  200.410 by revising the last sentence to read as 
follows:


Sec.  200.410   Collection of unallowable costs.

    * * * See also Subpart D of this part, Sec. Sec.  200.300 through 
200.308.
0
94. Amend Sec.  200.413 by revising paragraph (b) to read as follows:


Sec.  200.413   Direct costs.

* * * * *
    (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 be considered direct cost, examples include extraordinary 
utility consumption, the cost of materials supplied from stock or 
services rendered by specialized facilities, program evaluation costs, 
or other institutional service operations.
* * * * *
0
95. Amend Sec.  200.414 by revising paragraphs (a), (c)(4), and (f) and 
adding paragraph (h) to read as follows:


Sec.  200.414   Indirect (F&A) costs.

    (a) Facilities and Administration Classification. For major 
Institutions of Higher Education (IHE) 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 
IHEs, 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 200, and Rate Determination for 
Institutions of Higher Education paragraph C.11. Major nonprofit 
organizations are those which receive more than $10 million dollars in 
direct Federal funding.
* * * * *
    (c) * * *
    (4) As required under Sec.  200.204 Notices of funding 
opportunities, the Federal awarding agency must include in the notice 
of funding opportunity the policies relating to indirect cost rate 
reimbursement, matching, or cost share as approved under paragraph 
(e)(1) of this section. As appropriate, the Federal agency should 
incorporate discussion of these policies into Federal awarding agency 
outreach activities with non-Federal entities prior to the posting of a 
notice of funding opportunity.
* * * * *
    (f) In addition to the procedures outlined in the appendices in 
paragraph (e) of this section, any non-Federal entity, except for those 
non-Federal entities described in Appendix VII to Part 200, 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. No documentation is 
required to provide proof of costs that are covered under the de 
minimus indirect cost rate. As described in Sec.  200.403 Factors 
affecting allowability of costs, 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 non-Federal entity chooses to negotiate for a rate, which the 
non-Federal entity may apply to do at any time.
* * * * *
    (h) All rate agreements from non-Federal entities must be available 
publicly on an OMB-Designated Federal website.
0
96. Amend Sec.  200.419 by revising paragraphs (b)(1) and (b)(2) to 
read as follows:


Sec.  200.419   Cost accounting standards and disclosure statement.

* * * * *
    (b) * * *
    (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. The initial 
DS-2 and revisions to the DS-2 must be submitted in coordination with 
the IHE's F&A rate proposal, unless an earlier submission is requested 
by the cognizant agency for indirect costs. IHEs with CAS-covered 
contracts or subcontracts meeting the dollar threshold in 48 CFR 
9903.202-1(f) must submit their initial DS-2 or revisions no later than 
prior to the award of a CAS-covered contract or subcontract.
    (2) An IHE must maintain an accurate DS-2 and comply with disclosed 
cost accounting practices. An IHE must file amendments to the DS-2 to 
the cognizant agency for indirect costs 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 after it has notified the Federal cognizant 
agency for indirect costs. If the change represents a variation from 2 
CFR 200, the change may require approval by the Federal cognizant 
agency for indirect costs, in accordance with Sec.  200.102(b). 
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.
* * * * *
0
97. Amend Sec.  200.430 by revising paragraph (h) introductory text and 
the first two sentences of paragraph (h)(3) to read as follows:


Sec.  200.430   Compensation--personal services.

* * * * *
    (h) Institutions of Higher Education (IHEs).
* * * * *

[[Page 3804]]

    (3) Intra-Institution of Higher Education (IHE) consulting. Intra-
IHE consulting by faculty should be undertaken as an IHE responsibility 
requiring no compensation in addition to IBS. * * *
* * * * *
0
98. Revise Sec.  200.431 to read as follows.


Sec.  200.431   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, family-related, 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 non-Federal 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 Sec.  200.447); 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 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 non-Federal entity demonstrates that costs in relationship 
to salaries and wages do not differ significantly for different groups 
of employees.
    (e) Insurance. See also Sec.  200.447(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., post-retirement 
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 
non-Federal 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 non-Federal entity are 
allowable, provided that:
    (1) Such policies meet the test of reasonableness.
    (2) The methods of cost allocation are not discriminatory.
    (3) 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. Non-Federal entity may elect to follow the ``Cost 
Accounting Standard for Composition and Measurement of Pension Costs'' 
(48 CFR 9904.412).
    (4) 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.
    (5) 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 non-Federal entity in excess of the 
actuarially determined amount for a

[[Page 3805]]

fiscal year may be used as the non-Federal entity's contribution in 
future periods.
    (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. Post-retirement 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-as-you-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 non-Federal entity 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 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 post-retirement 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 non-Federal 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
    (i) Law;
    (ii) Employer-employee agreement;
    (iii) Established policy that constitutes, in effect, an implied 
agreement on the non-Federal entity's part; or
    (iv) 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 non-Federal 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 responsibility 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.
    (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 Federal 
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 non-Federal entity in that country, are unallowable, 
unless they are necessary for the performance of Federal programs and 
approved by the Federal awarding agency.
    (j) For IHEs only. (1) Fringe benefits in the form of undergraduate 
and graduate 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, 
provided that the benefit does not discriminate in favor of highly 
compensated employees. Employees can exercise these benefits at other 
institutions according to institutional policy. See Sec.  200.466 
Scholarships and student aid costs, 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 non-
Federal 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 
Sec. Sec.  200.402 Composition of costs through 200.411 Adjustment of 
previously negotiated

[[Page 3806]]

indirect (F&A) cost rates containing unallowable costs of this subpart;
    (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.


Sec.  200.433  [Amended]

0
99. In Sec.  200.433 amend paragraph (b) by removing the words 
``200.309 Period of Performance'' and adding, in its place, ``200.308 
Revision of budget and program plans''.


Sec.  200.434  [Amended]

0
100. In Sec.  200.434 amend paragraph (g)(2) by removing the words 
``200.309 Period of Performance'' wherever it appears and adding, in 
its place, ``200.308''.
0
101. Amend Sec.  200.436 by revising paragraph (c) introductory text, 
paragraphs (c)(3), (c)(4), and (e) and adding paragraph (c)(5) to read 
as follows:


Sec.  200.436   Depreciation.

* * * * *
    (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 computation of 
depreciation, the acquisition cost will exclude:
* * * * *
    (3) Any portion of the cost of buildings and equipment contributed 
by or for the non-Federal entity that are already claimed as matching 
or where law or agreement prohibits recovery;
    (4) Any asset acquired solely for the performance of a non-Federal 
award; and
    (5) Assets that were directly paid for and expensed using Federal 
financial assistance.
* * * * *
    (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 must be maintained.
0
102. Amend Sec.  200.439 by revising paragraph (a), paragraph (b)(3), 
and (b)(7) to read as follows:


Sec.  200.439   Equipment and other capital expenditures.

    (a) See the definitions for Capital expenditures, Equipment, 
Special purpose equipment, General purpose equipment, Acquisition cost, 
and Capital assets in Sec.  200.1.
    (b) * * *
    (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 Federal awarding agency, or pass-through entity. See Sec.  200.436 
Depreciation, for rules on the allowability of depreciation on 
buildings, capital improvements, and equipment. See also Sec.  200.465.
* * * * *
    (7) Equipment and other capital expenditures are unallowable as 
indirect costs. See Sec.  200.436.
0
103. Revise Sec.  200.433 paragraph (d) to read as follows:


Sec.  200.443   Gains and losses on disposition of depreciable assets.

* * * * *
    (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 Sec. Sec.  200.309 through 200.315.
0
104. Revise Sec.  200.444 paragraph (b) to read as follows:


Sec.  200.444   General costs of government.

* * * * *
    (b) For Indian tribes and Councils of Governments (COGs) (see Local 
government in Sec.  200.1), 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.
0
105. Amend Sec.  200.449 by revising paragraphs (b)(1) and (c)(4) to 
read as follows:


Sec.  200.449   Interest.

* * * * *
    (b)(1) Capital assets is defined as noted in the definition of 
Capital assets in Sec.  200.1. An asset cost includes (as applicable) 
acquisition costs, construction costs, and other costs capitalized in 
accordance with GAAP.
* * * * *
    (c) * * *
    (4) The non-Federal entity limits claims for Federal reimbursement 
of interest costs to the least expensive alternative. For example, a 
lease contract that transfers ownership by the end of the contract 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.
* * * * *
0
106. Revise Sec.  200.456 to read as follows:


Sec.  200.456   Participant support costs.

    Participant support costs as defined in Sec.  200.1 and are 
allowable with the prior approval of the Federal awarding agency.
0
107. Amend Sec.  200.458 by revising the last sentence to read as 
follows:


Sec.  200.458   Pre-award costs.

    * * * If charged to the award, these costs must be charged to the 
initial budget period of the award, unless otherwise specified by the 
Federal awarding agency.
0
108. Amend Sec.  200.461 by revising paragraph (b)(3) to read as 
follows:


Sec.  200.461   Publication and printing costs.

* * * * *
    (b) * * *
    (3) The non-Federal entity may charge the Federal award before 
closeout for the costs of publication or sharing of research results if 
the costs are not incurred during the period of performance of the 
Federal award. If charged to the award, these costs must be charged to 
the final budget period of the award, unless otherwise specified by the 
Federal awarding agency.
0
109. Amend Sec.  200.465 by
0
a. Redesignating paragraph (c)(5) as paragraph (d).
0
b. Redesignating paragraph (c)(6) as paragraph (f);
0
c. Revising newly redesignated paragraph (d); and
0
d. Adding paragraph (e).
    The addition and revision to read as follows:


Sec.  200.465   Rental costs of real property and equipment.

* * * * *
    (d) Rental costs under leases which are required to be accounted 
for as a financed purchase under GASB standards or a finance lease 
under FASB standards 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. Interest costs related to these leases are 
allowable to the extent they meet the criteria in Sec.  200.449 
Interest.

[[Page 3807]]

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.
    (e) Rental or lease payments are allowable under lease contracts 
where the non-Federal entity is required to recognize an intangible 
right-to-use lease asset (per GASB) or right of use operating lease 
asset (per FASB) for purposes of financial reporting in accordance to 
GAAP.
* * * * *
0
110. Amend Sec.  200.509 by revising paragraph (a) to read as follows:


Sec.  200.509   Auditor selection.

    (a) Auditor procurement. In procuring audit services, the auditee 
must follow the procurement standards prescribed by the Procurement 
Standards in Sec. Sec.  200.316 through 20.326 or the FAR (48 CFR part 
42), as applicable. When procuring audit services, the objective is to 
obtain high-quality 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 Sec.  
200.320, or the FAR (48 CFR part 42), as applicable.
* * * * *
0
111. Amend Sec.  200.510 by revising paragraph (b)(3) to read as 
follows:


Sec.  200.510   Financial statements.

* * * * *
    (b) * * *
    (3) Provide total Federal awards expended for each individual 
Federal program and the Assistance listing number or other identifying 
number when the Assistance listings information is not available. For a 
cluster of programs also provide the total for the cluster.
* * * * *
0
112. Amend 200.513 by revising paragraphs (a)(1), (a)(3)(ii), 
(a)(3)(vii), paragraph (b) introductory text, paragraph (c) 
introductory text, and paragraph (c)(3)(iii) to read as follows:


Sec.  200.513   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 funding directly (direct funding) to a non-Federal entity 
unless OMB designates a specific cognizant agency for audit. When the 
direct funding represents less than 25 percent of the total funding 
received by the non-Federal entity (as prime and sub awards), then the 
Federal agency with the predominant amount of total funding is the 
designated cognizant agency for audit.
* * * * *
    (3) * * *
    (ii) Obtain or conduct quality control reviews on selected audits 
made by non-Federal auditors, and provide the results to other 
interested organizations. Cooperate and provide support to the Federal 
agency designated by OMB to lead a governmentwide 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. The governmentwide project can rely on 
the current and on-going quality control review work performed by the 
agency. This governmentwide audit quality project must be performed 
once every 6 years beginning with audits submitted in 2021 or at such 
other interval as determined by OMB, and the results must be public.
* * * * *
    (vii) Coordinate a management decision for cross-cutting audit 
findings (as defined in Cross-cutting audit finding in Sec.  200.1) 
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.
* * * * *
    (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 
the 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:
* * * * *
    (c) Federal awarding agency responsibilities. The Federal awarding 
agency must perform the following for the Federal awards it makes (See 
also the requirements of Sec.  200.211):
* * * * *
    (3) * * *
    (iii) Use cooperative audit resolution mechanisms (see Cooperative 
audit resolution) to improve Federal program outcomes through better 
audit resolution, follow-up, and corrective action; and
* * * * *
0
113. Revise Sec.  200.515 paragraph (a) to read as follows:


Sec.  200.515   Audit reporting.

* * * * *
    (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 (or a special 
purpose framework such as cash, modified cash, or regulatory) 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.
* * * * *


Sec.  200.516  [Amended]

0
114. Amend Sec.  200.516 by removing ``CFDA'' wherever it appears and 
adding, in its place, ``Assistance listing''.
0
115. Amend Appendix I to Part 200 by revising paragraphs (A), the first 
paragraph of (B), paragraphs (D)(3), (D)(4), (D)(5), (E)(3), 
(E)(3(iii), and (F)(1) to read as follows:

Appendix I to Part 200--Full Text of Notice of Funding Opportunity

* * * * *

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 Federal awarding agency's funding 
priorities or the technical or focus areas in which the Federal 
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

[[Page 3808]]

section must include program goals and objectives, a reference to 
the relevant assistance listing, a description of how the award will 
contribute to the achievement of the program's goals and objectives, 
and the expected performance indicators and may include examples of 
successful projects that have been funded previously. This section 
also may include other information the Federal 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 Federal awarding agency expects to award through 
the announcement; the expected performance indicators, targets, 
baseline data, and data collection; 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.
* * * * *

D. * * *

    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 Sec.  
200.204).
* * * * *
    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 and applicants 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 website.
* * * * *

E. * * *

    3. For any Federal award under a notice of funding opportunity, 
if the Federal awarding agency anticipates that the total Federal 
share will be greater than the simplified acquisition threshold on 
any Federal award under a notice of funding opportunity may include, 
over the period of performance, this section must also inform 
applicants:
* * * * *
    iii. That the Federal awarding agency will consider any comments 
by the applicant, in addition to the other information in the 
designated integrity and performance system, in making a judgment 
about the applicant's integrity, business ethics, and record of 
performance under Federal awards when completing the review of risk 
posed by applicants as described in Sec.  200.206.
* * * * *

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 Federal 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 Sec.  200.211.
* * * * *
0
116. Amend Appendix II to Part 200 revising paragraph (A) and adding 
paragraph (K) to read as follows:

Appendix II to Part 200--Contract Provisions for Non-Federal Entity 
Contracts Under Federal Awards

* * * * *
    (A) Contracts for more than the simplified acquisition 
threshold, 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.
* * * * *
    (K) See Sec.  200.216.
0
117. Amend Appendix III to Part 200 by
0
a. Revising paragraphs (B)(4)(c)(2)(ii)(B) and (C)(2);
0
b. Redesignating paragraph (C)(7)(7) as paragraph (C)(7)(a);
0
c. Revising paragraph (C)(11)(a)(1); and
0
d. Revising paragraph (E).
    The revisions read as follows:

Appendix III to Part 200--Indirect (F&A) Costs Identification and 
Assignment, and Rate Determination for Institutions of Higher Education 
(IHEs)

* * * * *
    B. * * *
    4. * * *
    c. * * *
    2. * * *
    (ii) * * *
    B. In July 2012, values for these two indices (taken 
respectively from the Lawrence Berkeley Laboratory ``Labs for the 
21st Century'' benchmarking tool and the US Department of Energy 
``Buildings Energy Databook'' and 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 
website.
* * * * *
    C. * * *
    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 Sec.  200.1 
Definitions. 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

[[Page 3809]]

of the modified total direct costs identified with such pool.
* * * * *
    11. * * *
    a. * * *
    (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 directly 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 directly 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 Sec.  
200.331 Requirements for pass-through entities.
    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 website.
* * * * *
0
118. Amend Appendix IV to Part 200 by revising paragraphs (B)(2)(c), 
(B)(3)(f) and (C)(2)(a) to read as follows:

Appendix IV to Part 200--Indirect (F&A) Costs Identification and 
Assignment, and Rate Determination for Nonprofit Organizations

* * * * *
    B. * * *
    2. * * *
    c. The distribution base may be total direct costs (excluding 
capital expenditures and other distorting items, such as 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 Sec.  200.1.
* * * * *
    3. * * *
    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 Sec.  
200.1 Definitions of Part 200).
* * * * *
    C. * * *
    2. * * *
    a. Unless different arrangements are agreed to by the Federal 
agencies concerned, the Federal agency with the largest dollar value 
of Federal awards directly funded to 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 directly 
funded 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 Sec.  200.414 Indirect (F&A) costs of Part 200.) If 
the nonprofit does not receive any funding from any Federal agency, 
the pass-through entity is responsible for the negotiation of the 
indirect cost rates in accordance with section 200.331(a)(4).
* * * * *
0
119. Amend Appendix V to Part 200 by revising the last sentence of 
paragraph (A)(2) and paragraph (B)(4) to read as follows:

Appendix V to Part 200--State/Local Governmentwide Central Service Cost 
Allocation Plans

    A. * * *
    2. * * * A copy of this brochure may be obtained from the HHS 
Cost Allocation Services or at their website.
    B. * * *
    4. Cognizant agency for indirect costs is defined in Sec.  
200.1. The determination of cognizant agency for indirect costs for 
states and local governments is described in section F.1, 
Negotiation and Approval of Central Service Plans.
* * * * *
0
120. Amend Appendix VII to Part 200 by revising the last sentence of 
paragraph (A)(3) to read as follows:

Appendix VII to Part 200--States and Local Government and Indian Tribe 
Indirect Cost Proposals

    A. * * *
    3. * * * A copy of this brochure may be obtained from HHS Cost 
Allocation Services or at their website.
* * * * *
0
121. Revise Appendix XI to Part 200 to read as follows:

Appendix XI to Part 200--Compliance Supplement

    The compliance supplement is available on the OMB website.

[FR Doc. 2019-28524 Filed 1-21-20; 8:45 am]
 BILLING CODE 3110-01-P